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): August 31, 2021
SEQUENTIAL BRANDS GROUP, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-37656 | 47-4452789 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1407 Broadway, 38th Floor, New York, NY 10018
(Address of Principal Executive Offices/Zip Code)
(646) 564-2577
(Registrant’s telephone number, including area code)
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)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, par value $0.01 per share | SQBG | NASDAQ Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01. Entry into a Material Definitive Agreement.
The information set forth below in Item 1.03 in this Current Report on Form 8-K under the caption “Restructuring Support Agreement” is hereby incorporated by reference in this item 1.01.
Item 1.03. Bankruptcy or Receivership.
Voluntary Petitions for Bankruptcy
On August 31, 2021, Sequential Brands Group, Inc. (“Sequential” or the “Company”) and the subsidiaries of the Company listed on Exhibit 99.1 (together with the Company, the “Debtors”) commenced voluntary Chapter 11 proceedings under Chapter 11 of the United States, (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Debtors have requested that the Chapter 11 proceedings be jointly administered under the caption In re Sequential Brands Group Inc., et al. (the “Chapter 11 Cases”). The Debtors continue to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. The Debtors are seeking approval of various “first day” motions containing customary relief intended to assure the Debtors’ ability to continue their ordinary course operations.
Additional information about the Chapter 11 Cases, including access to Bankruptcy Court documents, is available online at www.kccllc.net/SQBG, a website administered by Kurtzman Carson Consultants LLC, a third party bankruptcy claims and noticing agent. The information on this website is not incorporated by reference into, and does not constitute part of, this Current Report on Form 8-K.
Restructuring Support Agreement
On August 31, 2021, the Debtors entered into a Restructuring Support Agreement (together with all exhibits and schedules thereto, the “RSA”) with creditors holding, in the aggregate, approximately 100% of obligations outstanding under the “Third Amended and Restated Credit Agreement,” dated as of July 1, 2016, with Wilmington Trust, National Association, as administrative agent and collateral agent and the lenders party thereto, as subsequently amended (such lenders, the “Consenting Lenders” or the “Investor Group”). Capitalized terms used but not otherwise defined in this “Restructuring Support Agreement” section of this Form 8-K have the meanings given to them in the RSA, which is attached as Exhibit 99.3 hereto.
In conjunction with the execution of the RSA, the Company entered into two asset purchase agreements (each, an “APA” and together, the “Asset Purchase Agreements”) with (i) Gainline Galaxy Holdings LLC (“Galaxy”) for the purchase of the Company’s Active Division Assets, for a purchase price of $333 million (subject to certain adjustments) and (ii) Centric Brands LLC (“Centric” and, together with Galaxy, the “Stalking Horse Bidders”) for the purchase of the Joe’s Jeans brand, for a purchase price (subject to certain adjustments) of (a) $38,250,000 in cash plus (b) certain earnout payments (subject to minimum guaranteed payments of $750,000 per year) over the next five years (the transactions collectively, the “Sale Transactions”).
Upon filing for the Chapter 11 Cases, the Company will contemporaneously initiate a sale process for the Active Division Assets, the Joe’s Jeans brand, and the Company’s remaining brands, which is intended to be value-maximizing by providing third parties with the ability to provide higher and/or better bids. The Company plans to ultimately sell all or substantially all of its assets to the Stalking Horse Bidders and/or one or more third party purchasers determined through an auction process supervised by the Bankruptcy Court to have submitted the highest or otherwise best offer in accordance with the proposed bidding and sale procedures (the “Bidding Procedures”).
The RSA also contemplates debtor-in-possession financing pursuant to a DIP Credit Agreement (as defined and described below), to be provided by the Consenting Lenders, which will provide the Debtors up to $150 million in financing for the purposes of refinancing the First Lien Credit Agreements (as defined below) and will provide the Company with the necessary liquidity to operate during the Chapter 11 Cases.
Pursuant to the RSA, each of the Debtors and the Consenting Lenders has made customary commitments to each other. The Debtors have agreed to, among other things, seek to implement the Sale Transactions and other matters contemplated by the RSA and to satisfy certain other covenants. The Consenting Lenders have also committed to support and to use commercially reasonable efforts to take, or refrain from taking, certain actions in furtherance of the Sale Transactions and other matters contemplated in the RSA and to provide the necessary financing for the Chapter 11 Cases through, among other things, the DIP Credit Agreement.
The RSA and other transaction documents contain milestones for the progress of the Chapter 11 Cases (the “Milestones”), which include the dates by which the Debtors are required to, among other things, obtain certain orders of the Bankruptcy Court and consummate the Sale Transactions. Among other dates set forth in the RSA, the agreement contemplates:
| · | On or prior to August 31, 2021 (the “Petition Date”), the Debtors shall have entered into the Asset Purchase Agreements (as defined in the RSA) with each of the respective Stalking Horse Bidders; |
| · | No later than one (1) calendar day after the Petition Date, the Company shall file a motion in Bankruptcy Court to approve the Debtors’ consensual use of cash collateral and debtor-in-possession financing facility pursuant to the terms set forth in the DIP Term Sheet (the “DIP Facility”); |
| · | No later than one (1) business day after the Petition Date, the Debtors shall file a motion requesting (a) an order from the Bankruptcy Court (the “Bidding Procedures Order”) (i) approving the proposed Bidding Procedures, and (ii) authorizing the Company to provide the Stalking Horse Bidders with the bid protections set forth in the applicable Asset Purchase Agreements, and (b) an order or orders from the Bankruptcy Court (each, a “Sale Order”) approving the Sale Transactions; |
| · | No later than three (3) business days after the Petition Date, the Bankruptcy Court shall have entered an order approving the DIP financing on an interim basis; |
| · | No later than twenty-three (23) calendar days after the Petition Date, the Bankruptcy Court shall have entered the Bidding Procedures Order and an order approving the DIP financing on a final basis; |
| · | The Debtors shall establish a date that is no later than fifty-five (55) calendar days after the Petition Date as the deadline for the submission of binding bids with respect to each of the Sales; |
| · | No later than sixty (60) calendar days after the Petition Date, the Debtors shall complete an auction for substantially all of its assets, in accordance with the Bidding Procedures; provided that if there is no higher or better offer submitted in comparison to the stalking horse bids, no auction shall be held; |
| · | No later than sixty-five (65) calendar days after the Petition Date, the Bankruptcy Court shall have entered one or more Sale Orders approving each of the winning bids resulting from the auction which any such order shall be in form and substance acceptable to the Requisite Consenting Lenders; and |
| · | Closing of the Sales, including consummation of the transactions contemplated thereby, shall occur no later than the date that is seventy-five (75) calendar days after the Petition Date. |
Each of the parties to the RSA may terminate the agreement under certain limited circumstances. Any Debtor may terminate the RSA upon, among other circumstances:
| · | the Bankruptcy Court enters an order denying any of the transactions embodied in the Asset Purchase Agreements and such order remains in effect for seven (7) Business Days after entry of such order; or |
| · | any Sale Order or Bidding Procedures Order is reversed or vacated. |
The transactions contemplated by the RSA do not provide for any ownership or other interest in the Company or the applicable Buyer being provided to the holders of the Company’s outstanding common stock, nor does the Company currently anticipate the holders of the Company’s outstanding common stock will receive any consideration as a result of such transactions.
The transactions contemplated by the RSA are subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated.
The APAs each contain customary representations, warranties and covenants, including closing conditions and agreements with respect to operation of the Company prior to closing. The APAs are attached to this Form 8-K to provide investors and security holders with information regarding their terms. It is not intended to provide any other factual information about Sequential or the counterparties or any of their respective businesses, subsidiaries or affiliates. The representations, warranties and covenants contained in the APAs (a) were made by the parties thereto only for purposes of that agreement and as of specific dates; (b) were made solely for the benefit of the parties to the applicable APA; (c) may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the applicable APA (such disclosures include information that has been included in public disclosures, as well as additional non-public information); (d) may have been made for the purposes of allocating contractual risk between the parties to the applicable APA instead of establishing these matters as facts; and (e) may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Sequential or the counterparties or any of their respective subsidiaries or affiliates. Additionally, the representations, warranties, covenants, conditions and other terms of the APAs may be subject to subsequent waiver or modification. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the APA, which subsequent information may or may not be fully reflected in Sequential’s public disclosures.
The foregoing description of the RSA and APAs is not complete and is qualified in its entirety by reference to the RSA, which is attached hereto as Exhibit 99.3 and incorporated by reference herein, and the Asset Purchase Agreements, which are attached hereto as Exhibits 2.1 and 2.2 and are incorporated by reference herein.
Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The filing of the Chapter 11 Cases constitutes an event of default that accelerated the following obligations under those certain credit agreements (the “Credit Agreements”):
| · | approximately $127.91 million under that certain “Third Amended and Restated First Lien Credit Agreement,” dated as of July 1, 2016, with Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto, as subsequently amended (the “First Lien Credit Agreement”); and |
| · | approximately $298.5 million under that certain “Third Amended and Restated Credit Agreement,” dated as of July 1, 2016, with Wilmington Trust, National Association, as administrative agent and collateral agent and the lenders party thereto, as subsequently amended. |
The Credit Agreements provide that, as a result of the Chapter 11 Cases, the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Credit Agreements are automatically stayed as a result of the Chapter 11 Cases, and the creditors’ rights of enforcement in respect of the Credit Agreements are subject to the applicable provisions of the Bankruptcy Code.
Item 7.01. Regulation FD Disclosure.
On August 31, 2021, the Company issued a press release announcing the filing of the Chapter 11 Cases. A copy of the press release is attached as Exhibit 99.2 hereto and incorporated herein by reference.
The information contained in this Item 7.01, including in Exhibit 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.
Item 8.01. Other Events.
Debtor-in-Possession Credit Agreement
The RSA, in addition to the Sale Transactions, also contemplates that the Company and the wholly-owned domestic subsidiaries of the Company, as guarantors, will enter into: a Super-Priority Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”) with Wilmington Trust, National Association, as administrative agent and collateral agent, and the lenders party thereto (collectively, the “DIP Lenders”), as summarized in the term sheet attached to the RSA as Exhibit D (the “DIP Term Sheet”).
The DIP Facility is subject to approval by the Bankruptcy Court, which has not been obtained at this time. The Debtors are seeking both (i) interim approval of the DIP Facility, and are seeking availability of a portion of the DIP Facility in the amount not less than $141 million at an interim hearing in the Bankruptcy Court, contemplated to occur promptly after the petition date, and (ii) final approval to access the remaining amounts available under the DIP Facility at a final hearing. The Debtors anticipate that the DIP Credit Agreement will become effective promptly following interim approval of the DIP Facility by the Bankruptcy Court.
If the Debtors’ entry into the DIP Credit Agreement is approved by the Bankruptcy Court as proposed, the DIP Lenders would provide a senior secured, super-priority debtor-in-possession term loan facility in an aggregate principal amount of $150 million (the “DIP Facility”), which term loan shall accumulate interest based on an interest rate of LIBOR rate plus 5.00%, with a 1.00% LIBOR floor. Payments under the DIP Facility include a 2.00% upfront payment (the “DIP Upfront Fee”) with (i) 0.50% payable on the date the DIP Facility transaction closes and (ii) 1.50% payable on the DIP Termination Date (as defined below). Principal under the DIP Facility is due on the maturity date under the DIP Credit Agreement. The scheduled maturity of the DIP Facility would be 120 days after the Petition Date (the “DIP Termination Date”).
Borrowings under the DIP Facility would be senior secured obligations of the Company, secured by a super priority lien on the collateral securing the Debtors’ obligations under the DIP Credit Agreement, as well as the unencumbered assets of the Debtors. The DIP Credit Agreement includes various customary covenants, including a covenant mandating compliance with a 13-week budget (subject to permitted variances), variance testing with respect to disbursements and receipts forecast in the 13-week budget and reporting requirements related to the Chapter 11 Cases, among others.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Sequential Brands Group, Inc. | ||
| Date: August 31, 2021 | By: | /s/ Lorraine DiSanto |
| Name: | Lorraine DiSanto | |
| Title: | Chief Financial Officer | |
Exhibit 2.1
EXHIBIT 2.1
GALAXY APA
ASSET PURCHASE AGREEMENT
by and among
GAINLINE GALAXY HOLDINGS LLC,
SEQUENTIAL BRANDS GROUP, INC.
and
THE OTHER SELLERS PARTY HERETO
Dated as of August 31, 2021
| TABLE OF CONTENTS | ||
| Page | ||
| Article I PURCHASE AND SALE OF THE BUSINESS | 1 | |
| Section 1.1 | Purchase and Sale of Interests and Assets | 1 |
| Section 1.2 | Excluded Assets | 3 |
| Section 1.3 | Assumption of Liabilities | 5 |
| Section 1.4 | Excluded Liabilities | 5 |
| Section 1.5 | Assumption and Assignment of Contracts | 7 |
| Section 1.6 | Non-Assignment of Assets | 10 |
| Section 1.7 | Wrong Pocket | 10 |
| Section 1.8 | Further Conveyances and Assurances | 11 |
| Section 1.9 | Buyer Designees | 11 |
| Section 1.10 | Swisstech | 11 |
| Article II Consideration; Closing | 12 | |
| Section 2.1 | Consideration | 12 |
| Section 2.2 | Purchase Price Adjustment | 13 |
| Section 2.3 | Closing | 15 |
| Section 2.4 | Closing Deliveries by Buyer | 15 |
| Section 2.5 | Closing Deliveries by Sellers | 16 |
| Section 2.6 | Withholding | 17 |
| Article III REPRESENTATIONS AND WARRANTIES OF SELLERS | 17 | |
| Section 3.1 | Organization; Good Standing; Qualification and Power | 17 |
| Section 3.2 | Authorization | 17 |
| Section 3.3 | Non-contravention | 18 |
| Section 3.4 | Consents and Approvals | 18 |
| Section 3.5 | RESERVED | 18 |
| Section 3.6 | Litigation | 18 |
| Section 3.7 | Real Property | 18 |
| Section 3.8 | Material Contracts | 19 |
| Section 3.9 | Compliance with Laws; Permits | 20 |
| Section 3.10 | Brokers and Finders | 22 |
| Section 3.11 | Material Customers and Suppliers | 22 |
| Section 3.12 | Title to and Sufficiency of Transferred Assets | 22 |
| Section 3.13 | Intellectual Property | 22 |
| Section 3.14 | Taxes | 24 |
| Section 3.15 | Absence of Certain Developments | 25 |
| Section 3.16 | Data Privacy and Security | 25 |
| Section 3.17 | No Other Representations or Warranties | 27 |
| Article IV REPRESENTATIONS AND WARRANTIES OF BUYER | 26 | |
| Section 4.1 | Organization, Good Standing | 26 |
| Section 4.2 | Authorization | 26 |
| i |
| Section 4.3 | Non-contravention | 27 |
| Section 4.4 | Financing | 27 |
| Section 4.5 | Brokers and Finders | 29 |
| Section 4.6 | No Other Representations or Warranties | 29 |
| Article V BANKRUPTCY MATTERS | 29 | |
| Section 5.1 | Bankruptcy Court Filings | 29 |
| Section 5.2 | Alternative Transaction | 31 |
| Section 5.3 | Bid Protections | 31 |
| Article VI COVENANTS | 31 | |
| Section 6.1 | Access and Information | 31 |
| Section 6.2 | Interim Operations of the Business | 33 |
| Section 6.3 | Cooperation; Status Updates; Regulatory Filings | 35 |
| Section 6.4 | Tax Matters | 37 |
| Section 6.5 | Confidentiality | 39 |
| Section 6.6 | Publicity | 40 |
| Section 6.7 | Use of Names and Marks | 40 |
| Section 6.8 | Financing | 41 |
| Section 6.9 | No Successor Liability | 44 |
| Section 6.10 | Intercompany Arrangements | 44 |
| Section 6.11 | Release; Termination of Buyer Consulting Agreement | 44 |
| Section 6.12 | R&W Insurance Policy | 45 |
| Section 6.13 | Receivables | 45 |
| Section 6.14 | Expense Reimbursement | 46 |
| Section 6.15 | Data Room | 46 |
| Section 6.16 | Consulting Agreement | 46 |
| Article VII CONDITIONS TO CLOSING | 46 | |
| Section 7.1 | Conditions Precedent to Each Party’s Obligation | 46 |
| Section 7.2 | Conditions Precedent to Obligations of Buyer | 47 |
| Section 7.3 | Conditions Precedent to Obligations of Sellers | 47 |
| Section 7.4 | No Frustration of Closing Conditions | 48 |
| Article VIII TERMINATION | 48 | |
| Section 8.1 | Termination of Agreement Prior to Closing | 48 |
| Section 8.2 | Effect of Termination | 50 |
| Section 8.3 | Fees and Expenses Following Termination | 51 |
| Article IX MISCELLANEOUS | 52 | |
| Section 9.1 | No Survival | 52 |
| Section 9.2 | Notices | 52 |
| Section 9.3 | Entire Agreement; Amendments and Waivers | 54 |
| Section 9.4 | Assignment | 54 |
| Section 9.5 | Expenses | 54 |
| ii |
| Section 9.6 | Governing Law | 55 |
| Section 9.7 | Specific Performance | 55 |
| Section 9.8 | Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial | 56 |
| Section 9.9 | Interpretation; Construction | 56 |
| Section 9.10 | Severability | 58 |
| Section 9.11 | Counterparts; Signatures | 58 |
| Section 9.12 | Bulk Transfer Laws | 58 |
| Section 9.13 | Non-Recourse | 58 |
| Section 9.14 | Seller Designation | 59 |
| Section 9.15 | No Personal Liability | 59 |
| Section 9.16 | Disclosure Schedules | 60 |
| iii |
EXHIBITS & SCHEDULES
| EXHIBITS | ||
| Exhibit A | - | Defined Terms |
| Exhibit B | - | Form of Assignment and Assumption Agreement |
| Exhibit C | - | Form of IP Assignment and Assumption Agreement |
| Exhibit D | - | Form of Bid Procedures Order |
| Exhibit E | - | Form of Subscription Agreement |
| Exhibit F | - | Form of Bill of Sale |
| Exhibit G | - | Form of Escrow Agreement |
| Exhibit H | - | Form of Sale Order |
| Exhibit I | - | Sample Calculation |
| iv |
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of August 31, 2021, is made by and between Gainline Galaxy Holdings LLC, a Delaware limited liability company (“Buyer”), Sequential Brands Group, Inc., a Delaware corporation (“Sequential”) and each Subsidiary of Sequential listed on the signature pages to this Agreement (collectively with Sequential, “Sellers”). Buyer and Sellers are collectively referred to as the “Parties” and individually as a “Party”. Exhibit A contains definitions of certain capitalized terms used in this Agreement.
RECITALS
WHEREAS, Sellers are currently engaged in the ownership and monetization of independent brand management platforms of the following brands that primarily provide athleticwear, footwear and yoga equipment, including licensing such brands: (a) GAIAM, (b) SPRI, (c) And1, (d) AVIA, and (e) Swisstech (the “Business”);
WHEREAS, Sellers intend to commence voluntary proceedings (the “Bankruptcy Proceeding”) under Chapter 11 of the Bankruptcy Code by filing petitions for relief in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), and to seek approval of the Bankruptcy Court to consummate this Agreement;
WHEREAS, Sellers desire to sell, and Buyer desires to purchase, the Transferred Assets, and Buyer is willing to assume the Assumed Liabilities (but not the Excluded Liabilities), the Closing Assumed Contracts and the Additional Assumed Contracts, in each case, upon the terms and subject to the conditions set forth herein for total consideration as set forth herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement, and a condition and material inducement to the willingness of Sellers to enter into this Agreement, Buyer has delivered to Sellers the fully executed Commitment Letters.
NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the Parties agree as follows:
Article I
PURCHASE AND SALE OF THE BUSINESS
Section 1.1 Purchase and Sale of Interests and Assets. On the terms and subject to the conditions set forth herein (including, without limitation, entry of each of the Bid Procedures Order and the Sale Order), subject to Section 1.6, at the Closing, Sellers shall Transfer to Buyer and/or one or more Buyer Designees, and Buyer and/or such Buyer Designees shall purchase and acquire from the Sellers, the entirety of the Sellers’ right, title and interest in, to and under all of the following enumerated assets (excluding in each case any assets that would be Excluded Assets), as they exist at the time of the Closing, in each case free and clear of all Liens (other than Permitted Post-Closing Encumbrances) (collectively, the “Transferred Assets”):
(a) subject to Section 6.13(b), the Delinquent Accounts Receivable and all associated collection rights;
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(b) all Transferred Intellectual Property;
(c) the furniture, furnishings, equipment, machinery, tools, fixtures, samples and other personal property of Sellers that are Related to the Business and located as of the date hereof at Sequential’s office at 1407 Broadway, New York, New York, other than the items listed on Schedule 1.1(c);
(d) except as set forth in Section 1.2(a)(iii), each Seller Contract listed on Schedule 1.1(d), other than the Rejected Identified Contracts (such Contracts collectively, the “Closing Assumed Contracts”), together with all documents relating to products, services, licenses, and purchase orders related thereto;
(e) pursuant to Section 1.5(e), each Additional Assumed Contract;
(f) all Actions owned by or available to any Seller, including any Avoidance Action, (i) solely to the extent Related to the Business or related to the Transferred Assets, the Assumed Liabilities or the acquisition, ownership, management, operation, use, function or value of the Business or any Transferred Asset or (ii) against any counterparty to a Closing Assumed Contract or Additional Assumed Contract, or any Affiliate of such counterparty (such Actions, the “Assigned Actions”);
(g) all transferable Permits, and all pending applications therefor, Related to the Business (the “Transferred Permits”);
(h) all credits, prepaid expenses, prepayments, deferred charges, advance payments, refunds, deposits (including customer deposits and security deposits), prepaid items and duties, customer rebates, credits or other refunds, and all other forms of deposit or security placed by Sellers for the performance of a Closing Assumed Contracts or an Additional Assumed Contracts, in each case, to the extent Related to the Business or related to a Transferred Asset, but excluding any prepayments or deposits of any Asset Taxes prior to the Closing for which Sellers shall receive credit to the extent provided in Section 6.4(b);
(i) to the extent transferrable, all of Sellers’ rights under confidentiality, non-disclosure, invention, Intellectual Property assignment, non-competition, non-solicitation of customers and employees, and non-disparagement agreements, solely to the extent related to the Transferred Assets;
(j) subject to Section 6.1(c), solely to the extent Related to the Business, Sellers’ books and records that are not protected by attorney-client, attorney work product or other legally recognized privileges or immunity from disclosure, including, as applicable, such corporate records, executed copies of the Closing Assumed Contracts and Additional Assumed Contracts, financial and accounting records, and such other business records relating to the foregoing; provided that Sellers shall be entitled to retain a copy of such documents for recordkeeping purposes;
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(k) all customer, supplier, licensor and licensee lists Related to the Business and all telephone and telephone facsimile numbers and other directory listings of the Business;
(l) all goodwill, customer and referral relationships, other intangible property and all privileges, and benefits of Sellers, in each case Related to the Business or the Transferred Assets or Assumed Liabilities;
(m) the equity interests of Gaiam PTY owned by Gaiam Americas, Inc.;
(n) all other assets of Sellers to the extent Related to the Business; and
(o) all of the assets set forth on Schedule 1.1.
Section 1.2 Excluded Assets. Notwithstanding anything to the contrary set forth in this Agreement or in any of the other Transaction Documents, the Parties expressly acknowledge and agree that nothing in this Agreement shall be construed to obligate any Seller to Transfer to Buyer (or obligate Buyer to acquire from any Seller) any of the assets, properties or rights of any Seller other than the Transferred Assets, and without limiting the generality of the foregoing, the term “Transferred Assets” shall expressly exclude the assets of Sellers listed in this Section 1.2, all of which shall be retained by the Sellers (the “Excluded Assets”). Each Seller shall retain all of its right, title and interest in and to the Excluded Assets, and neither Buyer nor the Buyer Designees shall acquire or have any rights or Liabilities with respect to the right, title and interest of each Seller in and to the following:
(a) any claim, right, award, recovery, indemnity, warranty, refund, reimbursement, audit right, duty, obligation, liability or other intangible right in favor of or owed to any Seller (i) to the extent primarily related to an Excluded Asset or to any other business of the Sellers, (ii) to the extent exclusively related to any of the Excluded Liabilities, or (iii) for indemnification under a Seller Contract that accrues prior to the Closing and without limiting Buyer’s rights for indemnification under any such Seller Contract with respect to Assumed Liabilities;
(b) all accounts receivable arising before the Closing other than Delinquent Accounts Receivable;
(c) any shares or other equity interests in any Person or any securities of any Person other than as set forth in Section 1.1(m);
(d) the corporate charter, seal, minute books, stock record books and other similar documents relating to the organization, maintenance and existence of Sellers or any Affiliate of Sellers;
(e) all personnel records (including all human resources and other records) of Sellers or any of their respective Affiliates relating to employees of Sellers or any of their respective Affiliates;
(f) all Cash held by or in the name of Sellers or any of their respective Affiliates;
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(g) all consideration received by Sellers and their respective Affiliates pursuant to, and all rights of Sellers and their respective Affiliates under, this Agreement or any Transaction Document, subject to the terms hereof and thereof;
(h) all of the following documents prepared or received by Sellers, their respective Affiliates or any of their respective Representatives, in each case, with respect to the Transferred Assets: (i) lists of prospective buyers; (ii) offers, bids or proposals submitted by any prospective buyer; (iii) analyses by Sellers of any offers, bids or proposals submitted by any prospective buyer; (iv) correspondence between or among Sellers, its Representatives and any prospective buyer other than Buyer; and (v) correspondence between Sellers, their respective Affiliates or any of their respective Representatives with respect to any offers, bids or prospective buyers, the Transactions or otherwise contemplated by the Bid Procedures;
(i) all Seller Contracts that are not Closing Assumed Contracts or Additional Assumed Contracts, including the Contracts set forth on the Rejected Contracts Schedule (the “Excluded Contracts”);
(j) all Intracompany Receivables;
(k) any prepayments and good faith and other bid deposits submitted by any third party under the terms of the Bid Procedures Order;
(l) any Benefit Plan and any trusts, funding vehicles, insurance policies, administrative services agreements, files and records, and other assets, related thereto;
(m) all real property leases;
(n) any refunds of Taxes that are either described in Section 1.4(h) or that Sellers bear under Section 6.4;
(o) all insurance policies;
(p) all bank accounts;
(q) the furniture, furnishings, equipment, machinery, tools, fixtures, samples and other personal property of Sellers listed on Schedule 1.1(c);
(r) all assets primarily related to any of Sellers’ past or present brands other than those included in the definition of the Business, including Jessica Simpson, Joe’s Jeans, William Rast, Ellen Tracy, and Caribbean Joe; and
(s) all of the assets set forth on Schedule 1.2(s).
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Section 1.3 Assumption of Liabilities. On the terms and subject to the conditions set forth herein, at the Closing, Buyer and/or each relevant Buyer Designee will assume, without duplication, and will in a timely manner pay, perform and discharge when due and be responsible for, in accordance with their respective terms, the following Liabilities of Sellers other than Excluded Liabilities (collectively, the “Assumed Liabilities”):
(a) all Liabilities to the extent exclusively relating to, arising from or with respect to the ownership or use of the Transferred Assets, or exclusively relating in any manner to the assumption, ownership, conduct or operation of, the Business, in each case, to the extent arising solely out of any event, fact, act, omission or condition occurring after the Closing and, with respect to the ownership of the Transferred Assets, only to the extent the Transferred Assets cannot as a matter of Law be sold free and clear of Liabilities under Section 363 of the Bankruptcy Code or other applicable Law;
(b) the accounts payable set forth on Schedule 1.3(b) and any additional accounts payable arising in the Ordinary Course between the date hereof and the Closing (collectively, the “Assumed Accounts Payable”);
(c) all Liabilities for any Tax that Buyer expressly bears under Section 6.4;
(d) all Liabilities under the Closing Assumed Contracts and the Additional Assumed Contracts in each case, to the extent arising out of any event, fact, act, omission or condition occurring after the Closing;
(e) all Liabilities related to the Assigned Actions to the extent arising out of any event, fact, act, omission or condition occurring after the Closing;
(f) all Liabilities under any Transferred Permit to the extent arising solely out of any event, fact, act, omission or condition occurring after the Closing; and
(g) all Liabilities set forth on Schedule 1.3(g).
Section 1.4 Excluded Liabilities. Notwithstanding anything to the contrary set forth in this Agreement or in any of the other Transaction Documents, the Parties expressly acknowledge and agree that Buyer will not, nor will any Buyer Designee, assume, be obligated to pay, perform or otherwise discharge or in any other manner be liable or responsible for any and all Liabilities that are not specifically Assumed Liabilities (all such Liabilities that are not specifically Assumed Liabilities, the “Excluded Liabilities”) including, for the avoidance of doubt, any and all of the following:
(a) any Liability under the Prepetition Credit Agreements and any other Indebtedness of the Sellers;
(b) any Liability to the extent arising out of any Excluded Asset, including the Excluded Contracts;
(c) all Actions (excluding, for the avoidance of doubt, any Assigned Actions) to the extent against or giving rise to Liabilities of the Business or the Transferred Assets based on acts or omissions prior to the Closing Date even if instituted after the Closing Date;
(d) all Liabilities to any current or former holder or owner of capital stock or other equity interests of the Sellers or any security convertible into, exchangeable or exercisable for shares of capital stock or other equity interests of the Sellers or any current or former holder of Indebtedness of Sellers;
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(e) all drafts or checks outstanding at the Closing under which the Sellers are obligated;
(f) indemnification or advancement of expenses for any current or former officer or director of any Seller or any of the Subsidiaries of Sellers;
(g) all accounts payable other than the Assumed Accounts Payable;
(h) any and all Taxes allocated to, of or imposed on Sellers, including without limitation, (i) all Asset Taxes for any period or portion thereof ending on or prior to the applicable Closing Date, (ii) Taxes imposed on or with respect to the Business or the Transferred Assets that are attributable to any period or portion thereof ending on or prior to the applicable Closing Date or that arise as a consequence of the Closing or the other Transactions, excluding any Transfer Taxes covered by Section 6.4(a), and (iii) Taxes payable to the extent arising out of or related to the Excluded Assets or with respect to the business or activities of any Seller or any of its Affiliates (including divested or discontinued business of any Seller or its Affiliates);
(i) all Liabilities relating to (i) the collection, storage, transmission, use or disposal of any Personal Information of any third party, in each case on or before the Closing Date, and (ii) the transfer of any such Personal Information to Buyer to the extent permitted under this Agreement;
(j) all Intracompany Payables;
(k) any and all Excluded Employee Liabilities;
(l) any payment obligation or liability, contingent or otherwise, for brokerage or finders’ fees or similar payment in connection with this Agreement;
(m) all Liabilities that existed, arose or were incurred (i) prior to the Petition Date unless expressly assumed in Section 1.3 or (ii) subsequent to the Petition Date and prior to the Closing Date, unless expressly assumed herein, including in each case of (i) and (ii) Liabilities that are dischargeable in the Bankruptcy Proceedings;
(n) all Liabilities relating to, arising from or with respect to any worker’s compensation claims and any other occurrence-based claim to the extent arising out of any event, fact, act, omission or condition occurring prior to the Closing Date, irrespective of when such Liabilities arise;
(o) all Liabilities of Sellers under or arising out of the Transaction Documents and all Liabilities for which Sellers or any of their respective Affiliates are expressly made responsible pursuant to this Agreement or any other Transaction Document;
(p) all Cure Costs;
(q) all Liabilities for all costs and expenses incurred or owed in connection with (i) the administration of the Bankruptcy Proceedings, or (ii) the negotiation, execution and consummation of the Transactions or any other Transaction Document;
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(r) all Liabilities relating to, arising from or with respect to, the conduct of the Business or to the Transferred Assets (and the use thereof) arising or accruing at any time at or prior to the Closing; and
(s) any other Liability of any kind, whether known or unknown, contingent, matured or otherwise, whether currently existing or hereinafter created, other than an Assumed Liability.
Section 1.5 Assumption and Assignment of Contracts.
(a) Sellers shall assign to Buyer or any Buyer Designee, and Buyer or any such Buyer Designee shall assume, the Closing Assumed Contracts at the Closing pursuant to the Sale Order. Buyer shall provide adequate assurance of any future performance in connection with the assignment and assumption of the Closing Assumed Contracts at Closing or the effective date of such assignment and assumption of an Additional Assumed Contract; provided, that all Cure Costs shall be the obligation, liability and responsibility of the Sellers.
(b) The Sale Order shall provide for the assumption by the applicable Seller party thereto, and the assignment to the extent legally capable of being assigned by such Seller to Buyer or any Buyer Designee, of each Closing Assumed Contract, and each Additional Assumed Contract, as applicable, pursuant to Section 365 of the Bankruptcy Code, the Bid Procedures Order, and the Sale Order.
(c) Sellers shall file with the Bankruptcy Court a notice (a “Notice of Potential Assignment”) in the form and manner approved pursuant to the Bid Procedures Order that Sellers may wish to assume and assign certain Seller Contracts in connection with the Transactions (each, an “Identified Contract”). At any time prior to the date that is five (5) days prior to the date of the Bankruptcy Court hearing to consider approval of this Agreement (the “Sale Hearing”), Buyer may, subject to the terms of the Bid Procedures Order, by written notice to the Sellers, designate, in writing, any Identified Contract for rejection by the Sellers effective on or as soon as reasonably practicable after the Closing (such Identified Contracts, the “Rejected Identified Contracts”). The Rejected Identified Contracts as of the date hereof are set forth on Schedule 1.5(c), which schedule shall be (and shall be deemed) modified or supplemented to reflect additions or removals, as applicable, of Identified Contracts that are designated for rejection as set forth in this Section 1.5 (the “Rejected Contracts Schedule”). At the Closing, Sellers shall assume and assign to Buyer or any Buyer Designee the Closing Assumed Contracts and any Additional Assumed Contracts, in each case, pursuant to Section 365 of the Bankruptcy Code, the Bid Procedures Order, and the Sale Order, subject to provision by Buyer of adequate assurance of future performance as may be required under Section 365 of the Bankruptcy Code.
(d) At any time prior to the date that is five (5) days prior to the date of the Sale Hearing (the “Designation Deadline”), Buyer may, subject to the terms of the Bid Procedures Order, by written notice to the Sellers, (i) designate additional Identified Contracts or any other executory contracts that Buyer wishes the Sellers to assume and assign to Buyer or any Buyer Designee in connection with the Transactions as “Additional Assumed Contracts” by providing written notice to Sellers in the form of an updated Additional Assumed Contracts Schedule; and (ii) designate additional Identified Contracts or any other executory Contracts that Buyer wishes for Sellers to reject in connection with the Transactions as “Additional Rejected Contracts” by providing written notice to Sellers in the form of an updated Rejected Contracts Schedule. Notwithstanding anything to the contrary contained in this Agreement, if as of the Closing Date, any Closing Assumed Contract or Additional Assumed Contract is the subject of an objection as to the amount of the Cure Costs required for the Sellers to assume and assign such contract to the Buyer or any Buyer Designee, or other objection as to the assumption and assignability of such contract, and such objection has not been resolved to the satisfaction of Buyer prior to the Closing Date, Buyer shall have the right to remove such contract from the Closing Assumed Contracts and Additional Assumed Contracts lists before the Closing Date such that such contract shall not be considered assumed and assigned to Buyer as of the Closing Date hereunder. Additional procedures for the assumption and assignment of any additional Closing Assumed Contracts and Additional Assumed Contracts, if any, shall be as set forth in the Sale Order.
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(e) [Reserved].
(f) As part of the motion with respect to the Bid Procedures Order (or as necessary in one or more separate motions), Sellers shall request that, by virtue of any Seller providing prior notice pursuant to the Bid Procedures Order of its intent to assume and assign any Closing Assumed Contract or Additional Assumed Contract, the Bankruptcy Court deem any non-debtor party to such Closing Assumed Contract or Additional Assumed Contract that does not file an objection with the Bankruptcy Court during such notice period to have given any Necessary Consent to the assumption of the Closing Assumed Contract or Additional Assumed Contract by the relevant Seller and assignment to Buyer or any Buyer Designee.
(g) At Buyer’s request, Sellers shall reasonably cooperate with Buyer as reasonably requested by Buyer to allow Buyer to enter into an amendment of any Closing Assumed Contract or Additional Assumed Contract upon assignment of such Closing Assumed Contract or Additional Assumed Contract to Buyer or any Buyer Designee (and Sellers shall reasonably cooperate with Buyer to the extent reasonably requested by Buyer in negotiations with the counterparties thereof); provided that (i) in no event shall any such amendments be effective prior to the Closing and (ii) Sellers shall not be required to enter into any such amendment if such amendment would result in the incurrence of any additional Liability or any other adverse effect that would not have existed but for such amendment by Sellers that is not otherwise paid by Buyer at the time of the assumption by Sellers of such Closing Assumed Contract or Additional Assumed Contract.
(h) [Reserved]
(i) Subject to Section 1.5(j) and the Bid Procedures Order, to the extent that there is (i) an objection to the assumption and assignment of any Closing Assumed Contract outstanding at the Closing Date, (ii) an objection to the assumption and assignment of any Additional Assumed Contract or (iii) any Necessary Consent that is required to assume and assign to Buyer or any Buyer Designee any Closing Assumed Contract or Additional Assumed Contract is not obtained by the Closing Date, each Seller shall, with respect to each such Seller Contract, from and after the Closing and until the earliest to occur of (A) the date on which such objection is resolved or such applicable Necessary Consent is obtained, and (B) the date on which such Seller Contract is deemed rejected under Section 365 of the Bankruptcy Code, use commercially reasonable efforts during the term of such Seller Contract (and to the extent the term of such Seller Contract ends prior to the earlier of clauses (A) or (B) above) to (1) provide to Buyer the benefits under such Seller Contract (it being understood that Buyer shall be solely responsible for the obligations under such Seller Contract during such period), (2) cooperate in any reasonable and lawful arrangement, including holding such Seller Contract in trust for Buyer pending resolution of such objection or receipt of the Necessary Consent, designed to provide such benefits to Buyer, and (3) enforce for the account of Buyer any rights of such Seller under such Seller Contract, including the right to elect to terminate such Seller Contract in accordance with the terms thereof upon the written direction of Buyer; provided, however, that notwithstanding the foregoing, Sellers shall not be obligated to take any action that breaches, violates or results in default under the terms of any Seller Contract. Buyer shall reasonably cooperate with Sellers in order to enable Sellers to provide to Buyer the benefits contemplated by this Section 1.5(i).
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(j) Notwithstanding the foregoing, a Seller Contract shall not be a Closing Assumed Contract or Additional Assumed Contract hereunder and shall not be assigned to Buyer to the extent that such Seller Contract is (i) deemed rejected under Section 365 of the Bankruptcy Code or (ii) the subject of an objection to assumption or assignment or requires, under applicable non-bankruptcy Law, Necessary Consent of any Governmental Entity or other third party (other than, and in addition to, that of the Bankruptcy Court) in order to permit the assumption and assignment by the applicable Seller to Buyer or any Buyer Designee of such Seller Contract pursuant to Section 365 of the Bankruptcy Code, and such objection has not been resolved or such Necessary Consent has not been obtained prior to the 60th day following the Closing (as such 60-day period may be extended by mutual agreement of Buyer and Sellers); provided that any Closing Assumed Contract or Additional Assumed Contract that is the subject of an objection with respect solely to the amount of the Cure Cost may be assumed and assigned prior to the resolution of such objection pursuant to the Bid Procedures Order (provided Sellers have escrowed the disputed Cure Cost pending resolution of such objection that is acceptable to Buyer).
(k) If prior to or following Closing, it is discovered that a Contract that is Related to the Business should have been listed on Schedule 1.5(c) as an Identified Contract but was not so listed and has not been rejected by Sellers (any such Contract, a “Previously Omitted Contract”), Sellers shall, promptly following the discovery thereof (but in no event later than two (2) Business Days following the discovery thereof), notify Buyer in writing of such Previously Omitted Contract and all Cure Costs (if any) for such Previously Omitted Contract. Buyer shall thereafter deliver written notice to Sellers, no later than five Business Days following notification of such Previously Omitted Contract from Sellers, designating such Previously Omitted Contract as “Assumed” or “Rejected” (a “Previously Omitted Contract Designation”). A Previously Omitted Contract designated in accordance with this Section 1.5(k) as “Rejected,” or with respect to which Buyer fails to deliver a Previously Omitted Contract Designation, shall be deemed an Excluded Contract and added to the Rejected Contracts Schedule.
(l) If Buyer designates a Previously Omitted Contract as “Assumed” in accordance with Section 1.5(k), (i) such Previously Omitted Contract shall be added to the Additional Assumed Contracts Schedule and deemed to be an “Additional Assumed Contract” for all purposes hereunder, and (ii) Sellers shall serve a notice (the “Previously Omitted Contract Notice”) on the counterparties to such Previously Omitted Contract notifying such counterparties of the Cure Costs with respect to such Previously Omitted Contract and Sellers’ intention to assume and assign such Previously Omitted Contract in accordance with this Section 1.5(l). The Previously Omitted Contract Notice shall provide the counterparties to such Previously Omitted Contract with notice pursuant to the terms of the Bid Procedures Order. If the counterparties, Sellers and Buyer are unable to reach a consensual resolution with respect to the objection, Sellers shall seek a hearing before the Bankruptcy Court (which may be sought on an expedited basis) to determine the Cure Costs and approve the assumption. If no objection is served on Sellers and Buyer, such Previously Omitted Contract may be deemed a Closing Assumed Contract. For the avoidance of doubt, Sellers shall be responsible for all Cure Costs relating to such “Assumed” Previously Omitted Contracts and for any Liabilities relating to such “Assumed” Previously Omitted Contracts arising prior to the assignment to Buyer.
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Section 1.6 Non-Assignment of Assets. Notwithstanding any other provision of this Agreement to the contrary, this Agreement will not constitute an agreement to assign or transfer and will not effect the assignment or transfer of any Transferred Asset (including any Closing Assumed Contract or Additional Assumed Contract) if (i) (A) prohibited by applicable Law, (B) an attempted assignment or transfer thereof would be reasonably likely to subject Buyer, its Affiliates or any of its or their respective Representatives to civil or criminal Liability or (C) an attempted assignment or transfer thereof, without the approval, authorization, consent or waiver of, or granting or issuance of any license or permit by, any third party thereto (each such action, a “Necessary Consent”), would constitute a breach, default or violation thereof or of any Law or Order or in any way adversely affect the rights of Buyer or any Buyer Designee (including relative to the rights of the assigning party prior to such assignment) or (ii) the Bankruptcy Court has not entered an Order approving such assignment or transfer. In the event such assignment or transfer is subject to such Necessary Consent being obtained, Sellers and Buyer will use their commercially reasonable efforts to obtain the Necessary Consents with respect to any such Transferred Asset (including any Closing Assumed Contract or Additional Assumed Contract) or any claim or right or any benefit arising thereunder for the assignment or transfer thereof to Buyer, as Buyer may reasonably request and at Buyer’s sole cost and expense; provided, however, that none of Sellers, Buyer or Buyer Designees will be obligated to pay any consideration therefor to any third party from whom approval, authorization, consent or waiver is requested. If such Necessary Consent is not obtained, or if an attempted assignment or transfer thereof would give rise to any of the circumstances described in clauses (i) or (ii) of the first sentence of this Section 1.6, be ineffective or adversely affect the rights of Buyer to such Transferred Asset following the Closing, (x) Sellers and Buyer will, and will cause their respective Subsidiaries to, at Buyer’s sole cost and expense, (1) use commercially reasonable efforts (including cooperating with one another to obtain such Necessary Consents, to the extent feasible) as may be necessary so that Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement, (2) complete any such assignments or transfers as soon as reasonably practicable and (3) upon receipt of any applicable Necessary Consents, transfer or assign the applicable Transferred Asset to Buyer for no additional consideration, and (y) Sellers will, and will cause their respective Subsidiaries to, cooperate with Buyer in good faith without further consideration in any arrangement reasonably mutually acceptable to Sellers and Buyer intended to provide Buyer with the benefit of any such Transferred Assets at Buyer’s sole cost and expense.
Section 1.7 Wrong Pocket. Subject to Section 1.6, if at any time after the Closing (i) Buyer or a Buyer Designee holds, directly or indirectly, any Excluded Assets or Excluded Liabilities or (ii) any Seller holds, directly or indirectly, any Transferred Assets or Assumed Liabilities, Buyer or the applicable Seller will promptly Transfer (or cause to be Transferred) such assets or assume (or cause to be assumed) such Liabilities to or from (as the case may be) the other Party, without further consideration from the other Party. Prior to any such transfer, the Party receiving or possessing any such asset will hold it in trust for such other Party. If at any time after the Closing, any Seller or any of its Subsidiaries receives any payments in respect of the Transferred Assets, such Seller shall, or shall cause such Subsidiary to, promptly remit such payments to Buyer (or any Buyer Designee). Subject in all cases to Section 6.13, if at any time after the Closing, Buyer receives any payments in respect of the Excluded Assets, Buyer shall promptly remit such payments to the applicable Seller or its Subsidiary.
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Section 1.8 Further Conveyances and Assurances. From time to time following the Closing, Sellers and Buyer will, and will cause their respective Subsidiaries to, execute, acknowledge and deliver all such further conveyances, notices, assumptions, assignments, releases and other instruments, and will take such further actions, as may be reasonably necessary or appropriate to assure to Buyer, its designees, successors or assigns, all of the properties, rights, titles, interests, estates, remedies, powers and privileges intended to be conveyed to Buyer under this Agreement and to assure fully to each Seller and its Subsidiaries and their respective successors and assigns, the assumption of the Liabilities and obligations intended to be assumed by Buyer under this Agreement, and to otherwise make effective the Transactions.
Section 1.9 Buyer Designees. Buyer shall be entitled to designate, in accordance with the terms and subject to the limitations set forth in this Section 1.9, one or more Affiliates of Buyer to (i) purchase specified Transferred Assets and/or (ii) assume specified Assumed Liabilities, in each case, as of the Closing Date (any Person that shall be properly designated by Buyer in accordance with this clause, a “Buyer Designee”); it being understood and agreed, however, that any such right of Buyer to designate a Buyer Designee is conditioned upon such Buyer Designee being able to perform the applicable covenants under this Agreement and, as applicable, any other Transaction Document to which Buyer is party and demonstrate satisfaction of the requirements of Section 365 of the Bankruptcy Code (to the extent applicable). As soon as reasonably practicable and in no event later than one (1) Business Days prior to the Closing, Buyer shall make any such designations of Buyer Designees by way of a written notice to be delivered to the Sellers. For the avoidance of doubt, and notwithstanding anything to the contrary herein, all Buyer Designees appointed in accordance with this Section 1.9 shall be included in the definition of “Buyer” mutatis mutandis for all purposes under this Agreement. Notwithstanding anything in this Agreement, no designation of a Buyer Designee pursuant to this Section 1.9 shall relieve Buyer of any obligation under this Agreement or the Transaction Documents, and in the event of such designation, both Buyer and such Buyer Designee shall be jointly and severally liable for each obligation of Buyer under this Agreement and the Transaction Documents.
Section 1.10 Swisstech. Notwithstanding anything herein to the contrary, in the event the Action set forth on Schedule 1.10 has not been settled in a manner acceptable to Buyer, Buyer shall have the option, in its sole discretion, by providing written notice to Sellers at least five (5) Business Days prior to the Closing (a “Swisstech Removal Notice”) to remove all assets and Liabilities primarily related to Swisstech from the Transferred Assets and Assumed Liabilities. In the event a Swisstech Removal Notice is validly and timely delivered to Buyer, the following changes to this Agreement shall automatically take effect without any further action of the Parties or any other Person:
(a) The Estimated Debt Consideration and Final Debt Consideration shall be reduced by $4,050,000;
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(b) The reference to “Swisstech” shall be removed from the definition of the “Business”;
(c) The reference to “Swisstech” shall be removed from the definition of “Royalty Adjustment” and the amount referenced in such definition shall be reduced to $57,100,000; and
(d) For the avoidance of doubt, the Transferred Assets (including the Closing Assumed Contracts and the Additional Assumed Contracts) and Assumed Liabilities (including the Closing Assumed Accounts Payable) shall in no event include any assets or Liabilities primarily related to the Swisstech brand and any such assets or Liabilities shall instead, for all purposes of this Agreement, be considered Excluded Assets or Excluded Liabilities.
To the extent necessary following delivery of the Swisstech Removal Notice and prior to the Closing, the Parties shall negotiate in good faith such additional changes to this Agreement, if any, as may be necessary to give effect to the removal of all assets and Liabilities of the Swisstech brand from “Transferred Assets” and “Assumed Liabilities.”
Article II
Consideration; Closing
Section 2.1 Consideration.
(a) At the Closing, in consideration for the purchase, sale, assignment and conveyance of Sellers’ right, title and interest in, to and under the Transferred Assets:
(i) Buyer shall pay or cause to be paid an amount equal to the Estimated Cash Consideration less the Escrow Amount (the “Closing Date Payment”) to Sellers by wire transfer of immediately available funds to the account of Sellers designated in the Estimated Closing Statement, which Closing Date Payment shall be distributed in accordance with the Sale Order;
(ii) Buyer shall issue or cause to be issued a number of Series A Units of Gainline Galaxy Holdings LLC equal to 11.3% of the aggregate outstanding Series A Units and Series B Units of Gainline Galaxy Holdings at the Closing (the “Equity Consideration”), pursuant to a subscription in substantially the form attached hereto as Exhibit E, such units to be valued at $50 million and to be distributed in accordance with the Sale Order;
(iii) Buyer shall issue or caused to be issued the Estimated Debt Consideration, with such indebtedness (i) subject to adjustment upon determination of the Final Debt Consideration and (ii) to be distributed in accordance with the Sale Order and ;
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(iv) Buyer shall deliver, or cause to be delivered, to the Escrow Agent in accordance with the terms of the Escrow Agreement an amount equal to the Escrow Amount to be held in the Escrow Account; and
(v) Buyer shall assume the Assumed Liabilities, and assume and be assigned the Closing Assumed Contracts and the Additional Assumed Contracts.
(b) No later than five (5) Business Days prior to the Closing Date, Sellers shall prepare and deliver to Buyer a statement (the “Estimated Closing Statement”) setting forth (i) Sellers’ good faith determination, together with reasonable supporting documentation, of (A) the Royalty Adjustment (the “Estimated Royalty Adjustment”), (B) the Delinquent Accounts Receivable Deficiency, (C) any amounts related to the East Asia Delinquent Accounts Receivable collected by Sellers as of the Closing Date, (D) the Closing Assumed Accounts Payable and (E) the Marketing Adjustment, together with a calculation of the Cash Consideration based on the foregoing amounts (the “Estimated Cash Consideration”) and (ii) the account or accounts of the Sellers to which the Closing Date Payment shall be wired. The Estimated Closing Statement shall be prepared on a basis consistent with this Agreement and the illustrative calculation attached as Exhibit I hereto (the “Sample Calculation”). Sellers and Buyer shall consult and cooperate with respect to the preparation of the Estimated Closing Statement, and Sellers shall provide access to such working papers, financial records, information (including working papers, financial records and information of their respective independent accountants) and individuals relating to the preparation of the Estimated Closing Statement as may be reasonably requested by Buyer or any of its Affiliates and their respective Representatives. Sellers shall consider in good faith any comments provided by Buyer or its Representatives with respect to the calculation of the Estimated Cash Consideration and the elements thereof; provided, however that no Party shall be entitled to delay the Closing on the basis of the foregoing.
Section 2.2 Purchase Price Adjustment.
(a) Following the Closing, but in any event no later than 90 days thereafter, Buyer shall cause to be prepared and delivered to the Sellers a statement (the “Closing Date Statement”) setting forth its calculation of the (i) the Royalty Adjustment (the “Final Royalty Adjustment”), (ii) the Delinquent Accounts Receivable Deficiency, (iii) any amounts related to the East Asia Delinquent Accounts Receivable collected by Sellers as of the Closing Date, (iv) the Closing Assumed Accounts Payable and (v) the Marketing Adjustment, and the calculation of the Cash Consideration resulting therefrom (the “Final Cash Consideration”). The Closing Date Statement (A) shall be prepared on a basis consistent with this Agreement and the Sample Calculation. To the extent any actions following the Closing with respect to the accounting books and records of Sellers on which the Closing Date Statement and the calculation of the Final Cash Consideration is to be based are not consistent with the Sample Calculation, such changes shall not be taken into account in preparing the Closing Date Statement or calculating amounts reflected thereon.
(b) Buyer shall make such information, personnel and resources available to the Sellers and their Representatives as may be reasonably requested by the Sellers to enable the Sellers to review the Closing Date Statement.
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(c) In the event that Sellers dispute the calculation of the Final Cash Consideration set forth in the Closing Date Statement, Sellers shall notify Buyer in writing (the “Dispute Notice”) of the amount, nature and basis of such dispute, within thirty (30) days after delivery of the Closing Date Statement. In the event of such a dispute, Buyer and Sellers shall first use their respective commercially reasonable efforts to resolve such dispute. If Buyer and Sellers are unable to resolve the dispute within thirty (30) calendar days after delivery of the Dispute Notice then any remaining items in dispute shall be submitted to a nationally recognized accounting firm jointly chosen by Buyer and Sellers (the “Audit Firm”). If such disagreement and the determination of the Final Cash Consideration are submitted to the Audit Firm for resolution, then (i) Sellers and Buyer shall execute any agreement(s) required by the Audit Firm to accept their engagement pursuant to this Section 2.2(c), (ii) Buyer shall promptly furnish or cause to be furnished to the Audit Firm and to Sellers such work papers and other documents and information relating to the computation of the Final Cash Consideration as the Audit Firm or Sellers may reasonably request and are available to Buyer, (iii) each Party shall be afforded the opportunity to present to such Audit Firm, with a copy to the other Party, any other written material relating to the computation of the Final Cash Consideration, (iv) the Audit Firm shall review only those items that are in dispute, (v) the Audit Firm shall not attribute a value to any single disputed amount greater than the greatest amount proposed by either Party nor an amount less than the least amount proposed by either Party, and (vi) Sellers, on the one hand, and Buyer, on the other hand, shall each bear the proportion of the fees and expenses of the Audit Firm based on the degree (as determined by the Audit Firm) to which the Audit Firm has accepted the positions of Buyer and Sellers; provided, however, that the engagement agreement(s) referred to in subpart (i) above may require the Parties to be bound jointly and severally to the Audit Firm for those fees and costs and, therefore, in the event Sellers or Buyer pays to the Audit Firm an amount in excess of its proportionate share determined in accordance with clause (vi) above of the fees and costs of the Audit Firm’s engagement, the other Party agrees to reimburse Sellers or Buyer, as the case may be, to the extent required to correct the payments made by the Sellers and Buyer with respect to the fees and costs of the Audit Firm. The written decision of the Audit Firm shall be rendered within no more than sixty (60) days from the date that the matter is referred to such firm and shall be final and binding on the Parties and, in the absence of fraud or manifest error, shall not be subject to dispute or review. Following any such dispute resolution (whether by mutual agreement of the Parties or by written decision of the Audit Firm), the Final Cash Consideration (as determined in such dispute resolution) shall be determined final.
(d) Immediately upon the expiration of the thirty (30) day period for giving the Dispute Notice, if no such notice is given, or upon notification by Sellers to Buyer that no such notice will be given, Buyer’s calculations set forth in the Closing Date Statement shall be final and binding on the Parties and shall not be subject to dispute or review.
(e) If the Final Cash Consideration (as set forth in the Closing Date Statement or as finally determined pursuant to Section 2.2(c) and Section 2.2(d), as the case may be) is less than the Estimated Cash Consideration (the absolute value of such difference between the Final Cash Consideration and the Estimated Cash Consideration the “Shortfall Amount”), Buyer and Sellers shall (i) promptly (but in any event within five (5) Business Days) deliver instructions in accordance with the Escrow Agreement to the Escrow Agent to pay to Buyer the Shortfall Amount from the Escrow Account and (ii) in the event the Shortfall Amount exceeds the amount of funds then remaining in the Escrow Account, Buyer shall be entitled to deduct such difference from (x) the portion of any Shared Payables that otherwise are or become payable to the Sellers and (y) any East Asia A/R Payment. In the event that the funds available in the Escrow Account are in excess of the Shortfall Amount (such excess, the “Escrow Excess Amount”), Sellers and Buyer shall simultaneously with the delivery of the instructions described in the first sentence of this Section 2.2(e), deliver instructions in accordance with the Escrow Agreement to the Escrow Agent to pay to Sellers the Escrow Excess Amount.
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(f) If the Final Cash Consideration (as set forth in the Closing Date Statement or as finally determined pursuant to Section 2.2(c) and Section 2.2(d), as the case may be) is greater than the Estimated Cash Consideration (such difference between the Final Cash Consideration and the Estimated Cash Consideration the “Excess Amount”), Buyer and Sellers shall promptly (but in any event within five (5) Business Days) deliver instructions in accordance with the Escrow Agreement to the Escrow Agent to pay to Seller the funds in the Escrow Account. In the event that the funds available in the Escrow Account are less than the Excess Amount, Buyer shall, within five (5) Business Days of the determination of the Final Cash Consideration, pay to Sellers such deficiency amount by wire transfer of immediately available funds to one (1) or more accounts of Sellers, and in such amounts, designated by Sellers to Buyer.
(g) The Parties agree that any payments made pursuant to Section 2.2 of this Agreement shall be treated for all federal, state and local income tax purposes as an adjustment to the Purchase Price, unless otherwise required by applicable Law.
Section 2.3 Closing. The closing (the “Closing”) of the purchase and sale of the Transferred Assets and the assumption of the Assumed Liabilities (together with the other transactions contemplated by this Agreement, the “Transactions”) shall take place remotely, via electronic exchange of documents, at 10:00 a.m., prevailing Eastern time, (a) on the third (3rd) Business Day following the date on which the last conditions set forth in Section 7.1, Section 7.2, and Section 7.3 (other than those conditions that by their nature are to be satisfied at the Closing but subject to the fulfillment or waiver of those conditions) has been satisfied or waived; or (b) at such other date, time and place as the Parties may mutually agree. The date on which the Closing occurs is called the “Closing Date.”
Section 2.4 Closing Deliveries by Buyer. At the Closing, Buyer shall deliver, or cause to be delivered, to Sellers, the following:
(a) the payment required to be made to Sellers pursuant to Section 2.1(a)(i);
(b) the certificate to be delivered pursuant to Section 7.3(c);
(c) duly executed counterparts to one or more assumption and assignment agreements, substantially in the form of Exhibit B attached hereto (the “Assumption and Assignment Agreement”);
(d) duly executed counterparts to one or more instruments of assignment substantially in the form of Exhibit C attached hereto with respect to the transfer of the issued, registered and applied-for Transferred Intellectual Property (the “IP Assignment and Assumption Agreement”);
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(e) duly executed counterparts to one or more bill of sale agreements, substantially in the form of Exhibit F attached hereto (the “Bill of Sale”);
(f) with respect to the Transactions, all Transfer Tax returns required to be prepared by Sellers and Buyer pursuant to Section 6.4(a), duly executed by Buyer;
(g) a duly executed counterpart to the Second Amended and Restated Limited Liability Company Agreement of Gainline Galaxy Holdings LLC (the “Holdings Second A&R LLC Agreement”);
(h) a duly executed counterpart to the Escrow Agreement; and
(i) such other instruments of assumption and other instruments or documents, including, without limitation, bills of sale and/or assignment and assumption agreements, in form and substance reasonably acceptable to Sellers and Buyer, as may be necessary to effect Buyer’s assumption of the Assumed Liabilities and the Transfer of any Transferred Assets in accordance with the requirements of applicable Law and this Agreement, in each case duly executed by Buyer.
Section 2.5 Closing Deliveries by Sellers. At the Closing, Sellers shall deliver, or cause to be delivered, to Buyer, the following:
(a) the certificate to be delivered pursuant to Section 7.2(c);
(b) an IRS Form W-9 with respect to such Seller that is a United States person within the meaning of Section 7701 of the Code, duly completed and executed;
(c) duly executed counterparts to the Assumption and Assignment Agreements;
(d) duly executed counterparts to the Bills of Sale;
(e) duly executed counterparts to the IP Assignment and Assumption Agreements;
(f) with respect to the Transactions, all Transfer Tax returns required to be prepared by Sellers and Buyer pursuant to Section 6.4(a), duly executed by Sellers;
(g) Lien Release Letters;
(h) a duly executed counterpart to the Holdings Second A&R LLC Agreement;
(i) a duly executed counterpart to the Escrow Agreement; and
(j) such other instruments of assumption and other instruments or documents, including, without limitation, bills of sale and/or assignment and assumption agreements and other documents evidencing or otherwise necessary to give effect to the Transfer of the Transferred Assets and Buyer’s assumption of the Assumed Liabilities and the effective Transfer of the Transferred Assets in accordance with the requirements of applicable Law and this Agreement, in each case duly executed by the applicable Seller.
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Section 2.6 Withholding. Buyer shall be entitled to deduct and withhold from amounts payable pursuant to this Agreement any amounts required to be deducted and withheld under the Code or any provision of any U.S. federal, state, local or foreign Tax Law. Any amounts so withheld shall be paid over to the appropriate Governmental Entity. To the extent that amounts are so deducted and withheld, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid to Sellers. The Parties shall cooperate and use their commercially reasonable efforts to prepare and submit all necessary filings in connection with obtaining any available exemption from such withholding requirement.
Article III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the corresponding numbered section or subsection of a Schedule (it being agreed that (i) for the purposes of the representations and warranties made by Sellers in this Agreement, disclosure of any item in any Schedule shall be deemed disclosure with respect to any other section or sub-section of the Agreement to which the relevance of such item is reasonably apparent on its face and (ii) the information and the dollar thresholds set forth herein shall not be used as a basis for interpreting the terms “material” or “Material Adverse Effect” or other similar terms in this Agreement), Sellers, jointly and severally, represent and warrant to Buyer as follows:
Section 3.1 Organization; Good Standing; Qualification and Power. Each Seller is duly organized, validly existing and in good standing under the Laws of the State of its organization, has all requisite power and authority to own, lease and operate its assets and to carry on its business as presently being conducted and as contemplated to be conducted, and is qualified to do business and in good standing in every jurisdiction in which the operation of the business of such Seller requires such company to be so qualified, except for any failure to be in good standing as would not, individually or in the aggregate, have a Material Adverse Effect.
Section 3.2 Authorization. Subject to the issuance of the Bid Procedures Order and the Sale Order and any other Order necessary to consummate the transactions contemplated by this Agreement and the other Transaction Documents:
(a) each Seller has the requisite power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and to consummate the Transactions;
(b) the execution and delivery of this Agreement and the other Transaction Documents to which such Seller is a party and the consummation of the Transactions by such Seller has been, or prior to the Closing will be, duly authorized by all necessary action on the part of such Seller; and
(c) this Agreement and the other Transaction Documents to which such Seller is a party have each been, or will be at the Closing, duly executed and delivered by such Seller and, assuming this Agreement and the other Transaction Documents to which it is a party constitute the valid and binding obligation of Buyer, will constitute the valid and binding obligation of such Seller, enforceable against such Seller in accordance with their respective terms except as limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or preferential transfer and other Laws of general applicability affecting enforcement of creditors’ rights generally and (b) Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
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Section 3.3 Non-contravention. Except as set forth in Schedule 3.3 and except as would not, individually or in the aggregate, have a Material Adverse Effect, the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party by each Seller, and the consummation of the Transactions, and compliance with the provisions hereof and thereof do not and will not (a) violate any Law to which such Seller or any of its assets is subject, (b) violate any provision of the Organizational Documents of such Seller, (c) violate, conflict with, result in a breach of, constitute (with due notice or lapse of time or both) a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify or cancel, require any notice under, or otherwise give rise to any Liability under, any Contract that is a Transferred Asset, or (d) result in the creation or imposition of any Lien upon any of the Transferred Assets.
Section 3.4 Consents and Approvals. Schedule 3.4 sets forth a true, correct and complete list of each consent, waiver, authorization or approval of any Governmental Entity or regulatory authority, domestic or foreign, or any other Person, firm or corporation, and each declaration to or filing or registration with any such Governmental Entity or regulatory authority, that is required of or to be made by each Seller in connection with the execution and delivery of this Agreement or the other Transaction Documents or the performance by such Seller of its obligations hereunder and thereunder, except for such consents, waivers, authorizations or approvals, the failure of which to be received or made as would not, individually or in the aggregate, have a Material Adverse Effect.
Section 3.5 RESERVED.
Section 3.6 Litigation. Except as set forth on Schedule 3.6 or as would have a Material Adverse Effect, there is no Action pending or, to the Knowledge of Sellers, threatened by or against, or affecting the Transferred Assets, the Business or any Seller with respect to the Business or to the Knowledge of the Sellers, against any officer, director, shareholder, employee or agent of any Seller in their capacity as such or relating to their employment services or relationship with the Business, and none of the Business or any Seller with respect to the Business is bound by any Order affecting the Transferred Assets. None of the Business or any Seller with respect to the Business has any Action pending against any Governmental Entity or other Person affecting the Transferred Assets. None of the Business or any Seller with respect to the Business has been engaged in a dispute with any customer which, either individually or in the aggregate, has adversely affected or would be reasonably likely to materially adversely affect the Business. To the Knowledge of Sellers, there is no basis for any Person to assert a claim against any Seller based upon such Seller entering into this Agreement, the other Transaction Documents or the consummation of the Transactions.
Section 3.7 Real Property. The Sellers do not own, and have never owned, any real property Related to the Business.
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Section 3.8 Material Contracts.
(a) Other than this Agreement and the other Transaction Documents, Schedule 3.8(a) sets forth a true and correct list of the following Contracts as of the date hereof that are Related to the Business (together, the “Material Contracts”):
(i) Contract that provides for a payment or benefit, or accelerated vesting, upon the execution of this Agreement or the Closing or in connection with any of the transactions contemplated by the Transaction Documents;
(ii) Contract relating to Indebtedness or to the mortgaging, pledging or otherwise placing a Lien on any asset or group of assets of the Business;
(iii) Contract involving the sale of the accounts receivable Related to the Business to any other Person;
(iv) guarantee of any obligation for borrowed money or otherwise that is Related to the Business;
(v) Contract (other than license agreements) under which any of the Sellers is the lessor of or permits any third Person to hold or operate any personal property that is a Transferred Asset;
(vi) Contract under which any Seller is licensed by any third Person to use Intellectual Property, with the exception of (1) shrink-wrap, click-wrap, or similar nonexclusive licenses to generally commercially available off-the-shelf software granted to Sellers and (2) open source licenses;
(vii) Contract under which any Seller licenses to any third Person the right to practice or use, or a covenant not to sue under, any material Transferred Intellectual Property;
(viii) Contract that limits or purports to limit the ability of the Business or a Seller to (1) solicit or hire any Person, (2) acquire any product or other asset or any service from any other Person, (3) develop, sell, supply, distribute, offer support to or service any product or any technology or other asset to or for any other Person, (4) charge certain prices pursuant to a “most-favored nation” or similar clause or (5) compete in any line of business, with any Person, in any geographic area or during any period of time;
(ix) Contract with any Affiliate of the Sellers;
(x) Contract or group of related Contracts with any Person which gives rise to payments in excess of $500,000 in any 12-month period;
(xi) Contract involving (1) the Business sharing its profits, losses, costs or liabilities with any other Person or (2) a vendor’s sharing of its profits, losses, costs or liabilities with the Business;
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(xii) Contract with Governmental Entities; or
(xiii) Contract related to joint ventures, partnerships, relationships for joint marketing (other than co-marketed items) or joint development with another Person.
(b) Except as set forth on Schedule 3.8(b), each Material Contract (a) is valid, binding and enforceable against Sellers and, to the Knowledge of Sellers, against each other party thereto, in accordance with its terms, except that such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights and general principles of equity, and (b) is in full force and effect and Sellers, as applicable, have performed all material obligations, including, but not limited to, the timely making of any payments, required to be performed by them under, and are not in material default or breach of in respect of, any Material Contract, and no event has occurred which, with due notice or lapse of time or both, would constitute such a material default. Except as set forth on Schedule 3.8(b), the ability of Sellers to perform all obligations required to be performed by them under the Material Contracts has not been materially limited or adversely affected by or as a result of COVID-19 or any COVID-19-related Laws, Orders, guidance or directives. Except as set forth on Schedule 3.8(b), to the Knowledge of Sellers, each other party to each Material Contract has performed all material obligations required to be performed by it under, including, but not limited to, the timely making of any payments, and is not in material default or breach of in respect of, any Material Contract, and no event has occurred which, with due notice or lapse of time or both, would constitute such a material default. There has been made available to Buyer a true, correct and complete copy of each of the Material Contracts listed on Schedule 3.8(a), together with all amendments, waivers or other changes thereto.
Section 3.9 Compliance with Laws; Permits.
(a) In each case to the extent Related to the Business, each of the Sellers and the Business has not been in, is not in, and does not have Liability in respect of any, material violation of, and no event has occurred or circumstance exists that (with or without notice or lapse of time) would constitute or result in a material violation by such Seller or the Business, as applicable, of, or failure on the part of such Seller or the Business, as applicable, to comply with, in all material respects, or any Liability suffered or incurred by such Seller or the Business, as applicable, in respect of any material violation of or noncompliance with, any Laws that are or were applicable to such Seller or the Business, as applicable, or the conduct or operation of the Business or the ownership or use of any of their respective assets, and no Action is pending, or to the Knowledge of the Sellers, threatened, alleging any such violation or noncompliance.
(b) To the Knowledge of Sellers, each Seller and the Business have all material Permits necessary for the conduct of the Business as presently conducted and as contemplated to be conducted and (i) each such Permit is in full force and effect, (ii) such Seller and the Business are in material compliance with the terms, provisions and conditions thereof, (iii) there are no material outstanding violations, notices of noncompliance, Orders or Actions adversely affecting any such Permits, and (iv) no condition (including, without limitation, the execution of this Agreement and the consummation of the Transactions) exists and no event has occurred which (whether with or without notice, lapse of time or the occurrence of any other event) would reasonably be expected to result in the suspension or revocation of such Permits other than by expiration of the term set forth therein. Schedule 3.9(b) sets forth a list of all the material Permits necessary for the conduct of the Business, and the Sellers have furnished to Buyer true, correct and complete copies of all such Permits.
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(c) To the Knowledge of Sellers, none of the Business, Sellers with respect to the Business or to the Knowledge of Sellers, any of the Representatives of Sellers with respect to the Business, has, directly or indirectly, made, offered, promised or authorized, or caused to be made offered, promised or authorized any payment, contribution, gift or favor of anything of value, including but not limited to money, property or services, whether or not in contravention of the U.S. Foreign Corrupt Practices Act, as amended from time to time (the “FCPA”), or any similar other applicable law prohibiting public or commercial bribery or corruption (collectively, including the FCPA, the “Legislation”), (i) as a kickback, gratuity, or bribe to any person, including, but not limited to, any foreign official as defined in the FCPA, or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Business. None of the Business, the Sellers with respect to the Business or to the Knowledge of the Sellers, any of the Representatives of the Business or the Sellers with respect to the Business, (i) is under investigation for any potential violation of the Legislation, (ii) has received any notice or other communication (in writing or otherwise) from any Governmental Entity regarding any actual, alleged, or potential violation of, or failure to comply with, any Legislation, (iii) is aware of or has any reason to believe that there has been any violation or potential violation of the Legislation by any of the Business, the Sellers with respect to the Business, any Representatives of the Business or the Sellers with respect to the Business, or any other business entity or enterprise with which the Business is or has been engaged, affiliated or associated, or (iv) has committed any act that would constitute a violation of the Legislation irrespective of whether the Legislation applies as a jurisdictional matter. None of the Business or the Sellers with respect to the Business, any of their respective officers, directors, employees, or other Representatives or any direct, indirect, or beneficial owners of the foregoing, is or has been a foreign official as defined under the FCPA (including any employee of a state-owned or state-controlled entity, business, or corporation).
(d) To the Knowledge of Sellers, none of the Sellers with respect to the Business, or any Related Person of the Sellers with respect to the Business is (i) a person listed in any Sanctions-related list of designated persons maintained by OFAC or the U.S. Department of State, (ii) a person operating, organized or resident in a country or region which is itself the subject or target of any Sanctions (“Sanctioned Country”), or (iii) any person owned or controlled by any person or persons specified in (i) or (ii) above or otherwise the target of Sanctions (together “Sanctioned Persons”). Each of the Business, the Sellers with respect to the Business and any Related Person of the Sellers is in compliance with applicable Sanctions in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in the Business, any Seller or any Related Person of Sellers being designated as a Sanctioned Person. None of the Business or Sellers with respect to the Business or any Related Person of Sellers with respect to the Business is engaged directly in any business or transactions with any Sanctioned Person or in any Sanctioned Country, or knowingly engaged in any indirect business or transactions with any Sanctioned Person or in any Sanctioned Country or any in any manner that would result in the violation of Sanctions by any Person.
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(e) (i) Each of the Business and Sellers with respect to the Business is in compliance in all material respects with all anti-money laundering laws, rules, regulations and orders of jurisdictions applicable to the Business (collectively, “AML Laws”), including without limitation, the USA PATRIOT Act and (ii) no proceeding involving the Business or the Sellers with respect to the Business, with respect to AML Laws, is currently pending or, to the Knowledge of the Sellers, threatened which in each case would be reasonably expected to result in a material violation of this representation. No Seller is required to be registered with the U.S. Department of the Treasury as a money services business, as such term is defined by federal law or regulation, nor is any Seller required to be registered or licensed as a money services business, money transmitter, or equivalent enterprise under the applicable Law of any other jurisdiction.
Section 3.10 Brokers and Finders. There are no claims, and will not be any claims, against Buyer for brokerage commissions or finder’s fees or similar compensation in connection with the Transactions based on any arrangement made by or on behalf of the Sellers or any of their respective Affiliates.
Section 3.11 Material Customers and Suppliers. Except as set forth on Schedule 3.11, there are no pending or threatened disputes between the Business on the one hand, and any material customer or supplier of the Business on the other hand and no such material customer or supplier has provided notice to the Sellers that such material customer or supplier intends to terminate or adversely change its relationship with the Business, in each case that would, individually or in the aggregate, reasonably be expected to be material to the Business, taken as a whole.
Section 3.12 Title to and Sufficiency of Transferred Assets.
(a) Except as set forth on Schedule 3.12(a), and subject to Section 1.6, each Seller has good and valid title to, or in the case of leased assets, has good and valid leasehold interests in, all Transferred Assets, free and clear of all Liens (other than Permitted Encumbrances) and, at the Closing, subject to the terms of the Sale Order, Buyer will be vested with good and valid title to, or in the case of leased assets, good and valid leasehold interests in, such Transferred Assets, free and clear of all Liens (other than Permitted Post-Closing Encumbrances) and Excluded Liabilities, to the fullest extent permissible under Law, including Section 363(f) of the Bankruptcy Code.
(b) Except as set forth on Schedule 3.12(b) and except for back office and administrative support and assets provided by Sellers’ corporate office (including legal services, human resources, finance and accounting, insurance policies, and internal information technology support), the Transferred Assets constitute all of the tangible and intangible assets and properties that are used or held for use by Sellers exclusively in connection with the Business as currently conducted, and are sufficient for Buyer to conduct and operate the Business from and after the Closing Date in substantially the same manner (and without interruption as a result of the Closing) as it was conducted by Sellers since January 1, 2020.
Section 3.13 Intellectual Property.
(a) Sellers own all right, title and interest in and to the Transferred Intellectual Property (other than the Specified Intellectual Property) and the Intellectual Property owned or purported to be owned by the Business (“Seller Intellectual Property”), respectively, free and clear of all Liens other than Permitted Encumbrances. Schedule 3.13(a) sets forth a true, complete and correct list, as of the date hereof, of all Transferred Intellectual Property that is registered or the subject of an application for registration with a Governmental Entity, including all issued patents, registered Trademarks, copyright registrations, domain names, and all applications therefor. Except as set forth in Schedule 3.13(a), all registered Transferred Intellectual Property and all registered Seller Intellectual Property is valid, subsisting and enforceable, and is not subject to any outstanding order, judgment, decree or agreement adversely affecting Sellers’ use thereof or rights thereto. Each of the Sellers, as applicable, have taken commercially reasonable steps to enforce, protect and maintain each item of Transferred Intellectual Property or Seller Intellectual Property.
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(b) Sellers’ conduct of the Business as currently conducted does not infringe, misappropriate or otherwise violate, and in the three year period prior to the date hereof, has not infringed, misappropriated or otherwise violated the Intellectual Property of any other Person. Except as set forth on Schedule 3.13(b), Sellers have not, in the three year period prior to the date hereof, received any written notice (i) alleging any such infringement, misappropriation of violation by any of Sellers of Intellectual Property owned by any other Person or (ii) challenging or questioning any of the Sellers’ right, title or interest in or to any of the Transferred Intellectual Property or Seller Intellectual Property, respectively. To the Knowledge of Sellers, none of the Transferred Intellectual Property or Seller Intellectual Property has been or is being infringed, misappropriated or otherwise violated by any Person.
(c) Except as set forth on Schedule 3.13(c), there is no Action pending before any Governmental Entity concerning the ownership, validity, registrability, enforceability, infringement, misappropriation or violation of any Transferred Intellectual Property or Seller Intellectual Property, excluding ordinary course prosecution or examination, consistent with past practice, before the United States Patent and Trademark Office or other similar applicable Governmental Entities. Except as set forth on Schedule 3.13(c), none of the Transferred Intellectual Property or Seller Intellectual Property is subject to any outstanding injunction, directive, order, decree, award, settlement or judgment restricting the use or validity thereof.
(d) To the Knowledge of Sellers, each of the Sellers (with respect to the Transferred Assets) has, during the past three (3) years, complied in all material respects with (i) all applicable Laws governing the collection, use, security, handling, and sharing of Personal Information, (ii) their respective policies governing the collection, use, security, handling, and sharing of Personal Information, and (iii) provisions of contracts related to the collection, use, security, handling, and sharing of Personal Information.
(e) Sellers have taken commercially reasonable security measures to safeguard and maintain the secrecy and confidentiality of, and their proprietary rights in and to, all material non-public Transferred Intellectual Property and Seller Intellectual Property, and to maintain the security of all Personal Information in the possession of the Sellers.
(f) No employee, officer, director, consultant or advisor of the Sellers (i) has any right, license, and claim or interest whatsoever in or with respect to any Transferred Intellectual Property or Seller Intellectual Property, or (ii) is in violation of any IP Assignment.
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(g) Sellers make no representations or warranties in this Section 3.13 or otherwise regarding the Specified Intellectual Property.
Section 3.14 Taxes.
(a) Each Seller has timely filed all material Tax Returns with respect to the Transferred Assets required under applicable Law to be filed with the appropriate Governmental Entities in all jurisdictions in which such Tax Returns are required to be filed (taking into account any extension of time to file). All such Tax Returns are true, correct and complete in all respects, and such Seller has paid all Taxes owed by it with respect to the Transferred Assets (whether or not shown as due on such Tax Returns).
(b) All income and other material Tax Returns of or with respect to each Seller have been filed with the appropriate Governmental Entities in all jurisdictions in which such Tax Returns are required to be filed (taking into account any extension of time to file). All such Tax Returns are true, correct and complete in all respects, and each Seller has paid all Taxes owed by it (whether or not shown as due on such Tax Returns).
(c) No audit or other proceeding with respect to any income or other material Taxes or income or other material Tax Returns with respect to the Transferred Assets or any Seller is currently in progress, or has been proposed or threatened in writing.
(d) No Seller has received written notice of any outstanding, proposed or assessed Tax deficiency that has not been paid, accrued for or been contested in good faith and in accordance with applicable Law (with appropriate reserves taken in accordance with applicable accounting standards), nor has any Seller executed any waiver of any statute of limitations in respect of material Taxes nor agreed to any extension of time with respect to a Tax assessment, collection or deficiency.
(e) There are no liens for Taxes upon any of the Transferred Assets or any assets of a Seller.
(f) There are not any outstanding ruling requests, and no rulings have been received, by any Seller relating to Taxes with respect to the Transferred Assets.
(g) No claim has been made by a Governmental Entity in a jurisdiction where a Seller has not filed a Tax Return with respect to the Transferred Assets, that such Seller is or may be subject to Tax by such jurisdiction with respect to the Transferred Assets (as applicable), nor to Sellers’ Knowledge is any such assertion threatened.
(h) Each Seller with respect to the Business and Transferred Assets has collected all sales and use Taxes required to be collected and has remitted or will remit on a timely basis such amounts to the appropriate Governmental Entity, or has been furnished properly completed exemption certificates.
(i) Each Seller has, to the extent related to the Transferred Assets or the Business, withheld and paid all Taxes required to be withheld with respect to amounts paid or owing to any employee, creditor, independent contractor or other third party.
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(j) None of the Transferred Assets constitutes a United States real property interest pursuant to Section 897 of the Code (including any below-market leases) such that the withholding pursuant to Section 1445 of the Code is required in connection with this Agreement.
Section 3.15 Absence of Certain Developments. Since December 31, 2020 to and including the date of this Agreement, except as expressly contemplated by this Agreement, the Transaction Documents, or as set forth on Schedule 3.15, (a) the Business has been operated in all material respects in the Ordinary Course, (b) there has not been a Material Adverse Effect and (c) Sellers have not taken any action that, if it had been taken after the date of this Agreement, would require the consent of Buyer under Section 6.2(b)(i), (iv), (viii), or (xii).
Section 3.16 Data Privacy and Security.
(a) The Business and Sellers (to the extent Related to the Business) comply with, and have for the three (3) years prior to the date hereof complied with, in all material respects, all Data Protection Laws, internal or publicly posted policies, procedures, agreements, and notices, and in connection with the collection, access, processing, use, storage, disclosure, transmission, or transfer (including cross-border transfer) of Personal Information, the requirements of any Material Contract and/or applicable industry standards, including the Payment Card Industry Data Security Standard (collectively the “Data Protection Requirements”). None of the Sellers has used, disclosed, transferred, or otherwise processed any Personal Information that is Related to the Business in any manner that violates any Data Protection Requirement.
(b) In each case to the extent Related to the Business, none of the Sellers has received any subpoenas, demands, or other notices from any Governmental Entity investigating, inquiring into, or otherwise relating to any actual or potential violation of any Data Protection Law and, to the Knowledge of the Sellers, none of the Sellers is under investigation by any Governmental Entity for any actual or potential violation of any Data Protection Law.
(c) No notice, complaint, claim, enforcement action, or litigation of any kind that is Related to the Business has been served on, or initiated against the Sellers or the Business under any applicable Data Protection Requirement.
(d) The Sellers have established and maintain physical, technical, and administrative security measures and policies, compliant with applicable Data Protection Requirements, that (i) protect the operation, confidentiality, availability, integrity, and security of the Sellers’ and the Business’s software, systems, and websites that are involved in the collection and processing of Personal Information and/or business data for the Business, and (ii) identify internal and organizational risks to the confidentiality, integrity, security, and availability of Personal Information of the Business and/or business data and data systems of the Business.
(e) To the Knowledge of Sellers, none of the Business or the Sellers has experienced any security breaches or incidents, unauthorized access, use, modification, or disclosure, or other adverse events or incidents related to Personal Information of the Business and/or business data and data systems of the Business that would require notification of individuals, other affected parties, law enforcement, or any Governmental Entity.
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(f) Each Seller with respect to the Business has made all required registrations and notifications in accordance with all applicable Data Protection Requirements, and all such registrations and notifications are current, complete, and accurate in all respects.
(g) The execution, delivery, and performance of this Agreement shall not cause, constitute, or result in a breach or violation of any Data Protection Requirement or other standard terms of service entered into by the users of the Business’s service(s).
Section 3.17 No Other Representations or Warranties.
(a) Except for the representations and warranties contained in the Transaction Documents, no Seller or any other Person makes any other express or implied representation or warranty with respect to Sellers, the Business, the Transferred Assets, the Assumed Liabilities or the Transactions and Sellers disclaim any other representations or warranties, whether made by Sellers, any Affiliate of Sellers or any of Sellers’ or their respective Affiliates’ respective Representatives. Except for the representations and warranties contained in the Transaction Documents, Sellers (i) expressly disclaim and negate any representation or warranty, expressed or implied, at common law, by statute or otherwise, relating to the condition of the Transferred Assets (including any express or implied warranty of merchantability or fitness for a particular purpose) and (ii) disclaim all liability and responsibility for any representation, warranty, projection, forecast, statement or information made, communicated or furnished (orally or in writing) to Buyer or its Affiliates or Representatives (including any opinion, information, projection or advice that may have been or may be provided to Buyer by any Representative of Sellers or any of their respective Affiliates). Sellers make no representations or warranties to Buyer regarding the probable success or profitability of the Business or the Transferred Assets. Notwithstanding anything to the contrary herein, the foregoing shall not limit, in any way, the specific representations and warranties made by Sellers in the Transaction Documents and nothing in this Agreement shall be deemed to be a waiver of any claim for Fraud.
(b) Sellers acknowledge and agree that, except for the representations and warranties expressly set forth in this Agreement and the other Transaction Documents, neither Buyer nor any other Person has made any express or implied representation or warranty with respect to the Transactions or with respect to the accuracy or completeness of any other information provided, or made available, to Sellers in connection with the Transactions and none of the Sellers have relied on any representation or warranty other than those expressly set forth in Article IV.
Article IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
Section 4.1 Organization, Good Standing. Buyer is duly organized, validly existing and in good standing under the Laws of the State of Delaware, has all requisite limited liability company power to own, lease and operate its assets and to carry on its business as presently being conducted and as contemplated to be conducted, and is qualified to do business and in good standing in every jurisdiction in which the operation of the business of Buyer requires it to be so qualified.
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Section 4.2 Authorization. Buyer has the requisite limited liability company power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and to consummate the Transactions. The execution and delivery of this Agreement and the other Transaction Documents to which it is a party and the consummation of the Transactions by Buyer have been duly authorized by all necessary limited liability company action on the part of Buyer. This Agreement and the other Transaction Documents to which it is a party have been duly executed and delivered by Buyer and, assuming this Agreement and the other Transaction Documents constitute the valid and binding obligation of each of the other parties hereto and thereto, constitute the valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms except as limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium and other Laws of general applicability affecting enforcement of creditors’ rights generally and (b) Laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
Section 4.3 Non-contravention. The execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party by Buyer and the consummation of the Transactions do not and will not (a) violate any Law to which Buyer or any of its Affiliates or any of Buyer’s assets are subject, (b) violate any provision of the Organizational Documents of Buyer or any Affiliate of Buyer, or (c) violate, conflict with, result in a breach of, constitute (with due notice or lapse of time or both) a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify or cancel, require any notice under, or otherwise give rise to any Liability under, any material Contract, lease, loan agreement, mortgage, security agreement, trust indenture or other material agreement or instrument to which Buyer or any of its Affiliates is a party or by which any of them is bound or to which any of the respective properties or assets of Buyer is subject; except as would not, individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect.
Section 4.4 Financing.
(a) Buyer has delivered true, correct and complete copies of (i) the executed debt commitment letter, dated as of the date hereof, together with true, correct and complete copies of any related executed fee letters (provided that, solely with respect to any such fee letters, the fee amounts and other economic terms (none of which would affect the availability or amount of, impose additional or new conditions on (or expand or modify any existing conditions), affect the enforceability or termination of, impair the validity of, or prevent or delay the consummation of the Debt Financing at the Closing) may be redacted in a customary manner from such true, correct and complete copies) (collectively, including all exhibits, schedules, amendments, supplements, modifications and annexes thereto, the “Debt Commitment Letter”), pursuant to which the Persons (other than Buyer) party to the Debt Commitment Letter (such parties, the “Debt Financing Sources”) have agreed, subject to (and only to) the terms and conditions expressly set forth therein and assuming the accuracy of the representations and warranties herein, to provide debt financing and (ii) the executed subscription agreements for equity investments in Buyer, dated as of the date hereof, from the Equity Financing Sources party thereto (the “Equity Commitment Letters” and, together with the Debt Commitment Letter, the “Commitment Letters”), pursuant to which the Persons (other than Buyer) party to the Equity Commitment Letters (such parties, the “Equity Financing Sources” and, together with the Debt Financing Sources, the “Financing Sources”) have agreed, subject to (and only to) the terms and conditions expressly set forth therein and assuming the accuracy of the representations and warranties herein, to provide equity financing in an amount equal to $146,027,243 in the aggregate, in each case in the amounts set forth therein for, among other things, the purposes of financing the Transactions on the date on which the Closing should occur (such debt financing, the “Debt Financing” and together with the equity financing, the “Financing”).
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(b) Each Commitment Letter is in full force and effect and has not been withdrawn, terminated, rescinded, amended, supplemented or otherwise modified in a manner which, when taken as a whole, is materially adverse to Sellers, and the respective commitments contained in each Commitment Letter have not been withdrawn, terminated or rescinded, in each case, in any respect, and no such withdrawal, termination or rescission is contemplated by Buyer or, to Buyer’s Knowledge, any other party thereto. Buyer has fully paid or caused to be fully paid any and all commitment fees or other fees in connection with and required by the Commitment Letters that are due and payable by it or its Affiliates on or prior to the date hereof. The Commitment Letters have been duly executed by Buyer and, to Buyer’s Knowledge, the Financing Sources, and each Commitment Letter is a valid, binding and enforceable obligation of Buyer and, to Buyer’s Knowledge, the Financing Sources, to provide the Financing subject only to the satisfaction or waiver of the conditions specified in such Commitment Letter except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, affecting creditors’ rights and remedies generally and (ii) the remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
(c) Assuming the accuracy of Sellers’ representations and warranties set forth in Article III, as of the date of this Agreement, no event has occurred that (with or without notice or lapse of time, or both) would constitute a material breach or material default under the Commitment Letters on the part of Buyer, or to Buyer’s Knowledge, any other parties thereto. As of the date hereof, Buyer is not aware of any fact or occurrence that makes any of the representations or warranties of Buyer in either Commitment Letter inaccurate in any material respect. As of the date hereof, Buyer has not incurred, and is not contemplating or aware of, any obligation, commitment, restriction or other liability of any kind, in each case, that would impair or adversely affect the Financing, other than those set forth in the Commitment Letters. As of the date hereof, there are no conditions precedent related to the initial funding of the Commitment Letters at the Closing, other than as set forth in the Commitment Letters. As of the date of this Agreement, assuming (i) the accuracy of Sellers’ representations and warranties set forth in Article III and (ii) the performance by Sellers of their obligations hereunder in all material respects, Buyer has no reason to believe that it will be unable to satisfy on a timely basis any term or condition to be satisfied by it and contained in the Commitment Letters.
(d) At the Closing, assuming satisfaction or waiver of the conditions to Buyer’s obligation to consummate the Closing as set forth in Section 7.1 and Section 7.2, the net proceeds from the Debt Financing, together with the available cash of Buyer, will be sufficient for Buyer to pay the Cash Consideration and to pay all related fees and expenses of Buyer required to be paid at the Closing.
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Section 4.5 Brokers and Finders. There are no claims, and will not be any claims, against Sellers for brokerage commissions or finder’s fees or similar compensation in connection with the Transactions based on any arrangement made by or on behalf of Buyer.
Section 4.6 No Other Representations or Warranties.
(a) Except for the representations and warranties contained in the Transaction Documents, neither Buyer nor any other Person makes any other express or implied representation or warranty with respect to the Transactions, and Buyer disclaims any other representations or warranties, whether made by Buyer, any Affiliate of Buyer or any of Buyer’s or its Affiliates’ respective Representatives.
(b) Buyer acknowledges and agrees that, except for the representations and warranties expressly set forth in this Agreement and the other Transaction Documents, no Seller nor any other Person has made any express or implied representation or warranty with respect to the Transactions or with respect to the accuracy or completeness of any other information provided, or made available, to Buyer in connection with the Transactions.
(c) BUYER HAS CONDUCTED ITS OWN INDEPENDENT REVIEW AND ANALYSIS OF SELLERS AND THE BUSINESS, INCLUDING THE OPERATIONS, ASSETS, LIABILITIES, RESULTS OF OPERATIONS, FINANCIAL CONDITION, SOFTWARE, TECHNOLOGY AND PROSPECTS OF SELLERS AND THE BUSINESS, AND ACKNOWLEDGES THAT IT HAS BEEN PROVIDED ACCESS TO THE PERSONNEL, PROPERTIES, PREMISES AND RECORDS OF SELLERS FOR SUCH PURPOSE. IN ENTERING INTO THIS AGREEMENT, BUYER HAS RELIED SOLELY UPON ITS OWN INVESTIGATION AND ANALYSIS, AND SELLERS’ REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE III. BUYER ACKNOWLEDGES THAT, SHOULD THE CLOSING OCCUR, BUYER SHALL ACQUIRE THE TRANSFERRED ASSETS, THE ASSUMED LIABILITIES AND THE BUSINESS WITHOUT ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS THEREOF FOR ANY PARTICULAR PURPOSE, IN AN “AS IS” CONDITION AND ON A “WHERE IS” BASIS.
Article V
BANKRUPTCY MATTERS
Section 5.1 Bankruptcy Court Filings.
(a) Within one Business Day of the Petition Date, Sellers shall file with the Bankruptcy Court a motion (the “Bid Procedures Motion”) in form and substance reasonably satisfactory to Buyer and Sellers seeking:
(i) entry of the Bid Procedures Order, inter alia, (A) establishing the Bid Procedures, (B) approving the payment of the Bid Protections, and (C) providing that the Bid Protections shall (1) constitute superpriority administrative expenses of the Debtors and (2) be part of the Carve-Out; and
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(ii) entry of the Sale Order, authorizing and approving, inter alia, the sale of the Transferred Assets to Buyer on the terms and conditions set forth herein, free and clear of all Liens (other than Permitted Post-Closing Encumbrances) and Liabilities (other than Assumed Liabilities), and the assumption and assignment of the Closing Assumed Contracts and Additional Assumed Contracts to Buyer.
(b) Sellers shall use their respective commercially reasonable efforts to have (i) the Bankruptcy Court enter the Bid Procedures Order as promptly as practicable after the filing of the Bid Procedures Motion and (ii) the Bankruptcy Court enter the Sale Order as promptly as practicable after the completion of the Auction, in each case, prior to the deadlines set forth in Section 8.1(d)(ii), and become Final Orders. Sellers and Buyer shall cooperate in good faith to obtain the Bankruptcy Court’s entry of the Bid Procedures Order, the Sale Order, and any other Order reasonably necessary in connection with the transactions contemplated by this Agreement, including furnishing affidavits, nonconfidential financial information, or other documents or information for filing with the Bankruptcy Court and making such advisors of Sellers and Buyer and their respective Affiliates available to testify before the Bankruptcy Court for the purposes of obtaining entry of such orders, including, among other things, providing adequate assurances of performance by Buyer as required under Section 365 of the Bankruptcy Code, and demonstrating that Buyer is a “good faith” purchaser under Section 363(m) of the Bankruptcy Code. Sellers and Buyer agree that they will each promptly take such actions as are reasonably requested by the other Party to assist in obtaining entry of the Bid Procedures Order, the Sale Order, and any other Order reasonably necessary, consistent with the above.
(c) Sellers shall consult with Buyer regarding any pleadings or other submissions that they intend to file with the Bankruptcy Court in connection with, or which might reasonably affect the Bankruptcy Court’s approval of, the Bid Procedures Order or Sale Order, including sharing in advance any drafts thereof in sufficient time for Buyer’s and its Representatives reasonable review and comment, which Sellers shall consider in good faith. No Seller shall seek any modification to the Bid Procedures Order or the Sale Order by the Bankruptcy Court or any other Governmental Entity of competent jurisdiction to which a decision relating to the Bankruptcy Proceeding has been appealed, in each case, without the prior written consent of Buyer in its sole discretion; provided, however, that the forgoing shall only apply to modifications that are adverse as to the Buyer or may result in the delay of Bankruptcy Court approval, or consummation, of this Agreement.
(d) If the Bid Procedures Order, Sale Order, or any other orders of the Bankruptcy Court relating to this Agreement or the Transactions are appealed by any Person (or if any petition for certiorari or motion for reconsideration, amendment, clarification, modification, vacation, stay, rehearing or reargument shall be filed with respect to the Bid Procedures Order and the Sale Order, or other such order), subject to rights otherwise arising from this Agreement, Sellers shall use their commercially reasonable efforts to prosecute such appeal, petition or motion and obtain an expedited resolution of any such appeal, petition or motion in favor of the Sellers.
(e) The Debtors and Buyer acknowledge that this Agreement, their obligations hereunder and the Transactions are subject to (i) entry of, as applicable, the Bid Procedures Order and the Sale Order and (ii) as permitted by this Agreement and the Bid Procedures Order, the consideration by Sellers of higher or otherwise better competing bids (whether through any and all types of consideration, including, without limitation, cash and assumed liabilities or credit bid) in respect of a sale, reorganization, or other disposition of the Sellers, the Business or the Transferred Assets. In the event of any discrepancy between this Agreement and the Bid Procedures Order and the Sale Order, the Bid Procedures Order and the Sale Order (as applicable) shall govern.
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Section 5.2 Alternative Transaction.
(a) During the period from the date of this Agreement through entry of the Bid Procedures Order, Sellers shall not pursue an Alternative Transaction; provided, however, that Sellers may, in response to any third party that has made (and not withdrawn) an unsolicited Proposal in writing after the date of this Agreement that Sequential’s board of directors determines in good faith after consultation with outside legal counsel and Sequential’s financial advisor constitutes or is reasonably likely to result in a Superior Proposal: (i) participate in discussions or negotiations with such third party with respect to an Alternative Transaction and (ii) furnish to such third party non-public information relating to the Business pursuant to an executed confidentiality agreement that constitutes an Acceptable Confidentiality Agreement; provided further, however, for the avoidance of doubt, in no event shall the Sellers enter into a definitive agreement with respect to, or consummate, an Alternative Transaction prior to the entry of the Bid Procedures Order. Upon entry of the Bid Procedures Order, Sellers shall only pursue an Alternative Transaction in accordance with the terms of the Bid Procedures. If Buyer is chosen as the Successful Bidder at the Auction, Sellers shall not take any steps in furtherance of an Alternative Transaction at any time after the Auction other than with respect to any Backup Bid, pursuant to the terms of the Bid Procedures.
(b) If, upon completion of the Auction, Sellers have agreed to sell their assets under an Alternative Transaction, Buyer shall have no obligation to serve as a Backup Bidder unless Buyer shall have participated in the Auction and submitted an overbid in respect of any qualified competing bid (such overbid, a “Buyer Backup Bid”).
Section 5.3 Bid Protections. Subject to entry of the Bid Procedures Order, Sellers shall make payment of the Seller Termination Fee in accordance with Section 8.3 hereof.
Article VI
COVENANTS
Section 6.1 Access and Information.
(a) From the date hereof through the Closing Date, subject to Section 6.1(b), Buyer will be entitled, through its Representatives, to have reasonable access to the offices, employees and properties of each of the Sellers Related to the Business for any reasonable purpose related to this Agreement and the transactions contemplated hereby. Any such access will be conducted upon reasonable advance notice and under reasonable circumstances and will be subject to restrictions under COVID-19 Measures and applicable Law. Sellers will direct and use their commercially reasonable efforts to cause their Representatives to cooperate with Buyer and Buyer’s Representatives in connection with such access, and Buyer and its Representatives will cooperate with Sellers and its Representatives; provided that (i) any such access shall be conducted, at Buyer’s expense, in accordance with binding Contracts, applicable Law (including applicable privacy and competition laws), during normal business hours, under the supervision of Sellers’ personnel, and in such a manner as to not unreasonably interfere with the normal operations of the Business or of Sellers and their respective Affiliates and (ii) the foregoing shall not require Sellers to disclose information or materials (1) protected by attorney-client, attorney work product or other legally recognized privileges or immunity from disclosure, (2) the disclosure of which would violate any binding Contracts, applicable Laws or fiduciary duties, or (3) pertinent to any litigation in which Sellers or any of their Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand, are engaged (provided that, at Buyer’s reasonable request, the Parties shall take commercially reasonable efforts to implement appropriate and mutually agreeable measures to permit the disclosure of such information in a manner to remove the basis for the non-disclosure to the greatest extent reasonably possible, including by arrangement of appropriate clean room procedures, redaction of text from documents or entry into a customary joint defense agreement with respect to any information to be so provided).
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(b) All information received pursuant to this Section 6.1 shall be governed by the terms of the Confidentiality Agreement.
(c) For a period not to exceed five (5) years following the Closing, Buyer shall provide to Sellers and their Affiliates and Representatives (at Sellers’ expense) reasonable access to, including the right to make copies of, all books and records included in the Transferred Assets and Assumed Liabilities relating to periods prior to the Closing to the extent necessary to permit Sellers to prepare financial reports, Tax returns, any Tax audits, or the defense or prosecution of any Action; provided that (i) any such access shall be conducted in accordance with binding Contracts and applicable Law (including applicable privacy and competition laws), during normal business hours, under the supervision of Sellers’ personnel, and in such a manner as to not unreasonably interfere with the normal operations of the Business or of Buyer and its Affiliates and (ii) the foregoing shall not require Buyer to disclose information or materials (1) protected by attorney-client, attorney work product or other legally recognized privileges or immunity from disclosure, (2) the disclosure of which would violate any binding Contracts, applicable Laws or fiduciary duties, or (3) pertinent to any litigation in which Sellers or any of their Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand, are engaged. Any such access will also be conducted upon reasonable advance notice and under reasonable circumstances and will be subject to restrictions under COVID-19 Measures and applicable Law. Notwithstanding anything herein to the contrary, Buyer may destroy any such books and records, provided that Buyer shall notify Sellers in writing at least 30 days in advance of destroying any such books and records prior to the five-year anniversary of the Closing Date in order to provide Sellers the opportunity to copy such books and records in accordance with this Section 6.1(c). Notwithstanding anything herein to the contrary, Buyer acknowledges that Sellers have the right to retain originals or copies of all books and records and other materials included in or related to the Transferred Assets or Assumed Liabilities.
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Section 6.2 Interim Operations of the Business.
(a) Except (i) as required by applicable Law (including COVID-19 Measures and as may be ordered by the Bankruptcy Court), which order is not inconsistent with this Agreement, (ii) as otherwise expressly required by this Agreement or another Transaction Document, (iii) with the prior written consent of Buyer, not to be unreasonably withheld, conditioned, or delayed or as taken or caused by Buyer on behalf of Sellers under the Buyer Consulting Agreement, (iv) as set forth on Schedule 6.2 or (v) to the extent primarily related to any Excluded Assets or Excluded Liabilities (so long as any such action would not reasonably be expected to (1) prevent, materially impair or materially delay the consummation of the Transactions or (2) adversely affect the Business or the Transferred Assets), during the period from the date hereof to and through the Closing Date, Sellers shall (A) subject to the DIP Order, timely approve and pay all marketing expenditures that are reasonably requested by Buyer in accordance with the Budget, (B) use commercially reasonable efforts to conduct the Business in the Ordinary Course and maintain, preserve, and protect in all material respects the Transferred Assets in their current condition, ordinary wear and tear excepted, (C) use commercially reasonable efforts to preserve in all material respects the present business operations, organization and goodwill of the Business, and the present relationships with material customers and material suppliers of the Business, (D) use commercially reasonable efforts to maintain in all material respects their books, accounts and records in the Ordinary Course; and (E) use commercially reasonable efforts to (x) comply in all material respects with all applicable Laws respecting the Business or any Transferred Asset, (y) comply in all material respects with contractual obligations applicable to or binding upon them pursuant to any Closing Assumed Contract or Additional Assumed Contract and (z) maintain in full force and effect all Permits necessary for the conduct of the Business and comply with the terms of each such Permit.
(b) In furtherance of and not in limitation of Section 6.2(a), except (i) as required by applicable Law (including COVID-19 Measures and as may be ordered by the Bankruptcy Court, which order is not inconsistent with this Agreement), (ii) as otherwise expressly contemplated by this Agreement or another Transaction Document, (iii) with the prior written consent of Buyer, not to be unreasonably withheld, conditioned, or delayed or as taken or caused by Buyer on behalf of Sellers under the Buyer Consulting Agreement, (iv) as set forth on Schedule 6.2 or (v) to the extent solely related to any Excluded Assets or Excluded Liabilities (so long as any such action would not reasonably be expected to (1) prevent, materially impair or materially delay the consummation of the Transactions or (2) adversely affect the Business or the Transferred Assets), during the period from the date hereof to and through the Closing Date, Sellers shall not take any of the following actions, in each case only to the extent such action relates to the Business, an Assumed Liability or a Transferred Asset:
(i) sell, lease, Transfer, mortgage, pledge, assign, exclusively license or otherwise dispose of or encumber any of the Transferred Assets (or permit any of such Transferred Assets to become subject to any additional Lien, other than in respect of Permitted Encumbrances), other than dispositions in the Ordinary Course;
(ii) (x) other than in the Ordinary Course, enter into any new Contract that would constitute a Material Contract if entered into prior to the date of this Agreement, or (y) terminate, amend or modify any Material Contract (other than any Excluded Contract or pursuant to Section 1.5(b));
(iii) make or authorize any payment of, or accrual or commitment for, capital expenditures Related to the Business, other than capital expenditures less than $100,000 individually or $250,000 in the aggregate, other than expenditures contemplated by the Budget;
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(iv) waive, release, assign, settle or compromise any material Action relating to the Business or the Transferred Assets, to the extent that such waiver, release, assignment, settlement or compromise (A) imposes any binding obligation or restriction, whether contingent or realized, on the Business, the Transferred Assets and/or Buyer, or (B) waives or releases any material rights or claims that would constitute Transferred Assets;
(v) with respect to the Business or the Transferred Assets, make or change any Tax election, file any amended Tax Return, enter into any closing agreement, settle any Tax claim or assessment, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment, or take any other similar action relating to the filing of any Tax Return or the payment of any Tax, in each case solely to the extent binding on Buyer after the Closing;
(vi) assume, reject or assign any Closing Assumed Contract or Additional Assumed Contract other than pursuant to Section 1.5;
(vii) with respect to the Business, change accounting policies or procedures, other than as required by GAAP or applicable Law;
(viii) (A) amend or modify pricing policies or delay or postpone payment of any accounts payable or commissions or any other Liability that is an Assumed Liability, or enter into any agreement or negotiation with any Person to extend the payment date of any accounts payable or commissions or any other Liability that is an Assumed Liability, or (B) accelerate the collection of, or cancel or discount, any accounts receivable Related to the Business;
(ix) grant any refunds, credits, rebates or other allowances to any end user, customer, reseller or distributor to the extent that they are Related to the Business;
(x) acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or division;
(xi) incur, assume or guarantee any Indebtedness, other than Indebtedness of Sellers that will not constitute an Assumed Liability;
(xii) cancel, surrender, allow to expire or fail to renew any Transferred Permit;
(xiii) propose or adopt a plan of complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization in respect of the Transferred Assets or that would adversely affect their ability to consummate this Agreement;
(xiv) enter into a joint venture, partnership, joint development program or similar transaction;
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(xv) abandon, cancel, permit to lapse or enter the public domain any Transferred Intellectual Property; or
(xvi) authorize, or commit or agree to take, any of the foregoing actions.
Section 6.3 Cooperation; Status Updates; Regulatory Filings.
(a) Cooperation. Subject to the terms and conditions set forth in this Agreement, the Parties shall cooperate with each other and use their respective commercially reasonable efforts to: (i) take or cause to be taken all actions reasonably necessary, proper or advisable on their part under this Agreement or applicable Law to Transactions contemplated hereby as promptly as reasonably practicable in accordance with the Bid Procedures; (ii) execute, acknowledge and deliver in proper form any further documents, certificates, agreements and other writings, and take such other action as such other Party may reasonably require, in order to effectively carry out the intent of the Transaction Documents; (iii) make or cause to be made all registrations, filings, notifications, submissions and applications with, to give all notices to and to obtain any consents, governmental transfers, approvals, orders, qualifications and waivers from any Governmental Entity necessary for the consummation of the Transactions; (iv) not to take any action prior to the Closing that would reasonably be expected to prevent, materially impair or materially delay the consummation of the Transactions, except to the extent such action is otherwise expressly required by this Agreement, any other Transaction Document or the Bid Procedures; (v) provide each other Party with cooperation and take such actions as such other Party may reasonably request in connection with the consummation of the Transactions and by the Transaction Documents; and (vi) cause the fulfillment at the earliest practicable date of all of the conditions to their respective obligations to consummate the Transactions.
(b) Status Updates. Each of Sellers and Buyer shall promptly notify the other Party of the occurrence, to such Party’s knowledge, of any event or condition, or the existence of any fact or circumstance, that would reasonably be expected to result in any of the conditions set forth in Article VII not being satisfied as of a reasonably foreseeable Closing Date.
(c) Regulatory Filings.
(i) Sellers and Buyer shall prepare and file as promptly as practicable all documentation to effect all necessary notices, reports and other filings and to obtain as promptly as practicable all consents, clearances, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any Governmental Entity in order to consummate the Transactions, including, (A) all filings pursuant to the HSR Act within ten (10) Business Days after the date of this Agreement and (B) all other filings for required competition or other governmental approvals as promptly as practicable after the date of this Agreement, in each case subject to Sellers supplying as promptly as practicable (and in any event no later than five (5) Business Days following the later of the date hereof or the date requested, if available) any information and documentary material Buyer reasonably requests in connection with such filings.
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(ii) Subject to applicable Law, Sellers and Buyer shall cooperate with each other and shall furnish to the other Party all information necessary or desirable in connection with making any filing under the HSR Act and for any application or other filing to be made pursuant to any competition or foreign investment review Law, and in connection with resolving any investigation or other inquiry by any Governmental Entity under any competition or foreign investment review Laws with respect to the Transactions. Each of the Parties shall promptly inform the other Party of any substantive communication with any Governmental Entity regarding any such filings relating to the HSR Act or other competition Laws. To the extent practicable, neither Sellers nor Buyer shall participate in any substantive pre-scheduled meeting with any Governmental Entity in respect of any such filings, investigation or other inquiry without giving the other Party prior notice of the meeting. Such other Party shall be permitted to participate in any substantive pre-scheduled meeting with any Governmental Entity in respect of any such filings, investigation or other inquiry relating to the HSR Act or other competition Laws, to the extent permitted by such Governmental Entity. The Parties will consult and cooperate with one another in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any Party in connection with all meetings, actions and proceedings under or relating to the HSR Act or other competition Laws (including, with respect to making a particular filing, by providing copies of all such documents to the non-filing Party and their advisors prior to filing and, if requested, giving due consideration to all reasonable additions, deletions or changes suggested in connection therewith); provided that the Parties shall not be required to provide to each other any confidential information or business secrets, which information shall be provided on an outside counsel-only basis; provided, further, that Buyer shall control and direct the processes relating to all consents, clearances, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any Governmental Entity in order to consummate the Transactions.
(d) Efforts.
(i) During the period from the date hereof and continuing until the earlier of the valid termination of this Agreement and the Closing Date, Buyer and its Affiliates shall not take any action, including entering into any transaction, that would reasonably be expected to prevent or delay any filings or approvals required under the HSR Act or any applicable competition Laws.
(ii) Notwithstanding anything in this Agreement to the contrary, Buyer and its Subsidiaries shall take, or cause to be taken, any and all actions and do, or cause to be done, any and all things necessary, proper or advisable to avoid, eliminate and resolve each and every impediment and obtain all consents required to permit the satisfaction of the conditions in Article VII, as promptly as reasonably practicable, including by offering to:
(A) proffer and agree to sell, divest, lease, license, transfer, dispose of or otherwise encumber, or hold separate pending such disposition, and effectuate such actions with respect to such assets of Buyer or its Subsidiaries (and the entry into agreements with, and submission to Orders giving effect thereto) if such action is necessary to avoid, prevent, eliminate or remove the issuance of any Order that would reasonably be expected to materially delay, restrain, prevent, enjoin or otherwise prohibit consummation of the Transactions by any Governmental Entity;
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(B) terminate any existing relationships and contractual rights and obligations of Buyer including, after the Closing, with respect to the Business or any of the Transferred Assets;
(C) amend or terminate existing licenses or other intellectual property agreements and to enter into such new licenses or other intellectual property agreements;
(D) take any and all actions and make any and all behavioral commitments, whether or not they limit or modify Buyer’s rights of ownership in, or ability to conduct the business of, the Business or any of the Transferred Assets; and
(E) enter into agreements, including with the relevant Governmental Entity, giving effect to the foregoing clauses (A) through (D) (such actions in clauses (A) through (E), “Required Actions”); provided that (1) such Required Actions are conditioned upon and become effective only from and after the Closing and (2) for the avoidance of doubt, no Affiliate of Buyer (other than any Subsidiary) shall be required to take any of the Required Actions.
Section 6.4 Tax Matters.
(a) Transfer Taxes. All documentary, stamp, transfer, motor vehicle registration, sales, use, value added, excise and other similar non-income Taxes and all filing and recording fees (and any penalties and interest associated with such Taxes and fees) arising from or relating to the consummation of the Transactions (collectively, “Transfer Taxes”) will be borne 50% by Buyer and 50% by Sellers, regardless of the Party on whom liability is imposed under the provisions of the Laws relating to such Transfer Taxes. Sellers and Buyer will consult and cooperate in timely preparing and making all filings, Tax Returns, reports and forms as may be required to comply with the provisions of the Laws relating to such Transfer Taxes, and will cooperate and otherwise take commercially reasonable efforts to obtain any available refunds for or exemptions from such Transfer Taxes, including preparing exemption certificates and other instruments as are applicable to claim available exemptions from the payment of Transfer Taxes under applicable Law and executing and delivering such affidavits and forms as are reasonably requested by the other Party.
(b) Asset Taxes. Sellers shall be allocated and bear all Asset Taxes for any period or portion thereof ending on or prior to the Closing Date and Buyer shall be allocated and bear all Asset Taxes for any period or portion thereof that begins after the Closing Date. For purposes of this Section 6.4(b), (i) Asset Taxes that are based upon or related to income or receipts or imposed on a transactional basis (other than such Asset Taxes described in clause (ii)), shall be allocated to the period in which the transaction giving rise to such Asset Taxes occurred, and (ii) Asset Taxes that are ad valorem, property or other Asset Taxes imposed on a periodic basis pertaining to a Straddle Period shall be allocated between the portion of such Straddle Period ending on the Closing Date and the portion of such Straddle Period beginning after the Closing Date by prorating each such Asset Tax based on the number of days in the applicable Straddle Period ending on and including the Closing Date, on the one hand, and the number of days in such Straddle Period that occur after the Closing Date, on the other hand. To the extent the actual amount of an Asset Tax is not known at the time an adjustment is to be made with respect to such Asset Tax pursuant to Article II, no later than two Business Days prior to the Closing Date, the Parties shall utilize the most recent information available in estimating in good faith the amount of such Asset Tax for purposes of such adjustment. For the avoidance of doubt, to the extent any Seller has prepaid or deposited any amounts of any Asset Taxes prior to the Closing Date, such Seller shall receive credit for such amounts in determining payments of Asset Taxes. Buyer shall be responsible for the preparation and timely filing of any Tax Returns and the payment to the applicable Governmental Entity of all Asset Taxes that become due and payable after the Closing Date. Sellers shall be responsible for the preparation and timely filing of any Tax Returns and payment to the applicable Governmental Entities of all Asset Taxes that become due and payable on or prior to the Closing Date.
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(c) Cooperation and Audits. Buyer and Sellers will cooperate fully with each other regarding Tax matters and will make available to the other as reasonably requested all information, records and documents relating to Taxes with regard to the Transferred Assets until the expiration of the applicable statute of limitations or extension thereof or the conclusion of all audits, appeals or litigation with respect to such Taxes. Notwithstanding anything in this Section 6.4(c) to the contrary, Sellers, Buyer and their respective Affiliates shall not be required to provide to Sellers and their respective Affiliates or Buyer and its Affiliates, as the case may be, any records, Tax Returns or any other information, in each case, to the extent such records, Tax Returns, or any other information do not relate to the Transferred Assets.
(d) Purchase Price Allocation.
(i) As promptly as practicable after the Closing Date, but no later than 30 days thereafter, and subject to Section 6.4(d)(iii), Buyer will prepare and deliver to Sellers, an allocation schedule setting forth the amounts to be allocated among Sellers and the Transferred Assets, pursuant to (and to the extent necessary to comply with) Section 1060 of the Code and the applicable regulations promulgated thereunder (or, if applicable, any similar provision under state, local or foreign Law or regulation) (the “Proposed Allocation Statement”). Sellers will have 20 Business Days following delivery of the Proposed Allocation Statement during which to notify Buyer in writing (an “Allocation Notice of Objection”) of any objections to the Proposed Allocation Statement, setting forth in reasonable detail the basis of their objections. If Sellers fail to deliver an Allocation Notice of Objection in accordance with this Section 6.4(d)(i), the Proposed Allocation Statement will be conclusive and binding on all Parties and will become the “Final Allocation Statement.” If Sellers submit an Allocation Notice of Objection, then for 20 Business Days after the date Buyer receives the Allocation Notice of Objection, Buyer and Sellers will use their commercially reasonable efforts to agree on the allocations. If Buyer and Sellers agree on the allocations, such revised allocations will become the Final Allocation Statement. Failing such agreement within 20 Business Days of such notice, the unresolved allocations will be submitted to an independent, nationally recognized accounting firm mutually agreeable to Buyer and Sellers, which firm will be instructed to determine its best estimate of the allocation schedule based on its determination of the unresolved allocations and provide a written description of the basis for its determination within 45 Business Days after submission, such written determination to be final, binding and conclusive. The allocations determined by such accounting firm (or those on the Proposed Allocation Statement to the extent Sellers did not object) will be conclusive and binding on all Parties and will become the “Final Allocation Statement.” The fees and expenses of such accounting firm will be apportioned 50% to Sellers and 50% to Buyer. For the avoidance of doubt, in administering any Action, the Bankruptcy Court shall not be required to apply the Final Allocation Statement in determining the manner in which the Purchase Price should be allocated.
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(ii) Subject to Section 6.4(d)(iii), except to the extent otherwise required by a “determination” within the meaning of Section 1313(a) of the Code or by applicable Law, Sellers and Buyer and their respective Affiliates will report, act and file Tax Returns (including, but not limited to IRS Form 8594) in all respects and for all purposes consistent with the Final Allocation Statement and neither Sellers nor Buyer will take any position (whether in audits, Tax Returns, or otherwise) that is inconsistent with the Final Allocation Statement.
(iii) Notwithstanding anything to the contrary contained herein, including, without limitation, this Section 6.4(d), (x) Buyer shall have the unilateral right to allocate the Purchase Price solely for the purpose of calculating the Transfer Taxes described in Section 6.4(a) with respect to the Transferred Assets and (y) Buyer shall provide written notice to Sellers no later than three Business Days prior to the Closing Date of Buyer’s Purchase Price allocation to such Transferred Assets for Transfer Tax purposes; provided, however, (A) no such Purchase Price allocation shall result in a change to the Purchase Price and (B) any Purchase Price allocation shall be reasonable and proposed for a valid business purpose. To the extent required by Law, each Seller of its respective Transferred Assets shall execute any applicable Transfer Tax return containing such allocation in accordance with this Section 6.4(d).
(e) Buyer and Sellers agree to treat the equity issuance described in Section 2.1(a)(ii) as a tax deferred transaction to the maximum extent permitted by applicable Law.
Section 6.5 Confidentiality. Each Party acknowledges that the information being provided to it in connection with the Transactions is subject to the terms of the Confidentiality Agreement. If, for any reason, the Closing does not occur, the Confidentiality Agreement shall continue in full force and effect in accordance with its terms. Buyer acknowledges and understands that this Agreement, before it becomes otherwise publicly available, may be publicly filed in the Bankruptcy Court and further made available by Sellers to prospective bidders and that, except as prohibited herein, such disclosure will not be deemed to violate any confidentiality obligations owing to Buyer, whether pursuant to this Agreement, the Confidentiality Agreement or otherwise. Sellers acknowledge and agree that from and after the Closing, all non-public information relating to the Business, the Transferred Assets and the Assumed Liabilities (other than any such information that is now or subsequently becomes generally available to the public other than as a direct or indirect disclosure by Sellers or any of their Representatives in violation of this Agreement, will be valuable and proprietary to Buyer and its Affiliates, including, but not limited to, any and all confidential and proprietary information that relates to the actual or anticipated business and/or products, research, or development of the Business, or to any technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Business’s products or services and markets, customer lists, and customers, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, and other confidential and proprietary information about the Business. Sellers agree that, from and after the Closing, Sellers and their respective Representatives will hold in confidence, will not disclose to any Person and will not use any information relating to Buyer and its Affiliates, the Business, the Transferred Assets or the Assumed Liabilities, except as required by Law or Order or Bankruptcy Court requirement, or as otherwise becomes available in the public domain other than through any action by Sellers in violation of its obligations under this Section 6.5.
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Section 6.6 Publicity. Except as required by the Bankruptcy Court in connection with the Bankruptcy Proceeding, with the exception of the initial press releases issued by Sequential and Buyer in connection with signing on the date hereof and the Closing Date in forms mutually agreeable to Sequential and Buyer, any disclosure statement that the Debtors may file in connection with the Bankruptcy Proceeding and any public disclosure issued by Sequential pursuant to its contractual obligations under any confidentiality agreement or as required by Law (including any SEC reporting obligation), Buyer and Sellers will not issue any press release or public announcement concerning this Agreement or the Transactions without obtaining the prior written approval of the other Party, which approval may not be unreasonably withheld, except that such consent shall not be required in connection with ordinary or required pleadings made by any Debtor in the Bankruptcy Court or if disclosure is otherwise required by applicable Law or by the Bankruptcy Court; provided, however, that Buyer or Sellers, as applicable, will consult with the other Party with respect to the text of any such required disclosure; provided further, that nothing in this Section 6.6 shall restrict any Party and its Affiliates’ disclosure of information regarding the Transactions, including information related to such Party’s determination to enter into this Agreement, to advisors, lenders, investors or prospective investors in such Party or its Affiliates.
Section 6.7 Use of Names and Marks. As soon as reasonably practicable, but in no event more than 60 Business Days after the Closing, Sellers shall cause an amendment to the certificate or articles of incorporation or formation (or any equivalent organizational documents) of each Seller to be filed with the appropriate Governmental Entity and shall take all other action necessary to change each Seller’s legal, registered, assumed, trade and “doing business as” name, as applicable, to a name or names not containing any Transferred Intellectual Property, including “Galaxy” or any name confusingly similar to the foregoing, and will cause to be filed as soon as practicable after the Closing, in all jurisdictions in which each Seller is qualified to do business, any documents necessary to reflect such change in its legal, registered, assumed, trade and “doing business as” name, as applicable, or to terminate its qualification therein. Sellers further agree that from and after the Closing, each Seller and its Subsidiaries will cease to make any use of any Transferred Intellectual Property, in whole or in part.
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Section 6.8 Financing.
(a) Notwithstanding anything to the contrary contained in this Agreement, prior to the Closing, Sellers shall use commercially reasonable efforts to, and shall use commercially reasonable efforts to cause its senior management, agents and representatives to, provide cooperation and assistance reasonably requested by Buyer in connection with obtaining the Debt Financing, including: (i) participating in meetings, presentations and due diligence sessions with Buyer, the Debt Financing Sources and their respective Representatives and promptly furnishing such reasonably available information (including financial information) as may be reasonably requested by Buyer; (ii) executing and delivering any definitive financing documents and certificates as may be reasonably requested by Buyer (the “Financing Cooperation Request”) and otherwise facilitating the pledging of collateral and the providing of guarantees (provided that the effectiveness thereof shall be conditioned upon, or become operative after, the Closing); (iii) permitting Buyer, the Debt Financing Sources and their respective Representatives to evaluate, examine or audit the Transferred Assets and the Business, including the current assets, cash management and accounting systems and policies and procedures relating thereto, and cooperating with any reasonable requests in connection with such efforts, including due diligence requests relating thereto, (iv) furnishing Buyer, the Debt Financing Sources and their respective Representatives as promptly as practicable with available financial, borrowing base and other pertinent available information regarding the Business as may be reasonably requested by Buyer, (v) facilitating the granting of a security interest (and perfection thereof) in collateral, guarantees, mortgages, other definitive financing documents or other certificates or documents as may reasonably be requested by Buyer, including obtaining releases of existing liens, (vi) cooperating in satisfying the conditions precedent set forth in any definitive document relating to the Debt Financing, (vii) identifying any portion of the information provided in rating agency presentations, lender and investor presentations, offering documents, bank information memoranda, business projections and similar documents that constitutes material, non-public information and (viii) providing (A) documentation and other information about Sellers, the Transferred Assets and the Business as is reasonably required under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act, and (B) to the extent required by applicable Law, beneficial ownership certifications required pursuant to 31 C.F.R. § 1010.230 (provided, in the case of this clause (B), that Sellers shall not be responsible for including in any such certification information relating to the ownership of the Transferred Assets or the Business, in each case, following the Closing), in each case of this clause (v), at least five Business Days prior to the Closing Date to the extent requested by or on behalf of Buyer in writing at least ten (10) Business Days prior to the Closing Date. Sellers hereby consent to the use of any logos related to the Transferred Assets and the Business in connection with the Debt Financing; provided that such logos shall not be used in a manner that is intended to or reasonably likely to harm or disparage the Business, Sellers, any of their Subsidiaries or any of their Affiliates or the reputation or goodwill of the Business, Sellers, any of their Subsidiaries or any of their Affiliates. Sellers hereby expressly authorize the use of the financial statements and other information provided hereunder for purposes of the Debt Financing and are not aware of any limitation on the use of such financial statements required by any independent accountant.
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(b) Notwithstanding anything to the contrary contained herein, if Buyer makes a Financing Cooperation Request, nothing in this Section 6.8 shall require any such cooperation or assistance to the extent that it would (i) require any Seller to waive or amend any terms of this Agreement or agree to pay any commitment or other fees or reimburse any expenses prior to the Closing (other than expenses reimbursed by Buyer at or prior to Closing in accordance with the terms of Section 6.8(c)), or incur any liability or give any indemnities to any third party or otherwise commit to take any similar action, except in the case of normal costs incurred by such Seller in the ordinary course of business, for which it is not reimbursed or indemnified by Buyer, (ii) unreasonably interfere with the ongoing business or operations of Sellers and their Subsidiaries or the Business, taken as a whole, (iii) require Sellers, any of their Subsidiaries or any of their Affiliates to commit to take any action that is not contingent upon the Closing, (iv) require Sellers, any of their Subsidiaries or any of their Affiliates to take any action that would (A) subject any director, manager, officer or employee of any Seller, any of their Subsidiaries or any of their Affiliates to any actual or reasonably likely personal liability relating to the Debt Financing, (B) conflict with, violate or result in any breach of or default under any Organizational Documents of any Seller, any of its Subsidiaries or of any of their Affiliates, any Contract or any Law, (C) require providing access to or disclose information that Sellers reasonably determine would jeopardize any attorney client privilege of, or conflict with any confidentiality requirements applicable to, any Seller, any of its Subsidiaries or any of their Affiliates (provided that in such instances any Seller, any of its Subsidiaries or any of their Affiliates shall inform Buyer and its Debt Financing Sources of the general nature of the information being withheld and reasonably cooperate with Buyer and its Debt Financing Sources to provide such information, in whole or in part, in the manner that would not result in the loss of such privilege or the conflict with such applicable confidentiality requirements) or (D) require any such entity to change any fiscal period, (v) require any director or manager or equivalent of a Seller or any of its Subsidiaries to pass resolutions or covenants to approve the Debt Financing or authorize the creation of any agreements, documents or actions in connection therewith, unless, in each case, such documents shall not become effective until the Closing or thereafter, (vi) cause or result in any representation or warranty in Article III of this Agreement to be inaccurate or breached, (vii) cause or result in any closing condition set forth in Article VII to fail to be satisfied or (viii) otherwise cause the breach of this Agreement.
(c) If a Financing Cooperation Request is made by Buyer to Sellers, Buyer shall (i) promptly upon request by any Seller, reimburse Sellers for all reasonable and documented out of pocket fees, costs and expenses (including, to the extent incurred at the request or consent of Buyer, reasonable and documented out-of-pocket legal fees) incurred by Sellers and their Affiliates in connection with the cooperation or assistance contemplated by this Section 6.8; provided, that Buyer shall not be required to reimburse Sellers for costs and expenses related to any items that Sellers would have prepared in the ordinary course of its business and (ii) indemnify and hold harmless Sellers, their Subsidiaries and their Affiliates and representatives from and against any and all losses suffered or incurred by them in connection with the arrangement of the Debt Financing, any action taken by them at the request of Buyer pursuant to this Section 6.8 and any information used in connection therewith, other than to the extent such losses are a result of Sellers’ fraud, gross negligence or willful misconduct or Sellers acting in bad faith through the knowing, intentional or the material breach of Sellers’ obligations under this Section 6.8. Without limiting the foregoing and if a Financing Cooperation Request is made by Buyer to Sellers, neither any Seller nor any of its Subsidiaries shall be required, under the provisions of this Section 6.8 or otherwise in connection with the Debt Financing to pay any commitment or other similar fee prior to the Closing that is not advanced to such Seller or its applicable Subsidiary.
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(d) Buyer shall use best efforts to arrange and obtain the Debt Financing on the terms and conditions described in the Debt Commitment Letter on or prior to Closing. Without limiting the foregoing, Buyer shall use commercially reasonable efforts to (i) maintain in effect the Debt Commitment Letter until the earlier of (x) the funding of the Debt Financing at or prior to the Closing or (y) the termination of this Agreement, (ii) comply with all of Buyer’s obligations thereunder, (iii) satisfy (and if unable to so satisfy, use commercially reasonable efforts to obtain the waiver of) on a timely basis all conditions within Buyer’s control applicable to Buyer obtaining the Debt Financing and (iv) to enter into definitive agreements with respect to the Debt Financing reflecting terms and conditions no less favorable, taken as a whole, to Buyer with respect to conditionality than those contained in the Debt Commitment Letter, so that such agreements are in effect no later than the Closing. In the event that all of the conditions set forth in Section 7.1 and Section 7.2 have been satisfied or waived, Buyer shall use commercially reasonable efforts to cause the funding on the Closing Date of the full amount of the Debt Financing (or such lesser amount as may be required to consummate the transactions contemplated by this Agreement), and shall enforce all of its rights under the Debt Commitment Letter, including, if necessary, to comply with Section 9.7 hereof, commencing and diligently pursuing proceedings against the Debt Financing Sources in good faith. Without limiting the generality of the preceding two sentences, Buyer shall give Sellers prompt notice: (A) if Buyer or any of its Affiliates materially breaches or materially defaults under or materially deviates from the terms of, or obtains Knowledge of any other party’s material breach or material default under or material deviation from the terms of, the Debt Commitment Letter or any definitive documents related thereto; or (B) of the receipt by it of any written notice or other written communication from any Person with respect to any actual or alleged breach, default, termination or repudiation by any party of the Debt Commitment Letter or any definitive document related to the Debt Financing.
(e) Prior to the Closing, Buyer shall not amend, modify or agree to any waiver under any Equity Commitment Letter without the prior written consent of Sellers if such amendment, modification or waiver would (i) reduce the aggregate amount committed pursuant to the Equity Commitment Letters below an amount sufficient to satisfy the payment obligations of Buyer in cash at the Closing under this Agreement or (ii) impose new or additional conditions to the funding of such amounts. Prior to the Closing, neither Buyer nor any of its Affiliates shall amend, modify, supplement, replace or agree to any waiver or consent under the Debt Commitment Letter without the prior written consent of Sellers if such amendment, modification, supplement, replacement or waiver would (i) reduce the aggregate amount of the Debt Financing below an amount sufficient to satisfy the payment obligations of Buyer in cash at the Closing under this Agreement, including by changing the amount of fees to be paid or original issue discount of the Debt Financing, or (ii) impose new or additional conditions to the Debt Financing, otherwise materially directly or indirectly expand, amend or modify any of the conditions to the Debt Financing in a manner that would reasonably be expected to (A) delay, prevent, or impair the funding or availability of all or any portion of the Debt Financing (or satisfaction of the conditions to the Debt Financing) on the Closing Date, (B) adversely affect the ability of Buyer to enforce its material rights against the Debt Financing Sources or any other parties to the Debt Commitment Letter or any definitive documents related thereto or (C) adversely affect the ability of Buyer to timely consummate the transactions contemplated hereby; provided that Buyer may modify, amend or supplement the Debt Commitment Letter to (A) correct typographical errors or mistakes, (B) add lenders, arrangers, bookrunners, agents or similar entities or titles that have not executed the Debt Commitment Letter as of the date hereof or amend titles, allocations and fee sharing arrangements in connection therewith or (C) increase the amount of the Debt Financing. Notwithstanding any of the foregoing, Buyer may reduce the commitment under the Debt Commitment Letter on a dollar-for-dollar basis with the net proceeds of consummated offerings or other incurrences of any debt for borrowed money incurred after the date of this Agreement for the purpose of financing payment of the Cash Consideration and other amounts payable by Buyer or its Subsidiaries pursuant to this Agreement and the other Transaction Documents to which Buyer is a party. In the event that new commitment letters are entered into in accordance with any amendment, replacement, supplement or other modification of the Debt Commitment Letter permitted pursuant to this Section 6.8(e), Buyer shall promptly deliver to Sellers a true, complete and accurate copy thereof.
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(f) In the event any portion of the Debt Financing becomes unavailable on the terms and conditions (including the flex provisions) contemplated in the Debt Commitment Letter, Buyer shall (i) promptly notify Sellers in writing thereof and the reasons therefor and (ii) use its commercially reasonable efforts to arrange to obtain alternative financing from alternative sources on terms not materially less favorable, in the aggregate, to Buyer (as determined in the reasonable judgment of Buyer, taking into account the flex provisions set forth in the Debt Commitment Letter), in an amount sufficient to consummate the transactions contemplated by this Agreement.
Section 6.9 No Successor Liability. The Parties intend that, to the fullest extent permitted by Law (including under Section 363(f) of the Bankruptcy Code), upon the Closing, Buyer shall not be deemed to: (a) be the successor or successor employer any Seller, including with respect to Environmental Liabilities; (b) have, de facto or otherwise, merged with or into any Seller; (c) have any common law successor liability in relation to any Multiemployer Plan, including with respect to withdrawal liability or contribution obligations, (d) be a mere continuation or substantial continuation of any Seller; or (e) be liable for any acts or omissions of any Seller in the conduct of the Business or arising under, or related to, the Transferred Assets, other than as expressly set forth in this Agreement. Without limiting the generality of the foregoing, and except as otherwise provided in this Agreement, the Parties intend that Buyer shall not be liable for any Liability or Lien (other than Assumed Liabilities) against the Debtors or any of the Debtors’ predecessors or Affiliates, and Buyer shall have no successor or vicarious Liability of any kind or character whether known or unknown as of the Closing Date, whether now existing or hereafter arising, or whether fixed or contingent, with respect to the Business, the Transferred Assets or any Liabilities of Sellers arising prior to the Closing Date. The Parties agree that the provisions substantially in the form of this Section 6.9 shall be reflected in the Sale Order.
Section 6.10 Intercompany Arrangements. All intercompany and intracompany accounts or contracts between the Business, on the one hand, and any Seller or its Affiliates, on the other hand, shall be cancelled without any consideration or further liability to any Party and without the need for any further documentation, immediately prior to the Closing.
Section 6.11 Release; Termination of Buyer Consulting Agreement. Upon the Closing, (a) Sellers shall pay all amounts due and owing by them under the Buyer Consulting Agreement solely through the Closing Date which, for the avoidance of doubt, shall include the proration of any amounts purported to be paid on a weekly, monthly, quarterly, semi-annual or annual basis, so that the Sellers shall only be obligated to pay amounts due and owing through the Closing Date, and (b) thereafter, without any further action on the part of Buyer or Seller, the Buyer Consulting Agreement shall terminate and be of no further effect. Effective as of the Closing, (i) Buyer, on its own behalf and on behalf of its direct and indirect Affiliates, hereby absolutely, irrevocably and unconditionally releases and forever discharges Sequential and its direct and indirect Affiliates from, and agrees not to assert any cause of action or proceeding with respect to, any losses or Liabilities whatsoever, of any kind or nature, whether at law or in equity, which have been or could have been asserted against Seller or its Affiliates, which Buyer or its Affiliates has or ever had, which arises out of or in any way relates to events, circumstances or actions occurring, existing or taken prior to or as of the Closing Date in respect of the Buyer Consulting Agreement and (ii) Sequential, on its own behalf and on behalf of its direct and indirect Affiliates, hereby absolutely, irrevocably and unconditionally releases and forever discharges Buyer and its direct and indirect Affiliates from, and agrees not to assert any cause of action or proceeding with respect to, any losses or Liabilities whatsoever, of any kind or nature, whether at law or in equity, which have been or could have been asserted against Buyer or its Affiliates, which Sequential or its Affiliates has or ever had, which arises out of or in any way relates to events, circumstances or actions occurring, existing or taken prior to or as of the Closing Date in respect of the Buyer Consulting Agreement.
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Section 6.12 R&W Insurance Policy.
(a) Buyer shall cause any R&W Insurance Policy purchased by Buyer with respect to the Transactions to include terms to the effect that the insurer waives its rights to bring any claim against Sellers by way of subrogation, claim for contribution or otherwise, other than claims by way of subrogation against Sellers to the extent that the relevant losses arose out of Fraud by Sellers, and will ensure that such terms are held by Buyer in trust for Sellers.
(b) Sellers shall, and shall cause each of their Subsidiaries and their respective directors, officers, managers, employees, members and Representatives to, provide reasonable access upon reasonable advance notice and during business hours to the books, records and personnel and other Representatives of the Sellers and each of their Subsidiaries, as may be reasonably requested by Buyer or any insurance broker or insurance carrier in connection with working with Buyer in connection with Buyer’s considering or obtaining the R&W Insurance Policy prior to the Closing.
Section 6.13 Receivables.
(a) Subject to reduction pursuant to Section 2.2, within ten (10) Business Days following receipt of any amounts relating to Shared Receivables, Buyer shall pay or cause to be paid to Sellers the Seller Portion of any such amounts actually received, net of any taxes with respect thereto and shall, concurrently with such payment, deliver to Sellers a statement setting forth a calculation of such payment in sufficient detail to identify the accounts with respect to which such payments relate.
(b) Subject to reduction pursuant to Section 2.2, within ten (10) Business Days following receipt of any amount of the East Asia Delinquent Accounts Receivables, Buyer shall pay or cause to be paid to the Term B Lenders 50% of such collected amount (each such payment, an “East Asia A/R Payment”) and shall, concurrently with such payment, deliver to Sellers a statement setting forth a calculation of such payment in sufficient detail to identify the accounts with respect to which such payments relate. The Term B Lenders shall be third party beneficiaries of this Section 6.13.
(c) Notwithstanding the foregoing or anything herein to the contrary, in no event shall Buyer by required to make any payments under Section 6.13(a) or Section 6.13(b) prior to Buyer’s submission of the Closing Date Statement in accordance with Section 2.2(a). Upon Buyer’s submission of the Closing Date Statement, in the event the Final Cash Consideration (as set forth in the Closing Date Statement) is less than the Estimated Cash Consideration, Buyer shall promptly pay to Sellers all amounts payable pursuant to Section 6.13(a) and Section 6.13(b) in excess of the amount by which the Shortfall Amount included in the Closing Date Statement exceeds the Escrow Amount and may continue to withhold payments under Section 6.13(a) and Section 6.13(b) up to the amount by which the Shortfall Amount included in the Closing Date Statement exceeds the Escrow Amount, until the Final Cash Consideration is finally determined pursuant to Section 2.2(c) and Section 2.2(d) and any resulting Shortfall Amount is fully paid.
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(d) The dispute procedures set forth in Section 2.2 shall govern in the event of a dispute with respect to any of the payments contemplated by this Section 6.13.
(e) Buyer shall, subject to applicable Law, use commercially reasonable efforts to collect the East Asia Delinquent Accounts Receivable and the Shared Receivables to the same extent as Buyer would in the ordinary course of its business if the East Asia A/R Payments and the Seller Portion of the Shared Receivables were not payable to Sellers, and shall not offset any East Asia Delinquent Accounts Receivable or Shared Receivables against amounts otherwise owed by Buyer or any of its Subsidiaries or Affiliates.
Section 6.14 Expense Reimbursement. Immediately following the execution of this Agreement, Sellers shall deliver to Buyer an amount equal to the Expense Reimbursement Amount by wire transfer of immediately available funds, which amount Buyer shall be entitled to utilize to satisfy its reasonable and documented expenses whether incurred prior to or following the Petition Date and whether or not the Bankruptcy Court enters the Bid Procedures Order.
Section 6.15 Data Room. As promptly as practicable following the date hereof, and in any event prior to the Closing, Sellers shall deliver to Buyer an electronic copy of the Data Room as of 11:59 p.m. eastern time on the date that was two (2) Business Days prior to the date hereof.
Section 6.16 Consulting Agreement. From the date hereof through the Closing Date, Sellers shall pay to Buyer amounts due and owing pursuant to the terms of the Buyer Consulting Agreement.
Article VII
CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to Each Party’s Obligation. The Parties’ obligations to consummate the Transactions are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by the Parties in whole or in part to the extent permitted by applicable Law):
(a) the waiting period (and any extension thereof) applicable to the consummation of the Transactions under the HSR Act shall have expired or been earlier terminated;
(b) there shall not be in effect any Order of a Governmental Entity of competent jurisdiction or any Law preventing, restraining, enjoining, making illegal or otherwise prohibiting the consummation of the Transactions; and
(c) the Bankruptcy Court shall have entered each of the Bid Procedures Order and the Sale Order, and the Sale Order shall have become a Final Order and shall be in full force and effect.
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Section 7.2 Conditions Precedent to Obligations of Buyer. The obligation of Buyer to consummate the Transactions is subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Buyer in whole or in part to the extent permitted by applicable Law):
(a) (i) the Fundamental Representations shall be true and correct in all respects on and as of the Closing, except to the extent expressly made as of an earlier date, in which case such representations and warranties shall be true and correct in all respects as of such earlier date (in each case except for any failure to be so true and correct that is de minimis in nature); and (ii) all other representations of Sellers contained in this Agreement (without giving effect to any materiality limitations, such as “material,” “in all material respects” and “Material Adverse Effect” set forth therein) shall be true and correct on and as of the Closing, except to the extent expressly made as of an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date, except in either case for any failure of any such representation and warranty to be so true and correct that has not had, individually or in the aggregate, a Material Adverse Effect;
(b) Sellers shall have performed and complied in all material respects with all obligations and agreements required in this Agreement to be performed or complied with by them prior to or on the Closing Date;
(c) Buyer shall have received from Sellers a certificate signed by an authorized officer of Sellers on behalf of Sellers certifying that the conditions set forth in Section 7.2(a), Section 7.2(b) and Section 7.2(d) have been satisfied;
(d) since the date of this Agreement, there shall not have been any Material Adverse Effect;
(e) Sellers shall have assumed and assigned to Buyer the Closing Assumed Contracts and the Additional Assumed Contracts, in each case pursuant to Section 365 of the Bankruptcy Code, the Sale Order, the Bid Procedures Order and Section 1.5 subject to Buyer’s provision of adequate assurance of future performance in respect of the Closing Assumed Contracts and the Additional Assumed Contracts as may be required under Section 365 of the Bankruptcy Code; and
(f) Sellers shall have delivered (or caused to be delivered) each of the documents and instruments to be delivered by Sellers at the Closing pursuant to Section 2.5.
Section 7.3 Conditions Precedent to Obligations of Sellers. The obligations of Sellers to consummate the Transactions are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of which may be waived by Sellers in whole or in part to the extent permitted by applicable Law):
(a) the representations and warranties of Buyer contained in this Agreement shall be true and correct (without giving effect to any materiality limitations, such as “material,” “in all material respects” or “Buyer Material Adverse Effect”, set forth therein) on and as of the Closing, except to the extent expressly made as of an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date, except for any failure of any such representation and warranty to be so true and correct that has not had, individually or in the aggregate, a Buyer Material Adverse Effect;
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(b) Buyer shall have performed and complied in all material respects with all obligations and agreements required in this Agreement to be performed or complied with by Buyer prior to or on the Closing Date;
(c) Sellers shall have received from Buyer a certificate signed by an authorized officer of Buyer on behalf of Buyer certifying that the conditions set forth in Section 7.3(a) and Section 7.3(b) have been satisfied; and
(d) Buyer shall have delivered (or caused to be delivered) each of the documents and instruments to be delivered by Buyer at the Closing pursuant to Section 2.4.
Section 7.4 No Frustration of Closing Conditions. Neither Buyer nor Sellers may rely on the failure of any condition to their respective obligations to consummate the Transactions set forth in Section 7.1, Section 7.2 or Section 7.3 as the case may be, to be satisfied if such failure was caused by such Party’s or its Affiliates’ failure to use its commercially reasonable efforts (or such other applicable efforts standard expressly contemplated hereby) to satisfy the conditions to the consummation of the Transactions or by any other breach of a representation, warranty, or covenant hereunder.
Article VIII
TERMINATION
Section 8.1 Termination of Agreement Prior to Closing. This Agreement may be terminated prior to the Closing as follows:
(a) by mutual written consent of Buyer and Sellers;
(b) automatically, if the Bankruptcy Court enters an order approving an Alternative Transaction (unless Buyer has submitted a Buyer Backup Bid);
(c) by either Party, upon written notice to the other Party:
(i) if the Closing has not occurred by 5:00 p.m., prevailing Eastern time, on the date that is 75 days after the Petition Date (the “Termination Date”), which date (x) shall be extended (by the same number of days) to the extent the Milestone set forth in Section 8.1(d)(ii)(E) is extended pursuant to the Bid Procedures Order, and (y) be extended by mutual agreement of the Parties; provided that if the Closing has not occurred on or before the Termination Date due to a material breach of any covenants or agreements contained in this Agreement by Buyer or Sellers so as to cause any of the conditions of the other Party set forth in Section 7.1, Section 7.2 or Section 7.3, to not be satisfied, as applicable, then such breaching Party may not terminate this Agreement pursuant to this Section 8.1(c)(i);
(ii) if there is in effect a final non-appealable Order of a Governmental Entity of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the Transactions; provided, that the party so requesting termination shall have complied with Section 6.3;
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(iii) if, other than as a result of a request by any Seller, the Bankruptcy Proceeding of any Seller is dismissed or converted to a case under Chapter 7 of the Bankruptcy Code or an order is entered by the Bankruptcy Court appointing a trustee or other Person for operation or administration of any of the Sellers or their Business or assets, or a responsible officer for any of the Sellers, or an examiner with enlarged power relating to the operation or administration of Sellers or its Business or assets; or
(iv) if Buyer is not selected as a Successful Bidder or the Backup Bidder (but only if Buyer has submitted a Buyer Backup Bid) at the conclusion of the Auction;
(d) by Buyer, upon written notice to Sellers:
(i) in the event of (x) a willful breach of Sections 5.1(a), Section 5.1(b) or Section 5.2(a) by Sellers or (y) a material breach by Sellers of any representation or warranty or any other covenant or agreement contained in this Agreement that in the case of this clause (y) (A) would result in any of the conditions set forth in Section 7.1 or Section 7.2 not being satisfied if such breach remained uncured as of the Closing, and (B) such breach is incapable of being cured prior to the Termination Date or, if capable of being cured, such breach has not been cured within 30 days after the giving of written notice by Buyer to Sellers of such breach; provided that Buyer is not then in material breach of any representation, warranty, covenant or agreement contained in this Agreement;
(ii) in the event Sellers have not (A) commenced the Bankruptcy Proceeding within one day of execution of this Agreement, (B) filed the Bid Procedures Motion within one day of the Petition Date, (C) obtained entry of the Bid Procedures Order within 23 days following the Petition Date, (D) conducted and concluded the Auction within 60 days following the Petition Date, or (E) obtained entry of the Sale Order within 65 days of the Petition Date (each of the foregoing (A)-(E), a “Milestone”); provided that, in each case, if Sellers have failed to meet a Milestone on or prior to the date set forth herein, Sellers shall have five Business Days to meet such Milestone after the giving of written notice by Buyer to Sellers that such Milestone was not met; provided further that, to the extent any such Milestone is extended pursuant to the Bid Procedures Order, such Milestone shall be deemed to be extended hereunder;
(iii) if, following entry of the Bid Procedures Order or the Sale Order, any provision of either the Bid Procedures Order or Sale Order is amended, modified or supplemented without Buyer’s prior written consent or is voided, reversed or vacated; provided, that should the Bid Procedures Order or Sale Order be reversed, termination of this Agreement is subject to the Seller’s rights to appeal to a higher court; provided, further, the immediately preceding proviso is subject to Buyer’s other rights of termination set forth herein; provided, further, that if the Bid Procedures Order is voided post-Closing, the Transactions will remain consummated; or
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(iv) if (A) any Seller seeks to have the Bankruptcy Court enter an Order (I) dismissing, or converting into cases under Chapter 7 of the Bankruptcy Code, any of the cases commenced by Sellers under Chapter 11 of the Bankruptcy Code and comprising part of the Bankruptcy Proceeding, or (II) appointing a trustee in the Bankruptcy Proceeding or appointing a responsible officer or an examiner with enlarged powers (other than a fee examiner) relating to the operation of any Seller’s business pursuant to Section 1104 of the Bankruptcy Code, or (B) such an order of dismissal, conversion or appointment is entered for any reason and is not reversed or vacated within 14 days after the entry thereof; or
(e) by Sellers, upon written notice to Buyer:
(i) in the event of a breach by Buyer of any representation or warranty or any covenant or agreement contained in this Agreement, if (A) such breach would result in a failure of a condition set forth in Section 7.1 or Section 7.3 to be satisfied if such breach remained uncured as of the Closing, and (B) such breach is incapable of being cured prior to the Termination Date or, if capable of being cured, such breach has not been cured within 30 days after the giving of written notice by Sellers to Buyer of such breach; provided that Sellers are not then in material breach of any representation, warranty, covenant or agreement contained in this Agreement;
(ii) if (A) all of the conditions set forth in Section 7.1 and Section 7.2 have been satisfied or waived (other than those that, by their nature, are to be satisfied at the Closing, all of which are capable of being satisfied at the Closing), (B) Sellers have irrevocably confirmed by written notice to Buyer that (1) all conditions set forth in Section 7.3 have been satisfied (other than those that, by their nature, are to be satisfied at the Closing, each of which is capable of being satisfied at the Closing) or that they would be willing to waive any unsatisfied conditions in Section 7.3 at the Closing, and (2) they are ready, willing and able to consummate the Closing and (C) Buyer fails to consummate the Closing within three (3) Business Days following the date the Closing should have occurred pursuant to Section 2.3; or
(iii) if Sequential’s board of directors, based on the advice of outside legal counsel, determines that proceeding with the transactions contemplated by this Agreement or failing to terminate this Agreement would be inconsistent with its or such Person’s or body’s fiduciary duties or applicable law.
Section 8.2 Effect of Termination. In the event of termination of this Agreement pursuant to Section 8.1, this Agreement shall become void and of no effect; provided, however, that the provisions set forth in Section 5.3, this Section 8.2, Section 8.3, Article IX and in the Confidentiality Agreement shall survive the termination of this Agreement; provided, further, that nothing in this Section 8.2 shall be deemed to release any Party from liability for (i) any willful or material breach of the covenants in this Agreement prior to termination or (ii) any willful and material breach of the representations in this Agreement prior to termination.
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Section 8.3 Fees and Expenses Following Termination.
(a) If this Agreement is terminated by (i) operation of Section 8.1(b), (ii) either Party pursuant to Section 8.1(c)(iv), (iii) Buyer pursuant to Section 8.1(d)(ii) or Section 8.1(d)(iv)(A), or (iv) Seller pursuant to Section 8.1(e)(iii), then Sellers shall pay to Buyer (by wire transfer of immediately available funds), an amount equal to the Seller Termination Fee no later than the date that is the earlier of (x) 45 days of the date of such termination and (y) the date of consummation of an Alternative Transaction. If this Agreement is terminated by Buyer pursuant to Section 8.1(d)(i), then Sellers shall pay to Buyer (by wire transfer of immediately available funds), within ten (10) Business Days after such termination, an amount equal to the Seller Termination Fee. If this Agreement is (x) terminated by Buyer pursuant to Section 8.1(d)(iii) or Section 8.1(d)(iv)(B) or by either Party pursuant to Section 8.1(c)(iii) and (y) within one year of such termination the Sellers enters into or consummate an Alternative Transaction, then Sellers shall pay to Buyer (by wire transfer of immediately available funds), an amount equal to the Seller Termination Fee no later than the date of the consummation of such Alternative Transaction.
(b) If this Agreement is terminated by Sellers pursuant to Section 8.1(e)(i) or Section 8.1(e)(ii), then Buyer shall pay to Sellers (by wire transfer of immediately available funds), within ten (10) Business Days after such termination, an amount equal to the Buyer Termination Fee; provided, that if the Debt Financing Sources’ failure to consummate the Debt Financing when required to so pursuant to the terms of the Debt Commitment Letter (a “Debt Financing Failure”) is the sole cause of Buyer’s breach in the event of a termination pursuant to Section 8.1(e)(i) or failure to close in the event of a termination pursuant to Section 8.1(e)(ii), Buyer shall not be required to pay the Buyer Termination Fee to Seller.
(c) The Parties acknowledge and hereby agree that the provisions of this Section 8.3 and Section 5.3 are an integral part of the Transactions, in light of the difficulty of accurately determining actual damages with respect to the foregoing, the amount of such payment constitutes a reasonable estimate of the losses that will be suffered by reason of any such termination of this Agreement and constitutes liquidated damages (and not a penalty) and that, without such provisions, the Parties would not have entered into this Agreement. If a Party shall fail to pay in a timely manner the amounts due pursuant to this Section 8.3 or Section 6.14, and, in order to obtain such payment, Sellers or Buyer makes a claim against the other Party pursuant to this Section 8.3 or Section 5.3 that results in a judgment, Sellers or Buyer, as applicable, shall pay to the claimant the reasonable costs and expenses of such Party (including its reasonable attorneys’ fees and expenses) incurred or accrued in connection with such suit, together with interest on the amounts set forth in this Section 8.3 or Section 5.3, as applicable, at the prime rate as published in The Wall Street Journal in effect on the date such payment was required to be made through the date such payment was actually received, or a lesser rate that is the maximum permitted by applicable Law. The Parties acknowledge and agree that in no event shall Sellers or Buyer be obligated to pay the Seller Termination Fee or Buyer Termination Fee, as applicable, on more than one occasion.
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(d) Notwithstanding anything to the contrary in this Agreement, the Parties hereby acknowledge and agree that (i) in the event that the Seller Termination Fee is payable and paid by Sellers to Buyer, or the Buyer Termination Fee is payable and paid by Buyer to Sellers, the Seller Termination Fee or the Buyer Termination Fee, as applicable, shall be the sole and exclusive remedy under any Theory of Liability under this Agreement of such Party and their respective Subsidiaries and any of their respective Related Persons, for any loss suffered as a result of the failure of the Closing or the other Transactions to be consummated or for a breach or failure to perform hereunder or otherwise (whether intentional, willful, negligent or otherwise), and, upon payment of such amount, none of any Party’s Related Persons shall have any further liability or obligation relating to or arising out of this Agreement, the Closing or the other Transactions and no Party or its Related Persons shall be entitled to assert, bring or maintain, and each Party on behalf of itself and its Related Persons, hereby waives any right to assert, bring or maintain, any claim, suit, action or proceeding against such other Party or its Related Persons arising out of or in connection with this Agreement or the Transactions (and the abandonment or termination thereof) or any matter forming the basis for such termination, whether by or through any Theory of Liability, (ii) if a Debt Financing Failure was the sole cause of any breach by Buyer under this Agreement (including a failure to consummate the Transactions) giving rise to the termination of this Agreement, Buyer shall not have any liability to Sellers or any other Person for such breach, (iii) under no circumstances will Sellers or any of their respective Related Persons be entitled to monetary damages in excess of the amount of the Buyer Termination Fee and (iv) under no circumstances will Buyer or any of its Related Persons be entitled to monetary damages in excess of the amount of the Seller Termination Fee. Notwithstanding anything to the contrary contained in this Agreement, under no circumstances will Sellers be entitled to, and in no event shall Sellers seek to recover, monetary damages from any Related Persons of Buyer. Each Party’s Related Persons shall be third party beneficiaries of this Section 8.3. For purposes hereof, “Theory of Liability” shall mean any claim, obligation, liability, cause of action, or proceeding (in each case, whether in contract or in tort, at law or in equity, or pursuant to law or equity) that may be based upon, in respect of, arise under, out or by reason of, be connected with, or relate in any manner to, this Agreement or any document referenced herein, or the negotiation, execution, performance, termination or breach (whether intentional, willful, negligent or otherwise) of this Agreement or any other document referenced herein, including any representation or warranty made in, in connection with, or as an inducement to enter into, this Agreement and including theories of equity, agency, control, instrumentality, alter ego, domination, sham, single-business enterprise, piercing the veil, unfairness, undercapitalization or otherwise. Upon payment of the Buyer Termination Fee, none of Buyer or any Related Person of Buyer will have any further liability or obligation to Sellers relating to or arising out of this Agreement or the Transactions other than for collection costs or expenses that Buyer requested the Sellers incur, and that Sellers actually incurred, in accordance with the terms of this Agreement. Upon payment of the Seller Termination Fee, none of Sellers nor any Related Person of Sellers will have any further liability or obligation to Buyer relating to or arising out of this Agreement or the Transactions other than for collection costs or expenses that Buyer requested the Sellers incur, and that Sellers actually incurred, in accordance with the terms of this Agreement. No Financing Source shall be subject to any special, consequential, punitive or indirect damages or damages of a tortious nature.
Article IX
MISCELLANEOUS
Section 9.1 No Survival. Between the Parties (and not, for the avoidance of doubt, for purposes of the R&W Insurance Policy), none of the representations, warranties or covenants (other than covenants that expressly survive the Closing) contained in this Agreement or in any instrument delivered under this Agreement will survive the Closing.
Section 9.2 Notices. Unless otherwise set forth herein, all notices and other communications, including consents and waivers, to be given or made hereunder shall be in writing and shall be deemed to have been duly given or made on the date of delivery to the recipient thereof if received prior to 5:00 p.m. in the place of delivery and such day is a Business Day (or otherwise on the next succeeding Business Day) if (a) delivered by registered or certified mail, return receipt requested with notice by email of such delivery or (b) sent by email to the email addresses set forth below.
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To Buyer:
c/o Gainline Capital Partners LP
700 Canal Street, 5th Floor
Stamford, CT 06902
| Attn: | Allan Weinstein | |
| Email: | allan@gainlinecapital.com |
With a copy to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
| Attn: | Gregory B. Astrachan | |
| Paul V. Shalhoub | ||
| Jonathan S. Kubek | ||
| Email: | gastrachan@willkie.com | |
| pshalhoub@willkie.com | ||
| kubek@willkie.com |
To Sellers or Debtors:
Sequential Brands Group, Inc.
1407 Broadway
38th Floor
New York, NY 10018
| Attn: | Eric Gul | |
| Email: | EGul@sbg-ny.com |
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
| Attn: | Joshua Brody | |
| William Sorabella | ||
| Jason Zachary Goldstein | ||
| Email: | brody@gibsondunn.com | |
| wsorabella@gibsondunn.com | ||
| goldstein@gibsondunn.com |
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or to such other Person or addressees as may be designated in writing by the Party to receive such notice as provided above; provided, however, that copies to outside counsel are for convenience only and the provision of a copy to outside counsel does not constitute notice or alter the effectiveness of any notice, request, instruction or other communication otherwise made or given in accordance with this Section 9.2.
Section 9.3 Entire Agreement; Amendments and Waivers. This Agreement (including any exhibits and schedules hereto), the Confidentiality Agreement and the other Transaction Documents represent the entire understanding and agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior discussions and agreements between the Parties with respect to the subject matter hereof and thereof. This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed, in the case of an amendment, supplement or change, by Buyer and Sequential, or in the case of a waiver, by the Party against whom enforcement of such waiver is sought. The waiver by any Party of a breach of any provision of this Agreement will not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder will operate as a waiver thereof, nor will any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by Law.
Section 9.4 Assignment. This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Except as expressly set forth herein, nothing in this Agreement or any other Transaction Document (including any exhibit or schedule hereto or thereto) will create or be deemed to create any third party beneficiary rights in any Person or entity not a party to this Agreement. No assignment of this Agreement or of any rights or obligations hereunder may be made by either Sellers or Buyer (by operation of law or otherwise) without the prior written consent of the other Party and any attempted assignment without the required consents will be void; provided, however, that (a) Buyer may assign some or all of its rights or delegate some or all of its obligations hereunder to one or more Affiliates (including to a Buyer Designee), (b) Buyer may collaterally assign its rights and benefits hereunder, in whole or in part, to any of the Debt Financing Sources in connection with the Debt Financing and (c) each Seller may assign some or all of its rights or delegate some or all of its obligations hereunder to successor entities (including any liquidating trust) pursuant to a Chapter 11 plan confirmed by the Bankruptcy Court, in the case of each of clauses (a), (b) and (c) above, without any other Party’s consent. No assignment or delegation of any obligations hereunder will relieve the Parties of any such obligations. Upon any such permitted assignment, the references in this Agreement to Sellers or Buyer will also apply to any such assignee unless the context otherwise requires.
Section 9.5 Expenses. Except with regard to the Expense Reimbursement Amount or as otherwise expressly provided in this Agreement, whether or not the Transactions are consummated, each of Sellers, on the one hand, and Buyer, on the other hand, will bear its own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the Transactions and all proceedings incident thereto. For the avoidance of doubt, the cost of the R&W Insurance Policy, and the fees and expenses incurred in connection with obtaining R&W insurance, will be the sole cost and expense of Buyer, and Seller will not have any liability with respect thereto.
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Section 9.6 Governing Law. This Agreement will be governed by and construed in accordance with the internal Laws of the State of New York, without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York, and the obligations, rights and remedies of the Parties shall be determined in accordance with such Laws.
Section 9.7 Specific Performance.
(a) The Parties agree that irreparable damages would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, and that damages at law may be an inadequate remedy for the breach of any of the covenants, promises and agreements contained in this Agreement. Accordingly, prior to a valid termination of this Agreement in accordance with its terms, any Party will be entitled to injunctive relief to prevent any such breach, and to specifically enforce the terms and provisions of this Agreement without the necessity of posting bond or other security against it or proving damages. The rights set forth in this Section 9.7 will be in addition to any other rights which a Party may have at law or in equity pursuant to this Agreement. For the avoidance of doubt, notwithstanding anything else in this Agreement, in no event shall specific performance of Buyer’s obligation to consummate the Closing survive if this Agreement is terminated in accordance with its terms.
(b) The Parties hereby agree not to raise any objections to the availability of the equitable remedy of specific performance to prevent or restrain breaches of this Agreement by Buyer or Sellers, as applicable, and to specifically enforce the terms and provisions of this Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the respective covenants and obligations of Buyer or Sellers, as applicable, under this Agreement all in accordance with the terms of this Section 9.7.
(c) Notwithstanding anything in this Agreement to the contrary, the Parties hereby acknowledge and agree that Sellers shall be entitled to specific performance to cause Buyer (i) to consummate and obtain the Debt Financing (which may include bringing claims or actions against the Debt Financing Sources) on the terms and conditions of the Debt Commitment Letter, solely if (A) all conditions in Section 7.1 and Section 7.2 have been satisfied or waived (other than those to be satisfied at the Closing itself, each of which is capable of being, and is, satisfied or waived upon the Closing) at the time when the Closing would have occurred pursuant to the terms hereof, (B) all conditions to the consummation of the Debt Financing provided for by the Debt Commitment Letter have been satisfied (or, with respect to certificates to be delivered at the consummation of the Debt Financing, are capable of being satisfied upon consummation) at the time when the Closing would have occurred pursuant to the terms thereof and (C) Sellers have irrevocably confirmed in a written notice delivered to Buyer that (1) all conditions set forth in Section 7.1 and Section 7.3 have been satisfied (other than those to be satisfied at the Closing itself, each of which is capable of being, and is, satisfied upon the Closing) or that it is willing to waive any unsatisfied conditions in Section 7.3 at the Closing, and (2) if the Debt Financing were consummated, it would take such actions that are within its control to cause the Closing to occur in accordance with this Agreement and (ii) to effect the Closing solely if (A) the Debt Financing has been consummated in accordance with the terms thereof or the Debt Financing Sources have confirmed in writing that the Debt Financing shall be consummated at the Closing and (B) Sellers have irrevocably confirmed to Buyer in writing that (1) (1) all conditions set forth in Section 7.1 and Section 7.3 have been satisfied (other than those to be satisfied at the Closing itself, each of which is capable of being, and is, satisfied upon the Closing) or that it is willing to waive any unsatisfied conditions in Section 7.3 at the Closing, and (2) Sellers stand ready, willing and able to proceed with the Closing if specific performance is granted and the Debt Financing is consummated.
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(d) Notwithstanding the foregoing, the Parties hereby acknowledge and agree that in no event shall Sellers or any of their Related Persons or Affiliates, or any of their respective Related Persons or Affiliates be entitled to seek (or force, or seek the remedy of specific performance to make, Buyer or any of its Related Persons or Affiliates to seek) the remedy of specific performance of this Agreement, the Debt Commitment Letter, the Debt Financing or any other financing, in each case, against any Debt Financing Source.
Section 9.8 Submission to Jurisdiction; Consent to Service of Process; Waiver of Jury Trial.
(a) Without limiting any Party’s right to appeal any order of the Bankruptcy Court, (i) the Bankruptcy Court will retain exclusive jurisdiction to enforce the terms of this Agreement and to decide any claims or disputes which may arise or result from, or be connected with, this Agreement, any breach or default hereunder, or the Transactions, and (ii) any and all proceedings related to the foregoing will be filed and maintained only in the Bankruptcy Court, and the Parties hereby consent to and submit to the jurisdiction and venue of the Bankruptcy Court for such purposes and will receive notices at such locations as indicated in Section 9.2; provided, however, that if the Bankruptcy Proceeding has been closed pursuant to Section 350 of the Bankruptcy Code, the Parties agree to unconditionally and irrevocably submit to the exclusive jurisdiction of the United States District Court for the Southern District of New York, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such Action, in the Supreme Court of the State of New York, New York County, for the resolution of any such claim or dispute. The Parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such Action brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the Parties agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
(b) Each of the Parties hereby consents to process being served by any other Party in any Action by delivery of a copy thereof in accordance with the provisions of Section 9.2; provided, however, that such service will not be effective until the actual receipt thereof by the Party being served.
(c) Each Party to this Agreement waives any right to trial by jury in any Action regarding this Agreement or any provision hereof.
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Section 9.9 Interpretation; Construction.
(a) The Table of Contents, Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not in any way affect the meaning or interpretation of this Agreement.
(b) Unless otherwise specified in this Agreement or the context otherwise requires: (i) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (ii) any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular and the singular shall include the plural; (iii) all Preamble, Recital, Article, Section, clause, Schedule and Exhibit references used in this Agreement are to the preamble, recitals, articles, sections, clauses, schedules and exhibits to this Agreement; (iv) wherever the word “include,” “includes” or “including” is used in this Agreement, it shall be deemed to be followed by the words “without limitation;” (v) the terms “date hereof” and “date of this Agreement” mean the date first written above; (vi) with respect to the determination of any period of time, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”; (vii) (A) any reference to “days” means calendar days unless Business Days are expressly specified and (B) any reference to “months” or “years” shall mean calendar months or calendar years, respectively, in each case unless otherwise expressly specified; (viii) the word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends and such phrase shall not mean simply “if”; (ix) each accounting term not otherwise defined in this Agreement has the meaning commonly applied to it in accordance with GAAP; (x) the term “made available” means made available in the Data Room and accessible by Buyer and its Representatives at least two Business Days prior to the date hereof; (xi) a reference herein to $ or dollars is to U.S. dollars; and (xii) references herein to an agreement, instrument, or other document means such agreement, instrument, or other document as amended, supplemented, and modified from time to time to the extent permitted by the provisions thereof.
(c) Unless otherwise specified in this Agreement, any deadline or time period set forth in this Agreement that by its terms ends on a day that is not a Business Day shall be automatically extended to the next succeeding Business Day.
(d) Unless otherwise specified in this Agreement or the context otherwise requires, all references to any (i) statute in this Agreement include the rules and regulations promulgated thereunder and all applicable guidance, guidelines, bulletins or policies issued or made in connection therewith by a Governmental Entity, and (ii) Law in this Agreement shall be a reference to such Law as amended, re-enacted, consolidated or replaced as of the applicable date or during the applicable period of time.
(e) Unless otherwise specified in this Agreement all references in this Agreement to this Agreement mean this Agreement (taking into account the provisions of Section 9.3) as amended, supplemented or otherwise modified from time to time in accordance with Section 9.3.
(f) With regard to each and every term and condition of this Agreement, the Parties understand and agree that the same have or has been mutually negotiated, prepared and drafted, and that if at any time the Parties desire or are required to interpret or construe any such term or condition or any agreement or instrument subject thereto, no consideration shall be given to the issue of which Party actually prepared, drafted or requested any term or condition of this Agreement.
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(g) All capitalized terms in this Agreement (including the Exhibits and Schedules hereto) shall have the meaning set forth in Exhibit A, except as otherwise specifically provided herein. Each of the other capitalized terms used in this Agreement has the meaning set forth where such term is first used or, if no meaning is set forth, the meaning required by the context in which such term is used. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.
Section 9.10 Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority of competent jurisdiction to be invalid, void or unenforceable, or the application of such provision, covenant or restriction to any Person or any circumstance, is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, (a) a suitable and equitable provision shall be negotiated in good faith by the Parties so as to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision, covenant or restriction to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction and the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
Section 9.11 Counterparts; Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement. This Agreement may be executed by .pdf signature and a .pdf signature shall constitute an original for all purposes.
Section 9.12 Bulk Transfer Laws. The Parties intend that, under section 363(f) of the Bankruptcy Code, the transfer of the Transferred Assets shall be free and clear of any encumbrances arising out of bulk transfer Laws, and the Parties shall take such steps as may be necessary or appropriate to so provide in the Sale Order. In furtherance of the foregoing, each Party hereby waives compliance by the Parties with “bulk sales,” “bulk transfers” or similar Laws in respect of the Transactions.
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Section 9.13 Non-Recourse. All Actions (whether in contract or in tort, in Law or in equity, or granted by statute) that may be based upon, in respect of, arise under, out or by reason of, be connected with, or related in any manner to this Agreement or the Transactions may be made only against (and are expressly limited to) the Persons that are expressly identified as Parties (the “Contracting Parties”). No Person who is not a Contracting Party, including any director, officer, employee, incorporator, member, partner, manager, equityholder, Affiliate, agent, attorney or Representative of, or any financial advisor or lender to, a Contracting Party (“Non-Party Affiliates”), shall have any Liability (whether in contract or in tort, in Law or in equity, or granted by statute or based upon any theory that seeks to impose Liability of an entity party against its owners or Affiliates) for any Actions, obligations or Liabilities arising under, out of, in connection with or related in any manner to this Agreement or the Transactions or based on, in respect of, or by reason of this Agreement (or the negotiation, execution, performance or breach thereof) or the Transactions; and, to the maximum extent permitted by Law, each Contracting Party waives and releases all such Liabilities, claims and obligations against any such Non-Party Affiliates. Without limiting the foregoing, to the maximum extent permitted by Law, (a) each Contracting Party hereby waives and releases any and all rights, claims, demands, or causes of action that may otherwise be available at Law or in equity, or granted by statute, to avoid or disregard the entity form of a Contracting Party or otherwise impose Liability of a Contracting Party on any Non-Party Affiliate, whether granted by statute or based on theories of equity, agency, control, instrumentality, alter ego, domination, sham, single business enterprise, piercing the veil, unfairness, undercapitalization, or otherwise, and (b) each Contracting Party disclaims any reliance upon any Non-Party Affiliates with respect to the performance of this Agreement or the Transactions or any representation or warranty made in, in connection with, or as an inducement to this Agreement. The Parties acknowledge and agree that the Non-Party Affiliates are intended third party beneficiaries of this Section 9.13.
Section 9.14 Seller Designation. Each Seller hereby designates Sequential to execute any and all instruments, certificates or other documents on behalf of such Seller, and to do any and all other acts or things on behalf of such Seller, which Sequential may deem necessary or advisable, or which may be required pursuant to this Agreement, any other Transaction Document or otherwise, in connection with the consummation of the transactions contemplated hereby or thereby and the performance of all obligations hereunder or thereunder, including the exercise of the power to: (a) execute any other Transaction Document on behalf of such Seller, (b) act for such Seller with respect to any determination of the Estimated Cash Consideration and the Final Cash Consideration under this Agreement, (c) give and receive notices and communications to or from Buyer relating to this Agreement, any other Transaction Document or any of the transactions and other matters contemplated hereby or thereby, (d) agree to, object to, negotiate, resolve, enter into settlements and compromises of, demand arbitration or litigation of, and comply with orders of arbitrators or courts with respect to, any dispute between Buyer, on the one hand, and Sellers, on the other hand, in each case relating to this Agreement, any other Transaction Document or any of the transactions and other matters contemplated hereby or thereby, (e) grant any waiver, consent or approval, or election, and making any filings with any Governmental Entity, on behalf of such Seller under this Agreement or any other Transaction Document, and (f) take all actions necessary or appropriate in the judgment of Sequential for the accomplishment of the foregoing. Sequential shall have authority and power to act on behalf of each other Seller with respect to the disposition, settlement or other handling of all claims under this Agreement and any other Transaction Document and all rights or obligations arising hereunder or thereunder. Each Seller shall be bound by all actions taken and documents executed by Sequential in connection with this Agreement and any other Transaction Document, and Buyer shall be entitled to rely on any action or decision of Sequential. The appointment of Sequential as each other Seller’s attorney-in-fact revokes any power of attorney heretofore granted that authorized any other Person or Persons to represent any such Seller with regard to this Agreement or any other Transaction Document. The appointment of Sequential as attorney-in-fact pursuant hereto is coupled with an interest and is irrevocable.
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Section 9.15 No Personal Liability. This Agreement shall not create or be deemed to create or permit any personal liability or obligation on the part of any direct or indirect stockholder of Sellers or Buyer or any officer, director, employee, Representative or investor of any Party.
Section 9.16 Disclosure Schedules. The representations and warranties of Sellers set forth in this Agreement are made and given subject to the disclosures in the Disclosure Schedules. Where a reference is made only to a particular disclosed document, the full contents of the document are deemed to be disclosed. Inclusion of information in the Disclosure Schedules will not be construed (i) as an admission that such information is material to the Business, (ii) as an admission of Liability or obligation of any Seller to any third Person, or (iii) to mean that such information is required to be disclosed by this Agreement. The specific disclosures set forth in the Disclosure Schedules have been organized to correspond to section references in this Agreement to which the disclosure is most likely to relate, together with appropriate cross-references when disclosure is applicable to other sections of this Agreement; provided, however, that any disclosure in any section of the Disclosure Schedules will apply to and will be deemed to be disclosed in any other section of the Disclosure Schedules, so long as the applicability of such disclosure is reasonably apparent on its face. It is understood and agreed that the specification of any dollar amount in the representations and warranties or covenants contained in this Agreement or the inclusion of any specific item in the Disclosure Schedules is not intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and no Party or other Person shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the Disclosure Schedules in any dispute or controversy as to whether any obligation, item or matter not described in this Agreement or included in the Disclosure Schedules is or is not material for purposes of this Agreement. Nothing in this Agreement (including the Disclosure Schedules) shall be deemed an admission by either Party or any of its Affiliates, in any Action, that such Party or any such Affiliate, or any third party, is or is not in breach or violation of, or in default in, the performance or observance of any term or provisions of any Contract or Law.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have executed or caused this Agreement to be executed as of the date first written above.
| GAINLINE GALAXY HOLDINGS LLC | ||
| By: | /s/ Allan Weinstein | |
| Name: Allan Weinstein | ||
| Title: President | ||
[Signature Page to Asset Purchase Agreement]
| sequential brands group, inc. | ||
| By: | /s/ Lorraine DiSanto | |
| Name: Lorraine DiSanto | ||
| Title: Chief Financial Officer | ||
| GALAXY BRANDS LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: Lorraine DiSanto | ||
| Title: Chief Financial Officer | ||
| THE BASKETBALL MARKETING COMPANY, INC. | ||
| By: | /s/ Lorraine DiSanto | |
| Name: Lorraine DiSanto | ||
| Title: Chief Financial Officer | ||
| AMERICAN SPORTING GOODS CORP | ||
| By: | /s/ Lorraine DiSanto | |
| Name: Lorraine DiSanto | ||
| Title: Chief Financial Officer | ||
| GAIAM AMERICAS, INC. | ||
| By: | /s/ Lorraine DiSanto | |
| Name: Lorraine DiSanto | ||
| Title: Chief Financial Officer | ||
[Signature Page to Asset Purchase Agreement]
EXHIBIT A
Definitions
Unless otherwise defined in this Agreement, the following terms have the meaning specified in this Exhibit A.
“Action” means any action, suit, petition, plea, charge, claim, counterclaim, demand, hearing, inquiry, right, cause of action, complaint, grievance, summons, litigation, investigation, prosecution, contest, inquest, audit, examination, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), mediation, arbitration or other similar matter.
“Actual Spend” means the amount actually paid by Sellers or their Affiliates in the current calendar year with respect to marketing expenses for the Business as of the Closing Date.
“Additional Assumed Contracts” means the executory Seller Contracts listed on Schedule 1.1(f) as modified by Buyer from time to time pursuant to Section 1.5(d) between the date hereof and two Business Days prior to the Closing Date (the “Additional Assumed Contracts Schedule”).
“Additional Assumed Contracts Schedule” has the meaning set forth in the definition of “Additional Assumed Contracts”.
“Additional Cash Consideration” means such additional amount of cash, if any, that Buyer may determine in its sole discretion to fund at Closing.
“Additional Rejected Contracts” means all Contracts other than the Closing Assumed Contracts and Additional Assumed Contracts that Buyer designates to reject from time to time as set forth on the Rejected Contracts Schedule pursuant to Section 1.5(d)(ii) prior to the Designation Deadline.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made (for purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise).
“Agreement” has the meaning set forth in the Preamble.
“Allocation Notice of Objection” has the meaning set forth in Section 6.4(d)(i).
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“Alternative Transaction” means any reorganization, merger, transaction, consolidation, business combination, joint venture, partnership, sale of assets, financing (debt or equity), or restructuring or similar transaction of or by any Seller involving any of the Transferred Assets other than to Buyer pursuant to this Agreement; provided, however, that an Alternative Transaction shall not include pursuit of confirmation of a Chapter 11 plan of liquidation if it does not and will not delay, and is not inconsistent with, the transactions contemplated by this Agreement, confirmation of which plan shall take place solely following the Bankruptcy Court’s entry of the Sale Order, with the occurrence of any “effective date” or similar concept under such plan subject to the occurrence of the Closing Date.
“AML Laws” has the meaning set forth in Section 3.9(e).
“Asset Taxes” means ad valorem, property, excise, severance, production, sales, use or similar Taxes (excluding, for the avoidance of doubt, any Income Taxes and Transfer Taxes) based upon or measured by the ownership or operation of the Business.
“Assigned Actions” has the meaning set forth in Section 1.1(f).
“Assumed Accounts Payable” has the meaning set forth in Section 1.3(b).
“Assumed Liabilities” has the meaning set forth in Section 1.3.
“Assumption and Assignment Agreements” has the meaning set forth in Section 2.4(c).
“Auction” has the meaning set forth in the Bid Procedures Order.
“Audit Firm” has the meaning set forth in Section 2.2(c).
“Avoidance Action” means any avoidance claims, right, recovery, subordination or cause of action or remedies under Chapter 5 of the Bankruptcy Code, including any proceeds thereof, and any analogous state law claims and proceeds thereof, in each case, that relates to the Transferred Assets or the Business.
“Backup Bid” has the meaning set forth in the Bid Procedures.
“Backup Bidder” has the meaning set forth in the Bid Procedures.
“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. § 101 et seq.
“Bankruptcy Court” has the meaning set forth in the Recitals.
“Bankruptcy Proceeding” has the meaning set forth in the Recitals.
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“Benefit Plan” means each “employee benefit plan” within the meaning of Section 3(3) of ERISA (whether or not subject to ERISA) and all other compensation and benefits plans, policies, trust funds, programs, arrangements or payroll practices, including Multiemployer Plans, and each other stock purchase, stock option, restricted stock, profit sharing, pension, savings, severance, retention, employment, consulting, commission, change-of-control, collective bargaining, bonus, incentive, deferred compensation, employee loan, fringe benefit, insurance, welfare, post-retirement health or welfare, health, life, tuition refund, service award, company car, scholarship, relocation, disability, accident, sick pay, sick leave, accrued leave, vacation, holiday, termination, unemployment, restrictive covenant, and other benefit plan, policy, trust fund, program, arrangement or payroll practice, whether or not subject to ERISA (including any related funding mechanism now in effect or required in the future), whether formal or informal, oral or written, funded, unfunded, insured or self-insured, in each case, that is sponsored, established, maintained, contributed to or required to be contributed to by the Sellers or any of their respective Affiliates, or under which the Sellers or any of their respective Affiliates has any current or potential Liability.
“Bid Procedures” has the meaning set forth in the Bid Procedures Order.
“Bid Procedures Motion” has the meaning set forth in Section 5.1.
“Bid Procedures Order” means an order entered by the Bankruptcy Court in the form of Exhibit D, with only such material changes as acceptable to Sellers and Buyer in their respective sole discretion.
“Bid Protections” means the Seller Termination Fee.
“Bill of Sale” has the meaning set forth in Section 2.4(d).
“Budget” means the 2021 annual budget for the Business approved and adopted by Sequential as set forth on Schedule 6.2.
“Business” has the meaning set forth in the Recitals.
“Business Day” means any day ending at 11:59 p.m., prevailing Eastern time, other than a Saturday, a Sunday, a day on which banks in New York, New York are authorized or required by Law, executive order or other governmental action to close.
“Buyer” has the meaning set forth in the Preamble.
“Buyer Consulting Agreement” means the Consulting Agreement between Galaxy Universal LLC and Seller effective as of January 1, 2021, as amended.
“Buyer Designee” has the meaning set forth in Section 1.9.
“Buyer Material Adverse Effect” means effect, event, change, occurrence, condition or state of facts that, individually or in the aggregate, is or would reasonably be expected to materially and adversely hinder or delay Buyer’s ability to consummate the Transactions and to fulfill and perform its covenants and obligations under this Agreement and the other Transaction Documents.
“Buyer Termination Fee” means an amount equal to $16,650,000.
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“Carve-Out” has the meaning given to it in the DIP Order.
“Cash” means all cash, cash equivalents and liquid investments, including marketable securities, bank deposits, investment accounts and similar items, excluding any security deposits or similar restricted cash and cash equivalents.
“Cash Consideration” means an amount equal to (a) $55,500,000, less (b) the Delinquent Accounts Receivable Deficiency, less (c) 50% of any amounts related to the East Asia Delinquent Accounts Receivable collected by Sellers between the date hereof and the Closing, less (d) the Closing Assumed Accounts Payable, less (e) the Marketing Adjustment, plus (f) the Additional Cash Consideration; provided, that there shall be no duplication that results in the Cash Consideration being reduced twice by the same liability.
“Closing” has the meaning set forth in Section 2.3.
“Closing Assumed Accounts Payable” means the Assumed Accounts Payable as of the Closing.
“Closing Assumed Contracts” has the meaning set forth in Section 1.1(d), except to the extent included in Excluded Assets.
“Closing Date” has the meaning set forth in Section 2.3.
“Closing Date Statement” has the meaning set forth in Section 2.2(a).
“Code” means the Internal Revenue Code of 1986, as amended through the date hereof.
“Commitment Letters” has the meaning set forth in Section 4.4(a).
“Confidentiality Agreement” means the Confidentiality and Nondisclosure Agreement, dated as of January 25, 2021 by and between Sequential and Buyer.
“Contract” means any contract, agreement, lease, sublease, license, sublicense, settlement, use agreement, occupancy agreement, permit, concession, franchise, note, bond, loan or credit agreement, mortgage, indenture, obligation, instrument, promise, undertaking, trust document, insurance policy, purchase order, commitment or other arrangement or understanding (in each case whether written or oral), and any amendments, modifications or supplements thereto.
“Contracting Parties” has the meaning set forth in Section 9.13.
“COVID-19 Measures” means (i) any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester or any other Law or Order, decree, judgment, injunction or other legal requirement, directive, guideline or recommendation by any Governmental Entity in connection with or in response to COVID-19, (ii) any measures, changes in business operations or other practices, affirmative or negative, adopted in good faith by Sellers directly or indirectly (A) for the protection of the health or safety of Sellers’ employees, customers, vendors, service providers or any other persons, (B) to preserve the assets utilized in connection with the business of Sellers, or (C) that are otherwise substantially consistent with actions taken by other companies in the industries or geographic regions in which Sellers operate, in each case, in connection with or in response to COVID-19 or (iii) any change, event, occurrence or effect of any of the matters contemplated by clause (i) or (ii) of this definition.
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“Cure Costs” means the monetary amounts that must be paid under Sections 365(b)(1)(A) and (B) of the Bankruptcy Code in connection with the assumption and/or assignment of any Closing Assumed Contract or Additional Assumed Contract, or as otherwise agreed upon by the Parties, or determined by the Bankruptcy Court pursuant to the procedures in the Bid Procedures Order and set forth on Schedule 1.5(c).
“Data Protection Laws” means all applicable Laws pertaining to data protection, data privacy, data security, cybersecurity, cross-border data transfer, and general consumer protection laws as applied in the context of data privacy, data breach notification, electronic communication, telephone and text message communications, marketing by email or other channels, and other similar laws.
“Data Protection Requirements” has the meaning set forth in Section 3.16(a).
“Data Room” means that certain virtual data room hosted by Intralinks with the project name “Project Sea Breeze” and made accessible to Buyer and its Representatives.
“Debt Commitment Letter” has the meaning set forth in Section 4.4(a).
“Debt Financing” has the meaning set forth in Section 4.4(a).
“Debt Financing Failure” has the meaning set forth in Section 8.3(b).
“Debt Financing Sources” has the meaning set forth in Section 4.4(a).
“Debtors” means Sequential Brands Group, Inc., SQBG, Inc., Sequential Licensing, Inc., William Rast Licensing, LLC, Heeling Sports Limited, Brand Matter, LLC, SBG FM, LLC, Galaxy Brands LLC, The Basketball Marketing Company, Inc., American Sporting Goods Corporation, LNT Brands LLC, Joe’s Holdings LLC, Gaiam Brand Holdco, LLC, Gaiam Americas, Inc., SBG-Gaiam Holdings, LLC, SBG Universe Brands, LLC, and GBT Promotions LLC.
“Delinquent Accounts Receivable” means the accounts receivable from the licenses set forth on Schedule 1.1(a)(i) and the East Asia Delinquent Accounts Receivable.
“Delinquent Accounts Receivable Deficiency” means the amount by which the Delinquent Accounts Receivable (including Delinquent Accounts Receivable converted to guaranteed minimum royalties, but excluding the East Asia Delinquent Accounts Receivable), is lower than $26,675,000 at the Closing.
“Designation Deadline” has the meaning set forth in Section 1.5(d).
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“DIP Order” means any interim or final order entered by the Bankruptcy Court approving debtor in possession financing and/or use of cash collateral in the Bankruptcy Proceedings, which shall be in form and substance satisfactory to Buyer in its sole discretion.
“Disclosure Schedules” means the Disclosure Schedules attached hereto.
“Dispute Notice” has the meaning set forth in Section 2.2(c).
“East Asia A/R Payment” has the meaning set forth in Section 6.13(b).
“East Asia Delinquent Accounts Receivable” means the accounts receivable set forth on Schedule 1.1(a)(ii) or sale proceeds from the sale of such accounts receivable.
“Environmental Law” means all Laws, contractual obligations and all common law concerning public health and safety, worker health and safety, and pollution or protection of the environment, including, without limitation, all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation.
“Environmental Liability” means any Liability arising under Environmental Law, including (a) any Liability relating to, arising from or with respect to (i) any actual or alleged violation of any Environmental Law, (ii) any actual or alleged generation, use, handling, transportation, storage, treatment, disposal, Release, or threatened Release of, or exposure to, any Hazardous Substances at any facility or location, and (iii) any Liability arising under Environmental Law relating to, arising from or with respect to any formerly owned, leased, or operated properties or any former, closed, divested, or discontinued business operations, and (b) any Liabilities arising under Environmental Law assumed or retained by contract, operation of law, or otherwise.
“Equity Commitment Letter” has the meaning set forth in Section 4.4(a).
“Equity Financing Sources” has the meaning set forth in Section 4.4(a).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
“Escrow Account” means the account into which the Escrow Amount is deposited.
“Escrow Agent” means Kurtzman Carson Consultants, LLC.
“Escrow Agreement” means that certain Fund Services Agreement to be entered into as of the Closing Date, among Sequential, Buyer and the Escrow Agent, based upon the form attached as Exhibit G with such customary changes as are mutually agreed by the Parties prior to the Closing.
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“Escrow Amount” means $1,665,000.
“Escrow Excess Amount” has the meaning set forth in Section 2.2(e).
“Estimated Cash Consideration” has the meaning set forth in Section 2.1(b).
“Estimated Closing Statement” has the meaning set forth in Section 2.1(b).
“Estimated Debt Consideration” means indebtedness of Buyer or its Subsidiaries in an amount equal to $227,500,000, less the Additional Cash Consideration, less the Estimated Royalty Adjustment.
“Excluded Assets” has the meaning set forth in Section 1.2.
“Excluded Contracts” has the meaning set forth in Section 1.2(i).
“Excluded Employee Liabilities” means (i) any and all Liabilities, including any Actions, obligations, payments, costs, expenses or disbursements that Sellers or any of their respective Affiliates owes or is obligated to provide, whether currently, prospectively or on a contingent basis, whether prior to, on, or following the Closing, in each case, with respect to any current or former employee of, or other service provider to, any of Sellers or any of their respective Affiliates (or any of their respective covered dependents, beneficiaries and estates), in connection with any such individual’s employment with and/or engagement by Sellers or any of their respective Affiliates, or the termination thereof, and (ii) any and all Liabilities and obligations, payments, costs, expenses or disbursements which arise under or relate to any Benefit Plan or any other employee benefit plan or arrangement.
“Excluded Liabilities” has the meaning set forth in Section 1.4.
“Expense Reimbursement Amount” means an amount equal to $1,500,000.
“FCPA” has the meaning set forth in Section 3.9(c).
“Final Allocation Statement” has the meaning set forth in Section 6.4(d)(i).
“Final Cash Consideration” has the meaning set forth in Section 2.2(a).
“Final Debt Consideration” means indebtedness of Buyer or its Subsidiaries in an amount equal to $227,500,000, less the Additional Cash Consideration, less the Final Royalty Adjustment.
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“Final Order” means an Order (a) as to which no appeal, leave to appeal, notice of appeal, motion to amend or make additional findings of fact, motion to alter or amend judgment, motion for rehearing or motion for new trial has been timely filed (in cases in which there is a date by which such filing is required to occur, or, if any of the foregoing has been timely filed, it has been disposed of in a manner that upholds and affirms the subject order in all respects without the possibility for further appeal thereon), (b) in respect of which the time period for instituting or filing an appeal, leave to appeal, motion for rehearing or motion for new trial shall have expired (in cases in which such time period is capable of expiring), and (c) as to which no stay is in effect; provided, however, that if no person, entity or governmental unit has specifically questioned, challenged or objected to the good faith (as such term is used within the meaning of section 363 of the Bankruptcy Code) of Buyer at or before the time of entry of the Sale Order (any such question, challenge or objection, a “Good Faith Objection”), and the Sale Order is not subject to a pending appeal, vacatur, reversal or motion for reconsideration based on a Good Faith Objection or the Bankruptcy Court’s determination that Buyer is a good faith purchaser within the meaning of section 363 of the Bankruptcy Code, and is not subject to a stay, as of the Closing, then the Sale Order need only have been entered by the Bankruptcy Court and be in full force and effect and not subject to a stay as of the Closing in order to be considered a Final Order for purposes of Section 5.1(b) and Section 7.1(c) hereof.
“Financing” has the meaning set forth in Section 4.4(a).
“Financing Cooperation Request” has the meaning set forth in Section 6.8(a).
“Financing Sources” has the meaning set forth in Section 4.4(a).
“Fraud” means actual and intentional fraud with respect to Articles III and IV hereof that involves a knowing and intentional misrepresentation therein with the intent that the other Party rely thereon, and for the avoidance of doubt, does not include constructive fraud or other claims based on constructive knowledge, negligent misrepresentation, recklessness or similar theories.
“Fundamental Representations” means the representations and warranties of Sellers set forth in Section 3.1 (Organization; Good Standing; Qualification and Power), Section 3.2 (Authorization), Section 3.10 (Brokers and Finders) and Section 3.12(a) (Title to Transferred Assets).
“GAAP” means United States generally accepted accounting principles.
“Governmental Entity” means any domestic or foreign governmental or regulatory authority, agency, commission, body, court or other legislative, executive or judicial governmental entity.
“Hazardous Substance” means any chemical, pollutant, contaminant, or material, waste or substance, whether hazardous, toxic, deleterious, radioactive, noxious, harmful, or otherwise, petroleum and petroleum products, by-products, derivatives or wastes, greenhouse gases, asbestos or asbestos-containing materials or products, per- and polyfluoroalkyl substances, polychlorinated biphenyls (PCBs) or materials containing same, lead or lead-based paints or materials, pesticides, radon, fungus, mold in quantities or concentrations that may adversely affect human health or materially affect the value or utility of the building(s) in which it is present, or other substances that may have an adverse effect on human health or the environment.
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“Holdings Second A&R LLC Agreement” has the meaning set forth in Section 2.4(g).
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
“Identified Contract” has the meaning set forth in Section 1.5(c).
“Income Taxes” means any income, franchise or similar Taxes.
“Indebtedness” means, with respect to any Person, without duplication, the outstanding principal amount of, accrued and unpaid interest on, and other payment obligations (including any prepayment premiums or penalties payable as a result of the repayment thereof) arising under, any obligations consisting of (i) indebtedness for borrowed money or indebtedness issued in substitution or exchange for borrowed money for the deferred purchase price of property or services, (ii) indebtedness evidenced by any note, bond, debenture or other debt security, (iii) all obligations under financing or capital leases, including obligations created or arising under any conditional sale or other title retention agreement, or incurred as financing, (iv) all deferred obligations to reimburse any bank or other Person in respect of amounts paid or advance under a letter of credit, surety bond, performance bond or other instrument and (v) all Indebtedness of others guaranteed, directly or indirectly by such Person or as to which such person has an obligation (contingent or otherwise that is substantially the economic equivalent of a guarantee or that is otherwise recognized in the financial statements of such Person).
“Intellectual Property” means all intellectual property rights arising in any jurisdiction of the world, including with respect to any of the following: (a) trademarks, service marks, trade dress, trade names, and other indicia of origin, applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby (collectively, “Trademarks”); (b) inventions (whether or not patentable), discoveries, improvements, ideas, know-how, formulas, methodology, models, algorithms, systems, processes, technology, patents and patent applications, including divisionals, continuations, continuations-in-part and renewal applications, and including renewals, re-examinations, extensions and reissues; (c) trade secrets and rights in confidential information or information, in each case that derive independent economic value from not generally being known to the public; (d) copyrightable works, works of authorship, software (including interpretive code or source code, object code, development documentation, programming tools, drawings, specifications and data), copyrights, applications and registrations therefor, and renewals, extensions, restorations and reversions thereof and all moral rights thereof; (e) Internet domain names; (f) social media accounts, identifiers and designations; and (g) all other proprietary rights or similar rights recognized in any jurisdiction around the world.
“Intracompany Payables” means all account, note or loan payables recorded on the books of Sellers or any of their respective Affiliates (the “Seller Payor”) for goods or services purchased by or provided to the Seller Payor, or advances (cash or otherwise) or any other extensions of credit to the Seller Payor, in each case, from any such other Seller or any of its Affiliates (other than the Seller Payor), whether current or non-current.
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“Intracompany Receivables” means all account, note or loan receivables recorded on the books of Sellers or any of their respective Affiliates (the “Seller Payee”) for goods or services sold or provided by the Seller Payee or advances (cash or otherwise) or any other extensions of credit made by the Seller Payee, in each case, to any such other Seller or any of its Affiliates (other than the Seller Payee), whether current or non-current.
“IP Assignment” has the meaning set forth in Section 3.13(e).
“Knowledge” means, with respect to Sellers, the actual knowledge (after reasonable inquiry) of the Persons set forth on Schedule 1.1(e)(i), and, with respect to Buyer, the actual knowledge (after reasonable inquiry) of the Persons set forth on Schedule 1.1(e)(ii).
“Law” means any federal, state, provincial, local, or municipal law, statute or ordinance, common law, or any rule, regulation, standard, judgment, order, writ, injunction, subpoena, discovery request, including interrogatory, decree, arbitration award, or agency requirement of any Governmental Entity.
“Legislation” has the meaning set forth in Section 3.9(c).
“Liabilities” means any and all claims (as defined in the Bankruptcy Code), debts, liabilities, commitments and obligations of any kind, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, asserted or not asserted, known or unknown, express or implied, primary or secondary, direct or indirect, determined, determinable or otherwise, due or to become due, whenever or however arising (including, whether arising out of any contract or tort based on negligence or strict liability).
“Lien” means, with respect to any property or asset, all pledges, liens, mortgages, charges, encumbrances, hypothecations, claims, options, rights of first refusal, rights of first offer, easements, servitudes, licenses to use, occupancy agreements, encroachments, transfer restrictions or other similar rights and security interests of any kind or nature whatsoever.
“Lien Release Letters” means one or more release letters or termination statements or customary release documentation in the applicable jurisdiction with respect to obligations under the Prepetition Credit Agreements with respect to which a Lien is granted on the Transferred Assets or the Business, in form and substance reasonably satisfactory to Buyer, which letters and other instruments provide that all obligations of the Business in respect of such obligations (including any guaranty thereof), and all Liens on the Transferred Assets or any asset of the Business securing such obligations, in each case, shall be released and terminated effective concurrently with the Closing with no Liability to Buyer or any of its Affiliates, unless, in each case above, such release has been included in the Sale Order.
“Marketing Adjustment” means an amount, which may be positive or negative, equal to the Targeted Spend minus the Actual Spend.
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“Material Adverse Effect” means any effect, event, change, occurrence, condition or state of facts which (A) is or would reasonably be expected to be, individually or when considered together with any other effects, events, changes, occurrences, conditions or states of facts, materially adverse to the financial condition, assets, liabilities, business or results of operations of the Business, taken as a whole; provided, however, that in no event shall an effect, event, change, occurrence, condition or state of fact occurring after the date hereof and resulting from the following, either alone or in combination, be deemed to constitute or be taken into account in determining whether there has occurred a Material Adverse Effect: (i) any change in interest or exchange rates or in the United States or foreign economies or financial, banking, capital, credit, or securities markets in general; (ii) any economic conditions that generally affect the industries or markets in which Sellers conduct the Business; (iii) any change arising in connection with acts of God, natural or manmade disasters, crises, calamities, emergencies, hurricanes, floods, tornados, tsunamis, earthquakes, epidemics, plagues, pandemics, disease outbreaks or public health events (including, for the avoidance of doubt, COVID-19), the declaration of a national emergency, hostilities, acts of war, armed hostilities, sabotage or terrorism (including cyber-terrorism) or military actions or any escalation or material worsening of any of the foregoing; (iv) any change in applicable Laws or accounting rules or the interpretation thereof; (v) any actions required to be taken by Sellers pursuant to this Agreement; (vi) the public announcement of this Agreement, including (1) the initiation of litigation by any Person with respect to this Agreement and (2) the impact of such announcement on relationships, contractual or otherwise, with customers, suppliers, licensors, distributors, partners, providers and employees; (vii) actions required under this Agreement to obtain any approval or authorization under applicable antitrust or competition Laws for the consummation of the Transactions; (viii) COVID-19 Measures; (ix) any failure to meet any projections (although the underlying facts and circumstances resulting in such failure may be taken into account to the extent not otherwise excluded from this definition); or (x) any actions taken (or omitted to be taken) at the request of or with the consent of Buyer; provided, however, that with respect to clauses (i), (ii), (iii) and (iv), such effects, events, changes, occurrences, conditions or states of facts will not be excluded to the extent the same disproportionately adversely affects the Business, taken as a whole, as compared to other similarly situated businesses or (B) would reasonably be expected to prevent or materially delay Sellers from consummating the Transactions.
“Material Contracts” has the meaning set forth in Section 3.8(a).
“Milestone” has the meaning set forth in Section 8.1(d)(ii).
“Multiemployer Plan” means each Benefit Plan that is a “multiemployer plan” as defined in Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code.
“Necessary Consent” has the meaning set forth in Section 1.6.
“Non-Party Affiliates” has the meaning set forth in Section 9.13.
“Notice of Potential Assignment” has the meaning set forth in Section 1.5(c).
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“OFAC” has the meaning set forth in the definition of “Sanction”.
“Order” means any administrative decision or award, decree, injunction, judgment, order, quasi-judicial decision or award, ruling or writ of any arbitrator, mediator or Governmental Entity.
“Ordinary Course” means the ordinary and usual course of day-to-day operations of the Business, consistent with past practices, other than as a result of COVID-19 Measures.
“Organizational Documents” means, with respect to any Person that is not an individual, such Person’s charter, certificate or articles of incorporation or formation, bylaws, memorandum or articles of association, operating agreement, limited liability company agreement, partnership agreement, limited partnership agreement, limited liability partnership agreement or other similar constituent or organizational documents of such Person.
“Party” and “Parties” have the meaning set forth in the Preamble.
“Permit” means any consent, license, permit, certificate, clearance, qualification, franchise, waiver, approval, authorization, certificate, registration, certificate of occupancy or filing issued by, obtained from or made with a Governmental Entity, other than any Intellectual Property.
“Permitted Encumbrance” means (a) any Liens that are expressly permitted by the Sale Order to remain attached to the Transferred Assets following the Closing, (b) any Lien on the Transferred Assets that will be expunged, released or discharged at the Closing by operation of the Sale Order, and (c) licenses, covenants not to sue and similar rights granted with respect to Intellectual Property, in each case, entered into in the Ordinary Course.
“Permitted Post-Closing Encumbrance” means those non-monetary encumbrances, if any, identified on Schedule 1.1(b) hereto.
“Person” means any natural person, corporation, company, partnership (general or limited), limited liability company, trust or other entity.
“Personal Information” means information that identifies, relates to, describes, is reasonably capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular individual or household, and when referring to a Data Protection Requirement, has the same meaning as the similar or equivalent term defined thereunder.
“Petition Date” means the date that Sellers and their affiliated debtors and debtors in possession commenced the Bankruptcy Proceeding.
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“Prepetition Credit Agreements” means, collectively, (i) that certain the Third Amended and Restated First Lien Credit Agreement, dated as of July 1, 2016 (as amended, restated, supplemented or modified and in effect as of the date hereof), among Sequential, as the borrower, certain Subsidiaries of Sequential, as guarantors, Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto and (ii) that certain Third Amended and Restated Credit Agreement, dated as of July 1, 2016 (as amended, restated, supplemented or modified and in effect as of the date hereof), among Sequential, as the borrower, certain Subsidiaries of Sequential, as guarantors, Wilmington Trust, National Association, as administrative agent and collateral agent, and the lenders party thereto.
“Previously Omitted Contract” has the meaning set forth in Section 1.5(k).
“Previously Omitted Contract Designation” has the meaning set forth in Section 1.5(k).
“Previously Omitted Contract Notice” has the meaning set forth in Section 1.5(l).
“Proposal” means an inquiry, proposal, or offer from, or indication of interest in making a proposal or offer by, any Person or group (other than Buyer and its Affiliates), relating to any transaction or series of related transactions (other than the transactions contemplated by this Agreement), involving the acquisition of a material portion of the Transferred Assets or all or substantially all of the Sellers’ assets related to the Business.
“Proposed Allocation Statement” has the meaning set forth in Section 6.4(d)(i).
“Purchase Price” means an aggregate of $333,000,000, comprised of (i) the Cash Consideration, (ii) the Final Debt Consideration and (iii) the Equity Consideration.
“R&W Insurance Policy” means a representation and warranty insurance policy to be issued in the name of Buyer or any of its Affiliates.
“Rejected Contracts Schedule” has the meaning set forth in Section 1.5(c).
“Rejected Identified Contracts” has the meaning set forth in Section 1.5(c).
“Related Person” means, (i) with respect to an individual (A) the family members of such individual, including (1) any individual related by lineal consanguinity to such Person or such Person’s spouse, (2) such Person’s spouse and the spouse of any individual described in clause (1) preceding and (3) all individuals related by lineal consanguinity to any of the individuals described in clause (1) or clause (2) preceding, (B) any Affiliate of such individual or of a member of his family or of a combination of the foregoing and (C) any Person with respect to which he or one or more members of his family serves as a director, officer, partner, executor, or trustee (or in a similar capacity) and (ii) with respect to a Person (other than an individual), (A) an Affiliate of such Person, (B) each Person that serves as a director, officer, partner, executor, or trustee of such Person (or in a similar capacity) and (C) any Person with respect to which such Person serves as a general partner or a trustee (or in a similar capacity).
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“Related to the Business” means primarily related to, owned, leased, licensed, used, held for use or in consignment primarily in connection with the Business as conducted by Sellers prior to the Closing; provided, however, for the avoidance of doubt, that corporate assets of Sellers not dedicated to any particular brand of Sellers, including the GAIAM, SPRI, And1, AVIA, and Swisstech brands, shall be deemed not to be “Related to the Business”.
“Release” means any release, spill, emission, discharge, leaking, pumping, injection, deposit, placing, disposal, dispersal, leaching or migration into or through the environment (including, without limitation, ambient air, vapor, surface water, groundwater and surface or subsurface strata) or into or out of any property, including the movement of Hazardous Substances through or in the ambient air, vapor, soil, surface water, groundwater or property, and including the abandonment or discarding of barrels, containers and other receptacles containing any Hazardous Substances.
“Representatives” means with respect to a Person, such Person’s officers, directors, employees, stockholders, partners, members, managers, agents, attorneys, accountants, consultants, advisors and other representatives.
“Royalty Adjustment” means the amount by which the remaining cash payments in respect of royalties under the AVIA and Swisstech agreements with Walmart at the Closing is less than $63,500,000. For the avoidance of doubt, in no event shall the Royalty Adjustment be a negative amount.
“Sale Order” means an order entered by the Bankruptcy Court or other court of competent jurisdiction approving and authorizing this Agreement and the Transactions (including, without limitation, approving and authorizing Sellers’ assumption of the Closing Assumed Contracts and Additional Assumed Contracts pursuant to Section 365 of the Bankruptcy Code), which Sale Order shall be in the form attached hereto as Exhibit H to this Agreement, with such changes that are acceptable to Sellers and Buyer in their respective sole discretion (provided that changes to the Sale Order that do not adversely affect the Sellers or Buyer need only be reasonably acceptable to Sellers or Buyer, as applicable).
“Sanction” means any sanction administered or enforced by the United States Government, including without limitation the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the Department of State, and the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority.
“Sanctioned Country” has the meaning set forth in Section 3.9(d).
“Sanctioned Persons” has the meaning set forth in Section 3.9(d).
“Securities Act” means the Securities Act of 1933.
“Seller Contracts” means any Contracts to which any Seller is a party.
“Seller Intellectual Property” has the meaning set forth in Section 3.13(a).
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“Seller Payee” has the meaning set forth in the definition of “Intracompany Receivables.”
“Seller Payor” has the meaning set forth in the definition of “Intracompany Payables.”
“Seller Portion” means a fraction, the numerator of which is equal to the number of days elapsed in the calendar month in which the Closing occurs on the Closing Date (but not, for the avoidance of doubt, including the Closing Date) and the denominator of which is equal to the total number of days in such calendar month.
“Seller Termination Fee” means an amount equal to $12,987,000 in cash.
“Sellers” has the meaning set forth in the Preamble.
“Sequential” has the meaning set forth in the Preamble.
“Shared Receivables” means any receivables of the Business derived from the calendar month in which the Closing occurs.
“Shortfall Amount” has the meaning set forth in Section 2.2(e).
“Specified Intellectual Property” means the Intellectual Property identified on Schedule 3.13(a) as potentially not being owned by Sellers or potentially not Related to the Business.
“Straddle Period” means any Tax period beginning before and ending on or after the Closing Date.
“Subsidiary” means, with respect to any Person, any other Person of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is directly or indirectly owned or controlled by such Person and/or by one or more of its Subsidiaries.
“Successful Bidder” has the meaning set forth in the Bid Procedures Order.
“Superior Proposal” means a written Proposal that Sequential’s board of directors determines in good faith, after consultation with outside counsel and its financial advisor, (i) is more favorable to the Sellers than the Transactions, taking into account all factors that Sequential’s board of directors deems relevant and (ii) is reasonably likely to be completed on the terms proposed, taking into account all legal, financial, regulatory and other aspects of such proposal.
“Targeted Spend” means an amount equal to (x) $1,665,000 multiplied by (y) a fraction, the numerator of which is equal to the total number of days elapsed in the calendar year in which the Closing occurs on the Closing Date (but not, for the avoidance of doubt, including the Closing Date) and the denominator of which is equal to 365.
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“Tax Returns” means any return, report, declaration, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto and any amendment thereof.
“Taxes” means (a) any and all taxes of any kind, including, without limitation, any charges or other assessments, all income, profits, environmental, capital stock, stamp, gross receipts, windfall profits, premium, value added, severance, property, production, sales, harmonized sales, goods and services, use, occupancy, duty, license, excise, franchise, payroll, unemployment, employment, disability, escheat and unclaimed property, transfer, registration, mortgage, withholding or similar taxes and other taxes, duties or assessments in the nature of a tax, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties and (b) any liability for any items described in cause (a) payable by reason of contract, transferee liability or operation of Law (including Treasury Regulation Section 1.1502-6) or otherwise.
“Term B Credit Agreement” means that certain Third Amended and Restated Credit Agreement, dated as of July 1, 2016 (as amended, restated, supplemented or modified and in effect as of the date hereof), among Sequential, as the borrower, certain Subsidiaries of Sequential, as guarantors, Wilmington Trust, National Association, as administrative agent and collateral agent, and the lenders party thereto.
“Term B Lenders” means the lenders party to the Term B Credit Agreement.
“Termination Date” has the meaning set forth in Section 8.1(c)(i).
“Theory of Liability” has the meaning set forth in Section 8.3(d).
“Trademarks” has the meaning set forth in the definition of “Intellectual Property.”
“Transaction Documents” means this Agreement and all other ancillary agreements to be entered into by, or documentation delivered by, any Party pursuant to this Agreement.
“Transactions” has the meaning set forth in Section 2.3.
“Transfer” means to sell, assign, transfer, convey and deliver.
“Transfer Taxes” has the meaning set forth in Section 6.4.
“Transferred Assets” has the meaning set forth in Section 1.1.
“Transferred Intellectual Property” means the Intellectual Property owned by Sellers that is Related to the Business, including the Intellectual Property listed on Schedule 3.13(a).
“Transferred Permits” has the meaning set forth in Section 1.1(g).
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Exhibit 2.2
EXECUTION VERSION
EXHIBIT 2.2
CENTRIC APA
ASSET PURCHASE AGREEMENT
by and among
Centric Brands LLC,
as Buyer
and
JOE’S HOLDINGS LLC,
as Seller
August 31, 2021
TABLE OF CONTENTS
| PAGE | ||
| Article 1 Definitions | 1 | |
| Section 1.01 | Definitions | 1 |
| Section 1.02 | Construction | 7 |
| Article 2 Purchase And Sale | 8 | |
| Section 2.01 | Purchase and Sale | 8 |
| Section 2.02 | Assumed Liabilities | 10 |
| Section 2.03 | Excluded Liabilities | 10 |
| Section 2.04 | Excluded Assets | 11 |
| Section 2.05 | Assignment of Contracts and Rights | 11 |
| Section 2.06 | Purchase Price | 12 |
| Section 2.07 | Earn-Out. | 12 |
| Section 2.08 | Purchase Price Allocation | 14 |
| Section 2.09 | Good Faith Deposit. | 14 |
| Section 2.10 | Closing | 15 |
| Article 3 REPRESENTATIONS AND WARRANTIES OF SELLER | 16 | |
| Section 3.01 | Organization and Qualification | 16 |
| Section 3.02 | Corporate Authorization | 16 |
| Section 3.03 | Execution and Delivery; Enforceability | 16 |
| Section 3.04 | Consents and Approvals | 16 |
| Section 3.05 | No Conflicts | 17 |
| Section 3.06 | Litigation | 17 |
| Section 3.07 | Title to the Purchased Assets | 17 |
| Section 3.08 | Intellectual Property | 17 |
| Section 3.09 | Taxes | 19 |
| Section 3.10 | Assumed Contracts | 19 |
| Section 3.11 | No Other Representations or Warranties | 19 |
| Article 4 REPRESENTATIONS AND WARRANTIES OF BUYER | 19 | |
| Section 4.01 | Corporate Existence and Power | 19 |
| Section 4.02 | Corporate Authorization | 19 |
| Section 4.03 | Execution and Delivery; Enforceability | 19 |
| Section 4.04 | No Conflicts | 20 |
| Section 4.05 | Availability of Funds; Solvency | 20 |
| Section 4.06 | Litigation | 20 |
| Section 4.07 | Buyer’s Knowledge. | 20 |
| Section 4.08 | Brokers. | 20 |
| Section 4.09 | Condition of Purchased Assets; Representations | 21 |
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| Article 5 COVENANTS OF SELLER | 21 | |
| Section 5.01 | Conduct of the Business | 21 |
| Section 5.02 | Access to Information | 22 |
| Section 5.03 | Update of Disclosure Schedules | 23 |
| Section 5.04 | Use of Name | 23 |
| Section 5.05 | Notices of Certain Events | 23 |
| Article 6 COVENANTS OF BUYER | 24 | |
| Section 6.01 | Confidentiality | 24 |
| Section 6.02 | Notices of Certain Events | 24 |
| Section 6.03 | Preservation of Books and Records | 24 |
| Section 6.04 | Insurance | 25 |
| Section 6.05 | Communication | 25 |
| Section 6.06 | Release | 25 |
| Section 6.07 | Buyer’s Knowledge | 25 |
| Article 7 COVENANTS OF BUYER AND SELLER | 26 | |
| Section 7.01 | Further Assurances | 26 |
| Section 7.02 | Certain Filings | 26 |
| Section 7.03 | Public Announcements | 26 |
| Section 7.04 | Tax Matters | 27 |
| Section 7.05 | Misallocated Assets | 27 |
| Section 7.06 | Pre-Closing Accounts Receivables; Payments after Closing | 28 |
| Section 7.07 | Bulk Transfer Laws | 28 |
| Section 7.08 | Bankruptcy Court Approval | 29 |
| Section 7.09 | Bidding Protections. | 31 |
| Section 7.10 | Buyer’s License | 32 |
| Article 8 CONDITIONS TO CLOSING | 32 | |
| Section 8.01 | Conditions to Obligations of Buyer and Seller | 32 |
| Section 8.02 | Conditions to Obligation of Buyer | 33 |
| Section 8.03 | Conditions to Obligation of Seller | 33 |
| Article 9 SURVIVAL | 34 | |
| Section 9.01 | Survival | 34 |
| Article 10 TERMINATION | 34 | |
| Section 10.01 | Grounds for Termination | 34 |
| Section 10.02 | Effect of Termination | 35 |
| Section 10.03 | Costs and Expenses | 36 |
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| Article 11 MISCELLANEOUS | 36 | |
| Section 11.01 | Notices | 36 |
| Section 11.02 | Amendments and Waivers | 37 |
| Section 11.03 | Successors and Assigns | 38 |
| Section 11.04 | Governing Law | 38 |
| Section 11.05 | Jurisdiction | 38 |
| Section 11.06 | WAIVER OF JURY TRIAL | 38 |
| Section 11.07 | Counterparts; Third Party Beneficiaries | 38 |
| Section 11.08 | Specific Performance | 39 |
| Section 11.09 | Entire Agreement | 39 |
| Section 11.10 | No Strict Construction | 39 |
| Section 11.11 | Severability | 40 |
| Section 11.12 | Disclosure Schedules | 40 |
| EXHIBITS | |||
| Exhibit A | Form of Assignment and Assumption Agreements | ||
| Exhibit B | Form of Bills of Sale | ||
| Exhibit C | Form of Assignment of Trademarks | ||
| Exhibit D | Form of Assignment of Copyrights | ||
| Exhibit E | Form of Assignment of Domain Names | ||
| Exhibit F | Form of Assignment of Other Intellectual Property | ||
| Exhibit G | Milestones | ||
| Exhibit H | Bid Procedures Order | ||
| SCHEDULES | |||
| Schedule 1.01(a) | Knowledge of Seller | ||
| Schedule 2.01(a) | Trademarks | ||
| Schedule 2.01(c) | Domain Names, Websites and Social Media Handles | ||
| Schedule 2.01(d) | Copyrights | ||
| Schedule 2.05(a) | Assumed Contracts and Cure Costs | ||
| Schedule 3.04 | Consents and Approvals | ||
| Schedule 3.06 | Litigation | ||
| Schedule 3.08(g) | Certain Intellectual Property Contracts | ||
| Schedule 5.01 | Conduct of the Business | ||
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Asset Purchase Agreement
THIS ASSET PURCHASE AGREEMENT dated as of August 31, 2021 (the “Agreement”), is made and entered into by and between Centric Brands LLC, a Delaware limited liability company (“Buyer”) and Joe’s Holdings LLC, a Delaware limited liability company (the “Company” or “Seller”). Seller and Buyer are sometimes referred to collectively herein as the “Parties” and individually as a “Party”. Capitalized terms used herein and not otherwise defined herein have the meanings set forth in Article 1.
W I T N E S E T H:
Whereas, subject to the terms and conditions set forth in this Agreement, Seller desires to sell, assign, transfer, and convey to Buyer, and Buyer desires to, and shall, (i) purchase and acquire from Seller, all of Seller’s right, title and interest in and to the Purchased Assets (as defined below) and (ii) assume all of the Assumed Liabilities (as defined below); and
Whereas, Seller, and certain of its affiliates (the “Debtors”) intend to seek relief under Chapter 11 of Title 11, §§ 101-1330 of the United States Code (as amended, the “Bankruptcy Code”) by filing cases (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and to seek approval of the Bankruptcy Court to consummate the transactions contemplated by this Agreement.
Now, Therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the foregoing and of the representations, warranties, covenants, agreements and conditions herein contained, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound hereby, agree as follows:
Article 1
Definitions
Section 1.01 Definitions.
(a) The following terms, as used herein, have the following meanings:
“Action” means any claim, action, suit, arbitration or proceeding by or before any Governmental Authority.
“Affiliate” means, with respect to any Person, another Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, ownership of more than fifty percent (50%) of the voting securities shall be deemed to be “control” for purposes of this definition.
“Alternative Transaction” means any reorganization, merger, transaction, consolidation, business combination, joint venture, partnership, sale of assets, financing (debt or equity), or restructuring or similar transaction of or by Seller involving any of the Purchased Assets; provided, however, that an Alternative Transaction shall not include (a) after the entry of the Bid Procedures Order, a sale for the Purchased Assets determined by the Debtors to be higher or otherwise better in accordance with the Bid Procedures (as defined in the Bid Procedures Order), or (b) pursuit of confirmation of a Chapter 11 plan of liquidation, confirmation of which plan shall take place solely following the Bankruptcy Court’s entry of the Sale Order, with the occurrence of any “effective date” or similar concept under such plan subject to the occurrence of the Closing Date.
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“Auction” means any auction for the sale of Debtors’ assets conducted pursuant to the terms and conditions of the Bid Procedures and the Bid Procedures Order.
“Backup Bidder” has the meaning set forth in the Bid Procedures Order.
“Bankruptcy Rules” means the Federal Rules of Bankruptcy Procedure.
“Bid Procedures” means the bidding procedures for the solicitation and submission of bids for a sale, reorganization, or other disposition of the Debtors, any portion of, or all or substantially all of their assets approved by the Bankruptcy Court pursuant to the Bid Procedures Order.
“Bid Procedures Motion” means the motion seeking entry of the Bid Procedures Order and the Sale Order.
“Bid Procedures Order” means an order of the Bankruptcy Court in the form attached hereto as Exhibit H that, among other things, approves (a) the Bid Procedures, (b) bid protections granted to Buyer, including the Break-Up Fee and Expense Reimbursement and provides that such bid protections shall constitute allowed administrative expenses of Debtors’ estates under section 503(b) of the Bankruptcy Code, (c) the form and manner of notice of auction(s), sale transaction(s), and hearing(s), (d) the procedures for assumption and assignment of the Assumed Contracts, and (e) the date for auction(s), if necessary; with any material changes thereto in form and substance reasonably acceptable to Buyer.
“Brand” means the Joe’s Jeans brand.
“Break-Up Fee” means a cash amount equal to $1,397,189.70.
“Business” means all activities by Seller or any Affiliate of Seller associated with the ownership, licensing, and marketing of the Purchased Assets.
“Business Day” means a day other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.
“Buyer’s License” means the Joe’s Jeans Sportswear and Jeanswear License between Sequential Brands Group, Inc. and Centric West LLC (as successor to GBG USA Inc.), dated as of September 1, 2015, as amended.
“Causes of Action” means any Claim, action, suit, arbitration or proceeding by or before any Governmental Authority.
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“Claim” means a “claim” as defined in Section 101 of the Bankruptcy Code.
“Closing Date” means the date of the Closing.
“Code” means the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” means the Confidentiality and Nondisclosure Agreement, dated April 29, 2021 by and between Blackstone Alternative Credit Advisors LP and the Company.
“Contract” means any contract, agreement, license, sublicense, sales order, purchase order, instrument or other commitment, that is binding on any Person under applicable Law.
“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions thereof or related or associated epidemics, pandemic or disease outbreaks.
“Cure Costs” means with respect to any Assumed Contract, the Liabilities that must be paid or otherwise satisfied to cure all monetary defaults under such Assumed Contract to the extent required by Section 365(b) of the Bankruptcy Code.
“Disclosure Schedules” means the Disclosure Schedules attached hereto, as may be supplemented and amended pursuant to Section 5.03.
“Encumbrance” means any mortgage, lien, pledge, security interest, charge, easement, covenant, right of way, claim, title defect, or other survey defect.
“Excluded Contract” means any Contract of Seller that is not an Assumed Contract.
“Expense Reimbursement” means an amount in cash equal to the lesser of (a) $200,000 and (b) all reasonable and documented out-of-pocket third-party expenses actually incurred by Buyer in connection with the negotiation of this Agreement and the transactions contemplated hereby.
“Final Order” means a judgment or Order of the Bankruptcy Court (or any other court of competent jurisdiction) entered by the clerk of the Bankruptcy Court (or such other court) on the docket in the Chapter 11 Cases (or the docket of such other court), which has not been modified, amended, reversed, vacated or stayed (other than such modifications or amendments that are consented in writing to by Buyer); provided that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedures, or any analogous rule under the Federal Rules of Bankruptcy Procedure, may be filed relating to such Order, shall not cause an Order not to be a Final Order.
“Governmental Authority” means any (a) multinational, federal, state, municipal, local or other governmental or public department, court, tribunal, bureau, agency or instrumentality of government, domestic or foreign, (b) any subdivision or authority of any of the foregoing or (c) any regulatory or administrative authority.
“Intellectual Property” means any and all intellectual property of every kind, whether protected or arising under the Laws of the United States or any other jurisdiction, including all intellectual or industrial property rights in any of the following: (a) the Trademarks, Domain Names and Copyrights, and all rights under Contracts relating to the foregoing and (b) all other intellectual property owned by Seller as of the Closing Date that is used or held for use by Seller exclusively in the conduct of the Business, including (i) any inventions (whether patentable or not and whether reduced to practice or not), (ii) patents, (iii) patent applications, and (iv) copies of all advertising, marketing, proof of sales, and creative and promotional material, in each case, to the extent the intellectual property described in this definition is exclusively related to the Business; provided, however, for the avoidance of doubt, that the intellectual property described in the foregoing clause (b) shall be limited to such intellectual property that is owned by Seller as of the Closing Date (all such intellectual property described in the foregoing clause (b), the “Other Intellectual Property”).
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“Knowledge of Seller” means the actual knowledge of the individuals set forth on Schedule 1.01(a) hereto.
“Law” means any law, treaty, statute, statute, ordinance, code, decree, Order, rule or regulation of any Governmental Authority.
“Liability” means any and all debts, liabilities, commitments and obligations of any kind, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, asserted or not asserted, known or unknown, determined, determinable or otherwise, whenever or however arising (including, whether arising out of any Contract or tort based on negligence or strict liability) and whether or not the same would be required to be reflected in financial statements or disclosed in the notes thereto.
“Material Adverse Effect” means any change, effect, event, circumstance, occurrence or state of facts that, individually or in the aggregate, (a) would be reasonably likely to prevent or materially delay or materially impair the ability of Seller to consummate the transactions contemplated by this Agreement, or (b) has had or would reasonably be expected to have a material adverse effect on the Purchased Assets, taken as a whole, excluding, however, for purposes of clause (b) only, any change, effect, event, circumstance, occurrence or state of facts that results from or arises out of: (i) the execution and delivery of this Agreement or the announcement thereof or the pendency or consummation of the transactions contemplated by this Agreement and the other Transaction Documents; (ii) general changes or developments in global or national political, economic, business, monetary, financial or capital or credit market conditions or trends; (iii) general political, economic, business, monetary, financial or capital or credit market conditions or trends (including interest rates); (iv) geopolitical conditions or any outbreak or escalation of hostilities, acts of terrorism or war, civil unrest, epidemic, pandemic, disease outbreak or other health crisis or public health event (including COVID-19), regional, national or international emergency, earthquakes, floods, hurricanes, tornadoes, wildfires, natural disasters or any other acts of God or similar force majeure events, or any escalation or worsening of the foregoing; (v) the failure of the financial or operating performance of Seller or its business to meet internal, Buyer or analyst or other external projections, forecasts or budgets for any period (it being understood that the underlying cause of such failure to meet such projections and forecasts may be taken into account in determining whether a Material Adverse Effect has occurred); (vi) any action taken or omitted to be taken after the date hereof by or at the written request of Buyer, or in compliance with the express covenants and agreements contained in this Agreement; (vii) changes in (or proposals to change) Laws or accounting regulations or principles; (viii) any existing event, occurrence or circumstance that relates to Buyer’s License and of which Buyer has knowledge as of the date hereof; or (ix) the Chapter 11 Cases, including the Auction and any announced liquidation of Seller or any of its assets; provided, that any change, effect, event, circumstance, occurrence or state of facts described in clauses (ii), (iii), (iv) and (vii) shall be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such change, effect, event, circumstance, occurrence or state of facts has a materially disproportionate effect on the Purchased Assets, taken as a whole, as compared to the effects on other participants in the same industry as Seller.
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“Milestones” means the milestones set forth on Exhibit G.
“Order” means any award, writ, injunction, judgment, order, ruling, decision, subpoena, precept, directive, consent, approval, award, decree or similar determination or finding entered, issued, made or rendered by any Governmental Authority.
“Permitted Encumbrances” means the following Encumbrances: (a) Encumbrances for Taxes, assessments or other governmental charges or levies that are not yet due or payable or that are being contested in good faith by appropriate Causes of Action; (b) Encumbrances that will be released at the Closing with no Liability to Buyer or its Affiliates; (c) Encumbrances incurred by or at the written direction of Buyer at the Closing; and (d) outbound Intellectual Property licenses, covenants not to sue and similar rights that are subject to Section 365(n) of the Bankruptcy Code or other outbound non-exclusive licenses to Intellectual Property entered into in the ordinary course of business that are Assumed Contracts hereunder.
“Person” means any individual, corporation (including any non-profit corporation), partnership, limited liability company, joint venture, unincorporated organization, estate, trust, association, organization or other legal entity or group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) or Governmental Authority.
“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any Straddle Period, the portion of such taxable period ending on and including the Closing Date.
“Sale Order” means an Order by the Bankruptcy Court, in form and substance reasonably acceptable to Buyer and Seller, among other things, (a) approving this Agreement, (b) authorizing the sale of the Purchased Assets to Buyer pursuant to section 363 of the Bankruptcy Code, pursuant to the terms and conditions set forth herein, free and clear of any Encumbrances (other than Permitted Encumbrances), (c) authorizing the assumption and assignment to Buyer of the Assumed Contracts and the Assumed Liabilities pursuant to section 365 of the Bankruptcy Code and (d) authorizing the other transactions contemplated by this Agreement.
“Successful Bidder” has the meaning set forth in the Bid Procedures Order.
“Tax” means (a) all federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, real property gains, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, special assessment, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding tax, or any other taxes, fees, assessments or charges of any kind whatsoever including any interest, penalties or additions to tax or additional amounts in respect of the foregoing; (b) any Liability for payment of amounts described in clause (a), whether as a result of transferee Liability, of being a member of an affiliated, consolidated, combined or unitary group for any period or otherwise through operation of law; and (c) any Liability for the payment of amounts described in clauses (a) or (b) as a result of any tax sharing, tax indemnity, tax receivable or tax allocation agreement or express or implied obligation (other than any such agreement or obligation entered into in the ordinary course of business that is not primarily related to Taxes).
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“Tax Return” means any report, return, election, extension or similar document (including schedules or any related or supporting information) filed or required to be filed with respect to Taxes with any Governmental Authority or other authority in connection with the determination, assessment or collection of any Tax or the administration of any Laws or administrative requirements relating to any Tax, including any information return, claim for refund, amended return or declaration of estimated Taxes.
“Transaction Document” means this Agreement, Assignment Agreements, Bills of Sale, Assignment of Trademarks, Assignment of Copyrights, Assignment of Domain Names and any other agreements, instruments or documents entered into pursuant to, or as contemplated by, this Agreement.
“Transfer Taxes” means any sales, use, property transfer or gains, documentary, stamp, registration, intangible, conveyance, recording or similar Tax (including, for certainty, goods and services tax and harmonized sales tax) and any recording costs or fees, however styled or designated, or other amounts in the nature of transfer Taxes payable in connection with the sale or transfer of the Purchased Assets, including the filing costs, attorneys’ fees, and processing fees associated with the transfer and recordation of the Purchased Intellectual Property.
(b) Each of the following terms is defined in the Section set forth opposite such term:
| Term | Section | |
| A/R Shortfall Amount | Section 7.06(a) | |
| Agreement Allocation Schedule | Preamble Section 2.08 | |
| Assignment of Trademarks | Section 2.10(a)(iv) | |
| Assignment of Copyrights | Section 2.10(a)(iv) | |
| Assignment of Domain Names | Section 2.10(a)(iv) | |
| Assumed Contracts | Section 2.01(b) | |
| Assumed Liabilities | Section 2.02 | |
| Assignment and Assumption Agreements | Section 2.10(a)(ii) | |
| Assignment of Other Intellectual Property | Section 2.10(a)(iv) | |
| Bankruptcy and Equity Exception | Section 3.03 | |
| Bankruptcy Code | Recitals | |
| Bankruptcy Court | Recitals | |
| Bankruptcy Period | Section 11.05 | |
| Bills of Sale | Section 2.10(a)(iii) | |
| Buyer | Preamble | |
| Calculation Period | Section 2.07(a) | |
| Calculation Period 1 | Section 2.07(a) | |
| Calculation Period 2 | Section 2.07(a) | |
| Calculation Period 3 | Section 2.07(a) | |
| Calculation Period 4 | Section 2.07(a) | |
| Calculation Period 5 | Section 2.07(a) | |
| Cash Consideration | Section 2.06 | |
| Chapter 11 Cases | Recitals | |
| Closing | Section 2.10 | |
| Company | Preamble | |
| Copyrights | Section 2.01(d) | |
| Debtors | Preamble | |
| Domain Names | Section 2.01(c) | |
| Earn-Out Payment | Section 2.07(b) | |
| End Date | Section 10.01(b) | |
| Excluded Liabilities | Section 2.03 | |
| Excluded Records | Section 2.01(f) | |
| Good Faith Deposit | Section 2.09(a) | |
| Independent Accounting Firm | Section 2.07(c) | |
| Minimum Annual Payment | Section 2.07(a) | |
| Net Wholesale Sales | Section 2.07(a) | |
| Net Wholesale Sales Calculation | Section 2.07(c) | |
| Party or Parties | Preamble | |
| Petition Date | Section 7.08(a) | |
| Pre-Closing A/R Payment | Section 7.06(a) | |
| Pre-Closing A/R Threshold | Section 7.06(a) | |
| Purchased Assets Purchased Intellectual Property | Section 2.01 Section 3.08(a) | |
| Purchase Price | Section 2.06 | |
| Seller Straddle Period | Preamble Section 7.04(a)(i) | |
| Surviving Post-Closing Covenants | Section 9.01 | |
| Trademarks | Section 2.01(a) |
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Section 1.02 Construction. In construing this Agreement, including the Exhibits and Schedules hereto, the following principles shall be followed: (a) the terms “herein,” “hereof,” “hereby,” “hereunder” and other similar terms refer to this Agreement as a whole and not only to the particular Article, Section or other subdivision in which any such terms may be employed unless otherwise specified; (b) except as otherwise set forth herein, references to Articles, Sections, Schedules and Exhibits refer to the Articles, Sections, Schedules and Exhibits of this Agreement, which are incorporated in and made a part of this Agreement; (c) a reference to any Person shall include such Person’s successors and assigns; (d) the word “includes” and “including” and their syntactical variants mean “includes, but is not limited to” and “including, without limitation,” and corresponding syntactical variant expressions; (e) a defined term has its defined meaning throughout this Agreement, regardless of whether it appears before or after the place in this Agreement where it is defined, including in any Schedule; (f) the word “dollar” and the symbol “$” refer to the lawful currency of the United States of America; (g) unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa, (h) the words “to the extent” shall mean “the degree by which” and not “if”; (i) the word “will” will be construed to have the same meaning and effect as the word “shall,” and the words “shall,” “will,” or “agree(s)” are mandatory, and “may” is permissive, (j) where a word is defined herein, references to the singular will include references to the plural and vice versa, (k) all references to a day or days will be deemed to refer to a calendar day or calendar days, as applicable, unless Business Days are expressly specified, (l) any reference to any agreement or Contract will be a reference to such agreement or Contract, as amended, modified, supplemented or waived; (m) any reference to any particular Code section or any Law will be interpreted to include any amendment to, revision of or successor to that section or Law regardless of how it is numbered or classified; provided that, for the purposes of the representations and warranties set forth herein, with respect to any violation of or non-compliance with, or alleged violation of or non-compliance, with any Code section or Law, the reference to such Code section or Law means such Code section or Law as in effect at the time of such violation or non-compliance or alleged violation or non-compliance; (n) references to “written” or “in writing” include in electronic form; (o) the headings contained in this Agreement and the other Transaction Documents are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement and the other Transaction Documents; (p) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and if the last day of such period is not a Business Day, the period shall end on the next succeeding Business Day; and (q) the word “or” shall not be exclusive.
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Article 2
Purchase And Sale
Section 2.01 Purchase and Sale. Subject to the entry of the Bid Procedures Order and the Sale Order and upon the terms and subject to the conditions of this Agreement and the Sale Order, on the Closing Date, Seller shall sell, transfer, assign, convey and deliver, or cause to be sold, transferred, assigned, conveyed and delivered, to Buyer, and Buyer shall purchase, acquire and accept from Seller, free and clear of all Encumbrances (other than Permitted Encumbrances), all of Seller’s right, title and interest in the following assets, properties, interests and rights (collectively, the “Purchased Assets”), other than, for the avoidance of doubt, the Excluded Assets, which, notwithstanding the foregoing provisions of this Section 2.01 to the contrary, will remain, as applicable, the assets, properties, interests and rights of Seller:
(a) all trademarks and service marks owned by Seller and all registrations, renewals and applications therefor as set forth on Schedule 2.01(a) and, in each case, all worldwide rights, title and interest associated with the foregoing, together with the goodwill associated with any of the foregoing, in each case, that are exclusively associated with the Brand (collectively, the “Trademarks”);
(b) all Contracts set forth on Schedule 2.05(b) (as described below), under the heading “Assumed Contracts” (collectively, the “Assumed Contracts”);
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(c) the domain names, websites, and social media handles owned by Seller that are utilized in connection with the Business, including related passwords (collectively, the “Domain Names”), as set forth on Schedule 2.01(c);
(d) all copyrights (registered or unregistered), designs, patterns, sketches, works of authorship, creations or drawings owned by Seller and relating to products developed, manufactured, marketed or sold by Seller exclusively in connection with the Trademarks or the Business, including the applications and registrations thereof set forth on Schedule 2.01(d) (collectively, the “Copyrights”);
(e) all Other Intellectual Property;
(f) subject to the first proviso in this Section 2.01(f), Seller’s books and records, to the extent exclusively related to the Business, including all corporate records, executed copies of the Assumed Contracts, all technical information and data, databases, computer files, schematics, all filings made with or records required to be kept by any Governmental Authority, all research and development reports, all financial and accounting records, all creative, promotional or advertising materials, and any other ledgers, files, documents, correspondence and business records relating to the foregoing; provided, however, in no event shall any books and records of any kind or medium, communications, corporate records, minute books, emails, correspondence or any other transmission, records or materials that, in each case, are related to the sale of the Business or the Purchased Assets by Seller, including, without limitation, the transactions contemplated by this Agreement, the negotiation thereof and hereof and the consummation of the transactions contemplated hereby, constitute Purchased Assets and shall instead constitute “Excluded Assets” (as defined below) (such excluded records, the “Excluded Records”); provided, further, that Seller shall be entitled to retain a copy of such books and records described in this Section 2.01(f) that constitute Purchased Assets for recordkeeping purposes, which such copies shall be retained in accordance with the terms of the Confidentiality Agreement;
(g) all claims (including counterclaims), rights, causes of action, privileges, demands, indemnification rights against, and defense of Seller, in each case, solely to the extent arising (in whole or in part, but if in part, only to the extent of such part) after the Closing and exclusively related to Buyer’s ownership, licensing, and marketing of the Purchased Assets following the Closing;
(h) all associated income, royalties, damages, and payments due from or payable by any third party, in each case, solely to the extent arising (in whole or in part, but if in part, only to the extent of such part) after the Closing and exclusively related to Buyer’s ownership, licensing, and marketing of the Purchased Assets, including under the Assumed Contracts, following the Closing; and
(i) all accounts receivable and other receivables arising under or pursuant to any Assumed Contract solely to the extent arising (in whole or in part, but if in part, only to the extent of such part) after the Closing and exclusively related to Buyer’s ownership, licensing, and marketing of the Purchased Assets following the Closing, it being understood and agreed that none of Seller’s right to, interest in or entitlement to any fees, payments or any other amounts payable to Seller by Buyer in its capacity as a licensee under Buyer’s License that relate to the provision of any license thereunder prior to the Closing and that remain unpaid as of the Closing shall be included in Purchased Assets or be offset or credited by Buyer against any amounts payable under Buyer’s License following the Closing.
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Section 2.02 Assumed Liabilities. Upon the terms and subject to the conditions of this Agreement, Buyer agrees, effective at the time of the Closing, to assume the following Liabilities of Seller (the “Assumed Liabilities”):
(a) all Liabilities of Seller relating to or arising out of the Assumed Contracts solely to the extent arising (in whole or in part, but if in part, only to the extent of such part) after the Closing;
(b) all Cure Costs related to the Assumed Contracts;
(c) all Liabilities relating to or arising out of the Purchased Assets solely to the extent arising (in whole or in part, but if in part, only to the extent of such part) after the Closing; and
(d) any and all Liabilities for Transfer Taxes, if any.
For the avoidance of doubt, the fact that a Liability may be excluded under one clause of this Section 2.02 does not imply that it is not intended to be included under another clause.
Section 2.03 Excluded Liabilities. Notwithstanding any provision in this Agreement to the contrary, Buyer shall not assume or be liable for hereunder any Liabilities of Seller other than the Assumed Liabilities, and Seller shall retain and be responsible for all other Liabilities of Seller (other than the Assumed Liabilities), including the following (collectively, the “Excluded Liabilities”):
(a) any and all Liabilities for Taxes (other than Transfer Taxes) (i) of or imposed on Seller (or any member or Affiliate of Seller) or (ii) related or attributable to (but solely to the extent related or attributable to) the Purchased Assets or the Business for any Pre-Closing Tax Period (including any Taxes with respect to a Straddle Period allocated to Seller pursuant to Section 7.04(a));
(b) any indebtedness for borrowed money, bank loans or facilities or any other debt instruments of Seller, other than accounts payable or accrued expenses of Seller with respect to the Business incurred or accrued in the ordinary course of business;
(c) all Liabilities related to any Action to the extent relating to the ownership or operation of the Purchased Assets or the Business prior to the Closing Date;
(d) all Liabilities under the Assumed Contracts arising prior to the Closing Date to the extent relating to the period prior to the Closing Date;
(e) all Liabilities arising under or relating to any Excluded Asset;
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(f) any brokerage, commission, finders or similar fees, which is payable in connection with the transactions contemplated by this Agreement or otherwise, pursuant to any arrangement entered into by Seller or any Affiliate thereof; and
(g) all Liabilities relating to any employee or consultant of Seller or any of its Affiliates, whether arising before, on or following the Closing Date.
Section 2.04 Excluded Assets. Notwithstanding anything contained in Section 2.01 to the contrary, Seller is not selling, and Buyer is not purchasing, any assets other than those specifically listed or described in Section 2.01 (including the Excluded Contracts and the Excluded Records, such assets that are not Purchased Assets, the “Excluded Assets”). For the avoidance of doubt, all Intellectual Property of Seller that is not Purchased Intellectual Property is excluded from Purchased Assets.
Section 2.05 Assignment of Contracts and Rights.
(a) Schedule 2.05(a) sets forth a list of all Assumed Contracts to which Seller is party and that Buyer intends to have Seller assume and assign to Buyer on the Closing Date, together with the applicable Cure Costs, if any, for each such Assumed Contract as reasonably estimated in good faith by Seller. At any time prior to the date that is twenty-one (21) days prior to the Closing Date, Buyer may, by written notice to the Company, designate in writing any Contract related to the Business not designated as an Assumed Contract and, upon such designation, such Assumed Contract will constitute a Purchased Asset and will be conveyed to Buyer under, and in accordance with the terms of, this Agreement at Closing (and, if applicable, will cease to constitute an Excluded Asset). All Contracts of Seller which do not constitute Assumed Contracts or which otherwise cannot be assumed and assigned to Buyer shall not be considered Purchased Assets and shall automatically be deemed Excluded Contracts.
(b) Seller shall use its reasonable best efforts to assign, or cause to be assigned, the Assumed Contracts to Buyer so long as Buyer pays all Cure Costs associated with the assumption and assignment of such Assumed Contracts. If Buyer does not pay all Cure Costs associated with the assignment and assumption of an Assumed Contract, it shall become an Excluded Contract. Notwithstanding anything to the contrary herein, Seller shall not be obligated to assume and assign any such Contract pursuant to this Section 2.05 with respect to which Buyer fails to pay any Cure Costs or to satisfy the Bankruptcy Court as to adequate assurance of future performance.
(c) Except as to Assumed Contracts assigned pursuant to Section 365 of the Bankruptcy Code, this Agreement shall not constitute an agreement to assign any Purchased Asset or any right thereunder if an attempted assignment, without the consent of a third party or Governmental Authority (each, a “Transfer Consent”), would constitute a breach or in any way adversely affect the rights of Buyer or Seller thereunder. If such Transfer Consent is not obtained or such assignment is not attainable pursuant to Section 365 of the Bankruptcy Code, to the extent permitted and subject to any approval of the Bankruptcy Court that may be required, Seller and Buyer will reasonably cooperate in a mutually agreeable arrangement (at Buyer’s sole cost and expense) under which Buyer would obtain the benefits and assume the obligations thereunder in accordance with this Agreement.
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(d) At Closing, (i) Seller shall, pursuant to the Sale Order and the Assignment and Assumption Agreement, assume and assign, or cause to be assigned, to Buyer each of the Assumed Contracts that is capable of being assumed and assigned and the consideration for which is included in the Purchase Price, (ii) Buyer shall pay promptly all Cure Costs in connection with such assumption and assignment, and (iii) Buyer shall assume and perform and discharge the Assumed Liabilities under the Assumed Contracts, pursuant to the Sale Order and the Assignment and Assumption Agreement.
(e) To the extent that Buyer makes a valid designation with respect to any Contract pursuant to Section 2.05(a), the applicable exhibits and schedules to this Agreement will be deemed to have automatically been updated (without action of any Party or Person) to reflect such designation. If Buyer exercises its rights in clause (a) above to designate a Contract as an Assumed Contract or an Excluded Contract, as applicable, then the Parties acknowledge and agree that there will be no reduction in, or increase to, the Purchase Price as a result of such designation or change in designation; provided, however, that such designation may increase or decrease (as applicable) the extent of the Assumed Liabilities, Purchased Assets and/or Excluded Contracts.
Section 2.06 Purchase Price. On the terms and subject to the conditions contained herein, including the terms of Section 7.06(a), the purchase price (the “Purchase Price”) for the Purchased Assets shall consist of (a) cash equal to $38,250,000 (the “Cash Consideration”) plus the Earn-Out Payments and (b) the assumption of the Assumed Liabilities.
Section 2.07 Earn-Out.
(a) The following terms shall have the following meanings:
(i) “Calculation Period” means each of Calculation Period 1, Calculation Period 2, Calculation Period 3, Calculation Period 4, and Calculation Period 5, as applicable.
(ii) “Calculation Period 1” means the 12-month period beginning on the Closing Date and ending on the first anniversary of the Closing Date.
(iii) “Calculation Period 2” means the 12-month period beginning on the first anniversary of the Closing Date and ending on the second anniversary of the Closing Date.
(iv) “Calculation Period 3” means the 12-month period beginning on the second anniversary of the Closing Date and ending on the third anniversary of the Closing Date.
(v) “Calculation Period 4” means the 12-month period beginning on the third anniversary of the Closing Date and ending on the fourth anniversary of the Closing Date.
(vi) “Calculation Period 5” means the 12-month period beginning on the fourth anniversary of the Closing Date and ending on the fifth anniversary of the Closing Date.
(vii) “Minimum Annual Payment” means an amount in cash equal to $750,000 per each Calculation Period.
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(viii) “Net Wholesale Sales” has the meaning given to such term in Buyer’s License.
(b) Earn-Out Payments. For each Calculation Period, Seller shall be entitled to receive, and Buyer shall pay, or cause to be paid, to Seller, an amount equal to the greater of (A) the Minimum Annual Payment for such Calculation Period, and (B) an amount equal to 1% of the amount of the Net Wholesale Sales made during the applicable Calculation Period (each an “Earn-Out Payment” and collectively, the “Earn-Out Payments”), it being understood and agreed that the Minimum Annual Payment for each Calculation Period is a guaranteed payment regardless of the amount of the Net Wholesale Sales in any applicable Calculation Period and in no event shall the Earn-Out Payments for any Calculation Period be less than the Minimum Annual Payment. Buyer shall pay, or cause to be paid, to Seller, each Earn-Out Payment for each Calculation Period by wire transfer of immediately available funds no later than ten (10) Business Days following the final determination of the amount of Net Wholesale Sales in such applicable Calculation Period pursuant to Section 2.07(c)(ii) but in any event no later than within ninety (90) days from the end of such applicable Calculation Period.
(c) Review and Dispute Procedures.
(i) Within thirty (30) days following the end of each Calculation Period, Buyer shall submit to Seller in writing the proposed calculation of the Net Wholesale Sales for such Calculation Period (the “Net Wholesale Sales Calculation”), together with supporting documentation reasonably necessary for Seller review of such proposed Net Wholesale Sales Calculation.
(ii) Seller shall have 10 days following delivery by Buyer of the proposed Net Wholesale Sales Calculation to notify Buyer of any disagreement with such proposed Net Wholesale Sales Calculation, which notice shall set forth in reasonable detail the basis for such dispute. If Seller does not notify Buyer of any such disagreement within such 10-day period, the Net Wholesale Sales Calculation provided by Buyer shall be deemed to be final and binding on Buyer and Seller. If Seller does notify Buyer of any such disagreement within such 10-day period, Buyer and Seller shall cooperate in good faith to resolve such dispute as promptly as practicable, and upon such resolution, the Net Wholesale Sales for the applicable Calculation Period shall be determined in accordance with the mutual written agreement of Buyer and Seller. If Buyer and Seller are unable to resolve any dispute regarding such Net Wholesale Sales Calculation within 15 days (or such longer period as Buyer and Seller shall mutually agree in writing) of receipt of a notice of a dispute, the dispute shall be resolved by an independent public accounting firm as agreed in writing by Seller and Buyer (the “Independent Accounting Firm”). Such resolution shall be final and binding on Buyer and Seller. The Independent Accounting Firm shall use commercially reasonable efforts to complete its work within 30 days of its engagement. The fees, costs and expenses of the Independent Accounting Firm (A) shall be borne by Seller in the proportion that the aggregate dollar amount of all such disputed items so submitted that are unsuccessfully disputed by Seller (as finally determined by the Independent Accounting Firm) bears to the aggregate dollar amount of such items so submitted and (B) shall be borne by Buyer in the proportion that the aggregate dollar amount of such disputed items so submitted that are successfully disputed by Seller (as finally determined by the Independent Accounting Firm) bears to the aggregate dollar amount of all such items so submitted.
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(d) Operating Procedures of Buyer. During each Calculation Period, (i) in no event shall Buyer take any action with the intent or purpose of avoiding the obligation to make any Earn-Out Payment, and (ii) Buyer shall, and shall cause its subsidiaries and Affiliates, as applicable, to maintain books and records that are adequate in all material respects to permit the calculation and independent verification of the Net Wholesale Sales for each Calculation Period on a standalone basis.
Section 2.08 Purchase Price Allocation. No later than thirty (30) days prior to the Closing Date, Buyer shall deliver to Seller a schedule allocating the Purchase Price (and any adjustments thereto as determined for U.S. federal income tax purposes) among the Purchased Assets and Assumed Liabilities (the “Allocation Schedule”). The Allocation Schedule shall be prepared in accordance with Section 1060 of the Code. The Allocation Schedule shall be deemed final unless Seller notifies Buyer in writing that Seller objects to one or more items reflected in the Allocation Schedule within fifteen (15) Business Days after delivery of the Allocation Schedule to Seller. In the event of any such objection, Buyer and Seller shall negotiate in good faith to resolve such dispute. If Buyer and Seller reach an agreement regarding the Allocation Schedule, the Parties shall file all Tax Returns, including Form 8594 (Asset Acquisition Statement under Code Section 1060), in a manner consistent with the Allocation Schedule and shall not take any position inconsistent therewith upon examination of any Tax Return, in any Tax refund claim, in any Action related to Taxes, or otherwise unless otherwise required by applicable Law. If Buyer and Seller are unable to reach a timely resolution of any dispute regarding the Allocation Schedule, each of the Parties shall be entitled to adopt its own position regarding the Allocation Schedule and to report the federal, state and local income and other Tax consequences of the purchase and sale contemplated hereby in a manner consistent with its own position regarding the Allocation Schedule.
Section 2.09 Good Faith Deposit.
(a) No later than one (1) Business Day following the date of this Agreement, Buyer shall deposit (or cause to be deposited) in a trust account maintained on behalf of Seller (and to be designated by Seller prior to the date hereof) cash in the amount of $4,095,358.20 (the “Good Faith Deposit”) to be held in escrow in accordance with the terms of this Agreement and to be released as provided in Section 2.09(b).
(b) If the Closing occurs, the Good Faith Deposit (and any interest accrued thereon) shall be transferred to and retained by Seller at the Closing as a credit against the Cash Consideration. If this Agreement is terminated in accordance with the terms hereof, the Good Faith Deposit (together with any interest accrued thereon) shall be treated in the manner set forth in Section 10.02(b).
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Section 2.10 Closing. The closing (the “Closing”) of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities hereunder shall take place remotely by conference call and by exchange of signature pages by email or fax as soon as possible following entry of the Sale Order, but in no event later than three (3) Business Days, after satisfaction of the conditions set forth in Article 8, or at such other time or place as Buyer and the Company may agree in writing. At the Closing:
(a) Buyer shall deliver to Seller:
(i) the Cash Consideration (less the Good Faith Deposit as set forth in Section 2.09(b) and the amounts pursuant to Section 7.06(a)) by wire transfer of immediately available funds, to the bank account(s) designated in writing by the Company at least three days prior to the Closing Date;
(ii) one or more assignment and assumption agreements, in the form attached hereto as Exhibit A (the “Assignment and Assumption Agreements”), duly executed by Buyer;
(iii) a Bill of Sale, in the form attached hereto as Exhibit B (the “Bill of Sale”), duly executed by Buyer;
(iv) instruments of assignment of Trademarks (the “Assignment of Trademarks”), Copyrights (the “Assignment of Copyrights”), Domain Names (the “Assignment of Domain Names”), and Other Intellectual Property (the “Assignment of Other Intellectual Property”) that are included in the Purchased Assets, if any, duly executed by Seller in a form appropriate for recordation with the appropriate Governmental Authorities in the form of Exhibits C, D, E and F, respectively, in each case duly executed by Buyer;
(v) each other Transaction Document to which Buyer is a party, duly executed by Buyer; and
(vi) such other assignments and other good and sufficient instruments of assumption and transfer, in form satisfactory to Buyer and Seller, as Seller may reasonably request to transfer and assign the Purchased Assets and Assumed Liabilities to Buyer.
(b) Seller shall deliver to Buyer:
(i) the Assignment and Assumption Agreements, duly executed by Seller;
(ii) the Bill of Sale, duly executed by Seller;
(iii) Assignment of Trademarks, Assignment of Copyrights and Assignment of Domain Names, in each case duly executed by Seller;
(iv) each other Transaction Document to which Seller is a party, duly executed by each applicable Seller;
(v) certificate of non-foreign status executed by Seller (or, if applicable, a direct or indirect owner of a Seller) for U.S. federal income tax purposes, prepared in accordance with Treasury Regulation Section 1.1445-2(b) and a properly executed IRS Form W-9;
(vi) a list of all usernames, passwords and other relevant login information needed to access all Domain Names; and
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(vii) such other deeds, bills of sale, assignments and other good and sufficient instruments of conveyance and assignment, in form satisfactory to Buyer and Seller, as Buyer may reasonably request to vest in Buyer all right, title and interest in, to and under the Purchased Assets.
Article 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedules, Seller hereby represents and warrants to Buyer as of the date of this Agreement and the Closing Date as follows:
Section 3.01 Organization and Qualification. Seller has been duly organized and is validly existing and in good standing (where applicable) under the Laws of its jurisdiction of incorporation, with the requisite power and authority to own its properties and conduct its business as currently conducted, except for any failure to be in good standing as would not, individually or in the aggregate, have a Material Adverse Effect.
Section 3.02 Corporate Authorization. Subject to entry of the Sale Order, the execution, delivery and performance by Seller of this Agreement and the consummation of the transactions contemplated hereby have been, or prior to the Closing will be, duly authorized by all necessary corporate or other action on the part of Seller. Subject to entry of the Sale Order, Seller has all necessary power and authority to execute and deliver this Agreement and each agreement, certificate, document and instrument to be executed and delivered by it pursuant to this Agreement, as applicable, and to consummate the transactions contemplated hereby and thereby and to performs its obligations hereunder and thereunder.
Section 3.03 Execution and Delivery; Enforceability. This Agreement has been duly and validly executed and delivered by Seller and, subject to the Bankruptcy Court’s entry of the Bid Procedures Order and the Sale Order and subject to the effect of any Laws relating to bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or preferential transfers, or similar Laws relating to or affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in any Causes of Action in equity or at Law) (the “Bankruptcy and Equity Exception”) will constitute the valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.
Section 3.04 Consents and Approvals. No consent, approval, authorization or Order of or with any third party, or Governmental Authority having jurisdiction over Seller or any of its properties is required for the execution and delivery by Seller of this Agreement and performance of and compliance by Seller with all of the provisions hereof and the consummation of the transactions contemplated herein, except (a) for any Transfer Consents, the failure of which to obtain would not, individually or in the aggregate, be material to the Business or the Purchased Assets, taken as a whole, (b) as set forth on Schedule 3.04, (c) the entry of the Sale Order and the expiration, or waiver by the Bankruptcy Court, of the fourteen (14) day period set forth in Rules 6004(h) and 3020(e) of the Federal Rules of Bankruptcy Procedure, as applicable, (d) for notices, filings and consents required in connection with the Chapter 11 Cases; and (e) for such consents, approvals, authorizations and Orders, the failure of which to provide, make or obtain, would not, individually or in the aggregate, be material to the Business or the Purchased Assets, taken as a whole.
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Section 3.05 No Conflicts. The execution, delivery and performance by Seller of this Agreement and the other Transaction Documents to which it is or will be a party and the consummation by Seller of the transactions contemplated hereby and thereby do not and will not (a) conflict with or violate any of the organizational documents of Seller; (b) conflict with or violate any Law applicable to Seller; (c) result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under or require any consent of any Person pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other contract to which Seller is a party; or (d) subject to entry of the Sale Order, require any consent or approval of, registration or filing with, or notice to any Governmental Authority, except, in the causes of clauses (b)-(d), as would not, individually or in the aggregate, be material to the Business or the Purchased Assets, taken as a whole, or to Seller.
Section 3.06 Litigation. Except as set forth on Schedule 3.06, as of the date hereof, there are no Causes of Action to which Seller is a party pending, or, to the Knowledge of Seller, threatened (a) to restrain or prevent the transactions contemplated by this Agreement, or (b) otherwise affecting the Purchased Assets, except as would not be material to the Business, taken as a whole. Except as set forth on Schedule 3.06, Seller is not a party to any outstanding Order relating to the Business.
Section 3.07 Title to the Purchased Assets. Upon delivery to Buyer on the Closing Date of the instruments of transfer contemplated by Section 2.10, and subject to the terms of the Sale Order, Seller will thereby transfer to Buyer, all of Seller’s right, title and interest in and to the Purchased Assets free and clear of all Encumbrances (other than Permitted Encumbrances).
Section 3.08 Intellectual Property.
(a) Seller exclusively owns all right, title and interest in and to the Intellectual Property that constitute Purchased Assets (the “Purchased Intellectual Property”). Seller is listed in the applicable records of the appropriate federal, state, or foreign agency or registry as the sole owner of record for any registered Purchased Intellectual Property. The Purchased Intellectual Property constitutes all of the Intellectual Property owned by Seller and its Affiliates that is exclusively used in the Business.
(b) Trademarks:
(i) Schedule 2.01(a) contains a complete and accurate list of all registered and applied for Trademarks, including for each the applicable trademark or service mark, application number, filing date, trademark registration number and registration date, as applicable, owned by Seller and its Affiliates that is exclusively used in the Business.
(ii) To the Knowledge of Seller all of the registered Trademarks are subsisting and in full force and effect. All necessary maintenance and renewal documentation and fees in connection with the registered Trademarks have been timely filed with the appropriate authorities and paid except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
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(iii) There are no pending or, to the Knowledge of Seller, threatened oppositions, invalidation or cancellation proceedings or Causes of Action involving the Trademarks.
(c) Copyrights:
(i) Schedule 2.01(d) contains a complete and accurate list of all registered and applied for Copyrights owned by Seller, including title, registration number and registration date.
(ii) To the Knowledge of Seller, all of such registered Copyrights are in full force and effect.
(iii) To the Knowledge of Seller, there are no pending or, to the Knowledge of Seller, threatened oppositions, invalidation or cancellation proceedings or Causes of Action involving the Copyrights.
(d) To the Knowledge of Seller, all registered or issued Purchased Intellectual Property is valid and enforceable, and all the filing, examination, issuance, post-registration, maintenance, renewal, and other fees that have become due prior to the Closing Date have been paid, in each case except as would not be material to the Business, taken as a whole.
(e) To the Knowledge of Seller, no third party is infringing, misappropriating, or otherwise violating any Purchased Intellectual Property.
(f) There is no pending dispute, including any pending claim or, to the Knowledge of Seller, threatened claim, with respect to the Purchased Intellectual Property challenging the ownership, use, validity or enforceability of any such Intellectual Property.
(g) Schedule 3.08(g) contains a listing of all Contracts to which Seller is a party and pursuant to which any third party is granted a right to use any Purchased Intellectual Property, other than non-exclusive licenses entered into by Seller in the ordinary course of business. Schedule 3.08(g) also contains a listing of all executory Contracts to which Seller is a party covering the settlement of any claims related to the Purchased Intellectual Property (such as a co-existence agreement). To the Knowledge of Seller, the Contracts listed on Schedule 3.08(g) remain valid and binding on Seller and, to the Knowledge of Seller, the other parties thereto and/or any successor or assignees. Except in connection with the Chapter 11 Cases, there is no pending dispute, including any claim or, to the Knowledge of Seller, threatened claim indicating that Seller or any other party thereto is in material breach or default of any terms or conditions of such Contracts which would be reasonably likely to result in material Liability.
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Section 3.09 Taxes.
(a) Seller has timely filed all income or other material Tax Returns required to be filed with the appropriate Governmental Authorities, and all such Tax Returns are true, correct and complete in all material respects. All income and other material Taxes due and payable by Seller with respect to the Business whether or not shown to be payable on such Tax Returns, have been timely paid. No claim has been made in writing within the last three (3) taxable years by a Governmental Authority in a jurisdiction where Seller does not file Tax Returns that Seller or the Business is or may be subject to taxation by that jurisdiction.
(b) There are no Encumbrances on any of the Purchased Assets that arose in connection with any failure (or alleged failure) of Seller to pay any Tax, other than Encumbrances for Taxes not yet due and payable.
Section 3.10 Assumed Contracts. Schedule 2.05(a) sets forth a complete list, as of the date hereof, of each Assumed Contract and the Cure Costs with respect thereto. Except as set forth on Schedule 3.10, Seller has not assigned, delegated or otherwise transferred to any third party any of its rights or obligations with respect to any such Contract. Each Assumed Contract is in full force and effect and is a valid and binding obligation of Seller in accordance with its terms and conditions, in each case except as such enforceability may be limited by the Bankruptcy and Equity Exception. Upon entry of the Sale Order and Buyer’s payment of the Cure Costs, (a) Seller will not be in breach or default of its obligations under any Assumed Contract, (b) no condition exists that (either with or without notice or lapse of time or both) would constitute a default by Seller under any Assumed Contract and (c) to the Knowledge of Seller, no other party to any Assumed Contract is in breach or default thereunder. The Cure Cost amounts calculated by Seller with respect to each of the Assumed Contract and set forth on Schedule 2.05(a) are, to the Knowledge of Seller, true and correct.
Section 3.11 No Other Representations or Warranties. Buyer acknowledges that, except for the representations and warranties expressly set forth in this Article 3, neither Seller nor any other Person or representative acting on behalf of Seller or otherwise makes any express or implied representation or warranty with respect to Seller or with respect to any information provided by or on behalf of Seller to Buyer.
Article 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date of this Agreement as follows:
Section 4.01 Corporate Existence and Power. Buyer is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has all power and authority to carry on its business as presently conducted.
Section 4.02 Corporate Authorization. The execution, delivery and performance by Buyer of this Agreement and all other Transaction Documents to which Buyer is or will be a party and the consummation of the transactions contemplated hereby and thereby are within the corporate powers of Buyer and have been duly authorized by all necessary corporate action on the part of Buyer.
Section 4.03 Execution and Delivery; Enforceability. This Agreement and all other Transaction Documents to which Buyer is or will be a party have been duly and validly executed and delivered by Buyer, and constitute the valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms subject to the Bankruptcy and Equity Exception.
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Section 4.04 No Conflicts. The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is or will be a party and the consummation by Buyer of the transactions contemplated hereby and thereby do not and will not (a) conflict with or violate any of the organizational documents of Buyer; (b) conflict with or violate any Law applicable to Buyer; (c) except as set forth on Schedule 4.04, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under or require any consent of any Person pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other contract to which Buyer is a party; or (d) require any consent or approval of, registration or filing with, or notice to any Governmental Authority, except for such consents or approvals that would not, individually or in the aggregate, reasonably be expected to have a materially adverse effect on Buyer’s ability to consummate the transactions contemplated by this Agreement.
Section 4.05 Availability of Funds; Solvency. Buyer has and will have through the Closing unrestricted cash in immediately available funds sufficient to pay all of the Cash Consideration and any other costs, fees and expenses which may be required to be paid by or on behalf of Buyer under this Agreement and the other Transaction Documents. Notwithstanding anything to the contrary contained herein, Buyer acknowledges and agrees that its obligations to consummate the transactions contemplated hereby are not contingent upon its ability to obtain any third party financing. As of the Closing and immediately after consummating the transactions contemplated by this Agreement and the other transactions contemplated by the Transaction Documents, Buyer and its subsidiaries (taken as a whole) will not, (a) be insolvent (either because their financial condition is such that the sum of their debts is greater than the fair value of their assets or because the present fair value of their assets will be less than the amount required to pay their Liability (calculated as the amount that would reasonably be expected to become an actual and matured Liability) on their debts as they become absolute and matured); (b) have unreasonably small capital with which to engage in their respective businesses; or (c) have incurred or plan to incur debts beyond their ability to repay such debts as they become absolute and matured.
Section 4.06 Litigation. There are no Actions to which Buyer is a party pending, or, to the knowledge of Buyer, threatened (a) to restrain or prevent the transactions contemplated by this Agreement or any other Transaction Documents, or (b) that would affect in any material respect Buyer’s ability to perform its obligations under this Agreement or any other Transaction Documents or to consummate the transactions contemplated hereby or thereby.
Section 4.07 Buyer’s Knowledge. As of the date hereof, Buyer is not aware of (a) any default or breach by Seller under or related to Buyer’s License, or (b) any infringement, misappropriation or other violation by any third party related to, or arising from, Buyer’s License.
Section 4.08 Brokers. No broker, finder or agent will have any claim against Seller for any fees or commissions in connection with the transactions contemplated by this Agreement or any other Transaction Document based on arrangements made by or on behalf of Buyer.
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Section 4.09 Condition of Purchased Assets; Representations. BUYER HAS CONDUCTED ITS OWN INDEPENDENT REVIEW AND ANALYSIS OF SELLER AND THE BUSINESS, INCLUDING THE OPERATIONS, ASSETS, LIABILITIES, RESULTS OF OPERATIONS, FINANCIAL CONDITION, SOFTWARE, TECHNOLOGY AND PROSPECTS OF SELLER AND ITS BUSINESS, AND ACKNOWLEDGES THAT IT HAS BEEN PROVIDED ACCESS TO THE PERSONNEL, PROPERTIES, PREMISES AND RECORDS OF SELLER FOR SUCH PURPOSE. IN ENTERING INTO THIS AGREEMENT, BUYER HAS RELIED SOLELY UPON ITS OWN INVESTIGATION AND ANALYSIS, AND SELLER’S REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE 3 AND: (A) ACKNOWLEDGES THAT NEITHER SELLER NOR ANY OF ITS AFFILIATES OR REPRESENTATIVES MAKES OR HAS MADE ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY OF THE INFORMATION PROVIDED OR MADE AVAILABLE TO BUYER OR ITS REPRESENTATIVES (INCLUDING ANY INFORMATION PROVIDED OR MADE AVAILABLE TO BUYER IN ANY “DATA ROOM”, EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 3). EXCEPT AS SPECIFICALLY SET FORTH IN ARTICLE 3, (I) SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF OR OTHERWISE IN ANY WAY RELATING TO SELLER OR ITS LIABILITIES OR OPERATIONS, OR ITS BUSINESS, INCLUDING WITH RESPECT TO VALUE, CONDITION (INCLUDING ENVIRONMENTAL CONDITION) OR PERFORMANCE OR MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR ANY PURPOSE (BOTH GENERALLY OR FOR ANY PARTICULAR PURPOSE) AND WITH RESPECT TO FUTURE REVENUE, PROFITABILITY OR THE SUCCESS OF SELLER AND ITS BUSINESS AND (II) ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. BUYER ACKNOWLEDGES THAT, SHOULD THE CLOSING OCCUR, BUYER SHALL ACQUIRE THE PURCHASED ASSETS, THE ASSUMED LIABILITIES AND THE BUSINESS WITHOUT ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS THEREOF FOR ANY PARTICULAR PURPOSE, IN AN “AS IS” CONDITION AND ON A “WHERE IS” BASIS.
Article 5
COVENANTS OF SELLER
Section 5.01 Conduct of the Business.
(a) Except (t) as may be reasonably advisable to carry out any of the transactions contemplated by the Transaction Documents or as set forth on Schedule 5.01, (u) as may be reasonably advisable to satisfy the cure requirements of any of the Assumed Contracts (in consultation with Buyer), (v) as consented to by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), (w) as expressly permitted pursuant to the Bid Procedures Motion, Bid Procedures Order, and Bid Procedures or this Agreement, (x) as required or approved by the Bankruptcy Code or any Orders entered by the Bankruptcy Court in the Chapter 11 Cases, including, without limitation, any debtor-in-possession financing order or any order permitting the use of cash collateral, (y) as otherwise necessary to comply with applicable Law, or (z) for any actions taken in good faith as reasonably necessary to respond to COVID-19 (provided, that prior to taking (or abstaining from taking) any action pursuant to this clause (z), Seller shall use commercially reasonable efforts to provide reasonable advance notice to Buyer and consult in good faith with Buyer with respect to the appropriateness of such action or inaction), from the date hereof until the Closing Date, Seller shall use commercially reasonable efforts to conduct the Business in the ordinary course of business. In addition, except as otherwise contemplated by the immediately precedent sentence (but excluding clause (z) thereof), without the prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), Seller shall not:
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(i) sell, lease, license or otherwise encumber or dispose of any Purchased Assets other than pursuant to the Assumed Contracts in effect as of the date hereof or as properly modified, amended, or extended in accordance with this Section 5.01;
(ii) make any modification, amendment, or extension to, or terminate or reject, or grant or agree to any renewal of, any Assumed Contract;
(iii) sell, transfer, assign, pledge, lease, license, covenant not to sue, or grant any other right to any Purchased Intellectual Property, including agreeing to amend any licenses to Purchased Intellectual Property contained in any Contracts, other than pursuant to the Assumed Contracts in effect as of the date hereof or as properly modified, amended, or extended in accordance with this Section 5.01;
(iv) cancel, abandon, or allow to lapse or expire any Purchased Intellectual Property, other than in response to expiration following the applicable statutory period for protection of registered Intellectual Property in the ordinary course of business, provided that Seller shall take all commercially reasonable steps, such as payment of fees, to prevent such cancellation, abandonment or allowance to lapse or expire;
(v) waive, cancel, compromise or release any accounts receivable or other payables, or release any rights or claims of value, in each case, relating to or arising under the Assumed Contracts that is in excess of $50,000;
(vi) take any action to waive or compromise any material Claims which are included in the Purchased Assets; or
(vii) agree or commit to do any of the foregoing.
Section 5.02 Access to Information.
(a) From the date of the execution of this Agreement until the Closing Date, Seller will use commercially reasonable efforts, subject to the terms of the Confidentiality Agreement, (i) to give, on reasonable prior written notice and during normal business hours, Buyer, its counsel, and financial advisors, reasonable access to the offices, properties, books and records of such Seller relating (and solely to the extent relating) to the Purchased Assets and (ii) to furnish to Buyer, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating (and solely to the extent relating) to the Purchased Assets as such Persons may reasonably request. Buyer agrees that any investigation undertaken pursuant to the access granted under this Section 5.02(a) shall be conducted in such a manner as not to unreasonably interfere with the operation of Seller’s business. Notwithstanding anything to the contrary in this Agreement, Seller shall not be required to provide access to, or otherwise furnish, any information if Seller determines, in its reasonable discretion, that (i) such access would be reasonably likely to jeopardize any attorney-client or other similar privilege, (ii) such access would contravene any applicable Laws, fiduciary duty or binding agreement entered into prior to the date of this Agreement, (iii) the information to be accessed is pertinent to any existing or potential litigation between Seller or any of their Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand or (iv) any information, guidance or advice received by the Company and its Affiliates related to the transactions contemplated by this Agreement. Notwithstanding anything in this Section 5.02 to the contrary, Seller shall not be required to grant Buyer access to its Tax Returns for any reason.
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(b) All requests for access or information by or on behalf of Buyer shall be submitted to Stifel, Nicolaus & Co. or such other person(s) as Seller may designate in writing, and none of Buyer or any of its Affiliates or representatives shall communicate with any other employees or officers of Seller without the prior written consent of Seller. For the avoidance of doubt, and notwithstanding anything contained herein to the contrary, Buyer shall not have access to personnel records of Seller relating to individual performance or evaluation records, medical histories or other information related to employees of Seller.
(c) At and following the Closing, Seller may retain copies of the books and records or any other materials included, in the Purchased Assets to the extent Seller determines, in its sole discretion, that Seller (i) should retain them to comply with applicable Law or (ii) may require such copies for Tax purposes.
Section 5.03 Update of Disclosure Schedules. Until the Closing Date, Seller may deliver any new schedules or supplement or amend the Disclosure Schedules with respect to any matter that, if existing, occurring or known as of the date hereof, would have been required to be set forth or described in the Disclosure Schedules. Any such supplement or amendment shall be deemed to modify the Disclosure Schedules for purposes of this Agreement except to the extent that, absent such modification(s) to the Disclosure Schedules, Seller would then be in breach of the representations, warranties, covenants or other agreements contained herein such that the condition to Closing set forth in Section 8.02(a) would not then be satisfied; provided, however, that if the matter being disclosed in such supplement or amendment relates to Buyer’s License, and Buyer had knowledge of such matter as of the date of this Agreement, such supplement or amendment shall modify the Disclosure Schedules for all purposes of this Agreement.
Section 5.04 Use of Name. After the Closing, Seller shall not, and shall cause its Affiliates not to, use, authorize the use, register, or attempt to register the name “Joe’s Jeans” or any confusingly similar variations thereof (including “Joe” or “Joe’s”) as a Trademark, Domain Name, or any other form of Intellectual Property. Notwithstanding the foregoing, Buyer agrees and acknowledges that this Section 5.04 shall not restrict Seller’s (or its Affiliates’) use or registration of the name “Caribbean Joe.”
Section 5.05 Notices of Certain Events. Seller shall promptly (and in any event within five (5) Business Days) notify Buyer in writing (which notice shall include, to the extent reasonably practicable, any relevant details and information in Seller’s possession or control) of (a) the occurrence of any change, effect, event, circumstance, occurrence or state of facts of which it is or becomes aware, which does, or which could be reasonably be expected to, cause any condition set forth in Article 8 to fail to be satisfied or which would otherwise prevent, delay or impede the Closing, (b) any written notice or other communication from any Governmental Authority (other than the Bankruptcy Court) related to or in connection with the transactions contemplated by this Agreement and (c) the receipt of any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement. Any required to provide notice to be provided under this Section 5.05 may be fully satisfied by providing notice to counsel to Buyer at the email address for such counsel as set forth in Section 11.01.
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Article 6
COVENANTS OF BUYER
Section 6.01 Confidentiality. Buyer acknowledges and agrees that at any time prior to the Closing Date and after any termination of this Agreement, the Confidentiality Agreement shall remain in full force and effect and Buyer and its Affiliates shall remain bound thereby during such periods.
Section 6.02 Notices of Certain Events. Buyer shall promptly (and in any event within five (5) Business Days) notify Seller in writing (which notice shall include, to the extent reasonably practicable, any relevant details and information in Buyer’s possession or control) of (a) the occurrence of any change, effect, event, circumstance, occurrence or state of facts of which it is or becomes aware, which does, or which could be reasonably be expected to, cause any condition set forth in Article 8 to fail to be satisfied or which would otherwise prevent, delay or impede the Closing, (b) any written notice or other communication from any Governmental Authority (other than in or related to the Bankruptcy Court) related to or in connection with the transactions contemplated by this Agreement and (c) the receipt of any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement. Any requirement to provide notice under this Section 6.02 may be fully satisfied by provided notice to counsel to Seller at the email address for such counsel as set forth in Section 11.01.
Section 6.03 Preservation of Books and Records. After the Closing Date, Buyer shall provide to Seller and its Affiliates and representatives (without charge to Seller other than the costs of copying, if any) reasonable access to, including the right to make copies of, all books and records included in and otherwise related to the Purchased Assets, to the extent necessary to permit Seller to determine any matter relating to their respective rights and obligations hereunder or to any period ending on or before the Closing Date (for example, for purposes of any Tax or accounting audit or any claim or litigation matter) or otherwise related to the Excluded Assets, for periods prior to the Closing and shall preserve such books and records until the latest of (a) such period as shall be consistent with Buyer’s records retention policy in effect from time to time, (b) the retention period required by applicable Law, (c) the conclusion of all bankruptcy proceedings relating to the Chapter 11 Cases, including the closing of the Chapter 11 Cases and (d) in the case of books and records relating to Taxes, the expiration of the statute of limitations applicable to such Taxes. Such access shall include access to any information in electronic form to the extent reasonably available. Buyer acknowledges that Seller has the right to retain originals or copies of all of books and records included in or related to the Purchased Assets for periods prior to the Closing.
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Section 6.04 Insurance. From and after the Closing, the Business, the Purchased Assets, the Assumed Liabilities, and the operations and assets and Liabilities in respect thereof, shall cease to be insured by Seller’s or its Affiliates’ insurance policies or by any of their self-insured programs, and neither Buyer nor its Affiliates (including their respective businesses) shall have any access, right, title or interest to or in any such insurance policies (including to all claims and rights to make claims and all rights to proceeds) to cover the business of Seller (as acquired and operated by Buyer and its Affiliates after the Closing), the Purchased Assets, the Assumed Liabilities, or the operations or assets or Liabilities in respect thereof. Prior to, on or after the Closing, Seller or its Affiliates may amend any insurance policies in the manner they deem appropriate to give effect to this Section 6.04. From and after the Closing, Buyer shall be responsible for securing all insurance it considers appropriate for the Business, the Purchased Assets, the Assumed Liabilities, and the operations and assets and Liabilities in respect thereof.
Section 6.05 Communication. On and after the date hereof and through the Closing Date, Buyer shall not (and shall not permit any of Buyer’s representatives or Affiliates to) contact or communicate with the employees, licensees, customers, service providers and vendors of Seller without the prior consultation with and written approval of Seller; provided, that this Section 6.05 shall not prohibit ordinary course communications, subject to Section 6.01, that are unrelated to this Agreement or the transactions contemplated hereby.
Section 6.06 Release. Effective as of the Closing, Buyer, on its own behalf and on behalf of its direct and indirect Affiliates, hereby absolutely, irrevocably and unconditionally releases and forever discharges Seller and its direct and indirect Affiliates from, and agrees not to assert any cause of action or proceeding with respect to, any losses or Liabilities whatsoever, of any kind or nature, whether at law or in equity, which have been or could have been asserted against Seller or its Affiliates, which Buyer or its Affiliates has or ever had, which arises out of or in any way relates to events, circumstances or actions occurring, existing or taken prior to or as of the Closing Date in respect of Buyer’s License; provided, that the foregoing release shall not cover any losses or Liabilities arising out of or related to this Agreement or the Transaction Documents.
Section 6.07 Buyer’s Knowledge. Notwithstanding anything herein to the contrary, Buyer acknowledges and agrees that, in the event that Buyer has entered into this Agreement with any knowledge by Buyer or any Affiliate of Buyer of any breach by Seller of any representation, warranty or covenant in this Agreement relating to Buyer’s License, Buyer shall not have any claim or recourse against Seller or any of its Affiliates with respect to such breach under this Agreement, including under Article 8 and Article 10.
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Article 7
COVENANTS OF BUYER AND SELLER
Section 7.01 Further Assurances.
(a) At and after the Closing, and without further consideration therefor, Seller and Buyer shall execute and deliver such further instruments and certificates (including deeds, bills of sale, instruments of conveyance, powers of attorney, assignments, assumptions and assurances) and use commercially reasonable efforts to take, or cause to be taken, all actions, and do or cause to be done all things as may be reasonably necessary, to effectuate the purposes and intent of and consummate the transactions contemplated by this Agreement and the other Transaction Documents. Without limiting the foregoing, as reasonably requested by Buyer and at Buyer’s sole cost and expense, Seller shall use commercially reasonable efforts to take all actions and execute all required paperwork as reasonably required to assign, transfer, and convey all Purchased Assets, including, but not limited to, all Purchased Intellectual Property, to Buyer as of the Closing. Subject to Section 2.05(c), to the extent that any Purchased Intellectual Property has not been assigned, transferred or otherwise conveyed to Buyer as of the Closing, at Buyer’s sole cost and expense, Seller shall use its commercially reasonable efforts to execute and deliver such instruments and take such action as Seller and Buyer mutually reasonably determine is necessary to transfer, convey, and assign such assets to Buyer and to confirm Buyer’s title to or interest in the Purchased Intellectual Property, to confirm Buyer’s ownership over the Purchased Intellectual Property, and put Buyer in actual possession and control thereof and to assist Buyer in exercising all rights with respect thereto.
(b) The Parties agree to (and shall cause each of their respective Affiliates to) provide each other with such information and assistance as is reasonably necessary for the preparation of any Tax Returns or for the defense of any Tax claim or assessment, whether in connection with an audit or otherwise, including the furnishing or making available on a timely basis of records, personnel (as reasonably required), books of account, or other necessary materials.
Section 7.02 Certain Filings. Seller and Buyer shall use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary under applicable Law to consummate and make effective the transactions contemplated by this Agreement, including furnishing all information required by applicable Law in connection with approvals of or filings with any Governmental Authority, and filing, or causing to be filed, as promptly as practicable, any required notification and report forms under other applicable competition Laws with the applicable Governmental Authority.
Section 7.03 Public Announcements. On and after the date hereof and through the Closing Date, the Parties shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby, and neither Party shall issue any press release or make any public statement prior to obtaining, with respect to Seller, Buyer’s, and with respect to Buyer, Seller’s, prior written consent (which consent, in each case, shall not be unreasonably withheld, conditioned or delayed); provided, however, that that no such prior consultation or consent shall be required for disclosure by either Party (a) to its current, former or prospective lenders and their respective representatives, provided that the recipient of such information is subject to a customary confidentiality obligation, (b) in earnings releases or earnings calls or as otherwise advised by accountants, or (c) as required by applicable Law or applicable securities exchange rules.
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Section 7.04 Tax Matters.
(a) Allocation of Straddle Period Taxes.
(i) For purposes of this Agreement, in order to apportion appropriately any Taxes relating to a taxable period beginning before and ending after the day immediately prior to the Closing Date (a “Straddle Period”), the amount of Taxes that are allocable to the portion of the Straddle Period ending on and including the day immediately prior to the Closing Date shall be:
(A) in the case of Taxes imposed on a periodic basis with respect to the business or assets of a Seller (such as ad valorem and property Taxes) and exemptions, allowances or deductions that are calculated on an annual basis, such as depreciation, the amount of such Taxes, exemptions, allowances or deductions for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of calendar days in the portion of the Straddle Period ending on and including the Closing Date, and the denominator of which is the number of calendar days in the entire Straddle Period (provided that any Tax exemption or allowance with respect to an annual period shall be pro-rated on an equal daily basis between the pre-Closing Tax period and the remainder of the Straddle Period); and
(B) in the case of all other Taxes, determined on a “closing of the books basis” as if the taxable period ended on the Closing Date.
(b) Tax Cooperation. The Parties shall furnish or cause to be furnished to each other, upon request, and at the sole cost of the requesting Party, as promptly as practicable, such information and assistance relating to the Purchased Assets as is reasonably necessary for the filing of Tax Returns and the preparation for, or the prosecution or defense of, any audit, claim, demand, proposed adjustment or deficiency relating to Taxes, and any other matter or proceeding relating to Taxes.
(c) Transfer Taxes. To the extent Seller is required by applicable Law to pay Transfer Taxes, Buyer shall reimburse Seller the amount of such Transfer Taxes at least five Business Days prior to the applicable due date for such Transfer Taxes, and Seller shall provide timely payment thereof (if any payment is due) to the applicable Governmental Authority and promptly provide a copy of such Tax Return to Buyer. Further, each Party hereto agrees to timely sign and deliver (or to cause to be timely signed and delivered) such certificates or forms as may be necessary or appropriate and otherwise to cooperate to establish any available exemption from (or otherwise reduce) such Transfer Taxes. Closing. The Parties hereto shall cooperate in good faith to establish any available exemption from (or reduction of) any Transfer Taxes.
Section 7.05 Misallocated Assets. If, following the Closing, Buyer or its Affiliates own or hold any Excluded Asset, Buyer shall transfer, or shall cause its Affiliate to transfer, at no cost to Seller, such Excluded Asset as soon as practicable to Seller. If, following the Closing, Seller or any of its Affiliates owns any Purchased Asset, Seller shall transfer, or shall cause their respective Affiliates to transfer, such Purchased Asset as soon as practicable to Buyer or an Affiliate designated by Buyer.
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Section 7.06 Pre-Closing Accounts Receivables; Payments after Closing.
(a) The Parties hereby acknowledge and agree that, during the period commencing on the date hereof and ending on the day immediately prior to the Closing Date, in the event that Seller receives any payment from a third party (other than Buyer or any of its Affiliates) that constitutes an account receivable or other receivable of the Business (each, a “Pre-Closing A/R Payment”), such Pre-Closing A/R Payment will be credited to Buyer’s account (and shall reduce the Cash Consideration payable by Buyer at the Closing on a dollar for dollar basis), until the aggregate amount of the Pre-Closing A/R Payments is equal to $268,598 (the “Pre-Closing A/R Threshold”). At the Closing, solely to the extent that the aggregate amount of the Pre-Closing A/R Payments is less than the Pre-Closing A/R Threshold (such shortfall amount, the “A/R Shortfall Amount”), the Parties hereby agree that the Purchase Price shall be reduced by the A/R Shortfall Amount.
(b) In the event that Seller receives any payment from a third party (other than Buyer or any of its Affiliates) after the Closing Date pursuant to any of the Assumed Contracts (or with respect to the operation by Buyer of the Business or any Purchased Asset after the Closing) and to the extent such payment is not made in connection with an Excluded Asset or an Excluded Liability, Seller shall forward such payment, as promptly as practicable but in any event within thirty (30) days after such receipt, to Buyer (or other entity nominated by Buyer in writing to Seller) and notify such third party to remit all future payments (in each case, to the extent such payment is in respect of any post-Closing period with respect to the Business and is not in respect of an Excluded Asset or an Excluded Liability) pursuant to the Assumed Contracts to Buyer (or such other entity). Notwithstanding anything to the contrary in this Agreement, in the event that Buyer or any of its Affiliates receives any payment from a third party after the Closing on account of, or in connection with, any Excluded Asset (which includes, for the avoidance of doubt, any accounts receivables and other receivables of the Business with respect to any pre-Closing period), Buyer shall forward such payment, as promptly as practicable but in any event within thirty (30) days after such receipt, to the Company (or other entity nominated by the Company in writing to Buyer) and notify such third party to remit all future payments on account of or in connection with the Excluded Assets to the Company (or such other entity as the Company may designate).
(c) For the avoidance of doubt, following the Closing, any fees, payments or other amounts payable to the Seller by the Buyer in its capacity as licensee under Buyer’s License that relate to the provision of any license thereunder prior to the Closing and that remain unpaid as of the Closing shall be paid by Buyer to the Seller as promptly as practicable.
Section 7.07 Bulk Transfer Laws. The Parties intend that pursuant to section 363(f) of the Bankruptcy Code, the transfer of the Purchased Assets shall be free and clear of any security interests in the Purchased Assets, including any liens or claims arising out of the bulk transfer Laws, and the Parties shall take such steps as may be necessary or appropriate to so provide in the Sale Order. In furtherance of the foregoing, each Party hereby waives compliance by the other Parties with the “bulk sales,” “bulk transfers” or similar Laws and all other similar Laws in all applicable jurisdictions in respect of the transactions contemplated by this Agreement.
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Section 7.08 Bankruptcy Court Approval.
(a) The Debtors shall file the Bid Procedures Motion with the Bankruptcy Court no later than two (2) Business Days after the commencement of the Chapter 11 Cases (the “Petition Date”).
(b) The Parties shall use their respective commercially reasonable efforts to have (i) the Bankruptcy Court enter the Bid Procedures Order as promptly as practicable after the filing of the Bid Procedures Motion and (ii) the Bankruptcy Court enter the Sale Order as promptly as practicable after the completion of the Auction but, in any event, in each case in compliance with the Milestones. Debtors and Buyer shall cooperate in good faith to obtain the Bankruptcy Court’s entry of the Bid Procedures Order, the Sale Order, and any other Order reasonably necessary in connection with the transactions contemplated by this Agreement, including furnishing affidavits, nonconfidential financial information, or other documents or information for filing with the Bankruptcy Court and making such advisors of Debtors and Buyer and their respective Affiliates available to testify before the Bankruptcy Court for the purposes of, among other things, providing adequate assurances of performance by Buyer as required under Section 365 of the Bankruptcy Code, and demonstrating that Buyer is a “good faith” purchaser under Section 363(m) of the Bankruptcy Code. Buyer agrees that it will promptly take such actions as are reasonably requested by Seller to assist in obtaining entry of the Bid Procedures Order, the Sale Order, and any other Order reasonably necessary, consistent with the above.
(c) The Debtors shall give notice under the Bankruptcy Code and the Bankruptcy Rules of the request for the relief specified in the Bid Procedures and Sale Motion to all Persons entitled to such notice, including all Persons that have asserted Encumbrances on the Purchased Assets and all non-debtor parties to the Assumed Contracts, and other appropriate notice as required by the Bankruptcy Rules and the local rules of the Bankruptcy Court, including such additional notice as the Bankruptcy Court shall direct or as Buyer may reasonably request, and provide appropriate opportunity for hearing, to all parties entitled thereto, of all motions, orders, hearings or other proceedings in the Bankruptcy Court relating to this Agreement or the transactions contemplated hereby. Debtors shall be responsible for making all appropriate filings relating to this Agreement with the Bankruptcy Court, and shall use commercially reasonable efforts to submit such filings to Buyer no less than two Business Days prior to their filing with the Bankruptcy Court for Buyer’s prior review and comment, which comments the Debtors shall consider and attempt to incorporate in good faith, in consultation with Buyer.
(d) In the event the entry of the Bid Procedures Order, the Sale Order or any other Orders of the Bankruptcy Court relating to this Agreement or the transactions contemplated hereby shall be appealed by any Person (or if any petition for certiorari or motion for reconsideration, amendment, clarification, modification, vacation, stay, rehearing or reargument shall be filed with respect to the Bid Procedures Order, the Sale Order or other such Order), Debtors shall use commercially reasonable efforts to defend such appeal.
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(e) The Debtors and Buyer acknowledge that this Agreement and the transactions contemplated hereby are subject to (i) entry of, as applicable, the Bid Procedures Order and the Sale Order and (ii) the consideration by the Debtors and Seller of higher or better competing bids (whether through any and all types of consideration, including, without limitation, cash, assumed liabilities or credit bid) in respect of a sale, reorganization, or other disposition of the Debtors or Seller, the Business or the Purchased Assets. In the event of any discrepancy between this Agreement and the Bid Procedures Order and the Sale Order, the Bid Procedures Order and the Sale Order shall govern; provided, however, that nothing in this Section 7.08(e) shall limit the rights of Buyer hereunder in the event that any Bid Procedures Order or any Sale Order does not comply with the terms of this Agreement.
(f) During the period commencing on the date hereof and ending on the earlier of (i) the date of entry of the Bid Procedures Order or (ii) the date this Agreement is terminated as provided in Article 10, Seller will not, nor will it permit any of its Affiliates or anyone acting on behalf of any of them to, solicit, negotiate or enter into any discussions or negotiations with any Person (other than Buyer or its representatives) in connection with any Alternative Transaction; provided that Seller shall be permitted to furnish or cause to be furnished to any Person any information concerning the Purchased Assets or the Business. Seller shall, immediately upon the execution of this Agreement, cease any and all ongoing discussions with any other potential purchaser of all or any portion of the Purchased Assets and/or the Business and shall cause its representatives and Affiliates and their respective representatives to do the same. Notwithstanding anything to the contrary herein, from the date of entry of the Bid Procedures Order and until the transactions contemplated hereby are consummated, Buyer agrees and acknowledges that Seller, Debtors and their Affiliates, including through their representatives, are and may continue soliciting and/or responding to inquiries, proposals or offers from third parties in connection with any Alternative Transaction, including, without limitation, inquiries, proposals or offers related to the Purchased Assets, and may facilitate (and perform any and all other acts related thereto), including, without limitation, furnishing any information (subject to entering into a customary confidentiality agreement) with respect to, any effort or attempt by any Person to seek to do any of the foregoing in connection with an Alternative Transaction. Seller shall promptly notify Buyer of receipt by Debtors or any of their representatives of any such inquiries, proposals or offers; provided that, as to any inquiries, proposals or offers received prior to entry of the Bid Procedures Order, Seller shall provide Buyer with a copy of any such inquiries, proposals or offers within two (2) Business Days of receipt by the Debtors or their representatives.
(g) The Sale Order shall, among other things, (i) approve, pursuant to sections 105, 363, and 365 of the Bankruptcy Code, (A) the execution, delivery and performance by Seller of this Agreement, (B) the sale of the Purchased Assets to Buyer on the terms set forth herein and free and clear of all Encumbrances (other than Encumbrances included in the Assumed Liabilities and Permitted Encumbrances), and (C) the performance by Debtors of their respective obligations under this Agreement; (ii) authorize and empower Seller to assume and assign to Buyer the Assumed Contracts; (iii) find that Buyer is a “good faith” buyer within the meaning of section 363(m) of the Bankruptcy Code, find that Buyer is not a successor to any Seller, and grant Buyer the protections of section 363(m) of the Bankruptcy Code; (iv) find that Buyer shall have no Liability or responsibility for any Liability or other obligation of Seller arising under or related to the Purchased Assets other than as expressly set forth in this Agreement, including successor or vicarious Liabilities of any kind or character, including any theory of antitrust, successor, or transferee Liability, labor law, de facto merger, or substantial continuity; (v) find that Buyer has provided adequate assurance (as that term is used in section 365 of the Bankruptcy Code) of future performance in connection with the assumption of the Assumed Contracts; and (vi) find that Buyer shall have no Liability for any Excluded Liability.
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(h) Debtors shall comply with the Milestones.
(i) If an Auction is conducted, and Buyer is not the Successful Bidder at the Auction but is the next highest bidder after the Successful Bidder at the Auction, Buyer shall serve as a Backup Bidder and keep its bid to consummate the transactions contemplated by this Agreement on the terms and conditions set forth in this Agreement (as the same may be improved upon in the Auction) open and irrevocable, notwithstanding any right of Buyer to otherwise terminate this Agreement pursuant to Article 10 hereof, until the earlier of (i) the Backup Bid Expiration Date (as defined in the Bid Procedures) or (ii) the first Business Day after the closing of a transaction with a Successful Bidder for the Purchased Assets that is not Buyer; provided, however, that if prior to the Backup Bid Expiration Date, a Successful Bidder for the Purchased Assets that is not Buyer fails to consummate its transaction as a result of a breach or failure to perform on the part of such Successful Bidder, or because a condition in such Successful Bidder’s purchase agreement cannot otherwise be met, and the purchase agreement with such Successful Bidder is terminated, Buyer (as the Backup Bidder) will be deemed to have the new prevailing bid, and Seller will be authorized, without further order of the Bankruptcy Court, to, and Buyer (as the Backup Bidder) shall, subject to the terms and conditions of this Agreement, consummate the transactions contemplated by this Agreement by the later of (x) ten (10) days of becoming the Successful Bidder and (ii) the Backup Bid Expiration Date, on the terms and conditions set forth in this Agreement (as the same may be improved upon in the Auction).
Section 7.09 Bidding Protections.
(a) If this Agreement is terminated by Buyer or Seller pursuant to (i) Section 10.01(c), (ii) Section 10.01(i), or (iii) Section 10.01(k), then, in each case, Seller shall (or shall cause the Debtors to), without the requirement of any notice or demand by Buyer, pay to Buyer the Break-Up Fee, such payment to be made upon the earlier of (x) the consummation of an Alternative Transaction, (y) the consummation of a sale to the “Successful Bidder” or “Next Highest Bidder” at the Auction or (z) the date that is forty-five (45) days following such termination, in immediately available funds to one or more bank accounts of Buyer (or any of its Affiliates) designated in writing by Buyer to Seller.
(b) If this Agreement is terminated by Buyer or Seller pursuant to (i) Section 10.01(c), (ii) Section 10.01(e), (iii) Section 10.01(i), (iv) Section 10.01(j) or (v) Section 10.01(k), then, in each case, Seller shall (or shall cause the Debtors to), without the requirement of any notice or demand by Buyer, pay to Buyer the Expense Reimbursement, such payment to be made upon the earlier of (x) the consummation of an Alternative Transaction, (y) the consummation of a sale to the “Successful Bidder” or “Next Highest Bidder” at the Auction or (z) the date that is forty-five (45) days following such termination by wire transfer(s) in immediately available funds to one or more bank accounts of Buyer (or any of its Affiliates) designated in writing by Buyer to Seller.
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(c) The Parties acknowledge and agree that (i) the Parties have expressly negotiated the provisions of this Section 7.09 and the payment of the Break-Up Fee and the Expense Reimbursement are integral parts of this Agreement, (ii) in the absence of Seller’s obligations to make these payments, Buyer would not have entered into this Agreement, and (iii) subject to approval by the Bankruptcy Court, the Break-Up Fee and the Expense Reimbursement shall constitute allowed superpriority Administrative Expense Claims pursuant to sections 105(a), 503(b), and 507(a)(2) of the Bankruptcy Code with priority over all other administrative expenses of the kind specified in section 503(b) of the Bankruptcy Code. Seller shall seek the approval of the Break-Up Fee and the Expense Reimbursement as set forth in this Section 7.09 and this Agreement in the Bid Procedures Order. Buyer acknowledges and agrees that in the event the Break-Up Fee becomes payable, the right to receive the Break-Up Fee and the Expense Reimbursement and the return of the Good Faith Deposit shall be the sole and exclusive remedy of Buyer against Debtors, Seller, and any of their respective Affiliates for any liability, damage or other loss resulting from, the termination of this Agreement, breach of any representation, warranty covenant or agreement contained herein or the failure of the transactions contemplated hereby to be consummated, and none of Buyer nor any of its Affiliates shall have any other remedy or cause of action under or relating to this Agreement or any applicable Law. Notwithstanding the foregoing, nothing set forth herein shall limit or restrict Buyer’s rights to pursue a grant of specific performance pursuant to Section 11.08 prior to any termination of this Agreement by Buyer.
Section 7.10 Buyer’s License. The Parties hereby acknowledge and agree that notwithstanding any provision of Buyer’s License to the contrary, Buyer’s License will continue in full force and effect as of the commencement of the Chapter 11 Cases, be an Assumed Contract hereunder and shall be assigned to Buyer as an Assumed Contract hereunder upon the Closing, subject to the terms and conditions of this Agreement; provided, that to the extent this Agreement is terminated in accordance with Article 10 hereof, the Parties’ rights with respect to the impact of the commencement of the Chapter 11 Cases on Buyer’s License as of the date of termination of this Agreement are reserved, and nothing in this Agreement shall be considered a waiver of any rights, claims, arguments and defenses with respect thereto.
Article 8
CONDITIONS TO CLOSING
Section 8.01 Conditions to Obligations of Buyer and Seller. The obligations of each of Buyer and Seller to consummate the Closing are subject to the satisfaction or valid waiver at or prior to the Closing of the following conditions:
(a) no provision of any applicable Law and no judgment, injunction or Order shall then be in effect prohibiting or making illegal the consummation of the Closing;
(b) the Bankruptcy Court shall have entered the Bid Procedures Order and the Bid Procedures Order shall be a Final Order; and
(c) the Bankruptcy Court shall have entered the Sale Order in form and substance reasonably acceptable to Buyer and Seller and the Sale Order shall be a Final Order.
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Section 8.02 Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing is subject to the satisfaction (or valid waiver) at or prior to the Closing of the following further conditions:
(a) (i) each of the representations and warranties of Seller contained in Section 3.01, Section 3.02, Section 3.03, and Section 3.07 shall be true and correct in all respects (except for any failure to be so true and correct that is de minimis in nature) on and as of the date hereof and on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (provided that representations and warranties which speak to a specified date shall speak only as of such date) and (ii) each other representation and warranty of Seller contained in Article 3 shall be true and correct on and as of the date hereof and as of Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (provided that representations and warranties which speak to a specified date shall speak only as of such date) except where the failure to be so true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material”) or “Material Adverse Effect” or other similar term set forth therein) would not, individually or in the aggregate, have a Material Adverse Effect and Buyer shall have received a certificate of the Company certifying as to the matters set forth in this Section 8.02(a) signed by a duly authorized representative of the Company;
(b) the material covenants and agreements that Seller are required to perform or to comply with pursuant to this Agreement at or prior to the Closing shall have been performed and complied with in all material respects and Buyer shall have received a certificate of the Company to such effect signed by a duly authorized representative of the Company; and
(c) From the date hereof, there shall not have occurred any Material Adverse Effect.
Section 8.03 Conditions to Obligation of Seller. The obligation of Seller to consummate the Closing is subject to the satisfaction (or valid waiver) at or prior to the Closing of the following further conditions:
(a) the representations and warranties of Buyer contained in Article 4 shall be true and correct on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (provided that representations and warranties which speak to a specified date shall speak only as of such date) except where the failure to be so true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material”) or similar term set forth therein) would not, individually or in the aggregate, prevent, materially impede or delay the consummation of the Closing in accordance with its terms and Seller shall have received a certificate of Buyer to such effect signed by a duly authorized officer of Buyer; and
(b) the material covenants and agreements that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing shall have been performed and complied with in all material respects and Seller shall have received a certificate of Buyer to such effect signed by a duly authorized officer of Buyer.
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Article 9
SURVIVAL
Section 9.01 Survival. The Parties, intending to modify any applicable statute of limitations, agree that (a) (i) the representations and warranties in this Agreement and in any certificate delivered pursuant hereto and (ii) the covenants in this Agreement only requiring performance prior to the Closing shall, in each case, terminate and be of no further force and effect effective as of the Closing and shall not survive the Closing for any purpose, and thereafter there shall be no Liability on the part of, nor shall any claim be made by or on behalf of, any Party or any Party’s Affiliates in respect thereof and (b) the covenants in this Agreement that contemplate performance at or after the Closing or expressly by their terms survive the Closing shall survive the Closing in accordance with their respective terms (the “Surviving Post-Closing Covenants”). Except with respect to the Surviving Post-Closing Covenants, no other remedy shall be asserted or sought by Buyer, and Buyer shall cause its Affiliates not to assert or seek any other remedy, against Seller or any of its Affiliates under any contract, misrepresentation, tort, strict liability, or statutory or regulatory Law or theory or otherwise, all such remedies being hereby knowingly and expressly waived and relinquished to the fullest extent permitted under applicable law.
Article 10
TERMINATION
Section 10.01 Grounds for Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer;
(b) by either Seller or Buyer, if the Closing shall not have been consummated on or before November 30, 2021 (the “End Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 10.01(b) shall not be available to a Party whose breach of any of its representations, warranties, covenants or agreements contained herein has been the primary cause of the failure of the Closing to occur on or before the End Date;
(c) by either Seller or Buyer, if at the end of the Auction for the Purchased Assets (if any), Buyer is not determined by the Debtors to be either the “Successful Bidder” or “Next-Highest Bidder” (each as defined in the Bid Procedures Order);
(d) by Seller, if Seller is not then in material breach of its obligations under this Agreement and Buyer breaches or fails to perform any of its representations, warranties, covenants or agreements contained in this Agreement and such breach or failure to perform (i) would prevent the satisfaction of a condition set forth in Section 8.01 or Section 8.03, (ii) cannot be, or has not been, cured within ten (10) Business Days following delivery of written notice to Buyer of such breach or failure to perform and (iii) has not been waived by Seller;
(e) by Buyer, if Buyer is not then in material breach of its obligations under this Agreement and Seller breaches or fails to perform any of its representations, warranties, covenants or agreements contained in this Agreement and such breach or failure to perform (i) would prevent the satisfaction of a condition set forth in Section 8.01 or Section 8.02, (ii) cannot be, or has not been, cured within ten (10) Business Days following delivery of written notice to the Company of such breach or failure to perform and (iii) has not been waived by Buyer;
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(f) by either Seller or Buyer upon the conversion of any of Seller’s Chapter 11 Cases to cases under Chapter 7 of the Bankruptcy Code, the dismissal of any of Seller’s Chapter 11 Cases, or if a trustee or examiner with expanded powers to operate or manage the financial affairs of Seller is appointed;
(g) by either Seller or Buyer, if the Bankruptcy Court enters a final, non-appealable order that precludes the consummation of the transactions contemplated hereby on the terms and conditions set forth in this Agreement;
(h) by either Seller or Buyer, if any court of competent jurisdiction or other competent Governmental Authority shall have enacted or issued a Law or decree or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement and such Law or decree or other action shall have become final and non-appealable; provided, however, that the right to terminate this Agreement under this Section 10.01(h) shall not be available to a Party if the failure to consummate the Closing because of such action by a Governmental Authority shall be due to the failure of such Party to have fulfilled, in any material respect, any of its obligations under this Agreement;
(i) by either Seller or Buyer, if the Bankruptcy Court enters an order approving an Alternative Transaction with one or more Persons other than Buyer;
(j) by Buyer, if any of the Milestones are not met; or
(k) by Seller, if Seller or its board of directors (or similar governing body), based on the advice of counsel, determines that proceeding with the transactions contemplated by this Agreement or failing to terminate this Agreement would be inconsistent with its or such Person’s or body’s fiduciary duties or applicable law.
The Party desiring to terminate this Agreement pursuant to this Section 10.01 (other than pursuant to Section 10.01(a)) shall give written notice of such termination to the other Party in accordance with Section 11.01.
Section 10.02 Effect of Termination.
(a) If this Agreement is terminated as permitted by Section 10.01, (i) this Agreement shall become null and void and of no further force and except, except for the provisions of Sections 2.09, 6.01, 7.09, 10.03, Article 11 and this Section 10.02, which shall survive such termination of this Agreement and (ii) no Party (nor any stockholder, director, officer, employee, agent, consultant or representative of any such Party) shall thereafter have any Liability hereunder; provided, nothing in this Section 10.02 shall be deemed to release any Party from any Liability (x) for any breach of any covenants contained in this Agreement occurring prior to its termination and (y) that may otherwise be provided in, or contemplated by, the provisions of Section 2.09 or 10.02(b).
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(b) If this Agreement is terminated pursuant to Section 10.01(d), the Good Faith Deposit (together with any interest accrued thereon) shall be retained by Debtors for their own account as damages, and the Parties acknowledge and agree that such payment of the Good Faith Deposit to Debtors shall constitute liquidated damages (and not a penalty) and shall be the sole and exclusive remedy of Seller and any other Person against Buyer and its Affiliates arising under this Agreement in connection with any such termination, and upon payment of the Good Faith Deposit to the Debtors, neither seller nor any other Person shall be entitled to bring or maintain any other Action against Buyer or any of its Affiliates and neither Buyer nor any of its Affiliates shall have any further liability or obligation to Seller arising out of this Agreement, the transactions contemplated by this Agreement or any matters forming the basis of such termination. The Parties acknowledge and agree that (i) the agreements contained in this Section 10.01(b) are an integral part of this Agreement and the transactions contemplated hereby and (ii) in light of the difficulty of accurately determining actual damages with respect to the foregoing, the right to any such receipt of the Good Faith Deposit constitutes a reasonable estimate of the damages that will compensate Seller in the circumstances in which such fee is payable for the efforts and resources expended and the opportunities forgone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated hereby. If this Agreement is terminated pursuant to any provision of Section 10.01 (other than Section 10.01(d)), Debtors shall promptly (but in any event within two (2) Business Days of such termination) return the Good Faith Deposit (together with any interest accrued thereon) to Buyer by wire transfer of immediately available funds.
Section 10.03 Costs and Expenses. Except as otherwise expressly provided in this Agreement, including as set forth in Section 10.02(b) whether or not the transactions contemplated by this Agreement are consummated, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense; provided, however, that all Cure Costs shall be paid by Buyer.
Article 11
MISCELLANEOUS
Section 11.01 Notices. All notices, requests and other communications to any Party hereunder shall be in writing and shall be delivered to the addresses set forth below (or pursuant to such other address(es) as may be designated in writing by the Party to receive such notice):
if to Buyer:
Centric Brands LLC
350 Fifth Avenue
New York, NY 10118
Attention: Lori Nembirkow, General Counsel
Email: LNembirkow@centricbrands.com
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with a copy, which shall not constitute notice, to:
Akin Gump Strauss Hauer & Feld LLP
One Bryant Park
New York, NY 10036
Attention: Daniel I. Fisher and Brad Kahn
| Email: | dfisher@akingump.com |
bkahn@akingump.com
if to Seller, to:
Sequential Brands Group, Inc.
1407 Broadway
38th Floor
New York, NY 10018
Attention: Eric Gul
| Email: | EGul@sbg-ny.com |
with a copy, which shall not constitute notice, to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Joshua Brody, Lilit Voskanyan, Jason Zachary Goldstein
| Email: | jbrody@gibsondunn.com |
lvoskanyan@gibsondunn.com
jgoldstein@gibsondunn.com
All such notices, requests and other communications shall be deemed received (a) if delivered prior to 5:00 p.m. New York time on a day which is a Business Day, then on such date of delivery if delivered personally, or, if by e-mail, upon written confirmation of delivery by e-mail (which may be electronic), and if delivered after 5:00 p.m. New York time (whether personally or by email) then on the next succeeding Business Day, (b) on the first (1st) Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth (5th) Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid.
Section 11.02 Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by each of Buyer and Seller.
(b) No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Law.
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Section 11.03 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. Buyer, on the one hand, may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of Seller, and Seller, on the other hand, may not assign, delegate or otherwise transfer any of their respective rights or obligations under this Agreement without the prior written consent of Buyer; provided, however, that Buyer may assign any or all of its rights and obligations under this Agreement (including the right to receive the Purchased Assets) to one or more subsidiaries of Buyer, in each case, without the prior written consent of Seller; provided, further, that no such assignment will relieve Buyer of its obligations hereunder. Any attempted assignment in violation of this Section 11.03 shall be null and void, ab initio.
Section 11.04 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware, without regard to the conflicts of law rules of such State.
Section 11.05 Jurisdiction. Without limiting any Party’s right to appeal any order of the Bankruptcy Court, (i) the Bankruptcy Court will retain exclusive jurisdiction to enforce the terms of this Agreement and to decide any claims or disputes which may arise or result from, or be connected with, this Agreement, any breach or default hereunder, or the transactions contemplated hereby, and (ii) any and all proceedings related to the foregoing will be filed and maintained only in the Bankruptcy Court, and the Parties hereby consent to and submit to the jurisdiction and venue of the Bankruptcy Court for such purposes and will receive notices at such locations as indicated in Section 11.01; provided, however, that if the Chapter 11 Cases have been closed pursuant to Section 350 of the Bankruptcy Code, the Parties agree to unconditionally and irrevocably submit to the exclusive jurisdiction of the United States District Court for the Southern District of New York, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such Action, in the Supreme Court of the State of New York, New York County, for the resolution of any such claim or dispute. The Parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection which they may now or hereafter have to the laying of venue of any such Action brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the Parties agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Process in any such Action may be served on any party anywhere in the world, whether within or without the jurisdiction of the Bankruptcy Court, the United States District Court for the District of New York or any state court of the State of New York. Without limiting the foregoing, each Party agrees that service of process on such Party as provided in Section 11.01 shall be deemed effective service of process on such Party.
Section 11.06 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSES OF ACTION ARISING IN WHOLE OR IN PART UNDER, RELATED TO, BASED ON OR IN CONNECTION WITH THIS AGREEMENT OR ANY ANCILLARY DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 11.06 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
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Section 11.07 Counterparts; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Party. Delivery of a .pdf version of one or more signatures to this Agreement shall be deemed adequate delivery for purposes of this Agreement. No provision of this Agreement is intended to confer upon any Person other than the Parties any rights, benefits, Causes of Action or remedies hereunder.
Section 11.08 Specific Performance. It is understood and agreed by the Parties that money damages (even if available) would not be a sufficient remedy for any breach of this Agreement by Seller or Buyer and as a consequence thereof, Seller and Buyer shall each be entitled to seek specific performance and injunctive or other equitable relief as a remedy for any such breach or threatened breach in addition to any other remedy to which such Party may be entitled in Law or in equity, including an Order of the Bankruptcy Court or other court of competent jurisdiction requiring Buyer or Seller, as may be applicable, to comply promptly with any of their obligations hereunder. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that the other Party has an adequate remedy at Law or that any award of specific performance is not an appropriate remedy for any reason at Law or in equity. Any Party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with such Order.
Section 11.09 Entire Agreement. This Agreement and the other Transaction Documents (together with the Schedules and Exhibits hereto and thereto), and the Confidentiality Agreement, constitutes the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the Parties with respect to such subject matter. No Party to this Agreement shall be liable or bound to any other Party in any manner by any representations, warranties, covenants or agreements relating to such subject matter except as specifically set forth herein and therein. In the event an ambiguity or question of intent or interpretation arises with respect to this Agreement, the terms and provisions of the execution version of this Agreement will control and prior drafts of this Agreement and the documents referenced herein will not be considered or analyzed for any purpose (including in support of parol evidence proffered by any Person in connection with this Agreement), will be deemed not to provide any evidence as to the meaning of the provisions hereof or the intent of the Parties with respect hereto and will be deemed joint work product of the Parties.
Section 11.10 No Strict Construction. Buyer, on the one hand, and Seller, on the other hand, participated jointly in the negotiation and drafting of this Agreement, and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by Buyer, on the one hand, and Seller, on the other hand, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement. Without limitation as to the foregoing, no rule of strict construction construing ambiguities against the draftsperson shall be applied against any Person with respect to this Agreement.
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Section 11.11 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transaction contemplated hereby be consummated as originally contemplated to the fullest extent possible.
Section 11.12 Disclosure Schedules. The representations and warranties of Seller set forth in this Agreement are made and given subject to the disclosures in the Disclosure Schedules. Where a reference is made only to a particular disclosed document, the full contents of the document are deemed to be disclosed. Inclusion of information in the Disclosure Schedules will not be construed as an admission that such information is material to the business, operations of condition (financial or otherwise) of Seller or their respective businesses, in whole or in part, or as an admission of Liability or obligation of Seller to any third Person. The specific disclosures set forth in the Disclosure Schedules have been organized to correspond to section references in this Agreement to which the disclosure is most likely to relate, together with appropriate cross-references when disclosure is applicable to other sections of this Agreement; provided, however, that any disclosure in any section of the Disclosure Schedules will apply to and will be deemed to be disclosed in any other section of the Disclosure Schedules, so long as the applicability of such disclosure is reasonably apparent on its face. It is understood and agreed that the specification of any dollar amount in the representations and warranties or covenants contained in this Agreement or the inclusion of any specific item in the Disclosure Schedules is not intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and no Party or other Person shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the Disclosure Schedules in any dispute or controversy as to whether any obligation, item or matter not described in this Agreement or included in the Disclosure Schedules is or is not material for purposes of this Agreement. Nothing in this Agreement (including the Disclosure Schedules) shall be deemed an admission by either Party or any of its Affiliates, in any Causes of Action, that such Party or any such Affiliate, or any third party, is or is not in breach or violation of, or in default in, the performance or observance of any term or provisions of any Contract or Law.
[Signature Pages Follow.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
| Joe’s Holdings LLC | ||
| By: | /s Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | Chief Financial Officer | |
| Centric Brands LLC | ||
| By: | /s/ Anurup Pruthi | |
| Name: | Anurup Pruthi | |
| Title: | Chief Financial Officer | |
[Signature Page to Asset Purchase Agreement]
Exhibit 99.1
List of Filing Subsidiaries
| 1. | SQBG, Inc. |
| 2. | Sequential Licensing, Inc. |
| 3. | William Rast Licensing, LLC |
| 4. | Heeling Sports Limited |
| 5. | Brand Matter, LLC |
| 6. | SBG FM, LLC |
| 7. | Galaxy Brands LLC |
| 8. | The Basketball Marketing Company, Inc. |
| 9. | American Sporting Goods Corporation |
| 10. | LNT Brands LLC |
| 11. | Joe’s Holdings LLC |
| 12. | Gaiam Brand Holdco, LLC |
| 13. | Gaiam Americas, Inc. |
| 14. | SBG-Gaiam Holdings, LLC |
| 15. | SBG Universe Brands, LLC |
| 16. | GBT Promotions LLC |
Exhibit 99.2
Sequential Brands Group Commences Voluntary Chapter 11 Proceedings
Company to Facilitate Transaction Process and Sale of Its Assets Through Court-Supervised Process
Receives a Commitment for $150 Million in Debtor-in-Possession Financing
NEW YORK, August 31, 2021 (GLOBE NEWSWIRE) -- Sequential Brands Group, Inc. (“Sequential” or the “Company”) (NASDAQ:SQBG) today announced that it, together with its wholly-owned subsidiaries, has commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware (the “Court”).
The Company determined that, as a result of the significant debt on its corporate balance sheet, it was no longer able to operate its portfolio of brands. Accordingly, in conjunction with the filing, the Company will pursue the sale of all or substantially all of its assets under Section 363 of the U.S. Bankruptcy Code. The Company will seek approval from the Court of auction and bidding procedures that are designed to maximize the value of the Company’s assets through an open process that enables interested buyers to submit a bid or bid(s) on the Company’s assets. The Company believes that each of its brands is well-positioned for profitability under the stewardship of new owners.
In connection with this in-court process, Sequential will be obtaining $150 million in debtor-in-possession (“DIP”) financing from its existing Term B Lenders. The Company expects this new financing, together with cash generated from ongoing operations, to provide ample liquidity to support its operations during the sale process. The proposed transactions will be implemented pursuant to the terms of a Restructuring Support Agreement reached between the Company and its Term B Lenders.
Sequential has filed a number of customary motions seeking court approval to continue supporting its operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption and other relief measures customary in these circumstances.
Additional information regarding Sequential’s financial restructuring, including court filings and information about the claims process, are available at www.kccllc.net/SQBG or by calling Sequential’s claims agent, Kurtzman Carson Consultants LLC, at (866) 556-7696 (toll-free in the U.S. or Canada) or (781) 575-2048 (for parties outside the U.S.) or sending an email to SequentialBrandsInfo@kccllc.com. Please also refer to the Company’s form 8-K filed as of the date of this press release.
Gibson, Dunn & Crutcher LLP and Pachulski Stang Ziehl & Jones LLP are serving as Sequential’s legal counsel. Stifel and its affiliate Miller Buckfire & Co. are serving as Sequential’s investment banker.
This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We use words such as “future,” “seek,” “could,” “can,” “predict,” “believe,” “intend,” “expect,” “anticipate,” “plan,” “may,” “will,” “should,” “estimate,” “potential,” “project” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning the completion, outcome and effects of the Chapter 11 proceedings, the ability of Sequential to satisfy conditions of the APAs, Sequential’s ability to obtain approval of the bankruptcy court and our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such risks and uncertainties include, but are not limited to the following: (i) risks and uncertainties discussed in the reports that the Company has filed with the Securities and Exchange Commission (the “SEC”); (ii) general economic, market or business conditions; (iii) the Company’s substantial level of indebtedness, including the possibility that such indebtedness and related restrictive covenants may adversely affect the Company’s future cash flows, results of operations and financial condition, and decrease its operating flexibility; (iv) uncertainties around the effects of the COVID-19 pandemic, including adverse effects on the Company’s business, financial position, cash flows, ability to comply with its debt covenants and related uncertainty around the Company’s ability to continue as a going concern; (v) uncertainties related to the timing, proposals or decisions arising from the Company’s strategic review, including the divestiture of one or more existing brands or a sale of the Company; (vi) the Company’s ability to achieve any guidance it provides; (vii) continued market acceptance of the Company’s brands; (viii) changes in the Company’s competitive position or competitive actions by other companies; (ix) licensees’ ability to fulfill their financial obligations to the Company; (x) concentrations of the Company’s licensing revenues with a limited number of licensees and retail partners; (xi) the potential impact of the consummation of its acquisitions or any potential future acquisitions on the Company’s relationships, including with employees, licensees, customers and competitors; (xii) adverse effects on the Company and its licensees due to natural disasters, pandemic disease and other unexpected events; (xiii) uncertainties surrounding the Company and its legal proceedings, including the expense, timing and outcome of existing or future legal and governmental proceedings, investigations in connection with the Company; (xiv) the effect of the non-reliance identified in, and the resultant restatement of, certain of the Company’s previously issued financial results; (xv) the timing of the completion or outcome of the review of the Company’s financial statements; (xvi) the effectiveness of its internal controls; and (xvii) other circumstances beyond the Company’s control.
Forward-looking statements speak only as of the date they are made and are based on current expectations and assumptions. You should not put undue reliance on any forward-looking statement. We are not under any obligation, and we expressly disclaim any obligation, to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to such or other forward-looking statements.
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Exhibit 99.3
THIS RESTRUCTURING SUPPORT AGREEMENT IS NOT AN OFFER OR ACCEPTANCE WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN WITHIN THE MEANING OF SECTION 1125 OF THE BANKRUPTCY CODE (AS DEFINED HEREIN). ANY SUCH OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE BANKRUPTCY CODE, IF APPLICABLE. NOTHING CONTAINED IN THIS RESTRUCTURING SUPPORT AGREEMENT SHALL BE AN ADMISSION OF FACT OR LIABILITY OR, UNTIL THE OCCURRENCE OF THE RSA EFFECTIVE DATE (AS DEFINED HEREIN), DEEMED BINDING ON ANY OF THE PARTIES HERETO ON THE TERMS DESCRIBED HEREIN.
RESTRUCTURING SUPPORT AGREEMENT
This RESTRUCTURING SUPPORT AGREEMENT is made and entered into as of August 31, 2021 (as amended, supplemented or otherwise modified in accordance with the terms herewith, this “RSA”) by each of:
| a. | Sequential Brands Group, Inc. (“Borrower”) and its direct and indirect subsidiaries signatory hereto, including each of the “Loan Parties” (as such term is defined in the Term B Credit Agreement (as defined below)) (collectively, the “Company Parties” or the “Company”); and |
| b. | Wilmington Trust, National Association, as “Agent,” and the “Lenders” under the Term B Credit Agreement (the “Term B Lenders”), and such Term B Lenders that are signatories hereto (the “Consenting Lenders”, and the Consenting Lenders that represent “Required Lenders” under the Term B Credit Agreement, the “Requisite Consenting Lenders”); |
with respect to a restructuring of the Company’s outstanding obligations under the Term B Credit Agreement, and with respect to other claims against and interests in the Company as contemplated by (i) that certain Asset Purchase Agreement, by and among the Borrower and Galaxy Universal LLC attached hereto as Exhibit A (the “Galaxy APA”), (ii) that certain Asset Purchase Agreement, by and among Joe’s Holdings LLC and Centric Brands LLC attached hereto as Exhibit B (the “Centric APA,” together with the Galaxy APA, the “Asset Purchase Agreements”), the Plan Term Sheet attached hereto as Exhibit C (the “Plan Term Sheet”), and the DIP Term Sheet attached hereto as Exhibit D (the “DIP Term Sheet”). The Asset Purchase Agreements and the DIP Term Sheet are expressly incorporated herein by reference and made a part of this RSA as if fully set forth herein. Any reference to this RSA herein shall also include the Asset Purchase Agreements, the Plan Term Sheet, and the DIP Term Sheet.
Each party to this RSA may be referred to as a “Party” and, collectively, as the “Parties.”
RECITALS
WHEREAS, the Borrower, the “Guarantors” thereunder, the Term B Lenders and Wilmington Trust, National Association, as agent for the Term B Lenders, are party to that certain Third Amended and Restated Credit Agreement dated as of July 1, 2016 (as amended, restated, supplemented or modified and in effect as of the date hereof, the “Term B Credit Agreement”);1
WHEREAS, the Parties have engaged in arm’s length, good faith discussions with respect to strategic alternative transactions and restructuring of the Company’s capital and equity structure;
WHEREAS, as of the date hereof, the Consenting Lenders hold 100% of the Obligations outstanding under the Term B Credit Agreement (the claims with respect to such Obligations under the Term B Credit Agreement, the “Term B Lender Claims”); and
WHEREAS, the Parties have reached an agreement to implement, and consummate, the Restructuring (as defined herein) in the Chapter 11 Cases to be filed in the Bankruptcy Court on the terms and conditions set forth in this RSA.
NOW, THEREFORE, in consideration of the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Parties to this RSA, intending to be legally bound hereby, agree as follows:
AGREEMENT
Section 1. Support of the Restructuring and Definitive Documents.
| 1.1 | Obligations of the Company Parties. |
Until the Termination Date (as defined herein), each Company Party agrees to:
| (a) | support and take all reasonable actions necessary to implement and consummate the Restructuring contemplated by this RSA and all of the transactions contemplated herein, and not withdraw its tender, support or direction unless otherwise permitted herein; provided, that none of the Company Parties shall be obligated to waive (to the extent waivable by such Company Party) any condition to the consummation of any part of the Restructuring set forth in this RSA or any of the supporting definitive documentation required to consummate the Restructuring, including, without limitation, the documentation set forth in the respective Asset Purchase Agreements, the Plan Term Sheet, and the DIP Term Sheet (such documentation including any amendments, supplements or modifications, the “Definitive Documents”) in each case to be mutually reasonably acceptable in form and substance to the Requisite Consenting Lenders and the Company Parties; |
| 1 | Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Term B Credit Agreement. |
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| (b) | negotiate in good faith, execute, perform its obligations under, and consummate the transactions contemplated by the Definitive Documents; |
| (c) | use best efforts to obtain any and all required governmental, regulatory, permitting, licensing, Bankruptcy Court, or other material third-party approvals or consents, each as applicable and necessary for the Company Parties to implement and/or consummate the Restructuring; |
| (d) | exercise any and all necessary and appropriate rights, negotiate in good faith, and execute and deliver any and all necessary and appropriate documentation, in furtherance of the Restructuring and the Definitive Documents; |
| (e) | negotiate in good faith any appropriate additional or alternative provisions or agreements to address any legal, financial, or structural impediment that may arise that would prevent, hinder, impede, or delay, or that are necessary to effectuate the implementation and/or consummation of, the Restructuring; |
| (f) | not take any action, make any filing or commence any action challenging the validity, enforceability, perfection or priority of or seeking avoidance of the liens securing the Term B Lender Claims; |
| (g) | other than as permitted pursuant to the Bid Procedures Order and/or any Asset Purchase Agreement (as in effect on the date hereof), not, directly or indirectly, propose, support, solicit, encourage, or initiate, vote for, consent to, or participate in any offer or proposal from, or enter into any agreement with, any Person concerning any actual or proposed sale or alternative transaction other than the Restructuring (any such transaction, an “Alternative Transaction”); provided, that in the event any of the Company Parties receive an offer or proposal for an Alternative Transaction, such Company Party shall (x) be permitted to consider, and respond to, such proposal, including by providing access to non-public information concerning any Company Party or entering into confidentiality agreements or nondisclosure agreements with any Person in connection with such proposal, (y) except as set forth in the Bid Procedures Order and/or any Asset Purchase Agreement, reasonably provide a copy of any written offer or proposal, and/or notice of any oral offer or proposal, for such Alternative Transaction, which shall include the material terms thereof, to the Consenting Parties within two (2) business days of the receipt by the Company Party of such offer or proposal, and (z) except as set forth in the Bid Procedures Order and/or any Asset Sale, to the extent reasonably practicable, promptly provide such information to the Consenting Lenders regarding such proposed Alternative Transaction (including copies of any materials provided to such Company Party hereunder) as requested by the Consenting Lenders to keep the Consenting Lenders substantially contemporaneously informed as to the status and substance of such Alternative Transactions; provided, further, however, that this Section 1.1(g) shall not apply to any Alternative Transaction where (i) the board of directors, board of managers, or such similar governing body of any Company Party determines, after consulting with counsel in the exercise of its fiduciary duties to pursue an Alternative Transaction and (ii) the proposed recovery to the Consenting Lenders is higher or otherwise better than the proposed recovery pursuant to the Restructuring; |
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| (h) | promptly notify the Consenting Parties of any breach of the Company’s obligations, representations, warranties, or covenants herein that the Company Parties have actual knowledge of by furnishing written notice to the Consenting Parties within two (2) business days of obtaining knowledge of such breach; |
| (i) | promptly notify the Consenting Lenders of any newly commenced or threatened litigations, investigations, or hearings involving or otherwise affecting the Company Parties; |
| (j) | provide prompt written notice to the Consenting Parties between the date hereof and the Termination Date, and in no event later than two (2) business days, after (A) obtaining actual knowledge of the occurrence, or failure to occur, of any event, which occurrence or failure could cause any condition precedent contained in this RSA or any other Definitive Document not to be satisfied or become impossible to satisfy; or (B) receipt of any notice from any third party alleging that the consent of such party is or may be required in connection with the transactions contemplated by the Restructuring; |
| (k) | confer with the Consenting Lenders and their counsel and advisors, as requested during normal business hours on reasonable advance notice to the Company Parties’ representatives and without disruption to the operation of the Company Parties’ business, to report on operational matters, ongoing operations and liquidity and any other matters pertaining to the Company; |
| (l) | provide, and direct their employees, officers, advisors, counsel and other representatives to provide, the Consenting Lenders and their advisors with (i) reasonable access to the Company’s books and records during normal business hours on reasonable advance notice to the Company Parties’ representatives and without disruption to the operation of the Company Parties’ business, (ii) reasonable access to the management of the Company and the Company’s advisors during normal business hours on reasonable advance notice to such persons and without disruption to the operation of the Company Parties’ business for the purposes of evaluating the Company’s assets, liabilities, operations, businesses, finances, strategies, prospects, and affairs, and (iii) timely responses to diligence requests; |
| (m) | other than changes in operations resulting from the Restructuring, conduct its business in the ordinary course in a manner that is consistent with past practices, and use commercially reasonable efforts to preserve intact their business organization, relationships with third parties (including lessors, licensors, suppliers, distributors, and customers), and employees (in each instance, subject to modifications and changes as agreed to in writing by the Requisite Consenting Lenders); |
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| (n) | not sell any assets, enter into any new contracts, or modify any existing contracts, in each case outside of the ordinary course of business, without the prior written consent (by email or otherwise) of the Requisite Consenting Lenders; |
| (o) | maintain their good standing under the laws of the states in which they are incorporated or organized unless otherwise agreed in writing by the Requisite Consenting Lenders; |
| (p) | not, directly or indirectly, take any actions, or fail to take any actions, where such taking or failing to take actions would be, (i) inconsistent with this RSA or the Definitive Documents or (ii) otherwise inconsistent with, or reasonably expected to prevent, interfere with, delay or impede the implementation and/or consummation of, the Restructuring; |
| (q) | in connection with an in-court restructuring set forth in the Asset Purchase Agreements and supported by the Consenting Lenders (the “Restructuring”): |
| (i) | meet the following Chapter 11 Case milestones (the “Milestones”), which Milestones may only be extended with the express prior written consent (by email or otherwise) of the Requisite Consenting Lenders: |
| (A) | On or prior to the Petition Date, the Debtors shall have entered into the Asset Purchase Agreements (in form and substance satisfactory to the Requisite Consenting Lenders) with each of the respective stalking horse purchaser(s); |
| (B) | The Petition Date shall have occurred on or before August 31, 2021; |
| (C) | No later than one (1) calendar day after the Petition Date, the Debtors shall file a motion to approve the Debtors’ consensual use of cash collateral and debtor-in-possession financing facility pursuant to the terms set forth in the DIP Term Sheet (the “DIP Facility”), consistent with the terms of this RSA and the Definitive Documents; |
| (D) | No later than one (1) business day after the Petition Date, the Debtors shall file a motion (the “Sale Motion”), in form and substance reasonably acceptable to the Requisite Consenting Lenders, requesting (x) an order from the Bankruptcy Court (the “Bid Procedures Order”) (i) approving the proposed bid procedures (the “Bid Procedures”) attached to the Sale Motion related to the sale of assets pursuant to the Asset Purchase Agreements, and (ii) authorizing the Debtors to provide the stalking horse purchaser(s) with the bid protections set forth in the applicable Asset Purchase Agreements, and (y) an order or orders from the Bankruptcy Court (each, a “Sale Order”) approving the sale of the assets of the Debtors to the stalking horse purchaser(s) or such other higher or better bidder(s) determined in accordance with the Bid Procedures (the “Sale(s)”); |
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| (E) | No later than three (3) business days after the Petition Date, the Bankruptcy Court shall have entered an order authorizing the Debtors’ use of cash collateral or the New Money DIP Loans (as defined in the DIP Term Sheet) on an interim basis (such order to be in form and substance acceptable to the Requisite Consenting Lenders, the “Interim Order”); |
| (F) | No later than twenty-three (23) calendar days after the Petition Date, the Bankruptcy Court shall have entered the Bid Procedures Order; |
| (G) | No later than twenty-three (23) calendar days after the Petition Date, the Bankruptcy Court shall have entered an order approving the Debtors’ use of cash collateral and DIP Facility on a final basis pursuant to a final order in form and substance acceptable to the Requisite Consenting Lenders (the “Final DIP Order”, together with the Interim Order, the “DIP Orders”); |
| (H) | The Debtors shall establish a date that is no later than fifty-five (55) calendar days after the Petition Date as the deadline for the submission of binding bids with respect to each of the Sale(s); |
| (I) | No later than sixty (60) calendar days after the Petition Date, the Debtors shall complete an auction (the “Auction”) for substantially all of its assets, in accordance with the Bid Procedures; provided that if there is no higher or better offer submitted in comparison to the stalking horse bid(s), no auction shall be held; |
| (J) | No later than sixty-five (65) calendar days after the Petition Date, the Bankruptcy Court shall have entered one or more Sale Order(s) approving each of the winning bid(s) resulting from the auction which any such order shall be in form and substance acceptable to the Requisite Consenting Lenders; |
| (K) | Approval of the Sale(s), including consummation of the transactions contemplated thereby, shall occur no later than the date that is seventy-five (75) calendar days after the Petition Date (the “Outside Date”); |
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| (L) | No later than 100 days after the Petition Date, the Bankruptcy Court shall have entered an order approving the disclosure statement and approving voting and solicitation procedures with respect to the Liquidating Plan (as defined in the Plan Term Sheet), in form and substance satisfactory to the Requisite Consenting Lenders; |
| (M) | No later than 145 days after the Petition Date, the Bankruptcy Court shall have entered an order confirming the Liquidating Plan (the “Confirmation Order”), which confirmation order shall be in form and substance satisfactory to the Requisite Consenting Lenders; and |
| (N) | No later than 14 days after entry of the Confirmation Order, the Liquidating Plan Effective Date (as defined in the Plan Term Sheet) shall have occurred (the “Effective Date”). |
provided that, if the date to complete the Auction is modified, the dates in Section 1.1(q)(i)(L)-(N) shall be modified by the same number of days as such modification to the date to complete the Auction.
| (ii) | unless otherwise provided herein, provide the Consenting Lenders and their advisors (a) draft copies of all (I) first day motions or applications and corresponding proposed orders and other documents that the Company intends to file with the Bankruptcy Court on the Petition Date, (II) motions, applications and corresponding proposed orders and documents relating to the DIP Facility and exit financing, (III) the Sale and Bidding Procedures Motion, and corresponding motions, applications and proposed orders seeking approval of the same, in each case, relating to the transactions contemplated pursuant to the Galaxy APA and the Centric APA, and (IV) the Liquidating Plan, accompanying disclosure statement, confirmation order, and corresponding pleadings; and (b) draft copies of all other material motions and applications and corresponding proposed orders that the Company intends to file with the Bankruptcy Court after the Petition Date, subject to the limitations set forth in the Bid Procedures, including with respect to any Consenting Lender acting as a prospective, potential, or qualified bidder thereunder, in the case of the foregoing (a) at least five (5) calendar days prior to the date on which the Company intends to file such pleading, and in the case of the foregoing (b) at least two (2) business days prior to the date on which the Company intends to file such pleading; provided, that if delivery of such motions, applications and proposed orders set forth in clause (b) two (2) business days in advance of filing is not reasonably practicable, such motions, applications and proposed orders shall be delivered as soon as reasonably practical prior to filing; provided, further, that (x) the final filing version of any such pleading and/or corresponding order, as applicable, shall be in form and substance reasonably acceptable to the Requisite Consenting Lenders and the Company Parties, and (y) the Company Parties shall not be required to file any pleading or other document unless such pleading or other document is consistent with this RSA; |
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| (iii) | file and prosecute a formal objection to any motion filed with the Bankruptcy Court by a party-in-interest seeking the entry of an order (a) directing the appointment of a trustee or examiner (with expanded powers beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code), (b) converting any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code, or (c) dismissing any of the Chapter 11 Cases; |
| (iv) | promptly following the request of the Required Consenting Lenders, use reasonable good faith efforts to cause this Agreement to be assumed in the Chapter 11 Cases pursuant to section 365(a) of the Bankruptcy Code; and |
| (v) | file and prosecute a formal objection to any motion filed with the Bankruptcy Court by a party-in-interest seeking the entry of an order modifying or terminating the Company’s exclusive right to file, or solicit votes on, a chapter 11 plan, as applicable. |
Each of the Milestones may be extended upon the mutual written consent of the Requisite Consenting Lenders and the Company Parties; provided, however, that it is the Parties’ intention that the Milestones set forth herein are the same as the corresponding milestones set forth in the Bid Procedures Order, the DIP Facility, and the DIP Orders and if any milestone is modified and/or extended pursuant to the Bid Procedures Order, the DIP Facility, and/or a DIP Order, the corresponding Milestone set forth in this RSA shall be deemed modified and/or extended to the same date and on the same basis as such milestone in the Bid Procedures Order, the DIP Facility and/or applicable DIP Order.
| 1.2 | Obligations of the Agent and Consenting Lenders |
Until the Termination Date, each of the Consenting Lenders and Agent, severally and not jointly, hereby agrees to (or, as applicable, that):
| (a) | support, not object to, and take all reasonable actions necessary to implement and consummate the Restructuring contemplated by this RSA and all of the transactions contemplated herein, and not withdraw its tender, support or direction other than in accordance with the terms of this RSA, provided, that none of the Consenting Lenders shall be obligated to waive (to the extent waivable by such Consenting Lender) any condition to the consummation of any part of the Restructuring set forth in this RSA or any of the Definitive Documents; |
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| (b) | negotiate in good faith, execute, perform its obligations under, and consummate the transactions contemplated by the Definitive Documents, which shall be in form and substance mutually reasonably acceptable to the Requisite Consenting Lenders and the Company Parties; |
| (c) | use commercially reasonable efforts to obtain any and all required governmental, regulatory, licensing, Bankruptcy Court, or other material third-party approvals, each as applicable and necessary for such Consenting Lender to implement and/or consummate the Restructuring; |
| (d) | exercise any and all necessary and appropriate rights, negotiate in good faith, and execute and deliver any and all necessary and appropriate documentation, including any direction letters, in furtherance of the Restructuring and the Definitive Documents; |
| (e) | consent to those actions contemplated by this RSA or otherwise required to be taken to effectuate the Restructuring, including entering into all documents and agreements reasonably necessary to consummate the Restructuring, which shall be in form and substance mutually reasonably acceptable to the Requisite Consenting Lenders and the Company Parties in all respects; |
| (f) | in connection with the Restructuring, |
| (i) | not directly or indirectly object to, delay, impede, or take any other action to interfere with, delay, or postpone acceptance, confirmation, or implementation of the Restructuring; |
| (ii) | (A) support and, as applicable, take all reasonable actions necessary to implement and consummate the DIP Facility, which shall be in form and substance acceptable to the Requisite Consenting Lenders in all respects, and (B) provide the DIP Facility on the terms set forth in this RSA and the Definitive Documents, subject to satisfaction of the applicable conditions precedent set forth herein and therein; |
| (iii) | subject to receipt of a disclosure statement, vote in favor of the Liquidating Plan and opt into, or not opt out of, as applicable, any pertinent third-party releases under the Liquidating Plan and, subject to any applicable fiduciary obligations, take all actions reasonably requested by the Debtors to support the Bankruptcy Court’s approval of all releases under the Liquidating Plan, including debtor releases, third-party releases and the exculpations provided in the Liquidating Plan; |
| (g) | negotiate in good faith any appropriate additional or alternative provisions or agreements to address any legal, financial, or structural impediment that may arise that would prevent, hinder, impede, or delay, or that are necessary to effectuate the implementation and/or consummation of, the Restructuring; provided, that the Restructuring shall be subject to the Definitive Documents; provided further that Consenting Lenders shall not be obligated to agree to any modification of any Definitive Document that is unacceptable to the Requisite Consenting Lenders; |
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| (h) | not directly or indirectly impede, hinder, object to, delay, or commence any proceeding to oppose, enjoin or to seek any modification of the Restructuring or any of the Definitive Documents nor support directly or indirectly any party seeking to impede, hinder, object to, delay or commence any such proceeding or otherwise take any actions, directly or indirectly, inconsistent with this RSA or the Definitive Documents; |
| (i) | not initiate, or have initiated on its behalf, any litigation or proceeding of any kind with respect to the Chapter 11 Cases, this Agreement, or the Restructuring contemplated herein against the Company Parties or the other Parties other than to enforce this Agreement or any Definitive Document; |
| (j) | use commercially reasonable efforts to cooperate with and assist the Company Parties in obtaining additional support for the Restructuring from the Company Parties’ other creditors and interest holders; |
| (k) | support and take all commercially reasonable actions reasonably requested by the Company to facilitate the implementation and consummation of the Restructuring; |
| (l) | promptly notify the other Parties of any breach of such Consenting Lender’s obligations, representations, warranties, or covenants herein that such Consenting Lender has actual knowledge of by furnishing written notice to the other Parties within two (2) business days of obtaining knowledge of such breach; |
| (m) | not direct the Agent, or any other administrative agent or collateral agent to take any action inconsistent with such Consenting Lender’s obligations under this RSA, and, if any applicable administrative agent or collateral agent takes any action inconsistent with such Consenting Lender’s obligations under this RSA, use commercially reasonable efforts to direct such administrative agent or collateral agent to cease and refrain from taking any such action; |
| (n) | provide prompt written notice to the other Parties between the date hereof and the Termination Date, and in no event later than two (2) business days, after (A) obtaining actual knowledge of the occurrence, or failure to occur, of any event, which occurrence or failure could cause any condition precedent contained in this RSA or any other Definitive Document not to be satisfied or become impossible to satisfy; or (B) receipt of any notice from any third party alleging that the consent of such party is or may be required in connection with the transactions contemplated by the Restructuring; |
| (o) | not, directly or indirectly, take any actions, or fail to take any actions, where such taking or failing to take actions would be, in either case, (i) inconsistent with this RSA or the Definitive Documents or (ii) otherwise inconsistent with, or reasonably expected to prevent, interfere with, delay or impede the implementation or consummation of, the Restructuring; |
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| (p) | subject to Section 1.1(g) and other than as set forth in the Bid Procedures, not, directly or indirectly, propose, support, solicit, encourage, or initiate, vote for, consent to, or participate in any offer or proposal from, or enter into any agreement with, any Person concerning an Alternative Transaction; and |
| (q) | comply with, and not terminate except as permitted thereunder, the terms of the Limited Waiver and Consent to Credit Agreement, dated as of August 10, 2021 (the “Limited Waiver”). |
Section 2. Termination Events.
| 2.1 | Consenting Lender Termination Events. |
This RSA may be terminated five (5) business days after delivery of a notice by the Requisite Consenting Lenders to the other Parties upon the occurrence and continuation of any of the following (each, a “Consenting Lender Termination Event”), each of which may be waived, extended or modified at the sole written discretion of the Requisite Consenting Lenders:
| (a) | the Company Parties fail to meet any Milestone that has not been waived or extended by the Requisite Consenting Lenders, unless such failure is the result of any act, omission, or delay on the part of any Consenting Lender in violation of its obligations under this RSA; |
| (b) | the commencement of any action or filing by any Company Party challenging the amount, validity, enforceability, perfection or priority of or seeking avoidance of the liens securing the Term B Lender Claims; |
| (c) | any court of competent jurisdiction, including the Bankruptcy Court, or other competent governmental or regulatory authority (i) issues an order making illegal or otherwise preventing or prohibiting the consummation of the Restructuring contemplated in this RSA or (ii) refuses to enter an order required by the corresponding Milestone date and such order has not been reversed, stayed, or vacated within five (5) business days after entry of such order; |
| (d) | any Company Party directly or indirectly seeks, solicits, proposes or supports an Alternative Transaction (other than as permitted pursuant and subject to Section 1.1(g) of this RSA), announces or indicates publicly its intention to pursue an Alternative Transaction or withdraws or announces publicly its intention not to support the Restructuring (any such action an “Alternative Transaction Action”), unless such Alternative Transaction is on terms and conditions reasonably acceptable to the Requisite Consenting Lenders; |
| (e) | the occurrence of any material breach by any Company Party of any of the undertakings, obligations, representations, warranties or covenants of any such Party set forth in this RSA, in each case (other than with respect to the Milestones), which breach remains uncured for a period of three (3) business days after written notice of such breach is provided by the Consenting Lenders to the Company Parties, unless such breach is the result of any act, omission, or delay on the part of any Consenting Lender in violation of its obligations under this RSA (a “RSA Breach”); |
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| (f) | any court of competent jurisdiction, including the Bankruptcy Court, enters an order invalidating or disallowing, recharacterizing, subordinating or limiting the enforceability, priority, or validity of any of the Term B Lender Claims; |
| (g) | the Company shall (i) voluntarily commence any proceeding or file any petition seeking relief under the Bankruptcy Code or other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief under state law, that is contrary to the terms set forth in this RSA; (ii) consent to the institution of, or fail to contest, any proceeding described in clause (a) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator, liquidator, rehabilitator or similar official for the Company or for a substantial part of the property of the Company, or (iv) make a general assignment for the benefit of creditors; |
| (h) | an involuntary insolvency proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company or of a substantial part of the property of the Company under the Bankruptcy Code, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar legal requirement, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator, liquidator, rehabilitator or similar official for the Company or for a substantial part of the property of the Company, or (iii) the winding-up or liquidation of the Company; and such proceeding or petition shall continue undismissed for sixty (60) calendar days or an order approving or ordering any of the foregoing shall be entered; and |
| (i) | in connection with the Restructuring, |
| (i) | the dismissal of one or more of the Chapter 11 Cases without the prior written consent (by email or otherwise) of the Requisite Consenting Lenders; |
| (ii) | the filing of any pleading by the Debtors in the Chapter 11 Cases that is materially inconsistent with this RSA over the express written objection (which objection shall be provided prior to the filing of such pleading by the Debtors) of the Requisite Consenting Lenders, and such breach remains uncured for a period of three (3) business days after written notice of such breach is provided to the other Parties; |
| (iii) | the appointment of (a) an examiner with expanded powers beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code, or (b) a trustee pursuant to Section 1104(a) of the Bankruptcy Code in one or more of the Chapter 11 Cases; |
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| (iv) | any Event of Default (as defined in the DIP Facility) that is not cured or waived, as applicable, under the DIP Facility pursuant to the terms thereunder, or the giving of notice by the administrative agent under the DIP Facility to the Company of termination of commitments or acceleration thereunder; |
| (v) | the Bankruptcy Court enters an order terminating the Company’s exclusive right to file and/or solicit acceptance of a plan; and |
| (vi) | the Bankruptcy Court or a court of competent jurisdiction enters an order either converting the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code or dismissing the Chapter 11 Cases. |
| 2.2 | Company Termination Events. |
This RSA may be terminated by the Company Parties by notice to the Consenting Parties upon the occurrence and continuation of any of the following (each, a “Company Termination Event” and, collectively with any Consenting Lender Termination Event, a “Termination Event”):
| (a) | the occurrence of any material breach by any of the other Parties of any of the undertakings, obligations, representations, warranties or covenants of any such Party set forth in this RSA unless such breach is the result of any act, omission or delay by the Company Parties in violation of their respective obligations under this RSA; provided, that counsel to the Company Parties, shall have given written notice to the other Parties of the intent of the Company Parties to terminate this RSA (which notice shall include the purported breach under this RSA), and the breach giving rise to the right to so terminate this RSA shall not have been cured within five (5) business days following receipt of such notice to the extent such breach is curable; |
| (b) | the board of directors, board of managers, or such similar governing body of any Company Party determines, after consulting with counsel, (i) that proceeding with any of the Restructuring Transactions would be inconsistent with the exercise of its fiduciary duties or applicable Law or (ii) in the exercise of its fiduciary duties, to pursue an Alternative Transaction; |
| (c) | any court of competent jurisdiction, including the Bankruptcy Court, or other competent governmental or regulatory authority issues an order making illegal or otherwise preventing or prohibiting the consummation of the Restructuring contemplated in this RSA or any of the Definitive Documents and such order has not been reversed, stayed, or vacated within five (5) business days after entry of such order; |
| (d) | the amendment of this RSA in violation of the terms hereof without the express written consent of the Company Parties; |
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| (e) | the Consenting Lenders fail to own at least 66.67% in aggregate principal amount outstanding of the Term B Lender Claims; |
| (f) | the Bankruptcy Court enters an order denying any of the transactions embodied in the Asset Purchase Agreements and such order remains in effect for seven (7) Business Days after entry of such order; |
| (g) | any Sale Order or the Bid Procedures Order is reversed or vacated; or |
| (h) | any court of competent jurisdiction has entered a final, nonappealable judgment or order declaring this Agreement to be unenforceable. |
| 2.3 | Mutual Termination. |
This RSA may be terminated effective upon a mutual written agreement of the Company Parties and the Consenting Lenders to terminate this RSA.
| 2.4 | Automatic Termination Events. |
This RSA shall terminate automatically without any further required action or notice upon the occurrence of the Effective Date.
| 2.5 | Termination Event Procedures. |
| (a) | Except as otherwise provided herein, upon the valid termination of this RSA pursuant to a Consenting Lender Termination Event or a Company Termination Event, the termination of this RSA shall (unless stated otherwise herein) be effective at 11:59 p.m. (ET) as to all Parties on the date of (i) delivery of written notice to the other Parties by the Party seeking to terminate this RSA or (ii) the date upon which any grace or notice period set forth in the applicable Termination Event expires (the “Termination Date”). |
| (b) | On the Termination Date, this RSA shall forthwith become void and of no further force or effect, each Company Party and Consenting Lender shall be released from its commitments, undertakings and agreements under or related to this RSA, and there shall be no liability or obligation on the part of each Company Party and Consenting Lender; provided, that in no event shall any such termination relieve a Party hereto from liability for its breach or non-performance of its obligations hereunder prior to the date of such termination, notwithstanding any termination of this RSA by any other Party; provided, further, that notwithstanding anything to the contrary herein, any Termination Event may be waived in accordance with the procedures established by Section 8.13 hereof, in which case the Termination Event so waived shall be deemed not to have occurred, this RSA shall be deemed to continue in full force and effect, and the rights and obligations of the Parties hereto shall be restored, subject to any modification set forth in such waiver. |
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| 2.6 | Automatic Stay |
In connection with the Restructuring, each Party acknowledges and agrees that after the commencement of the Chapter 11 Cases, the giving of notice of default or termination by any Party pursuant to the terms of this RSA shall not be a violation of the automatic stay under section 362 of the Bankruptcy Code and the Company shall not take any action inconsistent with such acknowledgement and agreement; provided, that nothing herein shall prejudice any Party’s right to argue that the giving of notice of default or termination was not proper under the terms of this RSA.
| 2.7 | Limitation on Termination. |
No occurrence shall constitute a Termination Event if such occurrence is the result of the action or omission of the Party seeking to terminate this RSA.
Section 3. The Company’s Fiduciary Obligations.
Notwithstanding anything to the contrary herein: (i) the Company Parties and each of their respective board of directors, board of managers, officers, members or other governing body (as applicable) thereof shall be permitted to take (or permitted to refrain from taking) any action with respect to the Restructuring (including, after the Petition Date, in the Company Parties’ capacity as Debtors) to the extent such governing body determines, in good faith and based upon consultation with external counsel, that taking such action, or refraining from taking such action, as applicable, is required to comply with its fiduciary duties or applicable law and (ii) the officers and employees of the respective Company Party shall not be required to take any actions that, upon consultation with counsel are inconsistent with their fiduciary duties. No action or inaction by the Company Parties pursuant to this Section 3 shall prevent any other Party from taking any action they are permitted to take as a result of such action or inaction, including terminating their obligations hereunder.
Nothing in this Agreement shall (i) impair or waive the rights of any Company Party to assert or raise any objection permitted under this Agreement in connection with the transactions pursuant to the Asset Purchase Agreements or the Restructuring, or (ii) prevent any Company Party from enforcing this Agreement or contesting whether any matter, fact, or thing is a breach of, or is inconsistent with, this Agreement.
Section 4. Conditions Precedent.
| 4.1 | Conditions Precedent to Effectiveness of the RSA. |
This RSA shall become effective and binding upon each of the Parties according to its terms as of 12:00 am (Eastern Time) on that date upon which all of the following conditions have been satisfied or waived in accordance with the express provisions of this RSA (such date, the “RSA Effective Date”);
| (a) | the Company Parties and Consenting Parties shall have executed and delivered counterpart signatures of this RSA to counsel to each of the other Parties; |
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| (b) | the Consenting Lenders shall have committed to provide the DIP Facility in accordance with the terms of this RSA in connection with the Restructuring on the terms and conditions set forth in the DIP Term Sheet; |
| (c) | the Consenting Lenders shall have received payment of their reasonable and documented fees and expenses (including advisors’ fees), invoiced prior to the RSA Effective Date; |
| (d) | the Company Parties shall maintain at all times its key employee retention plan, in form and substance reasonably acceptable to the Consenting Parties; and |
| (e) | the Company’s counsel shall have given notice to counsel to the other Parties that the conditions to the RSA Effective Date set forth in this Section 4.1 have been satisfied or waived in accordance with the express provisions of this RSA. |
Section 5. Representations, Warranties and Covenants.
| 5.1 | Compliance with Material Contracts |
Except (a) with respect to the consents contemplated in this RSA, (b) as disclosed in writing to the Consenting Lenders’ advisors, (c) as would not reasonably be expected to have a material and negative impact on the Company, or (d) any breaches or defaults caused by any Company Party’s insolvency and/or the commencement of the Chapter 11 Cases, each Company Party represents, warrants and covenants that the execution and delivery by the Company Parties of this RSA and the consummation of the Restructuring contemplated hereby will not (i) conflict with or result in a violation or breach of any material contract or license to which any Company Party is a party or by which any of their assets and properties is bound (a “Material Contract”), (ii) constitute (with or without notice or lapse of time or both) a default under any Material Contract, (iii) require any Company Party to obtain any consent, approval or action of, or make any filing with or give any notice to any governmental authority or other person, as a result or under the terms of any Material Contract, (iv) result in or give to any person any right of termination, cancellation, acceleration or modification in or with respect to any Material Contract, (v) result in or give to any person any additional rights or entitlement to increased, additional, accelerated or guaranteed payments under any Material Contract, or (vi) result in the creation or imposition of any lien upon any Company Party or any of their assets and properties under any Material Contract, in each case other than as a result of, or related to, the Company Parties’ commencement of the Chapter 11 Cases, if applicable.
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| 5.2 | Power and Authority and No Alternative Transaction. |
Each Party, severally and not jointly, represents, warrants and covenants to each other Party that, as of the date of this RSA, (a) such Party has and shall maintain all requisite corporate, partnership, limited liability company, or institutional power and authority, as applicable, to enter into this RSA and to carry out the transactions contemplated by, and perform its respective obligations under this RSA, (b) the execution and delivery of this RSA and the performance of its obligations hereunder have been duly authorized by all necessary actions on its part, (other than the Company Parties’ obligation to commence the Restructuring and the first day motions and applications, which obligations will be duly authorized by all necessary corporate, partnership, limited liability company and other similar action on its part prior to the Petition Date), and (c) such Party is validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, except, in the case of the Company Parties, as would not reasonably be expected to be material to the business of the Company taken as a whole.
Additionally, each Company Party, severally and not jointly, represents that it (a) is not currently pursuing any pending agreements (oral, written or otherwise) with respect to an Alternative Transaction as of the date hereof, and (b) as of the date hereof, has provided to the Consenting Lenders all offers or proposals received or solicited (oral, written or otherwise) with respect to an Alternative Transaction, including the material terms thereof.
| 5.3 | Enforceability. |
Each Party, severally and not jointly, represents, warrants and covenants to each other Party, that (a) this RSA is its legally valid and binding obligation, enforceable in accordance with its terms as to and against such Party, except as enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws limiting creditors’ rights generally or by equitable principles relating to enforceability, and (b) the execution, delivery and performance by such Party of this RSA does not violate any provisions of law, rule or regulation applicable to it, or its charter or bylaws (or other similar governing documents).
| 5.4 | Ownership. |
| (a) | The Consenting Lenders warrant and covenant to the other Parties that, subject to Section 8.1 hereof, (i) is the Consenting Lenders are the legal and beneficial owner of 100% of the Term B Lender Claims (the “Consenting Lender Holdings”), (ii) such Party (x) has and shall maintain full power and authority to vote on and consent to or (y) has received direction from the party having full power and authority to vote on and consent to such matters concerning its pro rata share of the Consenting Lender Holdings and to exchange, assign and transfer such Consenting Lender Holdings, and (iii) such Consenting Lender Holdings are and shall continue to be free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction, right of first refusal or other limitation on disposition, or encumbrances of any kind, that would materially and adversely affect in any way such Party’s performance of its obligations contained in this RSA. |
| (b) | Each of the Consenting Lenders represents, warrants and covenants to each other Party that, except as otherwise provided in Section 8.1 hereof, prior to the consummation of the Restructuring, it will not pledge, encumber, assign, sell or otherwise transfer, in whole or in part, any portion of its right, title, or interests in any of its shares, stock, or other equity interests in any Company Party. |
| 5.5 | Additional Consenting Lender Representations |
| (a) | Each of the Consenting Lenders, severally and not jointly, represents, warrants and covenants to the other Parties that (i) it is either (A) an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3), or (7) under the Securities Act of 1933, (as amended, the “Securities Act”), or (B) a non-U.S. person under Regulation S under the Securities Act, and (ii) any securities of the Company Parties acquired by the Consenting Lenders in connection with the Restructuring will have been acquired for investment and not with a view to distribution or resale in violation of the Securities Act. |
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| (b) | Each of the Consenting Lenders, severally and not jointly, represents, warrants and covenants to the other Parties that (i) it is relying entirely on its independent review and analysis of the business and affairs of the Company Parties, in consultation with its own advisors; (ii) it has not relied upon any oral or written representations and warranties of any kind or nature by the Company Parties or any of their Affiliates or advisors, except as specifically set forth in this RSA or in the Definitive Documents; and (iii) none of the Company Parties nor any of their Affiliates or advisors has made any representations or warranties, express or implied, regarding any of the Company Parties or any aspect of the transactions contemplated by this RSA, except as set forth in this RSA or the Definitive Documents. |
| (c) | Each of the Consenting Lenders, severally and not jointly, represents, warrants and covenants to the other Parties that it has (i) such knowledge and experience in financial and business matters of this type that it is capable of evaluating the merits and risks of entering into this RSA and of making an informed investment decision; (ii) conducted an independent review and analysis of the business and affairs of the Company Parties, in consultation with its advisors, that it considers sufficient and reasonable for purposes of entering into this RSA; and (iii) had the opportunity to speak with representatives of the Company Parties and to obtain and review information from the Company Parties sufficient to make an investment decision. |
| (d) | Each Consenting Lender has no fiduciary or similar duty to any person or entity that would prevent it from taking any action required of it under this RSA. |
Section 6. Remedies.
It is understood and agreed by each of the Parties that any breach of this RSA would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly, the Parties agree that, in addition to any other remedies, each non-breaching Party shall be entitled to seek specific performance and injunctive or other equitable relief, without the necessity of posting a bond for any such breach. For the avoidance of doubt, any and all remedies and liability for breach of this RSA shall survive any termination of this RSA. Unless otherwise expressly stated in this Agreement, no right or remedy described or provided in this Agreement is intended to be exclusive or to preclude a Party from pursuing other rights and remedies to the extent available under this Agreement, at law, or in equity.
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Section 7. Acknowledgement.
This RSA and the transactions contemplated herein are the product of good faith negotiations among the Parties, together with their respective representatives. Notwithstanding anything herein to the contrary, this RSA is not an offer for the purchase, sale, exchange, hypothecation, or other transfer of securities for purposes of the Securities Act and the Securities Exchange Act of 1934.
Section 8. Miscellaneous Terms.
| 8.1 | Assignment; Transfer Restrictions of Consenting Lender Holdings. |
| (a) | The Consenting Parties hereby agree for so long as this RSA shall remain in effect, not to sell, assign, transfer, hypothecate or otherwise dispose of (including by participation) (each a “Transfer”) any Consenting Lender Holdings to any third party that is not a Consenting Party, as the case may be, unless, as a condition precedent to any such Transfer, the transferee thereof executes and delivers a joinder in the form of Exhibit E hereto (the “Joinder”) to the Company Parties prior to or contemporaneously with the execution of an agreement (or trade confirmation) in respect of the relevant Transfer (it being understood and agreed that any Consenting Lender may at any time, after providing counsel for the Company with a written notice at least three (3) business days prior thereto, pledge or assign a security interest in its Consenting Lender Holdings to secure obligations of such Consenting Lender without such pledgee or assignee executing or delivering a Joinder so long as such Consenting Lender continues to maintain full power and authority to vote on and consent to such matters concerning its Consenting Lender Holdings and such pledge or assignment does not materially and adversely affect in any way such Consenting Lender’s performance of its obligations contained in this RSA). Upon execution of a Joinder, the transferee shall be deemed to be a Party for purposes of this RSA, except as otherwise set forth or limited herein. Any transferee of Consenting Lender Holdings pursuant to this Section 8.1(a) shall automatically be deemed to be subject to any consent, tender, agreement or vote in favor of the Restructuring (subject to the terms of this RSA). |
| (b) | Any Consenting Party that effectuates a Transfer permitted under and in compliance with Section 8.1(a) hereof shall have no liability under this RSA arising solely from or related to the failure of the relevant transferee to comply with the terms of this RSA on or after the effective date of such Transfer. |
| (c) | Any Transfer of any Consenting Lender Holdings that does not comply with the procedures set forth in Section 8.1(a) hereof shall be deemed void ab initio and the Company Parties shall have the right to enforce the voiding of such Transfer. |
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| (d) | Any person that receives or acquires Consenting Lender Holdings pursuant to a Transfer of such Consenting Lender Holdings by a Consenting Party, as the case may be, hereby agrees to be bound (and shall be deemed to be bound regardless of whether it executes and delivers a Joinder) by all of the terms of this RSA (as the same may be hereafter amended, restated or otherwise modified from time to time) (a “Joining Party”). The Joining Party shall be deemed to be a Party for all purposes under this RSA, except as otherwise set forth or limited herein, and shall automatically be deemed to be subject to any consent, tender, agreement or vote in favor of the Restructuring (subject to the terms of this RSA). |
| (e) | With respect to the Consenting Lender Holdings of any Joining Party, upon consummation of the Transfer of such Consenting Lender Holdings, the Joining Party hereby makes (and is deemed to have made) the same representations and warranties as the Consenting Parties set forth in Section 5 hereof. |
| (f) | This RSA shall in no way be construed to preclude any Consenting Party, as the case may be, from acquiring additional Consenting Lender Holdings, including as contemplated by this RSA; provided, that any such Consenting Lender Holdings shall automatically be deemed to be subject to the terms of this RSA. Each Consenting Party agrees to provide counsel for the Company with a written notice of the acquisition of any additional Consenting Lender Holdings within three (3) business days of the consummation of such acquisition. |
| (g) | This Section 8 shall not impose any obligation on the Company to issue any cleansing letter or disclosure document or otherwise publicly disclose information for the purpose of enabling the Transfer of any Consenting Lender Holdings. |
| 8.2 | No Third-Party Beneficiaries. |
Unless expressly stated herein, this RSA shall be solely for the benefit of the Parties. No other Person shall be a third-party beneficiary.
| 8.3 | Entire Agreement. |
This RSA, including exhibits and annexes hereto, constitutes the entire agreement of the Parties with respect to the subject matter of this RSA, and supersedes all other prior negotiations, agreements, and understandings, whether written or oral, among the Parties with respect to the subject matter of this RSA; provided, however, that any confidentiality agreement executed by any Party shall survive termination of this RSA and shall continue in full force and effect, subject to the terms thereof, irrespective of the terms hereof; provided, further, that except as expressly agreed in this RSA, all of the terms, conditions, rights and remedies of the Consenting Lenders under the Term B Credit Agreement and the other Loan Documents (as such term is defined in the Term B Credit Agreement) shall remain in full force and effect.
| 8.4 | Headings. |
The headings of all sections of this RSA are inserted solely for the convenience of reference and are not a part of and are not intended to govern, limit or aid in the construction or interpretation of any term or provision hereof.
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| 8.5 | Interpretation. |
This RSA is the product of good faith negotiations between the Parties, and in the enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any presumption with regard to interpretation for or against any Party by reason of that Party having drafted or caused to be drafted this RSA, or any portion hereof, shall not be effective in regard to the interpretation hereof.
| 8.6 | Counterparts. |
This RSA may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement. Delivery of an executed signature page of this RSA or a Joinder by email or facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. Each party agrees that this RSA and any other document to be delivered in connection herewith, including any Joinder, may be electronically signed, and that any electronic signatures appearing in this RSA or such other documents are the same as handwritten signatures for the purposes of validity, enforceability, and admissibility.
| 8.7 | Settlement Discussions. |
This RSA is part of a proposed settlement of disputes among the Parties hereto. Nothing herein shall be deemed to be an admission of any kind. Pursuant to Federal Rule of Evidence 408 and any applicable state law or rule counterpart, this RSA and all negotiations relating thereto shall not be admissible into evidence in any proceeding other than a proceeding to enforce the terms of this RSA.
| 8.8 | Reservation of Rights. |
If the transactions contemplated by this RSA are not consummated as provided herein, if a Termination Date occurs, or if this RSA, or a Party’s obligations under this RSA, is otherwise terminated for any reason, each Party fully reserves any and all of its respective rights, remedies and interests under the Term B Credit Agreement and any other Loan Documents, as applicable, and with respect to any other relevant claims, its respective rights applicable at law and in equity.
| 8.9 | Governing Law; Waiver of Jury Trial. |
| (a) | The Parties waive all rights to trial by jury in any jurisdiction in any action, suit, or proceeding brought to resolve any dispute between the Parties arising out of this RSA, whether sounding in contract, tort or otherwise. |
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| (b) | If the Chapter 11 Cases are not pending, this RSA shall be governed by and construed in accordance with the laws of the State of New York and without regard to any conflicts of law provision or principle that would require or permit the application of the law of any other jurisdiction. By its execution and delivery of this RSA, each Party hereby irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter under or arising out of or in connection with this RSA or for recognition or enforcement of any judgment rendered in any such action, suit or proceeding, may be brought in any federal court of competent jurisdiction in New York County, State of New York, and by execution and delivery of this RSA, each of the Parties hereby irrevocably accepts and submits itself to the nonexclusive jurisdiction of such court, generally and unconditionally, with respect to any such action, suit or proceedings. Notwithstanding the foregoing, after the Petition Date, if applicable, each Party irrevocably and unconditionally submits to the exclusive jurisdiction of the Bankruptcy Court in any action or proceeding arising out of or relating to this RSA, or for recognition or enforcement of any judgment arising therefrom, and further irrevocably and unconditionally agrees that all claims arising out of or relating to this RSA brought by them shall be brought, and shall be heard and determined, exclusively in the aforementioned Bankruptcy Court. |
| 8.10 | Successors. |
This RSA is intended to bind the Parties and inure to the benefit of the Parties and each of their respective successors, assigns, heirs, executors, administrators and representatives; provided, however, that nothing contained in this Section 8.10 shall be deemed to permit any transfer, tender, vote or consent, of any claims or interests other than in accordance with the terms of this RSA.
| 8.11 | Relationship Among Parties. |
Notwithstanding anything herein to the contrary, (a) the duties and obligations of the Parties under this RSA shall be several, not joint and (b) none of the Parties shall have any duty, whether a fiduciary duty or otherwise, to any other Party or their Affiliates or any other lender, creditor, stakeholder, or Person simply by being a party to this RSA or in connection with the transactions contemplated hereby. Notwithstanding anything to the contrary herein, (i) nothing in this RSA shall create any additional fiduciary obligations on the part of any of the Parties or any Related Parties in such Person’s capacity as a Related Party and (ii) nothing herein shall modify, elevate or diminish any fiduciary duties owed by the Company Parties to the other Parties.
| 8.12 | Acknowledgment of Counsel. |
Each of the Parties acknowledges that it has been represented by counsel (or had the opportunity to be so represented and waived its right to do so) in connection with this RSA and the transactions contemplated by this RSA. Accordingly, any rule of law or any legal decision that would provide any Party with a defense to the enforcement of the terms of this RSA against such Party based upon lack of legal counsel shall have no application and is expressly waived. The provisions of this RSA shall be interpreted in a reasonable manner to effect the intent of the parties hereto. No Party shall have any term or provision construed against such Party solely by reason of such Party having drafted the same.
| 8.13 | Amendments, Modifications and Waivers. |
Except as otherwise specified herein, this RSA may only be modified, amended or supplemented, and any of the terms thereof may only be waived, by an agreement in writing signed by each of the Company Parties and the Requisite Consenting Lenders (with email being sufficient as to any modification, amendment, waiver, or extension of a Milestone); provided, that notwithstanding anything to the contrary herein, if the modification, amendment, supplement or waiver at issue materially and adversely impacts the treatment or rights of any one Consenting Lender disproportionately than the other Consenting Lenders, the agreement in writing of such Consenting Lender whose treatment or rights are disproportionately impacted shall also be required for such modification, amendment, supplement, or waiver to be effective.
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| 8.14 | Severability of Provisions. |
If any provision of this RSA for any reason is held to be invalid, illegal or unenforceable in any respect, that provision shall not affect the validity, legality or enforceability of any other provision of this RSA.
| 8.15 | Notices. |
Unless otherwise set forth herein, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed given when: (a) delivered personally or by overnight courier to the applicable addresses set forth below; or (b) sent by facsimile transmission or email to the parties listed below with a confirmatory copy delivered by overnight courier.
If to the Company Parties, to:
Sequential Brands Group, Inc.
1407 Broadway
38th Floor
New York, NY 10018
| Attn: | Eric Gul |
| Email: | EGul@sbg-ny.com |
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
| Attn: | Joshua Brody |
Jason Zachary Goldstein
| Email: | jbrody@gibsondunn.com |
jgoldstein@gibsondunn.com
If to any Consenting Lender, to:
KKR Credit Advisors (US) LLC
30 Hudson Yards
New York, New York, 10001
Attention: Joshua Gruenbaum
Phone: +1 212 763 9058
Email: Joshua.Gruenbaum@kkr.com
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With a copy to (such copy not to constitute notice):
King & Spalding LLP
1185 Avenue of the Americas
New York, NY 10036
Attention: Roger Schwartz and Peter Montoni.
Telephone: (212) 556-2100
Email: rschwartz@kslaw.com; pmontoni@kslaw.com
Notwithstanding anything in this RSA to the contrary, where any notice, written consent, acceptance, approval, or waiver is required pursuant to or contemplated by this RSA, or otherwise, including a written approval by any one or more of the Company Parties or any one or more of the Consenting Parties, such written consent, acceptance, approval, or waiver may be provided and/or conveyed through electronic mail between counsel to such parties.
| 8.16 | Disclosure of Information. |
| (a) | Unless required by applicable law or regulation or otherwise permitted under the terms of the Term B Credit Agreement, as applicable, each Party agrees to keep confidential the amount of all Consenting Lender Holdings held (beneficially or otherwise) by any Consenting Lender absent the prior written consent (by email or otherwise) of such Consenting Lender, as applicable; provided, that each Party may disclose such information to its legal, accounting, financial and other advisors who agrees to keep such information strictly confidential. If the Company determines that it is required to attach a copy of this RSA to any document in connection with the Restructuring, it will redact any reference to a specific Consenting Lender. The foregoing shall not prohibit the Company from disclosing the aggregate claims or interests of all Consenting Lenders as a group and shall not apply with respect to any information that is or becomes available to the public other than as a result of a disclosure in violation of any Party’s obligations under this RSA. The Parties’ obligations under this Section 8.16 shall survive termination of this RSA. |
| (b) | No Party hereto shall (i) use the name of any other Party in any press release without such member’s prior written consent (by email or otherwise), or (ii) disseminate to any news media any press releases, public filings, public announcements or other public communications unless such Party (A) first submits such press release, public filing, public announcement or other public communication to counsel to the other Parties for review and potential suggestions and comments and (B) receives the prior written consent (by email or otherwise) of the other Parties. Nothing contained herein shall be deemed to waive, amend or modify the terms of any confidentiality or non-disclosure agreement between the Company Parties and the Consenting Lenders. Notwithstanding the foregoing in this Section 8.16(b), but subject to the requirements of Section 8.16(a), the Company Parties shall not be required to obtain the consent of any other Party prior to filing of any press releases, public documents, and any and all filings with the U.S. Securities and Exchange Commission, the Bankruptcy Court, or otherwise that constitute disclosure of the existence or terms of this RSA, the Parties hereto or any amendment to the terms of this RSA provided the Company Parties provide drafts of any such documents and/or disclosures to counsel to the Consenting Lenders at least two (2) business days or as soon as reasonably practicable prior to making any such disclosure or filing, and the Company Parties shall afford the Consenting Lenders a reasonable opportunity to comment on such documents and disclosures and shall consider any such comments in good faith. |
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| 8.17 | No Solicitation; Adequate Information. |
This RSA is not and shall not be deemed a solicitation of consents to any plan of reorganization or liquidation. With respect to any potential plan of reorganization or liquidation, the acceptance of the Consenting Lenders will not be solicited until the Consenting Lenders have received a disclosure statement that provides adequate information under applicable bankruptcy or non-bankruptcy law, as applicable.
| 8.18 | Business Day Convention. |
When a period of days under this RSA ends on a Saturday, Sunday or any day in New York that is a legal holiday or a day on which banking institutions are authorized or required to be closed, then such period shall be extend to the specified hour of the next business day.
| 8.19 | Survival. |
Notwithstanding the termination of this RSA in accordance with its terms, the agreements and obligations of the Parties in Sections 6, 7, and 8.2 through 8.19 shall survive such termination and shall continue in full force and effect for the benefit of the Parties in accordance with the terms hereof.
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IN WITNESS WHEREOF, the Parties hereto have caused this RSA to be executed and delivered by their respective duly authorized officers, managers, or other agents, solely in their respective capacity as officers, managers, or other agents of the undersigned, as applicable, and not in any other capacity, as of the date first set forth above.
[Signature Pages Follow]
| COMPANY PARTIES: | ||
| BORROWER: | ||
| SEQUENTIAL BRANDS GROUP, INC. | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| GUARANTORS: | ||
| SQBG, INC. | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| SEQUENTIAL LICENSING, INC. | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| WILLIAM RAST LICENSING, LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| BRAND MATTER, LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| SBG FM, LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
[Signature Page to Restructuring Support Agreement]
| SBG UNIVERSE BRANDS, LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| GALAXY BRANDS LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| The Basketball Marketing Company, Inc. | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| AMERICAN SPORTING GOODS CORPORATION | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| LNT BRANDS LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| JOE’S HOLDINGS LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
[Signature Page to Restructuring Support Agreement]
| GAIAM BRAND HOLDCO, LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| GAIAM AMERICAS, INC. | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| SBG-GAIAM HOLDINGS, LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
| GBT Promotions LLC | ||
| By: | /s/ Lorraine DiSanto | |
| Name: | Lorraine DiSanto | |
| Title: | CFO | |
[Signature Page to Restructuring Support Agreement]
| CONSENTING LENDERS: | ||
| FS KKR CAPITAL CORP. | ||
| By: | /s/ Jeffrey M. Smith | |
| Name: | Jeffrey M. Smith | |
| Title: | Authorized Signatory | |
| DUNLAP FUNDING LLC | ||
| By: | /s/ Jeffrey M. Smith | |
| Name: | Jeffrey M. Smith | |
| Title: | Authorized Signatory | |
| DARBY CREEK LLC | ||
| By: | /s/ Jeffrey M. Smith | |
| Name: | Jeffrey M. Smith | |
| Title: | Authorized Signatory | |
[Signature Page to Restructuring Support Agreement]
| CONSENTING LENDERS: | ||
| Apollo Investment Corporation | ||
| By: | Apollo Investment Management, L.P., | |
| its investment adviser | ||
| By: | ACC Management LLC, its general partner | |
| By: | /s/ Joseph D. Glatt | |
| Name: | Joseph D. Glatt | |
| Title: | Vice President | |
| Apollo Centre Street Partnership, L.P. | ||
| By: | Apollo Centre Street Management, LLC, | |
| its investment manager | ||
| By: | /s/ Joseph D. Glatt | |
| Name: | Joseph D. Glatt | |
| Title: | Vice President | |
| Apollo Union Street Partners, L.P. | ||
| By: | Apollo Union Street Management, LLC, | |
| its investment manager | ||
| By: | /s/ Joseph D. Glatt | |
| Name: | Joseph D. Glatt | |
| Title: | Vice President | |
| Apollo Kings Alley Credit Fund, L.P. | ||
| By: | Apollo Kings Alley Credit Fund Management, LLC, its investment manager | |
| By: | /s/ Joseph D. Glatt | |
| Name: | Joseph D. Glatt | |
| Title: | Vice President | |
[Signature Page to Restructuring Support Agreement]
| Apollo Tactical Value SPN Investments, L.P. | ||
| By: | Apollo Tactical Value SPN Management, LLC, its investment manager | |
| By: | /s/ Joseph D. Glatt | |
| Name: | Joseph D. Glatt | |
| Title: | Vice President | |
| Apollo Moultrie Credit Fund, L.P. | ||
| By: | Apollo Moultrie Credit Fund Management, LLC, its investment manager | |
| By: | /s/ Joseph D. Glatt | |
| Name: | Joseph D. Glatt | |
| Title: | Vice President | |
[Signature Page to Restructuring Support Agreement]
EXHIBIT C
PLAN TERM SHEET
SEQUENTIAL BRANDS GROUP, INC., et al.,
TERM SHEET
This term sheet (the “term sheet”)1 OUTLINES the MATERIAL TERMS OF a proposed RESTRUCTURING TO BE EFFECTUATED THROUGH a sale of CERTAIN of the assets of SEQUENTIAL BRAND GROUPS, INC. AND ITS AFFILIATED DEBTORS-IN-POSSESSION IN THEIR JOINTLY ADMINISTERED BANKRUPTCY CASES (THE “CHAPTER 11 CASES”) TO BE FILED IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE (THE “BANKRUPTCY COURT”), IN CONJUNCTION WITH THE OTHER SALES DETAILED IN THE RSA, AND a plan of liquidation under the bankruptcy code (the “Liquidating Plan”).2
THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH RESPECT TO ANY SECURITIES OF the Debtors, NOR IS IT A SOLICITATION OF THE ACCEPTANCE OR REJECTION OF A PLAN FOR PURPOSES OF SECTIONS 1125 AND 1126 OF THE BANKRUPTCY CODE. ANY SUCH OFFER OR SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE BANKRUPTCY CODE. THIS TERM SHEET AND THE TRANSACTIONS DESCRIBED HEREIN ARE SUBJECT IN ALL RESPECTS TO, AMONG OTHER THINGS, NEGOTIATION, EXECUTION AND DELIVERY OF DEFINITIVE DOCUMENTATION AND SATISFACTION OR WAIVER OF THE CONDITIONS PRECEDENT SET FORTH HEREIN AND THEREIN.
Overview
| Restructuring Overview | This Term Sheet, together with the Sale Term Sheets attached to the RSA, contemplate the sale of substantially all the assets of the Debtors effectuated through a series of sales under section 363 of the Bankruptcy Code. This Term Sheet sets forth the details of the “credit bid” purchase of certain assets by the Term B Lenders (as defined below) in accordance with Bid Procedures (as defined in the RSA) and/or pursuant to the terms and conditions of the Liquidating Plan, consistent with the terms of the RSA. |
| 1 | Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the restructuring support agreement, dated as of August 31, 2021 (“RSA”). |
| 2 | This Term Sheet does not include a description of all of the terms, conditions and other provisions that are to be contained in the Plan, which shall be consistent with the terms and conditions hereof and otherwise in form and substance reasonably acceptable to the Company and the Requisite Consenting Lenders. |
I. Parties
| Debtors: | Sequential Brands Group, Inc. (“Borrower” or “Parent”) and its debtor affiliates (collectively, the “Company” or the “Debtors”). |
| Agent: | Wilmington Trust, National Association as administrative agent under the Term B Credit Agreement (as defined below). |
| Term B Lenders: | Those Lenders under the Term B Credit Agreement. |
II. Other Defined Terms
| Administrative Expense Claim: |
Means any claim for payment of an administrative expense of a kind specified in section 503(b) of the Bankruptcy Code and entitled to priority pursuant to section 507(a)(2) of the Bankruptcy Code, including, but not limited to, the actual, necessary costs and expenses, incurred on or after the filing date of the Chapter 11 Cases, of preserving the bankruptcy estates of the Company and operating the business of the Company, including wages, salaries, or commissions for services rendered after the commencement of the Chapter 11 Cases, claims under section 503(b)(9) of the Bankruptcy Code, claims of professionals approved for payment by the bankruptcy estates, and all fees and charges assessed against the bankruptcy estates under chapter 123 of title 28 of the United States Code, and all allowed claims that are entitled to be treated as Administrative Expense Claims pursuant to a final order of the Bankruptcy Court (under section 546(c)(2) of the Bankruptcy Code or otherwise). |
| Cash: | Means legal tender of the United States of America and equivalents thereof. |
| DIP Claims: | Means all obligations, including, without limitation, all interest, fees and expenses, owed under or in connection with any DIP Credit Agreement by the Debtors. |
| DIP Credit Agreement: | Means any debtor-in-possession financing credit agreement entered into by and among the Debtors and the Term B Lenders (as amended, restated, supplemented or modified and in effect as of the date hereof) in connection with the Chapter 11 Cases. |
| DIP Order(s): | Means the interim and final orders entered by the Bankruptcy Court approving any DIP Credit Agreement. |
| Effective Date: | Means (a) the first business day after the entry of the order confirming the Liquidating Plan (the “Confirmation Order”) on which (i) no stay of the Confirmation Order is in effect and (ii) all conditions precedent to effectiveness of the Liquidating Plan have been satisfied or waived or (b) such other date as may be mutually agreed to between the Debtors and the Term B Lenders. |
| General Unsecured Claims: | Means any claim that is not an Administrative Expense Claim, Other Priority Claim, Other Secured Claim, Priority Tax Claim, DIP Claim, Term B Lender Claim, Section 510(b) Claim, and/or Intercompany Claim, including, for the avoidance of doubt, claims on account of rejection damages. |
2
| Intercompany Interests: | Means all shares of stock, units, options, warrants, rights and other instruments evidencing an ownership interest in any of the entities collectively constituting the Company existing prior to the Effective Date (whether fixed or contingent, matured or unmatured, disputed or undisputed), including any right, contractual, legal, equitable, or otherwise, to acquire any of the foregoing, in each case only to the extent held by any of the entities collectively constituting the Company. |
| Other Parent Equity Interests: |
Means all shares of stock, units, options, warrants, rights and other instruments evidencing an ownership interest in the Parent existing prior to the Effective Date (whether fixed or contingent, matured or unmatured, disputed or undisputed), including any right, contractual, legal, equitable, or otherwise, to acquire any of the foregoing, other than Parent Common Stock (as defined below). |
| Other Priority Claims: | Means any claim, other than an Administrative Expense Claim or Priority Tax Claim, entitled to priority payment as specified in section 507(a) of the Bankruptcy Code. |
| Other Secured Claims: | Means any claim secured by property of the Company other than the Term B Lender Claims. |
| Parent Common Stock: | Means shares of common stock of Parent that are authorized, issued, and outstanding prior to the Effective Date. |
| Paydown Amount: | Means the amount of Cash or other value at the Debtors’ estates as of the Effective Date, including, without limitation, Cash at the Debtors’ estates following the consummation of each of the sales pursuant to the terms set forth in the RSA, minus the Retained Cash (as defined below). |
| Priority Tax Claims: | Means any claim of a “government unit” as defined in section 101(27) of the Bankruptcy Code that is entitled to priority pursuant to section 507(a)(8) of the Bankruptcy Code. |
| Section 510 Claims: | Means any Claim (i) arising from (a) rescission of a purchase or sale of a security of the Debtors or an affiliate of the Debtors or (b) purchase or sale of such a security or (ii) subject to subordination in accordance with section 510 of the Bankruptcy Code or otherwise. |
| Term B Credit Agreement: |
Means the Third Amended and Restated Credit Agreement dated as of July 1, 2016 by and among the Borrower, the “Guarantors” thereunder, the Term B Lenders and Agent (as amended, restated, supplemented or modified and in effect as of the date hereof). |
| Term B Lender Claims: | Means all obligations, including, without limitation, all interest, fees and expenses, owed under or in connection with the Term B Credit Agreement by the Debtors. |
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| Wind-Down Amount: | Means cash, in an amount acceptable to the Debtors and the Consenting Required Lenders, which cash shall be funded from sources mutually agreed to by the Debtors and the Consenting Required Lenders, that the Debtors shall use, subject to the Wind-Down Budget (as defined below), to fund the anticipated costs of the wind-down of the Debtors’ operations, the administration of the estate following the consummation of the transactions set forth in the RSA, and the payment of all administrative and priority claims required to be paid pursuant to the Plan of Liquidation.
The Wind-Down Amount and Wind-Down Budget shall include, without limitation, and may be adjusted as necessary to provide for payment of, (i) professional fees and expenses of estate professionals incurred or estimated in good faith to be incurred prior to the Effective Date and post-Effective Date, including during the wind-down of the Debtors’ estates, which shall be deposited an escrow account (“Professional Fee Escrow Amount”), (ii) accrued postpetition liabilities through the closing related to any assets that are designated to be excluded assets but which have not been paid as of closing of the sales pursuant to the RSA or this Term Sheet due to timing and (iii) all claims required to be paid pursuant to the Plan of Liquidation as set forth in the Wind-Down Budget, including the anticipated expenses of the wind-down of the Debtors’ estates from and after the Effective Date (any Cash retained by the Debtors in connection with the foregoing (i)–(iii), the “Retained Cash”). |
| Wind-Down Budget: | Means the budget (as modified from time to time), as agreed between the Debtors and the Consenting Required Lenders, setting forth, among other things, (i) the aggregate amounts of Administrative Claims, DIP Claims, Other Priority Claims, Priority Tax Claims, Other Secured Claims, Term B Lender Claims, and General Unsecured Claims, in each case against the Debtors, to be paid under the Liquidating Plan; (ii) the Professional Fee Escrow Amount; (iii) the anticipated expenses of the wind-down of the Debtors’ estates from and after the Effective Date; and (iv) any expenses of the Requisite Consenting Lenders, including those anticipated to be incurred after the Effective Date that will be payable by the Debtors. |
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III. Effectuation of 363 Sale and Liquidating Plan with Treatment of Claims and Interests
| Effectuation of 363 Sale and Terms of Credit Bid | |
| Terms of Credit Bid | · Term B Lenders, through a new entity (“Purchaser”) to be organized and directly or indirectly owned by certain of the Term B Lenders or their affiliates under the Term B Credit Agreement, shall purchase the assets of the Debtors (the “Credit Bid Sale”), as applicable, for which there is no Successful Bid (as defined in the Bid Procedures) following the Debtors’ auction, as conducted in accordance with the Bid Procedures (collectively, the “Purchased Assets”).3
· The aggregate consideration for the Purchased Assets shall consist of the following (collectively, the “Purchase Price”): (i) pursuant to section 363(k) of the Bankruptcy Code, a credit bid in an amount acceptable to the Debtors and the Requisite Consenting Lenders (the “Credit Bid Amount”) of the Obligations owed by the Company arising under the Term B Credit Agreement, (ii) the Wind-Down Amount, and (iii) assumption of the assumed liabilities related to the Purchased Assets, including, without limitation related to Assumed Contracts (as defined below) and cure costs; provided that even if the Credit Bid Sale does not occur, the Term B Lenders agree to fully fund the Wind-Down Budget and provide the Debtors with the Wind-Down Amount in connection with the confirmation of the Liquidating Plan in accordance with the terms hereof.
· Terms of the Credit Bid Sale and Asset Purchase Agreement (as defined below), as applicable, including customary covenants, representations, and warranties, and all related documentation to be acceptable in all respects to the Requisite Consenting Lenders. |
| Consummation of Credit Bid | For the avoidance of doubt, nothing herein shall restrict the Debtors’ and Term B Lenders’ ability to consummate the Credit Bid Sale through a chapter 11 plan process, including without limitation, the Liquidating Plan (in such instance, in form and substance satisfactory to the Debtors and the Requisite Consenting Lenders in all respects). |
| Assumed Contracts / Excluded Contracts | “Assumed Contracts” shall include the contracts and licenses related to the Purchased Assets to be set forth on an exhibit (the “Contract Schedule”) to the asset purchase agreement (the “Asset Purchase Agreement”) or as a supplement to a chapter 11 plan; provided at any time prior to the date that is five (5) days prior to the date of the sale hearing or confirmation hearing, as applicable, the Required Consenting Lenders may, subject to the terms of any applicable order, by written notice to the Debtors, designate (i) additional contracts that Purchaser wishes the Debtors to assume and assign to Purchaser and (ii) additional contracts that Purchaser wishes for the Debtors to reject. |
| 363 Closing Conditions | The Asset Purchase Agreement or chapter 11 plan, as applicable, shall contain, among other things, the following conditions to the obligation of the Debtors and the Purchaser to consummate the Credit Bid Sale, in each case, in addition to other conditions that may be agreed upon by Purchaser and the Debtors:
· entry of a sale order or confirmation order, as applicable, with any modifications thereto to be in form and substance acceptable to the Debtors and the Purchaser and such sale order or confirmation order not being subject to any stay;
· expiration or early termination of any applicable Hart-Scott-Rodino waiting period (and any extension thereof);
· no provision of any applicable Law and no judgment, injunction or order shall then be in effect prohibiting or making illegal the consummation of the closing;
· enumerated customary representations and warranties in the Asset Purchase Agreement, as applicable, which do not contain materiality qualifiers shall be true and correct on the date of entry into the Asset Purchase Agreement and as of the closing date with the same effect as though such representations and warranties had been made on and as of the closing date (provided that representations and warranties which speak to a specified date shall speak only as of such date) except where the failure to be so true and correct (without giving effect to any limitation or qualification as to “materiality” (including the word “material”) or “Material Adverse Effect” or other similar term set forth therein) would not, individually or in the aggregate, have a Material Adverse Effect; and
· no material breach of any covenants in the Asset Purchase Agreement, as applicable. |
| 3 | For the avoidance of doubt, among other things, (i) director and officer insurance policies and claims thereunder, and (ii) all insurance policies of the Debtors shall not be Purchased Assets. |
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| Liquidating Plan - Treatment of Claims and Interests | |
| i. Unclassified Claims | |
| Administrative Expense Claims and Priority Tax Claims: | On or as soon as practicable after the later to occur of (i) the Effective Date or (ii) in the ordinary course of business as and when due, each holder of an allowed Administrative Expense Claim and/or Priority Tax Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such holder’s Administrative Expense Claim and/or Priority Tax Claim (a) Cash equal to the unpaid portion of such allowed claim, (b) treatment as is consistent with the provisions of section 1129(a)(9) of the Bankruptcy Code, or (c) such other treatment as may be agreed by the holder of such allowed claim, the Debtors and the Requisite Consenting Lenders.
Not classified – non-voting. |
| DIP Claims | Each holder of an allowed DIP Claim shall receive, in full and complete settlement, release, and discharge of such claim, either (i) its pro rata share of the Paydown Amount in Cash or (ii) such other treatment as to which the Debtors and the holder of such allowed DIP Claim have agreed.
Not classified – non-voting. |
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| i. Other Classes of Claims and Interests | |
Class 1 – Other Secured Claims:
|
Each holder of an allowed Other Secured Claim shall receive, in full and complete settlement, release, and discharge of such claim, at the option of the Debtors and the Requisite Consenting Lenders: (i) payment in full in cash of the due and unpaid portion of its Other Secured Claim on the later of (a) the Effective Date (or as soon thereafter as reasonably practicable) and (b) as soon as practicable after the date such Claim becomes due and payable; (ii) the collateral securing its allowed Other Secured Claim; (iii) reinstatement of its allowed Other Secured Claim; or (iv) such other treatment rendering its allowed Other Secured Claim unimpaired in accordance with section 1124 of the Bankruptcy Code.
Unimpaired – deemed to accept. |
Class 2 – Other Priority Claims:
|
Each holder of an allowed Other Priority Claim shall receive, in full and complete settlement, release, and discharge of such claim, at the option of the Debtors and the Requisite Consenting Lenders: (i) payment in full in cash of the due and unpaid portion of its Other Secured Claim on the later of (a) the Effective Date (or as soon thereafter as reasonably practicable) and (b) as soon as practicable after the date such Claim becomes due and payable; (ii) such other less favorable treatment as to which the Debtors and the holder of such allowed Other Priority Claim have agreed; or (iii) such other treatment rendering its allowed Other Priority Claim unimpaired in accordance with section 1124 of the Bankruptcy Code.
Unimpaired – deemed to accept. |
| Class 3 – Term B Lender Claims | Following payment in full in Cash of all allowed DIP Claims or such other treatment as to which the Debtors and the holders of such allowed DIP Claims have agreed, each holder of an allowed Term B Lender Claim shall receive, in full and complete settlement, release, and discharge of such claim, either (i) its pro rata share of any Paydown Amount or (ii) such other treatment as to which the Debtors and the holder of such allowed Term B Lender Claim have agreed.
Impaired – entitled to vote.
The allowed amount of Term B Lender Claims under the Plan shall be the Term B Lender Claims minus the Credit Bid Amount.4 |
| Class 4 – General Unsecured Claims: | Each holder of an allowed General Unsecured Claim shall receive in full and complete settlement, release, and discharge of such claim, its pro rata share of any Paydown Amount remaining following (i) payment in full in Cash of all allowed DIP Claims or such other treatment as to which the Debtors and the holders of such allowed DIP Claims have agreed and (ii) payment of the Paydown Amount to the holders of the Term B Lender Claims or such other treatment as to which the Debtors and the holder of such allowed Term B Lender Claim have agreed.
Impaired – voting to be determined. |
| Class 5 – Section 510 Claims: | Each holder of an allowed Section 510 Claim shall receive in full and complete settlement, release, and discharge of such claim, its pro rata share of any Paydown Amount remaining following (i) payment in full in Cash of all allowed DIP Claims or such other treatment as to which the Debtors and the holders of such allowed DIP Claims have agreed, (ii) payment of the Paydown Amount to the holders of all allowed Term B Lender Claims or such other treatment as to which the Debtors and the holder of such allowed Term B Lender Claim have agreed, and (iii) payment of any remaining Paydown Amount to all holders of allowed General Unsecured Claims.
Impaired – voting to be determined. |
| 4 | If the Term B Lenders credit bid any other Obligations owed by the Company arising under the Term B Credit Agreement in connection with any transaction under, pursuant to, or related to, the RSA and the bidding and auction process or otherwise, the amount that was credit bid shall also be subtracted from the allowed amount of Term B Lender Claims under the Plan. |
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Class 6 – Intercompany Claims:
|
Each claim by and among the Debtors shall, on the Effective Date, (i) be reinstated, in full or in part, and treated in the ordinary course of business or (ii) be cancelled and discharged, as mutually agreed upon by each holder of such claim, the Debtors and the Requisite Consenting Lenders. Holders of such claims shall not receive or retain any property on account of such claims to the extent that such Intercompany Claim is cancelled and discharged.
Impaired – deemed to reject. |
| Class 7 - Intercompany Interests: | On the Effective Date, each allowed Intercompany Interest shall be either reinstated or cancelled in the Debtors’ discretion with the consent of the Requisite Consenting Lenders. To the extent reinstated, Intercompany Interests are unimpaired solely to preserve the Company’s corporate structure and holders of allowed Intercompany Interests shall not otherwise receive or retain any property on account thereof.
Impaired – deemed to reject. |
| Class 8 – Parent Common Stock and Other Parent Equity Interests: | Each holder of an allowed Parent Common Stock and Other Parent Equity Interest shall receive in full and complete settlement, release, and discharge of such claim, its pro rata share of any Paydown Amount remaining following (i) payment in full in Cash of all allowed DIP Claims or such other treatment as to which the Debtors and the holders of such allowed DIP Claims have agreed, (ii) payment of the Paydown Amount to the holders of all allowed Term B Lender Claims or such other treatment as to which the Debtors and the holder of such allowed Term B Lender Claim have agreed, (iii) payment of any remaining Paydown Amount to all holders of allowed General Unsecured Claims, and (iv) payment of any remaining Paydown Amount to all holders of allowed Section 510 Claims.
Impaired – voting to be determined. |
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IV. Miscellaneous
| Regulatory Approvals; Third Party Consents | To the extent regulatory approvals are required, including under the HSR Act (the “Regulatory Approvals”), the Debtors shall use their commercially reasonable efforts to obtain the Regulatory Approvals.
To the extent applicable, the Debtors shall use their commercially reasonable efforts to obtain any third-party consents, including with respect to any licensing agreements (collectively, the “Third Party Consents”), required in connection with the Credit Bid Sale and Liquidating Plan. |
| Releases: | The Liquidating Plan shall provide for customary releases (including consensual third party releases) and/or waivers, including standard carve-outs, among the Debtors, each of the Agent, the Term B Lenders, and their respective affiliates, in any capacity, and each of their respective current and former directors, officers, funds, affiliates, members, employees, partners, managers, agents, representatives, principals, consultants, and professional advisors (each in their capacity as such) (collectively, the “Released Parties”) of any and all claims, obligations (contractual or otherwise), suits, judgments, damages, rights, liabilities, or causes of action, whether known or unknown, foreseen or unforeseen, relating to any actions, transactions, events, or omissions on or before the Effective Date in any way relating to the Debtors, the obligations under the Term B Credit Agreement, the restructuring, this Term Sheet and any related transactions. |
| Exculpation: | Customary exculpation provisions, including all Released Parties who are estate fiduciaries (including, without limitation, all current and former officers and directors of the Debtors). |
| Injunction: | Customary injunction provisions, including all Released Parties. |
| Tax Issues | The Debtors and the Requisite Consenting Lenders will work together in good faith and will use commercially reasonable efforts to structure and implement the Credit Bid Sale, the Liquidating Plan and the transactions related thereto in a tax efficient and cost-efficient manner. The parties also intend to structure the restructuring to preserve favorable tax attributes to the extent it is practicable and not materially adverse to the parties. |
| Documentation: | This Term Sheet does not include a description of all of the terms, conditions, and other provisions that will be contained in the definitive documentation governing the Credit Bid Sale, the Liquidating Plan and the transactions related thereto and the material documents shall be materially consistent with this Term Sheet and shall be reasonably acceptable to the Debtors and the Requisite Consenting Lenders. |
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| Conditions Precedent | Customary closing conditions for transactions of this type, including, but not limited to the following conditions all being met to the satisfaction of the Debtors and the Requisite Consenting Lenders: (i) an order approving the solicitation and disclosure statement shall have been entered for the Liquidating Plan, (ii) the applicable Confirmation Order shall have been entered, without any material modification that would require re-solicitation, and shall not be subject to any stay, and (iii) execution and delivery of the Definitive Documents. |
| Other Terms and Conditions | The Liquidating Plan, the Definitive Documents and other material agreements relating to the Liquidating Plan and the transactions related thereto shall be in form and substance reasonably satisfactory to the Debtors and the Requisite Consenting Lenders, and shall contain such other terms and conditions consistent with this Term Sheet as are customary for transactions of this type. |
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CONFIDENTIAL
EXHIBIT A
EXHIBIT D
DIP TERM SHEET
SEQUENTIAL BRANDS GROUP, INC.
SUPERPRIORITY SECURED
DEBTOR-IN-POSSESSION CREDIT FACILITY TERM SHEET
Summary of Proposed Terms and Conditions
This Summary of Terms and Conditions (this “DIP Term Sheet”) outlines certain terms of the DIP Facility (as defined herein) to be provided by the DIP Lenders (as defined herein) subject to the conditions herein and as set forth more fully below. The Loan Parties are not authorized to disclose the terms contained herein to any person other than their professional advisors, who shall agree to maintain its confidentiality.
| Borrower: |
Sequential Brands Group, Inc., a Delaware corporation (the “Borrower”), the borrower under the existing Prepetition BAML Credit Agreement,1 in its capacity as a debtor and debtor-in-possession in a case (together with the cases of its affiliated debtors and debtors-in-possession, the “Chapter 11 Cases”) to be filed under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). This DIP Term Sheet assumes that the Borrower and each of the Guarantors (as defined herein) will file voluntary proceedings simultaneously under the Bankruptcy Code in the Bankruptcy Court and will request joint administration of the Chapter 11 Cases (collectively, the “Bankruptcy Cases”). |
| Guarantors: |
Each of the Borrower’s existing and future direct and indirect subsidiaries that are guarantors under the Prepetition Term B Loan Documents (collectively, the “Guarantors”), in their capacities as debtors and debtors-in-possession in the Chapter 11 Cases, on a joint and several basis (the “Guarantors” and, together with the Borrower, each individually a “Loan Party” and a “Debtor”, and collectively, the “Loan Parties” and the “Debtors”). |
| 1 | Reference is hereby made to that certain (i) Third Amended and Restated First Lien Credit Agreement dated as of July 1, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the “Prepetition BAML Credit Agreement” and, together with all related loan documents, the “Prepetition BAML Loan Documents”), among the Borrower, the guarantors from time to time party thereto, Bank of America, N.A. (“BofA”), as administrative agent and collateral agent (in such capacities, the “Prepetition BAML Agent”) for the lenders from time to time party thereto (each, a “Prepetition BAML Lender” and collectively, the “Prepetition BAML Lenders”), and each of the other persons party thereto; (ii) Third Amended and Restated Credit Agreement dated as of July 1, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the “Prepetition Term B Credit Agreement” and, together with all related loan documents, the “Prepetition Term B Loan Documents”; the Prepetition BAML Credit Agreement together with the Prepetition Term B Credit Agreement, the “Prepetition Credit Agreements”; the Prepetition BAML Loan Documents together with the Prepetition Term B Loan Documents, the “Prepetition Loan Documents”), among the Borrower, the guarantors from time to time party thereto, Wilmington Trust, National Association, as administrative agent and collateral agent (in such capacities, the “Prepetition Term B Agent” and, together with the Prepetition BAML Agent, the “Prepetition Agents”) for the lenders from time to time party thereto (each, a “Prepetition Term B Lender” and collectively, the “Prepetition Term B Lenders” and, together with the Prepetition BAML Lenders, the “Prepetition Lenders”), and each of the other persons party thereto; and (iii) Amended and Restated Intercreditor Agreement dated as of December 4, 2015 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among the Prepetition BAML Agent and the Prepetition Term B Agent and acknowledged by the Borrower and guarantors signatory thereto. The Intercreditor Agreement shall remain in full force and effect following the occurrence of the Petition Date. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the applicable Prepetition Credit Agreement. |
| DIP Agent: |
Wilmington Trust, National Association (in such capacity, together with its successors and assigns, the “DIP Agent”). |
| DIP Lenders: |
Certain Prepetition Term B Lenders will, either directly or through one or more affiliates (or funds or accounts advised or sub-advised by such person) (such participating funds, collectively, the “DIP Lenders”), finance the New Money DIP Facility (as defined below) and participate in the New Money DIP Commitments (as defined herein) on a pro rata basis, determined based on the outstanding principal amount of Loans under the Prepetition Term B Credit Agreement (together with all other Obligations, the “Prepetition Term B Obligations”) held by the DIP Lenders as of the date of the commencement of the Chapter 11 Cases (the “Petition Date”).
All Prepetition Term B Lenders (either directly or through one or more affiliated funds of financing vehicles) shall have an opportunity to fund their pro rata share of the New Money DIP Commitments (as defined below) on a pro rata basis as determined in the preceding paragraph; provided that such Prepetition Term B Lender (or its affiliates, as applicable) shall have become a party to the Restructuring Support Agreement (the “RSA”) on or before the RSA Effective Date (as defined in the RSA). |
| Type and Amount of the DIP Facility: |
A secured superpriority priming debtor-in-possession non-amortizing facility comprised of: a new money credit facility in an aggregate principal amount equal to (i) $[128,860,546.03] plus (ii) an incremental working capital amount to be mutually agreed (the “New Money DIP Facility”; the DIP Lenders’ commitments under the New Money DIP Facility, the “New Money DIP Commitments”; the loans under the New Money DIP Facility, the “New Money DIP Loans”; each DIP Lender’s claim under the New Money DIP Facility, a “New Money DIP Claim”; and collectively, the “New Money DIP Claims”; and proceeds received by the Borrower from the New Money DIP Loans, the “DIP Proceeds”).
The New Money DIP Claims shall be pari passu in right of payment and collateral priority, and shall be treated the same in all other respects unless expressly specified herein or in the DIP Loan Documents (as defined below).
Following the Closing Date (as defined below), the New Money DIP Loans may be incurred during the Availability Period (as defined below) (x) upon entry of an interim order of the Bankruptcy Court authorizing and approving the DIP Facility or the use of the Company’s cash collateral, as applicable (the “Interim Order”), and an amount under the New Money DIP Facility to be agreed to be drawn in one drawing on the Closing Date and (y) the remaining amount of the New Money DIP Facility, upon entry of a final order of the Bankruptcy Court authorizing and approving the DIP Facility (including the New Money DIP Loans and all documents and lender fees related thereto) (such order to be acceptable in all respects to the DIP Agent and the DIP Lenders, the “Final DIP Order”) and satisfaction of any other conditions to draw as set forth herein, in multiple draws not to exceed one draw per weekly period in amounts not to exceed (and in intervals consistent with) those set forth in and in accordance with the Budget (as defined below) and in an aggregate amount not to exceed the New Money DIP Commitments, in each case subject to the terms and conditions provided herein (each an “Extension of Credit”). |
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| Once repaid, the New Money DIP Loans incurred under the DIP Facility cannot be reborrowed. For the avoidance of doubt, the New Money DIP Commitments will be permanently reduced by the amount of New Money DIP Loans made on the date of each Extension of Credit. | |
| Credit Bidding: | The Interim Order, the Final DIP Order, and the DIP Loan Documents shall provide that, in connection with any sale of any of the Debtors’ assets under section 363 of the Bankruptcy Code or under a plan of reorganization (i) the Prepetition Term B Agent shall have the right to credit bid the full amount of all Prepetition Term B Obligations, at the direction of the “Required Lenders” (as such term is defined in the Prepetition Term B Credit Agreement), and (ii) the DIP Agent shall have the right to credit bid all amounts outstanding under the DIP Facility at the direction of the Required DIP Lenders (as defined below), in each case, in accordance with Section 363(k) of the Bankruptcy Code. |
| Closing Date: |
The date of the satisfaction or waiver by the Required DIP Lenders of the relevant “Conditions Precedent to the Closing of the DIP Facility” set forth below (the “Closing Date”). |
| Availability Period: |
The New Money DIP Loans may be drawn during the period from and including the Closing Date up to, but excluding, the DIP Termination Date (as defined below) (such period, the “Availability Period”). The New Money DIP Commitments will expire at the end of the Availability Period. The New Money DIP Commitments shall be permanently reduced on the date of each Extension of Credit by the aggregate principal amount of the New Money DIP Loans made on the date of such Extension of Credit. |
| Maturity: |
All DIP Obligations (as defined herein) will be due and payable in full in cash unless otherwise agreed to by the DIP Lenders on the earliest of (i) the date that is [ ] calendar days after the Petition Date, (ii) if the Final DIP Order has not been entered, twenty-three (23) calendar days after the Petition Date, (iii) the acceleration of the DIP Loans and the termination of the New Money DIP Commitments upon the occurrence of an event referred to below under “Termination”, (iv) the effective date of any plan of reorganization, (v) the date the Bankruptcy Court converts any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code, (vi) the date the Bankruptcy Court dismisses any of the Chapter 11 Cases and (vii) the date an order is entered in any Bankruptcy Case appointing a Chapter 11 trustee or examiner with enlarged powers (any such date, the “DIP Termination Date”). Principal of, and accrued interest on, the DIP Loans and all other amounts owing to the DIP Agent and/or the DIP Lenders under the DIP Facility shall be payable on the DIP Termination Date. |
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| Budget: | The “Budget” shall consist of a 13-week operating budget setting forth all forecasted receipts and disbursements on a weekly basis for such 13-week period beginning as of the week of the Petition Date, broken down by week, including the anticipated weekly uses of the DIP Proceeds for such period (and draws under the DIP Facility), which shall include, among other things, available cash, cash flow, trade payables and ordinary course expenses, total expenses and capital expenditures, fees and expenses relating to the DIP Facility, fees and expenses related to the Chapter 11 Cases (including professional fees), and working capital and other general corporate needs, which forecast shall be in form satisfactory to the DIP Agent at the direction of the Required DIP Lenders and in substance satisfactory to the DIP Agent at the direction of the Required DIP Lenders (such Budget shall be supplemented in the manner required pursuant to the “Financial Reporting Requirements” section below). |
| Use of Proceeds: |
The New Money DIP Loans shall be used, in each case subject to the Budget (including Permitted Variances (as defined below)) and the terms and conditions of the DIP Credit Agreement, the Interim Order, and the Final DIP Order, to (i) upon the entry of the Final DIP Order, refinance in full (the “BAML Payoff Amount”) the outstanding obligations of the Borrower under the Prepetition BAML Obligations (the “Prepetition BAML Obligations”) set forth in a payoff letter (the “BAML Payoff Letter”) in form and substance acceptable to the Prepetition BAML Agent; provided, however, that in the event that the Debtors seek authorization and use of the New Money DIP Loan on an interim basis, the DIP Liens securing the DIP Obligations will be subject to and junior to the Prepetition Liens securing the Prepetition BAML Obligations; (ii) provide working capital and for other general corporate purposes of the Debtors, (iii) fund the costs of the administration of the Chapter 11 Cases (including professional fees and expenses) and the section 363 sale processes, and (iv) fund interest, fees, and other payments contemplated in respect of the DIP Facility. |
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| Without in any way limiting the foregoing, no DIP Collateral (as defined herein), DIP Proceeds, any portion of the Carve Out (as defined herein) or any other amounts may be used directly or indirectly by any of the Debtors, any official committee appointed in the Chapter 11 Cases (the “Committee”), if any, or any trustee or other estate representative appointed in the Chapter 11 Cases (or any successor case) or any other person or entity (or to pay any professional fees, disbursements, costs or expenses incurred in connection therewith): (a) to seek authorization to obtain liens or security interests that are senior to, or pari passu with, the DIP Liens (as defined below) or the Prepetition Liens (as defined herein) (except to the extent expressly set forth herein); or (b) to investigate (including by way of examinations or discovery proceedings), prepare, assert, join, commence, support or prosecute any action for any claim, counter-claim, action, proceeding, application, motion, objection, defense, or other contested matter seeking any order, judgment, determination or similar relief against, or adverse to the interests of, in any capacity, against any of the DIP Agent, the DIP Lenders, the Prepetition Agents or the Prepetition Lenders, and each of their respective officers, directors, controlling persons, employees, agents, attorneys, affiliates, assigns, or successors of each of the foregoing (all in their capacities as such) (collectively, the “Released Parties”), with respect to any transaction, occurrence, omission, action or other matter (including formal discovery proceedings in anticipation thereof), including, without limitation, (i) any claims or causes of action arising under chapter 5 of the Bankruptcy Code; (ii) any so-called “lender liability” claims and causes of action; (iii) any action with respect to the validity, enforceability, priority and extent of, or asserting any defense, counterclaim, or offset to, the DIP Obligations, the DIP Claims, the DIP Liens, the DIP Loan Documents, the Prepetition Loan Documents, the Prepetition Term B Obligations, and the Prepetition BAML Obligations (the Prepetition BAML Obligations and the Prepetition Term B Obligations, the “Prepetition Obligations”); (iv) any action seeking to invalidate, modify, set aside, avoid or subordinate, in whole or in part, the DIP Obligations or the Prepetition Obligations; (v) any action seeking to modify any of the rights, remedies, priorities, privileges, protections and benefits granted to either (A) the DIP Agent or the DIP Lenders hereunder or under any of the DIP Loan Documents, or (B) the Prepetition Agents or the Prepetition Lenders under any of the Prepetition Loan Documents (in each case, including, without limitation, claims, proceedings or actions that might prevent, hinder or delay any of the DIP Agent’s or the DIP Lenders’ assertions, enforcements, realizations or remedies on or against the DIP Collateral in accordance with the applicable DIP Loan Documents, the Interim Order, and the Final DIP Order); or (vi) objecting to, contesting, or interfering with, in any way, the DIP Agent’s and the DIP Lenders’ enforcement or realization upon any of the DIP Collateral once an Event of Default (as defined herein) has occurred; provided, however, that no more than $50,000 in the aggregate of the DIP Collateral, the Carve Out, cash collateral, proceeds from the borrowings under the DIP Facility or any other amounts, may be used by the Committee, if any, to investigate claims and/or liens of the Prepetition Agents and Prepetition Lenders under the Prepetition Loan Documents. | |
| Documentation: |
The DIP Facility will be evidenced by a credit agreement (the “DIP Credit Agreement”) to be in form based on the Prepetition Term B Credit Agreement (with such modifications as are necessary to reflect the terms set forth in this DIP Term Sheet and the nature of the DIP Facility as a debtor-in-possession facility, including appropriate qualifications to reflect the commencement and continuation of the Chapter 11 Cases, the events leading up to the Chapter 11 Cases, the effect of the bankruptcy, the terms of the RSA, the conditions in the industry in which the Borrower operates in as existing on the Closing Date and/or the consummation of transactions contemplated by the Debtors’ “first day” pleadings, and to reflect administrative agency and operational matters reasonably acceptable to the DIP Agent (acting at the direction of the Required DIP Lenders) and the Debtors and other modifications as may be reasonably agreed between DIP Agent (acting at the direction of the Required DIP Lenders) and the Debtors, the “Documentation Principles”), security documents, guarantees and other legal documentation (collectively, together with the DIP Credit Agreement, the “DIP Loan Documents”), which DIP Loan Documents shall be in form and substance consistent with the Documentation Principles, this DIP Term Sheet and otherwise satisfactory to the DIP Agent and the DIP Lenders. |
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| Controlled Accounts: | The Debtors shall maintain all existing Deposit Accounts (as defined in the Prepetition Term B Credit Agreement) (other than excluded accounts to be agreed) and each such Deposit Account shall remain subject to a perfected lien and control pursuant to the terms of the Interim Order and the Final DIP Order or, as may be requested by the DIP Agent, an enforceable control agreement in favor of the DIP Agent (any such account, a “Controlled Account”). The DIP Credit Agreement, the Interim Order (as applicable), and the Final DIP Order shall require the Debtors to maintain the DIP Proceeds in the Controlled Accounts except as permitted to be used in accordance with the Budget and shall prohibit the Debtors from withdrawing funds from the Controlled Accounts after the occurrence and during the continuance of an Event of Default under the DIP Credit Agreement. |
| Interest: |
The DIP Loans will bear interest at the Applicable Margin (as defined herein) plus the current LIBOR rate as determined by the DIP Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate, to be the rate at which United States Dollar deposits are offered to major banks in the London interbank market three (3) Business Days prior to the commencement of the requested interest period, adjusted for reserve requirements, if any, and subject to customary change of circumstance provisions, for interest periods of one month (the “LIBOR Rate”), payable quarterly in arrears; provided, however, that in no event shall the LIBOR Rate at any time be less than 1.00%.
“Applicable Margin” means a rate per annum equal to [__]%2 paid in cash.
Interest shall be calculated on the basis of the actual number of days elapsed in a 360 day year. |
2 NTD: To be determined based on DIP sizing and budget.
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| Default Interest: |
Upon the occurrence of and during the continuance of an Event of Default under the DIP Loan Documents, the DIP Loans and all DIP Obligations will automatically bear interest at an additional 2.00% per annum. |
| Fees: |
A closing fee equal to [__]% (the “Closing Fee”) on the entire New Money DIP Commitments, which shall be earned upon entry of the Final Order, with such Closing Fee to be shared on a pro rata basis by the DIP Lenders. The Closing Fee shall be paid in cash on the Closing Date to the DIP Agent (for distribution to the DIP Lenders). |
| Voluntary Prepayments: |
Voluntary prepayments of the DIP Loans shall be permitted at any time, without premium or penalty. |
| Mandatory Prepayments: | The DIP Credit Agreement will contain customary mandatory prepayment events for financings of this type consistent with the Documentation Principles and others agreed to by the DIP Lenders and the Borrower (“Mandatory Prepayments”), including, without limitation, prepayments from proceeds of (i) insurance and condemnation proceeds, (ii) equity or debt issuances, (iii) extraordinary receipts, (iv) any cash or cash equivalents cash collateralizing any letter of that is returned to the Borrower or any Guarantor for its own account and (v) any cash or cash equivalents returned to the Borrower or any Guarantor from rent reserves or security deposits returned to the Borrower or any Guarantor upon the assignment of a lease or otherwise, in each case, received by the Borrower or any of the Guarantors and subject to exceptions to be agreed. Mandatory Prepayments will result in a permanent reduction of the DIP Facility. |
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| Priority and Security under DIP Facility: |
All obligations of the Borrower and the Guarantors to the DIP Agent and the DIP Lenders under the DIP Facility, including, without limitation, all principal and accrued interest, premiums (if any), costs, fees and expenses or any other amounts due, or any exposure of each DIP Lender and its affiliates in respect of cash management incurred on behalf of the Borrower or any Guarantor under the DIP Facility (collectively, the “DIP Obligations”), shall be secured by the following liens and security interests (the “DIP Liens”): |
| (a) subject to the Carve Out and subject only to existing liens that under applicable law, are senior to, and have not been subordinated to, the liens of the DIP Agent under the DIP Loan Documents, but only to the extent that such liens are valid, perfected, enforceable and non-avoidable liens as of the Petition Date or perfected following the Petition Date as permitted by section 546 of the Bankruptcy Code (collectively, the “Permitted Liens”), pursuant to section 364(d)(1) of the Bankruptcy Code, a first priority perfected senior priming lien on, and security interest in the Collateral (as defined in the Prepetition Term B Loan Documents) securing the Prepetition BAML Obligations and the Prepetition Term B Obligations, wherever located, that may be subject to a validly perfected security interest in existence on the Petition Date securing the Prepetition BAML Obligations and the Prepetition Term B Obligations under the Prepetition Loan Documents (the “Prepetition Liens”), which Prepetition Liens shall be primed by, and made subject and subordinate to, the perfected first priority senior priming liens and security interests to be granted to the DIP Agent for the benefit of the DIP Lenders, which senior priming liens and security interests in favor of the DIP Agent for the benefit of the DIP Lenders shall also be senior to the Prepetition Term B Lender Adequate Protection Liens (as defined herein); provided, however, that that DIP Liens shall, until the Prepetition BAML Agent’s receipt of the BAML Payoff Amount (the “BAML Payoff Date”), be subject to and junior to the Prepetition Liens securing the Prepetition BAML Obligations; | |
| (b) subject to the Carve Out, pursuant to section 364(c)(2) of the Bankruptcy Code, a first priority perfected lien on, and security interest in, all present and after acquired property of the Debtors, wherever located, not subject to a lien or security interest on the date of commencement of the Chapter 11 Cases (collectively, the “Unencumbered Property”); | |
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(c) subject to the Carve Out, pursuant to section 364(c)(3) of the Bankruptcy Code, a junior perfected lien on, and security interest in, all present and after-acquired property of the Debtors, wherever located, that is subject to a Permitted Lien on the Petition Date or subject to a Permitted Lien in existence on the Petition Date that is perfected subsequent thereto as permitted by section 546(b) of the Bankruptcy Code; and
(d) subject to the Carve Out, a first priority perfected lien on, and security interest in, all funds on deposit in the Controlled Accounts. | |
| The property referred to in the preceding clauses (a), (b), (c) and (d) is collectively referred to as the “DIP Collateral” and shall include, without limitation, all assets (whether tangible, intangible, personal or mixed) of the Borrower and the Guarantors, whether now owned or hereafter acquired and wherever located, before or after the Petition Date, including, without limitation, all accounts, proceeds of leases, inventory, equipment, equity interests or capital stock in subsidiaries, investment property, instruments, chattel paper, real estate, leasehold interests, contracts, patents, copyrights, trademarks and other general intangibles, the proceeds of all claims or causes of action (including upon entry of the Final Order, avoidance actions and proceeds of avoidance actions under chapter 5 of the Bankruptcy Code) and all products, offspring, profits and proceeds thereof. |
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The DIP Liens shall be effective and perfected as of the entry of the Interim Order (subject to the occurrence of the Closing Date) and without necessity of the execution, filing or recording of control agreements, financing statements or other agreements. However, the DIP Agent may, in its discretion, require the execution, filing or recording of any or all of the documents described in the preceding sentence.
Notwithstanding the foregoing, the DIP Collateral shall not include (and the DIP Liens shall not extend to) assets scheduled and held by the Debtors in trust (but only for so long as such assets are held in trust). | |
| Superpriority DIP Claims: |
All DIP Claims shall be entitled to the benefits of section 364(c)(1) of the Bankruptcy Code, having superpriority over any and all administrative expenses of the kind that are specified in sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726, 1114 or any other provisions of the Bankruptcy Code, subject only to the Carve Out.
The DIP Claims will, at all times during the period that the DIP Loans remain outstanding, remain, in right of payment, senior in priority to all other claims or administrative expenses, including (a) any claims allowed pursuant to the obligations under the Prepetition Loan Documents, and (b) the Prepetition Term B Lender Superpriority Claims (as defined below), subject only to the Carve Out; provided, however, that the DIP Claims shall be subject to and junior to the claims of the Prepetition BAML Agent and the Prepetition BAML Lender until the BAML Payoff Date. |
| Carve Out: |
“Carve Out” means an amount equal to the sum of the following (A) : (i) all fees required to be paid to the Clerk of the Bankruptcy Court and to the Office of the United States Trustee under 28 U.S.C. § 1930(a) plus interest pursuant to 31 U.S.C. § 3717 (without regard to the notice set forth in clause (iii) below); (ii) all reasonable fees and expenses incurred by a trustee under section 726(b) of the Bankruptcy Code in an aggregate amount not to exceed $[50,000] (without regard to the notice set forth in clause (iii) below); and (iii) to the extent allowed by the Bankruptcy Court at any time, whether by interim order, procedural order, final order or otherwise, all accrued and unpaid fees, disbursements, costs and expenses incurred by persons or firms retained by the Debtors pursuant to section 327, 328 or 363 of the Bankruptcy Code (the “Debtor Professionals”) and all accrued unpaid fees, disbursements, costs and expenses incurred by the Committee (if any) pursuant to section 328 and 1103 of the Bankruptcy Code (the “Committee Professionals,” together with the Debtor Professionals, the “Estate Professionals,” and such Estate Professional fees in each case in accordance with the Budget, the “Allowed Professional Fees”) at any time before or on the first business day following delivery by the DIP Agent at the direction of the Required DIP Lenders of a Carve Out Trigger Notice (as defined below), whether allowed by the Bankruptcy Court prior to or after delivery of a Carve Out Trigger Notice; and (iv) Allowed Professional Fees of Estate Professionals in an aggregate amount not to exceed $[_____] incurred after the first business day following delivery by the DIP Agent at the direction of the Required DIP Lenders of a Carve Out Trigger Notice, to the extent allowed at any time, whether by interim order, procedural order, final order, or otherwise (the amounts set forth in this clause (iv), the “Post-Carve Out Trigger Notice Cap”); provided, however, nothing herein shall be construed to impair the ability of any party to object to any fees, expenses, reimbursement or compensation sought by any such professionals or any other person or entity. For purposes of the foregoing, “Carve Out Trigger Notice” shall mean a written notice (which may be delivered by e-mail (or other electronic means)) by the DIP Agent at the direction of the Required DIP Lenders to the Debtors and their counsel, the United States Trustee, and lead counsel to any Committee appointed in the Chapter 11 Cases, which notice may be delivered following the occurrence of an Event of Default, stating that the Post-Carve Out Trigger Notice Cap has been invoked. |
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| For the avoidance of doubt and notwithstanding anything to the contrary herein, the Carve Out shall be senior to all liens and claims securing the DIP Facility, the adequate protection liens and claims, and all other forms of adequate protection, liens, or claims securing the DIP Obligations or the Prepetition Obligations; provided, however, that upon the BAML Payoff Date, the Prepetition BAML Agent and the Prepetition BAML Lenders shall be released from any and all liability or subordination to the Carve Out. | |
| Investigation Rights: |
The Committee (to the extent appointed), and any other party in interest with standing, shall have the lesser of (x) sixty (60) calendar days from the date of its appointment and, to the extent a Committee is not appointed, any party in interest (other than the Debtors) shall have a maximum of seventy-five (75) calendar days from the entry of the Interim Order for any other party in interest with requisite standing or (y) two Business Days prior to the sale hearing approving the sale of all or substantially all of the Debtors’ assets (the “Investigation Period”) to investigate and commence an adversary proceeding or contested matter, as required by the applicable Federal Rules of Bankruptcy Procedure, and challenge (each, a “Challenge”) the findings, the Debtors’ stipulations, or any other stipulations contained in the Interim Order and the Final DIP Order, including, without limitation, any challenge to the validity, priority or enforceability of the liens securing the obligations under the Prepetition Loan Documents, or to assert any claim or cause of action against the Prepetition Agents or the Prepetition Lenders arising under or in connection with the Prepetition Loan Documents or the Prepetition Obligations, as the case may be, whether in the nature of a setoff, counterclaim or defense of Prepetition Obligations, or otherwise. The Investigation Period may only be extended with the prior written consent of the Prepetition Agents (acting at the direction of the Required Lenders), or pursuant to an order of the Bankruptcy Court. Except to the extent asserted in an adversary proceeding or contested matter filed during the Investigation Period, upon the expiration of such applicable Investigation Period (to the extent not otherwise waived or barred), (i) any and all Challenges or potential challenges shall be deemed to be forever waived and barred; (ii) all of the agreements, waivers, releases, affirmations, acknowledgements and stipulations contained in the Interim Order and Final DIP Order shall be irrevocably and forever binding on the Debtors, the Committee and all parties-in-interest and any and all successors-in-interest as to any of the foregoing, including any Chapter 7 Trustee, without further action by any party or the Bankruptcy Court; (iii) the Prepetition Obligations shall be deemed to be finally allowed and the Prepetition Liens shall be deemed to constitute valid, binding and enforceable encumbrances, and not subject to avoidance pursuant to the Bankruptcy Code or applicable non-bankruptcy law; and (iv) the Debtors shall be deemed to have released, waived and discharged the Released Parties from any and all claims and causes of action arising out of, based upon or related to, in whole or in part, the Prepetition Obligations. Notwithstanding anything to the contrary herein: (x) if any Challenge is timely commenced, the stipulations contained in the Interim Order and the Final DIP Order shall nonetheless remain binding on all other parties-in-interest and preclusive except to the extent that such stipulations are expressly and successfully challenged in such Challenge; and (y) the Released Parties reserve all of their rights to contest on any grounds any Challenge. For the avoidance of doubt, the Interim Order and the Final DIP Order shall include language that the investigation rights afforded to the Committee will not constitute the Debtors’, the Prepetition Lenders’ or DIP Lenders’ recognition, consent, or agreement not to object to, the Committee’s standing to assert any claim or cause of action. |
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| Conditions Precedent to the Closing of the DIP Facility: |
The DIP Credit Agreement will contain customary conditions precedent to closing mutually acceptable to the Debtors, the DIP Agent and the DIP Lenders, including but not limited to the following conditions precedent, each of which shall be subject to waiver with the consent of the Debtors and the DIP Agent at the direction of the Required DIP Lenders: |
| · All documentation relating to the DIP Facility shall be in form and substance satisfactory to the DIP Agent and the DIP Lenders, and shall have been duly executed and delivered by all parties thereto. | |
| · All reasonable and documented (in summary form) out-of-pocket fees, costs, disbursements and expenses, accrued and unpaid as of the Closing Date, of (i) the DIP Agent (limited, in the case of counsel, to all reasonable and documented out-of-pocket fees, costs, disbursements and expenses of the DIP Agent’s outside counsel, [James-Bates-Brannan-Groover LLP] (“[JBBG]”), and any successor counsel, and, to the extent necessary, one firm of local counsel engaged by the DIP Agent in connection with the Debtors’ Chapter 11 Cases), (ii) the DIP Lenders (limited, in the case of counsel, to all reasonable and documented out-of-pocket fees, costs, disbursements and expenses of the DIP Lenders’ outside counsel, King & Spalding LLP (“K&S”), and, to the extent necessary, one firm of local counsel engaged by the DIP Lenders in connection with the Debtors’ Chapter 11 Cases), (iii) Province Inc. and (iv) any other professional advisors retained by the DIP Agent at the direction of the Required DIP Lenders in their reasonable discretion, shall have been paid in full in cash (which payment may be made from DIP Proceeds), in each case to the extent invoices for any such accrued and unpaid amounts are provided to the Debtors no later than two (2) Business Days prior to the Closing Date. |
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| · The DIP Agent and the DIP Lenders shall have received a Budget in form and substance satisfactory to the DIP Agent at the direction of the Required DIP Lenders. | |
| · All first day motions, including those related to the DIP Facility, filed by the Debtors and related orders entered by the Bankruptcy Court in the Chapter 11 Cases shall be in form and substance reasonably satisfactory to the DIP Agent at the direction of the Required DIP Lenders. | |
| · Other than the Interim Order and the Final DIP Order, there shall not exist any law, regulation, ruling, judgment, order, injunction or other restraint that prohibits, restricts or imposes a materially adverse condition on the DIP Facility or the exercise by the DIP Agent at the direction of the DIP Lenders of its rights as a secured party with respect to the DIP Collateral. | |
| · Other than, in each case, as a result of the commencement and continuation of the Chapter 11 Cases, the events leading up to the Chapter 11 Cases, the effect of the bankruptcy, the conditions in the industry in which the Borrower operates in as existing on the Closing Date and/or the consummation of transactions contemplated by the Debtors’ “first day” pleadings reviewed by the DIP Agent and the Required DIP Lenders (collectively, the “Known Events”), since the Petition Date there shall have occurred no event, circumstance or condition which has resulted, or could reasonably be expected to result, in a material adverse change in (i) the business, operations, properties or condition (financial or otherwise) of the Debtors and their subsidiaries, collectively, (ii) the legality, validity or enforceability of any DIP Loan Documents, the Interim Order or the Final DIP Order, (iii) the ability of the Borrower or the Guarantors, taken as a whole, to perform their payment obligations under the DIP Loan Documents, (iv) the perfection or priority of the DIP Liens granted pursuant to the DIP Loan Documents, the Interim Order or the Final DIP Order, or (v) the rights and remedies of the DIP Agent and the DIP Lenders under the DIP Loan Documents taken as a whole (any of the foregoing being a “Material Adverse Change”). | |
| · Other than the Chapter 11 Cases, as stayed upon the commencement of the Chapter 11 Cases, or as disclosed in writing to the DIP Agent prior to the Petition Date on a schedule to the DIP Credit Agreement, there shall exist no action, suit, investigation, litigation or proceeding pending or threatened in writing in any court or before any arbitrator or governmental authority that (i) would reasonably be expected to result in a Material Adverse Change or (ii) restrains, prevents or purports to affect materially adversely the legality, validity or enforceability of the DIP Facility or the consummation of the transactions contemplated thereby. | |
| · Other than as a result of or in connection with the Chapter 11 Cases, all governmental and third party consents and approvals reasonably necessary to be obtained by the Borrower in connection with the DIP Facility, if any, shall have been obtained (without the imposition of any conditions that are not reasonably acceptable to the DIP Agent at the direction of the Required DIP Lenders in their reasonable discretion) or permitted via the Interim Order or the Final DIP Order, as applicable, and shall remain in effect. |
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| · Subject to the entry of the Interim Order, the DIP Agent, for the benefit of the DIP Lenders, shall have a valid and perfected lien on and security interest in the DIP Collateral of the Debtors on the basis and with the priority set forth herein. | |
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· In the event that the Debtors seek authorization and use of the New Money DIP Loans on an interim basis, the Bankruptcy Court shall have entered the Interim Order within three (3) calendar days following the Petition Date, in form and substance consistent with the terms and conditions set forth herein and otherwise satisfactory to the DIP Agent at the direction of the Required DIP Lenders, which Interim Order shall include, without limitation, copies of the DIP Facility and the initial Budget as exhibits thereto, entered on notice to such parties as may be satisfactory to the DIP Agent acting at the direction of the Required DIP Lenders and otherwise required by the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Local Bankruptcy Rules of the Bankruptcy Court, (i) authorizing and approving, on an interim basis, the New Money DIP Facility and the transactions contemplated thereby, including, without limitation, the granting of the superpriority status, security interests and priming liens (subject to the Prepetition Liens securing the Prepetition BAML Obligations to the extent the BAML Payoff Amount is not received on such date), and the payment of all fees, referred to herein; (ii) authorizing, on an interim basis, the lifting or modification of the automatic stay to permit the Borrower and the Guarantors to perform their obligations, and the DIP Lenders to exercise their rights and remedies, with respect to the DIP Facility; (iii) authorizing, on an interim basis, the use of cash collateral and providing for adequate protection in favor of the Prepetition Lenders as and to the extent provided herein; and (iv) reflecting such other terms and conditions that are mutually satisfactory to the DIP Agent (at the direction of the Required DIP Lenders) and the Debtors, in their respective discretion, in each case, on the terms and conditions set forth herein; which Interim Order shall be in full force and effect, shall not have been reversed, vacated or stayed and shall not have been amended, supplemented or otherwise modified without the prior written consent of the DIP Agent (at the direction of the Required DIP Lenders). |
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| · The Bankruptcy Court shall have entered the Final DIP Order within twenty (23) calendar days following the Petition Date, in form and substance consistent with the terms and conditions set forth herein and otherwise satisfactory to the DIP Agent at the direction of the Required DIP Lenders, which Final DIP Order shall include, an updated Budget (as necessary) as an exhibit thereto, entered on notice to such parties as may be satisfactory to the DIP Agent acting at the direction of the Required DIP Lenders and otherwise as required by the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Local Bankruptcy Rules of the Bankruptcy Court, (i) authorizing and approving, on a final basis, the New Money DIP Facility and the transactions contemplated thereby, including, without limitation, the granting of the superpriority status, security interests and priming liens, and the payment of all fees, referred to herein; (ii) authorizing, on a final basis, the lifting or modification of the automatic stay to permit the Borrower and the Guarantors to perform their obligations, and the DIP Lenders to exercise their rights and remedies, with respect to the DIP Facility; (iii) authorizing, on a final basis, the use of cash collateral and providing for adequate protection in favor of the Prepetition Lenders as and to the extent provided herein; and (iv) reflecting such other terms and conditions that are mutually satisfactory to the DIP Agent (at the direction of the Required DIP Lenders) and the Debtors, in their respective discretion, in each case, on the terms and conditions set forth herein; which Final DIP Order shall be in full force and effect, shall not have been reversed, vacated or stayed and shall not have been amended, supplemented or otherwise modified without the prior written consent of the DIP Agent (at the direction of the Required DIP Lenders). | |
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· The Debtors shall have entered into all stalking horse asset purchase agreements as set forth in and pursuant to the RSA.
· The DIP Agent shall have received, at least three (3) Business Days prior to the Closing Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act, and the DIP Agent shall have completed, with results satisfactory to the DIP Agent, its review procedures regarding the respective documentation and information, on or prior to the Closing Date.
· Receipt of customary closing items, including (i) a secretary’s certificate containing customary exhibits, and (ii) UCC-1 financing statements and intellectual property security agreements.
· The Debtors shall have entered into the RSA with the requisite Consenting Parties (as defined in the RSA) in accordance with its terms and the RSA shall otherwise become effective as to such parties, and the RSA shall continue to be in full force and effect according to its terms. |
| Conditions Precedent to Borrowing New Money DIP Loans: |
In addition to the satisfaction of the conditions on the Closing Date, the DIP Credit Agreement will contain the following conditions precedent to borrowings on the date of any Extension of Credit:
· The DIP Agent shall have received a borrowing notice from the Borrower at least three (3) business days prior to the anticipated date of any Extension of Credit.
· No Default or Event of Default shall have occurred, and shall be continuing, under the DIP Loan Documents immediately prior to the funding of the New Money DIP Loans or would result from such borrowing of the New Money DIP Loans. |
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· The representations and warranties of each Borrower and each Guarantor set forth in the DIP Credit Agreement shall be true and correct in all material respects (without duplication of any materiality qualifier) on and as of the Closing Date or on and as of the date of any Extension of Credit thereafter, as applicable, in each case immediately after giving effect to the funding of any New Money DIP Loans and to the application of the proceeds therefrom as though made on and as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (without duplication of any materiality qualifier) as of such earlier date).
· The making of the New Money DIP Loans shall not violate any requirement of law and shall not be enjoined temporarily, preliminarily or permanently.
· The making of the New Money DIP Loans shall be authorized pursuant to the Interim Order or the Final DIP Order, as applicable.
· Other than the Final DIP Order, there shall not exist any law, regulation, ruling, judgment, order, injunction or other restraint that prohibits or restricts the DIP Facility or the exercise by the DIP Agent at the direction of the DIP Lenders of its rights as a secured party with respect to the DIP Collateral.
· The entry of the Final DIP Order, in form and substance consistent with the terms and conditions set forth herein and otherwise satisfactory to the DIP Agent at the direction of the Required DIP Lenders, which Final DIP Order shall be in full force and effect, shall not have been reversed, vacated or stayed and shall not have been amended, supplemented or otherwise modified without the prior written consent of the DIP Agent (at the direction of the Required DIP Lenders).
· Other than the Known Events, since the Petition Date, there shall not have been a Material Adverse Change.
· The RSA shall remain in force and effect according to its terms.
· Other than the Chapter 11 Cases, as stayed upon the commencement of the Chapter 11 Cases, or as disclosed in writing to the DIP Agent prior to the Petition Date on a schedule to the DIP Credit Agreement, there shall exist no action, suit, investigation, litigation or proceeding pending or threatened in writing in any court or before any arbitrator or governmental authority that (i) would reasonably be expected to result in a Material Adverse Change or (ii) restrains, prevents or purports to affect materially adversely the legality, validity or enforceability of the DIP Facility or the consummation of the transactions contemplated thereby.
· The Loan Parties shall be in compliance with (i) the Interim Order, (ii) the Final DIP Order, and (ii) the Budget (subject to Permitted Variances). |
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| Representations and Warranties: |
The DIP Credit Agreement will contain representations and warranties (which will be applicable to each Debtor and its subsidiaries) consistent with the Documentation Principles and to be made as of (x) the date the Borrower and the Guarantors execute the DIP Loan Documents, (y) the Closing Date, and (z) the date of any Extension of Credit thereafter, including without limitation the following: representations and warranties regarding valid existence, requisite power, due authorization, no conflict with the Interim Order or the Final DIP Order (as applicable) or applicable law, governmental consent, enforceability of DIP Loan Documents, Budget, accuracy of financial statements and all other non-forward looking information provided, compliance with law, absence of Material Adverse Change, no default under the DIP Loan Documents, taxes, subsidiaries, litigation, labor matters, ERISA, pension and benefit plans, leases and real property, material contracts, bankruptcy matters, environmental, ownership of properties and necessary rights to intellectual property, insurance, inapplicability of Investment Company Act, compliance with OFAC, money laundering, PATRIOT Act and other anti-terrorism laws and anti-corruption laws, continued accuracy of representations and continued effectiveness of the Interim Order or Final DIP Order (as applicable) and each other order of the Bankruptcy Court with respect to the DIP Facility. |
| Affirmative and Negative Covenants: |
The DIP Credit Agreement will contain customary affirmative and negative covenants to be consistent with the Documentation Principles, including without limitation, the following: |
| · Deliver to the DIP Agent and the DIP Lenders and their counsel for review and comment, as soon as commercially reasonable, and in any event not less than three (3) Business Days prior to filing (or as soon thereafter as is reasonably practicable under the circumstances), all pleadings, motions and other documents material to the DIP Agent or DIP Lenders (provided that any of the foregoing relating to the DIP Facility shall be deemed material) to be filed on behalf of the Debtors with the Bankruptcy Court. | |
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· Promptly deliver in accordance with the Bid Procedures (as defined in the RSA), to the DIP Agent and the DIP Lenders copies of any term sheets, proposals, presentations, amendments to any Asset Purchase Agreement(s) (as defined in the RSA) or other documents, from any party, related to (i) the restructuring of the Debtors, or (ii) the sale of assets of one or more of the Debtors. Notwithstanding the foregoing, the Debtors will not provide copies of any term sheets, proposals, presentations, amendments to any Asset Purchase Agreement(s), bids or other confidential information to the DIP Agent and the DIP Lenders if the DIP Agent and the DIP Lenders are active bidders or involved in the bidding process as to the relevant Asset(s) at the applicable time.
· Comply with laws (including without limitation, the Bankruptcy Code, ERISA, environmental laws, OFAC, money laundering laws, PATRIOT Act and other anti-terrorism laws and anti-corruption laws), pay taxes, maintain all necessary licenses and permits and trade names, trademarks, patents, preserve corporate existence, maintain appropriate and adequate insurance coverage and permit inspection of properties, books and records, in each case, subject to materiality qualifiers consistent with the Documentation Principles. |
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| · Limitations against all transactions with affiliates of the Debtors (other than ordinary course transactions consistent with past practice among or between any Debtors and their respective subsidiaries), including, without limitation, restrictions on payment of any management fees to affiliates. | |
| · Maintain a cash management system as required by the Interim Order and the Final DIP Order and otherwise in compliance with the Prepetition Term B Credit Agreement. | |
| · Not make or commit to make payments to critical vendors in respect of prepetition amounts. | |
| · Delivery of the Budget, updated every two weeks and adherence to the Budget, subject to Permitted Variances. | |
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· (i) Actual line item and aggregate disbursements shall not exceed the line item and aggregate amount of disbursements in the Budget for the applicable period by more than the Permitted Variances, (ii) actual aggregate cash receipts (excluding DIP Proceeds that may be deemed a receipt) during the applicable period shall not be less than the aggregate amount of such cash receipts in the Budget for such period by more than the Permitted Variances; and (iii) actual cash flows during the applicable period shall not differ from the aggregate amount of such cash flows in the Budget for such period by more than the Permitted Variances.
[For purposes hereof, the term “Permitted Variances” will mean, for the first two week period after the Closing Date, to be tested on the first Wednesday following the end of such two week period (the “Initial Testing Period”) and for each rolling two week period after the Initial Testing Period (each such period after the Initial Testing Period, together with the Initial Testing Period, the “Testing Periods”): (i) all favorable variances, and (ii) an unfavorable variance of no more than [ ]% for each of actual receipts, actual disbursements (on a line item and aggregate basis) and actual net cash flows as compared to the budgeted receipts, disbursements and net cash flows, respectively, set forth in the Budget with respect to the applicable Testing Period; provided, further, that any disbursements in any Testing Period made from proceeds of favorable variances with respect to receipts in any Testing Period shall not be counted as disbursements for purposes of calculating unfavorable variances; notwithstanding the foregoing, the Carve Out shall be excluded from the determination of Permitted Variances. The Permitted Variances with respect to each Testing Period shall be determined and reported to the DIP Agent and the DIP Lenders not later than 5:00 p.m. Eastern Time on each Wednesday immediately following the end of each such Testing Period. Additional variances, if any, from the Budget, and any proposed changes to the Budget, shall be subject to the approval of the DIP Agent at the direction of the Required DIP Lenders.]3 |
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| · Consistent with the Documentation Principles and subject to the Budget, not incur or assume any additional debt or contingent obligations in respect of debt, give any guaranties in respect of debt, create any liens, charges or encumbrances or incur additional material lease obligations, in each case, beyond agreed upon limits; not merge or consolidate with any other person, change the nature of business or corporate structure or create or acquire new subsidiaries, in each case, beyond agreed upon limits; not amend its charter or by laws; not sell, lease or otherwise dispose of assets (including, without limitation, in connection with a sale leaseback transaction) outside the ordinary course of business and beyond agreed upon limits; not give a negative pledge on any assets in favor of any person other than the DIP Agent for the benefit of the DIP Lenders; and not permit to exist any consensual encumbrance on the ability of any subsidiary to pay dividends or other distributions to the Borrower; in each case, subject to customary exceptions or baskets as may be agreed. | |
| · Other than the DIP Obligations or as otherwise set forth in the Interim Order or the Final DIP Order, not prepay, redeem, purchase, defease, exchange or repurchase any debt or amend or modify any of the terms of any such debt or other similar agreements entered into by any Debtor or its subsidiaries. | |
| · Not make any loans, advances, capital contributions or acquisitions, form any joint ventures or partnerships or make any other investments in subsidiaries (other than among the Debtors) or any other person, subject to certain exceptions to be agreed. | |
| · Not make or commit to make any payments in respect of warrants, options, repurchase of stock, dividends or any other distributions (other than among the Debtors, from Debtors to non-Debtor affiliates in the ordinary course, among non-Debtors, and from non-Debtors to Debtors). | |
| · Not make, commit to make, or permit to be made any bonus payments to executive officers of the Debtors and their subsidiaries in excess of the amounts set forth in the Budget. | |
| · Not permit any change in ownership or control of any Debtor or any subsidiary or any change in accounting treatment or reporting practices, except as required by GAAP or as permitted or contemplated by the DIP Credit Agreement. | |
| · Without the prior written consent of the Required DIP Lenders, not make or permit to be made any change to the Interim Order or the Final DIP Order with respect to the DIP Facility. |
3 NTD: Variance concept to be discussed.
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· Not permit the Debtors to seek authorization for, and not permit the existence of, any claims other than that of the DIP Lenders entitled to a superpriority under section 364(c)(1) of the Bankruptcy Code that is senior or pari passu with the DIP Lenders’ section 364(c)(1) claim, except for the Carve Out.
· The Debtors shall comply with the Milestones (as defined herein). | |
| Financial Reporting Requirements: |
The Borrower shall provide to the DIP Agent for the benefit of the DIP Lenders (hereinafter the “Financial Reporting Requirements”): (i) monthly operating reports of the Debtors and their subsidiaries, within thirty (30) calendar days of month end, certified by the Debtors’ chief financial officer; (ii) quarterly consolidated financial statements of the Debtors and their subsidiaries within forty-five (45) calendar days of fiscal quarter end, certified by the Borrower’s chief financial officer; (iii) following delivery of the Budget on the Closing Date, by not later than 5:00 p.m. Eastern Time on the second Wednesday following the Closing Date and by not later than 5:00 p.m. Eastern Time on each Wednesday following the end of each Testing Period, an updated Budget, in each case, in form reasonably satisfactory to the DIP Agent at the direction of the Required DIP Lenders and in substance satisfactory to the DIP Agent at the direction of the Required DIP Lenders for the subsequent 13 week period consistent with the form of the Budget, and such updated Budget shall become the “Budget” for the purposes of the DIP Facility upon the DIP Agent’s acknowledgement at the direction of the Required DIP Lenders that the proposed updated Budget is substantially in the form of the Budget and in substance satisfactory to the DIP Agent at the direction of the Required DIP Lenders (provided, that, until a new Budget has been approved by the DIP Agent at the direction of the Required DIP Lenders, the most recently approved Budget shall govern); and (iv) beginning on the second Wednesday following the Closing Date (by not later than 5:00 p.m. Eastern Time), and on every Wednesday following the end of each Testing Period (by not later than 5:00 p.m. Eastern Time), a variance report (the “Variance Report”) setting forth actual cash receipts and disbursements and cash flows of the Debtors for the prior Testing Period and setting forth all the variances, on a line-item and aggregate basis, from the amount set forth for such period as compared to the applicable Budget delivered by the Debtors, in each case, on a weekly and cumulative rolling 2-week basis (and each such Variance Report shall include explanations for all material variances and shall be certified by the Chief Financial Officer of the Debtors). The Borrower will promptly provide notice to the DIP Agent, for distribution to the DIP Lenders, of any Material Adverse Change.
All deliveries required pursuant to this section shall be subject to the confidentiality provision to be negotiated in the DIP Credit Agreement.
On each Monday (or, in the event that such day is not a Business Day then on the Business Day immediately following) during the Chapter 11 Cases, the Borrower’s senior management and professionals shall host a telephonic meeting for the DIP Lenders and their professionals at which the Borrower’s senior management and professionals shall provide an update to the DIP Lenders (and make themselves available for questions) with respect to the financial and operating performance of the Loan Parties and their estates, including, but not limited to, the Variance Report. |
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| Other Reporting Requirements: |
The DIP Credit Agreement will contain other customary reporting requirements for similar debtor-in-possession financings and others determined by the DIP Lenders in their reasonable discretion to be appropriate to the transactions contemplated herein, including, without limitation, with respect to material adverse events, events and notices under other material debt instruments, litigation, contingent liabilities, ERISA or environmental events and consistent with the Documentation Principles (collectively with the financial reporting information described above, the “Information”). |
| Chapter 11 Cases Milestones: |
The DIP Credit Agreement will include the following milestones related to the Debtors’ Chapter 11 Cases (the “Milestones”):
· No later than [three] calendar days after the Petition Date, the Bankruptcy Court shall have entered the Interim Order.
· No later than twenty-three (23) calendar days after the Petition Date, the Bankruptcy Court shall have entered the Final DIP Order;
· The Debtors shall establish a date that is no later than fifty-five (55) calendar days after the Petition Date as the deadline for the submission of binding bids with respect to their assets;
· No later than sixty (60) calendar days after the Petition Date, the Debtors shall complete an auction for substantially all of its assets, in accordance with the Bid Procedures; provided that if there is no higher or better offer submitted in comparison to the stalking horse bid(s), no auction shall be held;
· No later than sixty-five (65) calendar days after the Petition Date, the Bankruptcy Court shall have entered one or more sale order(s) (which shall be in form and substance reasonably acceptable to Required DIP Lenders) approving each of the winning bid(s) resulting from the auction; and
· Approval of the Debtors’ sale(s), including consummation of the transactions contemplated thereby, shall occur no later than the date that is seventy-five (75) calendar days after the Petition Date.
· No later than [days] after the Petition Date, the Bankruptcy Court shall have entered an order approving the disclosure statement and approving voting and solicitation procedures with respect to the Liquidating Plan (as defined in the TSA);
· No later than [days] after the Petition Date, the Bankruptcy Court shall have entered an order confirming the Liquidating Plan; and
· No later than [days] after the Petition Date, the Liquidating Plan Effective Date (as defined in the TSA) shall have occurred. |
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| Events of Default: |
The DIP Credit Agreement will contain events of default customarily found in loan agreements for similar debtor-in-possession financings and other events of default deemed by the DIP Lenders appropriate to the transactions contemplated therein which will be applicable to the Debtors and their subsidiaries (each an “Event of Default”), including, without limitation:
· failure to make payments when due;
· noncompliance with covenants (subject to customary cure periods as may be agreed with respect to certain covenants);
· breaches of representations and warranties in any material respect, in either case, under the DIP Credit Agreement;
· failure to satisfy or stay execution of judgments in excess of specified amounts;
· the existence of certain materially adverse employee benefit or environmental liabilities, except for such liabilities as are in existence as of the Closing Date and are set forth on a schedule to the DIP Credit Agreement, and customary ERISA and similar foreign plan events;
· occurrence of a Material Adverse Change;
· invalidity of the DIP Loan Documents;
· change in ownership or control;
· termination of the RSA;
· termination of the Asset Purchase Agreement(s) due to a breach thereunder by the Debtors;
· filing of a plan of reorganization or plan of liquidation by the Debtors that does not propose to indefeasibly repay the DIP Obligations in full in cash on the plan effective date, unless otherwise consented to by the DIP Agent and the Required DIP Lenders;
· any of the Debtors shall file a pleading seeking to vacate or modify the Interim Order or the Final DIP Order over the objection of the DIP Agent at the direction of the Required DIP Lenders;
· entry of an order without the prior written consent of the Required DIP Lenders amending, supplementing or otherwise modifying the Interim Order or the Final DIP Order;
· reversal, vacatur or stay of the effectiveness of the Interim Order or the Final DIP Order except to the extent reversed within five (5) Business Days;
· any violation of any material term of the Interim Order or the Final DIP Order by the Debtors;
· dismissal of the Chapter 11 Case of a Debtor with material assets or conversion of the Chapter 11 Case of a Debtor with material assets to a case under Chapter 7 of the Bankruptcy Code, or any Debtor shall file a motion or other pleading seeking such dismissal or conversion of any Bankruptcy Case;
· appointment of a Chapter 11 trustee or examiner with enlarged powers, or any Debtor shall file a motion or other pleading seeking such appointment;
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· any sale of all or substantially all assets of the Debtors pursuant to Section 363 of the Bankruptcy Code, unless such sale is conducted in accordance with the Bid Procedures;
· failure to meet a Milestone, unless extended or waived by the prior written consent of the DIP Agent at the direction of the Required DIP Lenders;
· granting of relief from the automatic stay in the Chapter 11 Cases to permit foreclosure or enforcement on assets of the Borrower or any Guarantor, in each case, with a fair market value in excess of $[50,000];
· the Debtors’ filing of (or supporting another party in the filing of) a motion seeking entry of, or the entry of an order by the Bankruptcy Court, granting any superpriority claim or lien (except as contemplated herein) which is senior to or pari passu with the DIP Claims;
· an order shall be entered in any of the Chapter 11 Cases, without the prior written consent of the DIP Agent and the Required DIP Lenders (i) to permit any administrative expense or any claim (now existing or hereafter arising of any kind or nature whatsoever) to have administrative priority equal or superior to the DIP Claims (other than the Carve Out) or (ii) granting or permitted grant of a lien that is equal in priority or senior to the DIP Liens (other than the Carve Out);
· the Debtors’ filing of a motion seeking entry of an order approving any key employee incentive plan, employee retention plan, or comparable plan, without the prior written consent of the Required DIP Lenders;
· the Debtors shall seek, or shall support any other person’s motion seeking (in any such case, verbally in any court of competent jurisdiction or by way of any motion or pleading filed with the Bankruptcy Court, or any other writing to another party in interest by the Debtors), to challenge the validity or enforceability of any of the obligations of the parties under the Prepetition Loan Documents;
· the Debtors shall assert in any pleading filed in any court that the guarantee contained in the DIP Loan Documents is not valid and binding, for any reason, to be in full force and effect, other than pursuant to the terms hereof or thereof;
· payment of or granting adequate protection with respect to prepetition debt, other than as expressly provided herein or in the Interim Order or the Final DIP Order or consented to by the DIP Agent at the direction of the Required DIP Lenders;
· expiration or termination of the period provided by section 1121 of the Bankruptcy Code for the exclusive right to file a plan with respect to a Debtor with material assets unless such expiration or termination was sought by the Prepetition Lenders or the DIP Lenders;
· cessation of the DIP Liens or the DIP Claims to be valid, perfected and enforceable in all respects;
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· Permitted Variances under the Budget are exceeded for any period of time without consent of or waiver by the DIP Agent at the direction of the Required DIP Lenders;
· any uninsured judgments are entered with respect to any post-petition non-ordinary course claims against any of the Debtors or any of their respective affiliates in a combined aggregate amount in excess of $50,000 unless stayed;
· any Debtor asserting any right of subrogation or contribution against any other Debtor until all borrowings under the DIP Facility are paid in full and the commitments are terminated;
· subject to entry of the Final DIP Order, the allowance of any claim or claims under Section 506(c) of the Bankruptcy Code or otherwise against any DIP Lender;
· the commencement of a suit or action against any DIP Lender and, as to any suit or action brought by any person other than any Debtor or an officer or employee of any Debtor, the continuation thereof without dismissal for thirty (30) days after service thereof on the DIP Lenders, that asserts or seeks by or on behalf of the Debtors, any Committee or any other party in interest in any of the Bankruptcy Cases, a claim or any legal or equitable remedy that would (i) have the effect of subordinating any or all of the DIP Obligations or DIP Liens of the DIP Lenders under the DIP Loan Documents to any other claim, or (ii) have a material adverse effect on the rights and remedies of the DIP Agent and/or the DIP Lenders under any DIP Loan Document or the collectability of all or any portion of the DIP Obligations;
· the entry of an order in any Bankruptcy Case avoiding or requiring repayment of any portion of the payments made on account of the DIP Obligations owing under the DIP Credit Agreement or the other DIP Loan Documents;
· an order shall have been entered by the Bankruptcy Court prohibiting, limiting or restricting the right of the DIP Agent (on behalf of the DIP Lenders) to credit bid for any or all of the Debtors’ assets; and
· the payment of any prepetition claim other than (i) as consented to by the Required DIP Lenders, (ii) as authorized by the Budget, (iii) permitted under the terms of the DIP Credit Agreement or (iv) as authorized by the Bankruptcy Court pursuant to the “first day” or “second day” orders or the Interim Order or the Final DIP Order and reflected in the Budget.
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| Termination: |
Upon the occurrence and during the continuance of an Event of Default, the DIP Agent, at the direction of the Required DIP Lenders shall, by written notice to the Borrower, its counsel, the U.S. Trustee and counsel for any statutory committee, terminate the DIP Facility, declare the obligations in respect thereof to be immediately due and payable and, subject to the immediately following paragraph, exercise all rights and remedies under the DIP Loan Documents, the Interim Order, and the Final DIP Order.
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| Remedies: |
The DIP Agent and the DIP Lenders shall have customary remedies upon the occurrence and during the continuance of an Event of Default, including, without limitation, the following:
Without further order from the Bankruptcy Court, and subject to the terms of the Interim Order and the Final DIP Order (including in respect of any required notices), the automatic stay provisions of section 362 of the Bankruptcy Code shall be vacated and modified to the extent necessary to permit the DIP Agent and the DIP Lenders to exercise, upon the occurrence and during the continuance of any Event of Default under their respective DIP Loan Documents, all rights and remedies provided for in the DIP Loan Documents, and to take any or all of the following actions without further order of or application to the Bankruptcy Court (as applicable): (a) immediately terminate the Debtors’ limited use of any cash collateral; (b) cease making any DIP Loans under the DIP Facility to the Debtors; (c) declare all DIP Obligations to be immediately due and payable; (d) freeze monies or balances in the Debtors’ accounts (and, with respect to the DIP Credit Agreement and the DIP Facility, sweep all funds contained in the Controlled Accounts); (e) immediately set-off any and all amounts in accounts maintained by the Debtors with the DIP Agent or the DIP Lenders against the DIP Obligations, or otherwise enforce any and all rights against the DIP Collateral in the possession of any of the applicable DIP Lenders, including, without limitation, disposition of the DIP Collateral solely for application towards the DIP Obligations; and (f) take any other actions or exercise any other rights or remedies permitted under the Interim Order and the Final DIP Order, the DIP Loan Documents or applicable law to effect the repayment of the DIP Obligations; provided, however, that the DIP Agent and the DIP Lenders must provide the Debtors with three (3) business days’ written notice (which may be by email) before exercising any enforcement rights or remedies; provided, further, that neither the Debtors, the Committee nor any other party-in-interest shall have the right to contest the enforcement of the remedies set forth in the Interim Order and the Final DIP Order and the DIP Loan Documents on any basis other than an assertion that an Event of Default has not occurred or has been cured within the cure periods expressly set forth in the applicable DIP Loan Documents. The Debtors shall cooperate fully with the DIP Agent and the DIP Lenders in their exercise of rights and remedies, whether against the DIP Collateral or otherwise.
The Debtors shall waive any right to seek relief under the Bankruptcy Code, including under section 105 thereof, to the extent such relief would restrict or impair the rights and remedies of the DIP Agent and the DIP Lenders set forth in the Interim Order and the Final DIP Order and in the DIP Loan Documents.
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| Adequate Protection: |
As adequate protection for the use of the collateral securing the Prepetition Obligations (the “Prepetition Collateral”), the Prepetition Term B Agent, on behalf of and for the benefit of the Prepetition Term B Lenders, and the Prepetition Term B Lenders, shall receive, in each case subject to the Carve Out:
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(i) current payment of all reasonable and documented (in summary form) out-of-pocket fees, costs and expenses of (x) the Prepetition Term B Agent (limited, in the case of counsel, to all reasonable and documented out-of-pocket fees, costs, disbursements and expenses of [JBBG] as its counsel, and any successor counsel, and one local counsel) and (y) the Prepetition Term B Lenders (limited, in the case of counsel, to all reasonable and documented out-of-pocket fees, costs, disbursements and expenses of Province Inc. and of K&S as its counsel, and any successor counsel, and one local counsel);
(ii) replacement liens to the extent of any postpetition diminution in value of the Prepetition Term B Lenders’ interest in the Collateral resulting from the use, sale or lease by the Debtors of such Prepetition Collateral and/or the imposition of the automatic stay, including replacement liens on all Unencumbered Property of the Debtors, which liens will be junior to DIP Liens (the “Prepetition Term B Lender Adequate Protection Liens”) and senior to Prepetition Liens;
(iii) superpriority administrative expense claims to the extent of any postpetition diminution in value of the Prepetition Term B Lenders’ interest in the Collateral resulting from the use, sale or lease by the Debtors of such Prepetition Collateral and/or the imposition of the automatic stay (the “Prepetition Term B Lender Superpriority Claims”), which claims will be junior to the DIP Obligations and be payable from and have recourse to all assets and property of the Debtors; and
(iv) reasonable access to the Debtors’ books and records and such financial reports as are provided to the DIP Agent pursuant to provisions (i) through (iii) above of the Financial Reporting Requirements section.
(the foregoing clauses (i)-(iv), the “Adequate Protection Package”).4
The Interim Order and the Final DIP Order shall provide that the Debtors’ agreement to the Milestones and the Budget shall constitute a component of the Adequate Protection Package.
The Interim Order shall include language providing for the payment of all outstanding fees and expenses referenced in the foregoing clauses (i) and (ii) through and including the Petition Date upon entry of the Interim Order.
For the avoidance of doubt, any and all payments made on account of the Prepetition Term B Obligations to the Prepetition Term B Lenders in connection with the Adequate Protection Package shall be distributed in accordance with the waterfall set forth in the Prepetition Term B Credit Agreements.
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4 NTD: Interim Order and Final Order to include customary adequate protections for Prepetition BAML Obligations including, without limitation, (1) until the BAML Payoff Date, current pay of interest and reasonable and documented attorney’s fees, and customary cash collateral usage provisions (Milestones, reporting requirements, etc.), and (2) until the indefeasible repayment in full of the Prepetition BAML Obligations (including the running of the Investigation Period without a Challenge being filed), replacement liens and administrative expense claims and current pay of any contingent indemnification, reimbursement or similar surviving obligations arising under or in connection with the Prepetition BAML Obligations (including any reasonable and documented attorneys’ fees related thereto).
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| Marshalling and Waiver of 506(c) and 552(b) Claims: |
Effective upon entry of the Final DIP Order, the DIP Agent, the DIP Lenders, the Prepetition BAML Agent, the Prepetition BAML Lenders, the Prepetition Term B Agent, and the Prepetition Term B Lenders shall not be subject to the equitable doctrine of “marshalling” or any similar doctrine with respect to the DIP Collateral or the Prepetition Collateral, as applicable, and all proceeds shall be received and applied pursuant to the Final DIP Order and the DIP Loan Documents notwithstanding any other agreement or provision to the contrary.
Effective upon entry of the Final DIP Order, the Debtors (on behalf of themselves and their estates) shall waive, and shall not assert in the Chapter 11 Cases or any successor cases, (i) any surcharge claim under sections 105(a) and/or 506(c) of the Bankruptcy Code or otherwise for any costs and expenses incurred in connection with the preservation, protection or enhancement of, or realization by the DIP Agent, the DIP Lenders, the Prepetition BAML Agent, the Prepetition BAML Lenders, the Prepetition Term B Agent, and the Prepetition Term B Lenders, upon the DIP Collateral, or the Prepetition Collateral and (ii) the DIP Agent, the DIP Lenders, the Prepetition BAML Agent, the Prepetition BAML Lenders, the Prepetition Term B Agent, and the Prepetition Term B Lenders shall each be entitled to all of the rights and benefits of section 552(b) of the Bankruptcy Code, and the “equities of the case” exception under section 552(b) of the Bankruptcy Code shall not apply to the DIP Agent, the DIP Lenders, the Prepetition BAML Agent, the Prepetition BAML Lenders, the Prepetition Term B Agent, and the Prepetition Term B Lenders with respect to proceeds, product, offspring or profits of any of the Prepetition Collateral or DIP Collateral.
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| Indemnification: |
The Debtors shall jointly and severally indemnify and hold harmless the DIP Agent, each DIP Lender and each of their affiliates and each of the respective officers, directors, employees, controlling persons, agents, advisors, attorneys and representatives of each (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to any investigation, litigation or proceeding or the preparation of any defense with respect thereto, arising out of or in connection with or relating to the DIP Facility, the DIP Loan Documents or the transactions contemplated thereby, or any use made or proposed to be made with the DIP Proceeds, whether or not such investigation, litigation or proceeding is brought by any Debtor or any of its subsidiaries, any shareholders or creditors of the foregoing, an Indemnified Party or any other person, or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby or under the DIP Loan Documents are consummated, except, with respect to any Indemnified Party, to the extent such claim, damage, loss, liability or expense is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted solely from such Indemnified Party’s gross negligence or willful misconduct or any of such Indemnified Party’s affiliates or their respective principals, directors, officers, employees, representatives, agents, attorneys or third party advisors. No Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to any Debtor or any of its subsidiaries or any shareholders or creditors of the foregoing for or in connection with the transactions contemplated hereby, except, with respect to any Indemnified Party, to the extent such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted solely from such Indemnified Party’s gross negligence or willful misconduct or any of such Indemnified Party’s affiliates or their respective principals, directors, officers, employees, representatives, agents, attorneys or third party advisors. In no event, however, shall any Indemnified Party be liable on any theory of liability for any special, indirect, consequential or punitive damages.
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| Expenses: |
The Borrower and each Guarantor shall jointly and severally pay (i) (x) all reasonable and documented (in summary form) out-of-pocket fees, costs, disbursements and expenses of the DIP Agent (including (and limited, in the case of counsel, to) all reasonable and documented out-of-pocket fees, costs, disbursements and expenses of the DIP Agent’s counsel, [JBBG], and, to the extent necessary, one firm of local counsel engaged by the DIP Agent in connection with the Debtors’ Chapter 11 Cases, and any successor counsel to each), and any other professional advisors retained by the DIP Agent at the direction of the Required DIP Lenders in their reasonable discretion and (y) all reasonable and documented (in summary form) out-of-pocket fees, costs, disbursements and expenses of the DIP Lenders (including (and limited, in the case of counsel, to) all reasonable and documented out-of-pocket fees, costs, disbursements and expenses of the DIP Lenders’ counsel, K&S, and, to the extent necessary, one firm of local counsel engaged by the DIP Lenders in connection with the Debtors’ Chapter 11 Cases, and any successor counsel to each), in each case of the foregoing clauses (x) and (y), in connection with the negotiations, preparation, execution and delivery of the DIP Loan Documents and the funding of all DIP Loans under the DIP Facility, including, without limitation, all due diligence, transportation, computer, duplication, messenger, audit, insurance, appraisal, valuation and consultant costs and expenses, and all search, filing and recording fees, incurred or sustained by the DIP Agent or DIP Lenders and their respective counsel and professional advisors in connection with the DIP Facility, the DIP Loan Documents or the transactions contemplated thereby, the administration of the DIP Facility and any amendment or waiver of any provision of the DIP Loan Documents, and (ii) without duplication, (x) all reasonable and documented (in summary form) out-of-pocket fees, costs, disbursements and expenses of the DIP Agent (including (and limited, in the case of counsel, to) all reasonable and documented out-of-pocket fees, costs, disbursements and expenses of [JBBG] (and any successor counsel) as outside counsel to the DIP Agent (and any successor counsel), and, to the extent necessary, one firm of local counsel engaged by the DIP Agent in each relevant jurisdiction, and any successor counsel to such primary counsel and local counsel, and any other professional advisors retained by the DIP Agent at the direction of the Required DIP Lenders in their reasonable discretion) and (y) all reasonable and documented (in summary form) out-of-pocket fees, costs, disbursements and expenses of the DIP Lenders (including (and limited, in the case of counsel, to) all reasonable and documented out-of-pocket fees, costs, disbursements and expenses of Province, Inc. and K&S (and any successor counsel) as outside counsel to the DIP Lenders (and any successor counsel), and, to the extent necessary, one firm of local counsel engaged by the DIP Lenders in each relevant jurisdiction, and any successor counsel to such primary counsel and local counsel, in each case of the foregoing clauses (x) and (y), in connection with (A) the enforcement of any rights and remedies under the DIP Loan Documents, (B) the Chapter 11 Cases, including attendance at all hearings in respect of the Chapter 11 Cases; and (C) defending and prosecuting any actions or proceedings arising out of or relating to the Prepetition Obligations, the DIP Obligations, the Liens securing the Prepetition Obligations and the DIP Obligations, or any transaction related to or arising in connection with the Prepetition Loan Documents, the DIP Credit Agreement or the other DIP Loan Documents (in the case of the Prepetition Obligations and the Liens securing the Prepetition Obligations, to the extent provided in the Prepetition Loan Documents).
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| Assignments and Participations: |
No consent of the Borrower shall be required for any assignments. Each DIP Lender shall have the right to sell participations in its DIP Loans, subject to customary voting limitations.
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| Removal of DIP Lenders: |
The Required DIP Lenders shall have the right to cause any DIP Lender (under certain situations to be specified in the DIP Credit Agreement) to assign its DIP Loans, DIP Commitment or any other obligations to one or more existing and consenting DIP Lenders.
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| Required DIP Lenders: |
DIP Lenders holding more than 50.0% of the DIP Commitments (the “Required DIP Lenders”), except as to matters requiring unanimity under the DIP Credit Agreement (e.g., the reduction of interest rates, the extension of interest payment dates, the reduction of fees, the extension of the maturity of the Borrower’s obligations, any change in the superpriority status of the Borrower’s and Guarantors’ obligations under the DIP Facility and the release of all or substantially all of the DIP Collateral).
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| Miscellaneous: |
The DIP Credit Agreement will include standard yield protection provisions (including, without limitation, provisions relating to compliance with risk-based capital guidelines, increased costs, payments free and clear of withholding taxes and customary EU bail-in provisions).
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| Governing Law: |
Except as governed by the Bankruptcy Code, the law of the State of New York.
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| Counsel to the DIP Agent: | [James-Bates-Brannan-Groover LLP] |
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| Counsel to the DIP Lenders: | King & Spalding LLP |
| Local Counsel to the DIP Lenders: | Morris, Nichols, Arsht & Tunnell LLP |
| Counsel to the Debtors: | Gibson, Dunn & Crutcher LLP |
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Local Counsel to the Debtors:
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Pachulski Stang Ziehl & Jones LLP
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EXHIBIT E
JOINDER
This Joinder to the Restructuring Support Agreement, dated as of [_____], 2021 by and among each of the Company Parties and the Consenting Parties signatory thereto (as amended, supplemented or otherwise modified, the “RSA), is executed and delivered by __________________ (the “Joining Party”) as of ___________, 2021. Capitalized terms used but not otherwise defined herein shall have the meaning set forth in the RSA.
1. Agreement to be Bound. The Joining Party hereby agrees to be bound by all of the terms of the RSA (as the same may be hereafter amended, restated or otherwise modified from time to time). The Joining Party shall hereafter be deemed to be a Party for all purposes under the RSA.
2. Representations and Warranties. With respect to the aggregate principal amount of Consenting Lender Holdings, as applicable, held by the Joining Party upon consummation of the sale, assignment, transfer, hypothecation or other disposition (including by participation) of such Consenting Lender Holdings listed on the signature page hereto, the Joining Party hereby makes the representations and warranties, as applicable, to the Company set forth in the RSA.
3. Governing Law. This Joinder shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to any conflicts of law provisions which would require the application of the law of any other jurisdiction.
* * * * *
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Joining Party has caused this Joinder to be executed as of the date first written above.
| Name of Institution: |
| By: | ||
| Name: | ||
| Title: |
| Principal amount of Loans: $ |
| Notice Address: | ||
| Attn: | ||
| Phone: | ||
| Email: |
[Signature Page to Joinder]