EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
DATED AS OF JULY 22, 2005
AMONG
ICONIX BRAND GROUP, INC.,
BUYER,
▇▇▇ ▇▇▇▇▇ COMPANY, LLC, ▇▇▇ ▇▇▇▇▇ LICENSING, LLC
JBC CANADA HOLDINGS, LLC, ▇▇▇ ▇▇▇▇▇ CANADA, LP
(COLLECTIVELY, THE "SELLERS"),
AND
EACH OF
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(COLLECTIVELY, THE "PRINCIPALS").
TABLE OF CONTENTS
PAGE
1. Certain Definitions....................................................1
2. Sale and Purchase of Assets............................................8
2.1 Assets...........................................................8
2.2 Excluded Assets..................................................9
2.3 Assumption of Certain Liabilities................................9
2.4 Non-Assumption of Liabilities...................................10
2.5 Delivery of Certain Assets......................................10
3. Closing; Purchase Price...............................................10
3.1 Closing Date and Place..........................................10
3.2 Purchase Price..................................................10
3.3 Purchase Price Allocation.......................................10
4. Representations, Warranties and Covenants of Sellers..................11
4.1 Due Incorporation and Qualification.............................11
4.2 Equity Interests................................................11
4.3 Authority to Execute and Perform Agreement......................11
4.4 Financial Statements............................................11
4.5 No Asset Material Adverse Change................................12
4.6 Tax Matters.....................................................12
4.7 Compliance with Laws............................................12
4.8 Permits.........................................................12
4.9 No Breach.......................................................12
4.10 Consents........................................................13
4.11 Judgments and Proceedings.......................................13
4.12 Employee Relations..............................................13
4.13 Contracts.......................................................13
4.14 Accounts Receivable.............................................14
4.15 Inventory.......................................................14
4.16 Tangible Property...............................................14
4.17 Intangibles.....................................................14
4.18 Title...........................................................15
4.19 Indebtedness....................................................15
4.20 Undisclosed Liabilities.........................................15
4.21 Customers and Licensees.........................................15
4.22 Employee Benefit Plans..........................................15
4.23 Insurance.......................................................15
4.24 Software........................................................15
4.25 No Broker.......................................................16
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TABLE OF CONTENTS
PAGE
4.26 Investment Matters..............................................16
4.27 Real Property. No Seller owns any Real Property.................16
4.28 Assets..........................................................17
5. Representations and Warranties of Buyer...............................17
5.1 Subsidiaries....................................................17
5.2 Due Incorporation and Qualification.............................17
5.3 Authority to Execute and Perform Agreement......................17
5.4 No Breach.......................................................17
5.5 No Broker.......................................................18
5.6 Capitalization..................................................18
5.7 Tax Matters.....................................................18
5.8 Issuance of Buyer's Stock.......................................18
5.9 Filings, Consents and Approvals.................................19
5.10 Regulatory Compliance...........................................19
5.11 No Buyer Material Adverse Change................................19
5.12 Internal Accounting Controls....................................19
5.13 Listing and Maintenance Requirements............................20
5.14 Compliance with Laws............................................20
5.15 Investment Company..............................................20
5.16 Application of Takeover Protections.............................20
6. Closing Deliveries of Sellers.........................................20
6.1 Opinion of Counsel..............................................20
6.2 Transfer Documentation..........................................20
6.3 Secretary Certificate...........................................21
6.4 Organic Amendments..............................................21
6.5 Good Standing Certificates......................................21
6.6 Incumbency Certificates.........................................21
6.7 Licensing Fees..................................................21
6.8 Employment Agreements...........................................21
7. Closing Deliveries of Buyer...........................................21
7.1 Opinion of Counsel..............................................21
7.2 Transfer Documentation..........................................21
7.3 Secretary Certificate...........................................21
7.4 Good Standing Certificates......................................21
7.5 Incumbency Certificates.........................................22
7.6 Employment Agreements...........................................22
8. Interpretation and Survival of Representations and Warranties.........22
9. Certain Post-Closing Obligations......................................22
9.1 Voting Restrictions.............................................23
9.2 Automatic Registration..........................................23
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TABLE OF CONTENTS
PAGE
9.3 Other Registration Rights.......................................27
9.4 Form D..........................................................28
9.5 Integration.....................................................28
9.6 Cooperation on Tax Matters......................................28
9.7 Assistance with Audits..........................................28
10. Indemnification.......................................................29
10.1 Obligation of Sellers and Principals to Indemnify...............29
10.2 Limitation as to the Sellers' and the Principals'
Indemnification Obligations.....................................29
10.3 Obligation of Buyer to Indemnify................................31
10.4 Limitation as to the Buyer's Indemnification Obligations........32
10.5 Third Party Claims..............................................32
10.6 Assistance......................................................33
11. Waiver of Bulk Sales Compliance.......................................33
12. Expenses..............................................................33
13. Further Assurances....................................................34
14. Non-compete...........................................................34
15. Miscellaneous.........................................................34
15.1 Publicity.......................................................35
15.2 Notices.........................................................35
15.3 Entire Agreement................................................36
15.4 Waivers and Amendments..........................................36
15.5 Binding Agreement...............................................36
15.6 Governing Law...................................................36
15.7 Assignment......................................................36
15.8 Variations in Pronouns..........................................37
15.9 Severability....................................................37
15.10 Counterparts....................................................37
15.11 Exhibits and Schedules..........................................37
15.12 Headings........................................................37
15.13 Consent to Jurisdiction and Service of Process..................37
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SCHEDULE DESCRIPTION
2.1(3) Specified Contracts
2.3(3) Assumed Liabilities
3.3 Purchase Price Allocation
4.2 Seller Equity Interests
4.4 Seller Financial Statements
4.6 Seller Tax Matters
4.8 Seller Permits
4.10 Seller Consents
4.13(1) Seller Contracts
4.13(2) Tier I Specified Contracts
4.14 Seller Accounts Receivable
4.15 Seller Inventory
4.17 Seller Intangibles
4.18 Seller Title
4.19 Seller Indebtedness
4.22 Seller Benefit Plans
4.23 Seller Insurance
4.24 Seller Software
4.25 No Seller Broker
5.1 Buyer Subsidiaries
5.5 No Buyer Broker
5.6 Buyer Capitalization
5.10 Buyer Regulatory Compliance
5.15 Buyer Compliance with Laws
Annex A Notice Information for Principals
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of July 22, 2005, by and among Iconix Brand Group,
Inc., a Delaware corporation ("Buyer"), ▇▇▇ ▇▇▇▇▇ Company, LLC, a Delaware
limited liability company, ▇▇▇ ▇▇▇▇▇ Licensing, LLC, a Delaware limited
liability company, JBC Canada Holdings, LLC, a Delaware limited liability
company, ▇▇▇ ▇▇▇▇▇ Canada, LP, a Delaware limited partnership (collectively, the
"Sellers"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Principals").
Background
WHEREAS, Sellers are engaged in the business of marketing and licensing
the ▇▇▇ ▇▇▇▇▇(R) family of Marks and names for use in connection with a wide
variety of goods;
WHEREAS, the Principals indirectly own or control all of the outstanding
equity, ownership and beneficial interests of each of the Sellers;
WHEREAS, Buyer desires to acquire substantially all of the assets of
Sellers and to assume certain of Sellers' liabilities, and Sellers desire to
sell such assets to Buyer, all upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, in connection with the transactions contemplated herein, Buyer
will issue to the Sellers certain shares of Buyer's Stock as partial
consideration for Buyer's purchase of the assets hereunder.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, and intending to be legally bound, the parties agree as
follows:
1. Certain Definitions. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, (1) the
terms defined in this Section have the meanings assigned to them in this
Section, wherever they appear in this Agreement (2) all accounting terms not
otherwise defined herein have the meanings assigned under generally accepted
accounting principles in the United States consistently applied and as in effect
on the date hereof ("GAAP") and (3) all words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement, as a whole and not to
any particular Section or other subdivision.
1.1 "Accounts Receivable" means all of the Sellers' respective
accounts receivable (billed and unbilled).
1.2 "Acknowledged Encumbrances" means, collectively, (i)
Encumbrances specifically disclosed or reserved against in the Financial
Statements, (ii) Encumbrances for Taxes, fees, levies, duties or other
governmental charges not yet past due or duly reserved for and being contested
in good faith by appropriate proceedings which suspend the collection thereof
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and (iii) Encumbrances for mechanics, material, laborers, employees, suppliers
or similar liens arising by operation of Law for sums which are not yet past
due.
1.3 "Affiliate" means, with respect to a specified Person, any other
Person that directly or indirectly through one or more intermediaries controls,
is controlled by, or is under common control with, the specified Person.
1.4 "Asset Material Adverse Change" means any change in the Assets
that, individually or in the aggregate, has an Asset Material Adverse Effect.
1.5 "Asset Material Adverse Effect" means a material adverse effect
on the Assets, taken as a whole, other than (i) effects resulting from the
execution or announcement of this Agreement or any other Transaction Document or
resulting from or relating to compliance with the terms of, or the taking of any
action required by, this Agreement or any other Transaction Document, (ii)
effects of any change arising in connection with acts of war, sabotage,
terrorism, military actions or the escalation thereof, (iii) effects of any
change in applicable Laws, regulations or accounting rules, (iv) changes in
general economic, financial, regulatory, political or market conditions in the
world and (v) changes in conditions or developments generally applicable to the
industries in which the Assets are utilized and that do not affect the Assets in
any manner materially disproportionate to other Persons in such industry.
1.6 "Buyer Material Adverse Change" means any change in the
business, properties, assets or financial condition of Buyer or any of its
Subsidiaries that, individually or in the aggregate, has a Buyer Material
Adverse Effect.
1.7 "Buyer Material Adverse Effect" means a material adverse effect
on the business, properties, assets or financial condition of Buyer and its
Subsidiaries, taken as a whole, other than (i) effects resulting from the
execution or announcement of this Agreement or any other Transaction Document or
resulting from or relating to compliance with the terms of, or the taking of any
action required by, this Agreement or any other Transaction Document, (ii)
effects of any change arising in connection with acts of war, sabotage,
terrorism, military actions or the escalation thereof, (iii) effects of any
change in applicable Laws, regulations or accounting rules, (iv) changes in
general economic, financial, regulatory, political or market conditions in the
world and (v) changes in conditions or developments generally applicable to the
industries in which Buyer is involved and that do not affect Buyer in any manner
materially disproportionate to other Persons in such industry.
1.8 "Buyer's Stock" means shares of common stock, $0.001 par value
per share, of Iconix Brand Group, Inc.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Consent" means any consent, approval, order or authorization
of, or any declaration, filing or registration with, or any application or
report to, or any waiver by, or any other action (whether similar or dissimilar
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to any of the foregoing) of, by or with, any Person, which is necessary in order
to take a specified action or actions in a specified manner and/or to achieve a
specified result or to avoid the occurrence of a default.
1.11 "Contract" means any written contract, agreement, instrument,
order, commitment or binding arrangement, express or implied, of any nature
whatsoever.
1.12 "Contract Right" means any right, power or remedy under any
Contract, including but not limited to rights to receive property or services or
otherwise to derive benefits from the payment, satisfaction or performance of
another party's obligations.
1.13 "Documents" means and includes any document, agreement,
instrument, certificate, notice, Consent, affidavit, correspondence (by letter,
electronic mail, telex or otherwise), written statement, schedule or exhibit
whatsoever.
1.14 "Employee Benefit Plan" means (1) any employee benefit plan, as
defined in Section 3(3) of ERISA, or (2) any other material plan, trust
agreement or arrangement for any bonus, severance, hospitalization, vacation,
deferred compensation, pension or profit sharing, retirement, payroll savings,
stock option, group insurance, death benefit, fringe benefit, welfare or any
other employee benefit plan or fringe benefit arrangement of any nature
whatsoever.
1.15 "Encumbrance" means any lien, security interest, pledge,
mortgage, easement, leasehold, assessment, covenant, restriction, or any other
encumbrance, claim, burden or charge of any kind or nature whatsoever.
1.16 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.17 "Excluded Transactions" shall mean any transaction or series of
transactions that, directly or indirectly, (A) results in any holder of the
Shares receiving proportionately less or different consideration for any Shares
held by such holder or otherwise being treated disproportionately adversely than
any other holder of Buyer's Stock or other interests convertible, exchangeable
or exercisable into shares of Buyer's Stock; (B) has the effect of increasing
the proportionate share of the outstanding Buyer's Stock held by any Affiliate
of Buyer, except as a result of (y) the issuance to such Affiliate for fair
value of any such shares of Buyer's Stock on terms and conditions approved by
the Board, or (z) the issuance of equity securities of Buyer to Buyer's
employees in the ordinary course of business pursuant to employee benefit plans
or arrangements approved by the Board; (C) has an adverse effect on any existing
employment, consulting or other arrangement between Buyer or any of its
Subsidiaries and any such holder or any Affiliate of such holder of Shares; or
(D) would subject any holder of Shares to liability under any applicable Law.
1.18 "Family Group" means, with respect to any Person, (i) such
Person's spouse, parents, grandparents, heirs and lineal descendants (whether
natural or adopted), (ii) any trust for the benefit of such Person or any of the
3
other Persons identified in clause (i) above, and (iii) any retirement plan for
such Person or any of the other Persons identified in clause (i) above.
1.19 "First Level Capped Seller Failure of Representation" shall
mean any Seller Failure of Representation other than a Tier I Specified Contract
Failure of Representation or a Second Level Capped Seller Failure of
Representation.
1.20 "Guaranteed Minimum Royalties" means, as applicable, (i) with
respect to the Kmart Contract, the Minimum Royalties (as such term is defined in
the Kmart Contract as in effect on the date hereof) payable pursuant to the
Kmart Contract as in effect on the date hereof, (ii) with respect to the Canada
Contract I, shall relate solely to the Minimum Royalties (as such term is
defined in the Canada Contract I as in effect on the date hereof) payable
pursuant to the Canada Contract I as in effect on the date hereof and (iii) with
respect to the Canada Contract II, shall relate solely to the Minimum Royalties
(as such term is defined in the Canada Contract II as in effect on the date
hereof) payable pursuant to the Canada Contract II as in effect on the date
hereof.
1.21 "▇▇▇▇▇▇ Retained Liabilities" means any and all Liabilities of
any of the Sellers to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
1.22 "Indebtedness" means all indebtedness for borrowed money.
1.23 "Insurance Policies" means any policy or binder for fire,
public liability, product liability, general liability, life, hospital, medical,
disability, comprehensive, automobile, property damage, workmen's compensation,
key man, fidelity bond, theft, forgery, vehicular, or errors and omissions
insurance, or for any other insurance of any nature whatsoever.
1.24 "Intangible" means, throughout the world, the Marks, trademark
registrations, service ▇▇▇▇ registrations, all trade secrets, Permits, licenses,
patterns, pressbooks, promotional material, artwork, design rights, vendor
numbers, know-how, patents, patent applications, copyrights, copyright
applications, Web sites (including, but not limited to, domain names), designs,
formula, invention, product right, technology, Software, database or other
intangible asset of any nature, whether in use, operational, active, under
development or design, non-operative, or inactive, owned, marketed, maintained,
supported, used, licensed or otherwise held for use by, or licensed to or with
respect to which rights are granted to, a Seller, and all good will, whether or
not related to the foregoing, whether arising under statutory or common law in
any jurisdiction or otherwise, in each case, to the extent owned by one or more
of the Sellers on the Closing Date, and includes, without limitation, any and
all Intellectual Property Rights in and to the foregoing and the right to ▇▇▇
for past infringement of any Intangibles.
1.25 "Intellectual Property Right(s)" means any and all proprietary
rights (throughout the universe, in all media (including all uniform resource
locators (URLs)), now existing or created in the future, and for the entire
duration of such rights) arising under statutory or common law, contract, or
otherwise, and whether or not perfected, owned or used by the Sellers pursuant
to license, permission or other valid right, including without limitation, all
4
(a) patents, reissues and reexamined patents, and patent applications, whenever
filed and wherever issued, and all priority rights resulting from such
applications; (b) rights associated with works of authorship including, but not
limited to, copyrights, moral rights, copyright applications, copyright
registrations, and rights to prepare derivative works; (c) rights relating to
the protection of trade secrets and confidential information; (d) rights in
trademarks, trademark registrations, service marks, service ▇▇▇▇ registrations,
trade names, logos, symbols, and the like; (e) rights analogous to those set
forth in this definition and any and all other proprietary rights relating to
Intangibles; and (f) divisions, continuations, continuations-in-part,
substitutes, renewals, reissues and extensions of the foregoing (as and to the
extent applicable) now existing, hereafter filed, issued, or acquired; provided
in case of each of the foregoing any such Intellectual Property Right owned by
the Sellers and the right to ▇▇▇ for past infringement of any such Intellectual
Property Rights.
1.26 "Inventory" means any raw materials, supplies,
work-in-progress, finished goods, archived apparel, parts or any other inventory
of any nature whatsoever owned by the Sellers on the Closing Date. As used in
this Agreement, the term also includes finished products sold by Sellers prior
to the Closing Date and returned to inventory for any reason following the
Closing Date.
1.27 "IRS" means the Internal Revenue Service.
1.28 "Judgment" means any order, writ, injunction, fine, citation,
award, decree or any other judgment of any kind whatsoever of any foreign,
federal, state or local court, governmental body, administrative agency,
regulatory authority or arbitration tribunal.
1.29 "Law" means any provision of any law, statute, ordinance,
order, constitution, charter, treaty, rule or regulation enacted, approved or
adopted by any governmental, administrative or regulatory authority, including
common law.
1.30 "Liabilities" means any direct or indirect Indebtedness,
liability, claim, loss, damage, Judgment, deficiency or obligation, known or
unknown, fixed or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise required by GAAP to be set forth on
financial statements.
1.31 "Licensing Fees" mean any and all fees due to Sellers after
June 30, 2005 from its existing licensees under the Specified Contracts,
including but not limited to, the $3.75 million fee due to Sellers on July 1,
2005 under the License Agreement between ▇▇▇ ▇▇▇▇▇ Licensing, LLC and Kmart
Corporation dated August 13, 2001 (the "Kmart Contract").
1.32 "Losses" means any and all Liabilities, Proceedings, causes of
action, actual and documented costs and expenses including, without limitation,
costs of investigation, actual interest costs, penalties and reasonable
attorneys' fees; provided, however, the term "Losses" shall not include any
consequential, incidental, special, exemplary or punitive damages or losses or
any losses based upon a theory of lost profits.
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1.33 "Marks" means all names, corporate names, domain names,
trademarks, trademark applications, service marks, service ▇▇▇▇ applications,
trade names, brand names, product names, logos, trade dress, symbols, slogans or
other designations owned by any Seller.
1.34 "Permit" means any license, permit, certificate, Consent, right
or privilege of any kind or nature whatsoever granted, issued, approved or
allowed by any foreign, federal, state or local governmental, administrative or
regulatory authority.
1.35 "Permitted Holder" means, with respect to any Seller or
Principal, each of (i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and any member of his Family Group, (ii)
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and any member of his Family Group, (iii) any Affiliate of such
Seller or Principal and (iv) with respect to any Principal, any member of such
Principal's Family Group.
1.36 "Person" means any individual, sole proprietorship, joint
venture, partnership, corporation, limited liability company, association,
joint-stock company, unincorporated organization, cooperative, trust, estate,
government entity or authority (including any branch, subdivision or agency
thereof), administrative or regulatory authority, or any other entity of any
kind or nature whatsoever.
1.37 "Proceeding" means any claim, suit, action, equitable action,
litigation, investigation, arbitration, administrative hearing or any other
judicial or administrative proceeding of any kind or nature whatsoever, or any
formal demand which might lead to any of the foregoing.
1.38 "Prospectus" means the prospectus included in a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Shares covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
1.39 "Real Property" means any real estate, land, building,
structure, improvement or other real property of any kind or nature whatsoever
owned, leased or occupied by any Seller, all shares of stock or other ownership
interests through which interests in real estate may be held, and all
appurtenant and ancillary rights thereto, including, without limitation,
easements, covenants, water rights, sewer rights and utility rights.
1.40 "Registration Statement" means the registration statement
required to be filed hereunder in accordance with Section 9.2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
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1.41 "Second Level Capped Seller Failure of Representation" means
any breach of the representations and warranties of Sellers set forth in Section
4.17.
1.42 "Securities Act" means the Securities Act of 1933, as amended.
1.43 "Sellers' Actual Knowledge" means the actual knowledge of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ after due inquiry of such persons with such
individuals employed by the Sellers responsible for the matter being represented
or warranted.
1.44 "Software" means any computer program, operating system,
applications system, firmware or software of any kind or nature whatsoever,
including, without limitation, all object code, source code, technical manuals,
user manuals and other documentation therefor, whether in machine-readable form,
a programming language or any other language or symbols, and whether stored,
encoded, recorded or written on disk, tape, film, memory device, paper or other
media.
1.45 "Subsidiaries" with respect to any Person, means any other
Person or business entity, with respect to whom 50% or more of the equity
interest (or debt or other interest convertible into an equity interest) is
owned directly or indirectly by such Person.
1.46 "Tangible Property" means any machinery, buildings, fixtures,
equipment, parts, furniture, leasehold improvements, office equipment, vehicles,
tools, forms, supplies or other tangible property of any kind or nature
whatsoever, in each case, owned by any Seller on the Closing Date.
1.47 "Tax" or "Taxes" means all taxes and governmental impositions
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority or other governmental authority,
including, but not limited to, those on or measured by or referred to as income,
franchise, profits, gross receipts, capital, ad valorem, custom duties,
alternative or add-on minimum taxes, estimated, environmental, disability,
registration, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, and interest, penalties and additions to tax imposed with respect
thereto.
1.48 "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information
(including any amendments thereto) that is, has been or may in the future be
filed with or submitted to, or required to be filed with or submitted to, any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax or in connection with the administration,
implementation or enforcement of or compliance with any Law relating to any Tax.
1.49 "Tier I Specified Contract Counterparty" means, as applicable,
(i) with respect to the Kmart Contract, Kmart Corporation, (ii) with respect to
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the Canada Contract I, Caulfeild Apparel Group Ltd. and (iii) with respect to
the Canada Contract II, Boys Will Be Boys Clothing, Inc.
1.50 "Tier I Specified Contract Failure of Representation" means any
breach of the representations and warranties of Sellers set forth in Section
4.13(2), to the extent that such breach satisfies each of the following
conditions: (a) such breach is based upon the existence of, as of the date
hereof, a breach or default by ▇▇▇ ▇▇▇▇▇ Licensing, LLC or ▇▇▇ ▇▇▇▇▇ Canada, LP,
as applicable, of a Tier I Specified Contract, and (b) as a result of such
breach or default, pursuant to the terms of such Tier I Specified Contract in
effect as of the date hereof, the applicable Tier I Specified Contract
Counterparty is not required to pay, and in fact does not pay, any applicable
Guaranteed Minimum Royalties to Buyer that would, but for the existence of such
breach or default, otherwise be payable to Buyer after the date hereof but prior
to the expiration of the current term thereof (without giving effect to any
renewal or extension thereof) under the terms of such Tier I Specified Contract
(the actual amount of any such applicable Guaranteed Minimum Royalties that are
not so paid in respect of a Tier I Specified Contract Failure of Representation
is herein referred to as the "Applicable Royalties").
1.51 "Tier I Specified Contracts" means each of (i) the Kmart
Contract, (ii) the License Agreement, dated as of April 1, 2001, between ▇▇▇
▇▇▇▇▇ Canada, LP and Caulfeild Apparel Group Ltd. (the "Canada Contract I") and
(iii) the License Agreement, dated as of May 5, 2001, between ▇▇▇ ▇▇▇▇▇ Canada,
LP and Boys Will Be Boys Clothing, Inc. (the "Canada Contract II"), in each
case, as in effect on the date hereof.
1.52 "Tier II Specified Contracts" means each of the Specified
Contracts other than the Tier I Specified Contracts.
1.53 "Transaction Documents" means, collectively, this Agreement and
each other Document required to be executed in connection with the transactions
contemplated hereby.
2. Sale and Purchase of Assets.
2.1 Assets. On the Closing Date (as hereinafter defined), subject to
and upon the terms and conditions contained herein, Sellers will sell, transfer,
convey, assign and deliver to Buyer, and Buyer will purchase and acquire from
Sellers, all of the Sellers' right, title and interest in and to all of the
following (all of which (other than Excluded Assets) being hereinafter
collectively referred to as the "Assets"), in each case, other than any Excluded
Asset:
(1) All Tangible Property of Sellers;
(2) All Licensing Fees actually paid to Sellers on or prior to
the Closing Date;
(3) All of Sellers' rights, powers and privileges in and to
the Contracts described on Schedule 2.1(3) ("Specified Contracts") and all
Contract Rights thereunder;
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(4) All Intangibles owned by Sellers and all Intellectual
Property Rights associated therewith;
(5) All files, books and records, invoices, ledgers, sales
acknowledgments and other data pertaining to the foregoing ("Books and Records")
(provided, however that (x) Sellers may retain their Books and Records of
original entry and shall provide Buyer with copies thereof and (y) the term
"Books and Records" shall not include any corporate charter, certificate of
formation, limited liability company agreement, operating agreement,
qualifications to conduct business as a foreign company, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, and other documents relating to the
organization, maintenance and existence of the Sellers, and all of the Sellers'
privileged communications, oral or written, between any Seller's officers,
directors or employees, on one hand, and such Seller's attorneys, agents or
other representatives, on the other hand); and
(6) All of Sellers' claims, causes of action and other legal
rights and remedies, whether or not known as of the Closing, relating to
Sellers' ownership of the Assets, but excluding claims against Buyer with
respect to the transactions contemplated herein.
2.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, there is excluded from the sale and purchase contemplated by
this Agreement the following assets of Sellers (the "Excluded Assets"):
(1) All Contracts (and associated Contract Rights) other than
the Specified Contracts;
(2) All cash or cash equivalents, except for the Licensing
Fees;
(3) All Tax Returns and all refunds, rebates or similar items
of Taxes to the extent such Taxes were paid by or on behalf of the Sellers or
any of their affiliates or equity holders;
(4) Any of the rights of the Sellers under this Agreement;
(5) All rights to use any property or asset owned by Windsong
Allegiance Group, LLC or any of its affiliates or related Persons in connection
with the business of the Sellers;
(6) All of the equity interests of the Sellers in any other
Person; and
(7) All of Sellers' right, title and interest in and to
Sellers' Real Property and all of Sellers' rights under all Contracts relating
to the Real Property.
2.3 Assumption of Certain Liabilities. On the terms and subject to
the conditions set forth herein, from and after the Closing Date, Buyer will
assume, perform and pay only the following Liabilities ("Specified Liabilities")
but only to the extent the same are not incurred or resulting from (directly or
9
indirectly) any breach of any representation, warranty or covenant of Sellers
noted herein:
(1) All Liabilities of Sellers in respect of any Asset, in
each case, arising after the Closing Date;
(2) All Liabilities of any Seller under, or in connection
with, any Specified Contract whether arising prior to, on, or following the
Closing Date; and
(3) All such other Liabilities specifically set forth on
Schedule 2.3(3) hereof.
2.4 Non-Assumption of Liabilities. Notwithstanding anything herein
capable of interpretation to the contrary, Buyer does not assume any Liabilities
of the Sellers other than the Specified Liabilities (any such Liabilities not so
assumed are herein referred to as the "Retained Liabilities," it being
acknowledged and agreed that all ▇▇▇▇▇▇ Retained Liabilities shall constitute
Retained Liabilities).
2.5 Delivery of Certain Assets. On the Closing Date, Sellers shall
deliver, on behalf of Buyer, all of the Assets which are comprised of
Intangibles and Intellectual Property Rights directly to IP Holdings LLC, an
indirect wholly-owned Subsidiary of Buyer ("IP Holdings"). The parties hereto
acknowledge and agree that, notwithstanding this Section 2.5, all of the Assets,
including the Assets subject to this Section 2.5, are being acquired by Buyer
hereunder and the delivery by Sellers of the Assets subject to this Section 2.5
to IP Holdings shall be deemed to be a delivery of such Assets initially to
Buyer followed by a contribution of such Assets by Buyer to the capital of IP
Holdings. It is hereby acknowledged and agreed that the Sellers shall not be
obligated to deliver to Buyer at Closing any Assets comprised of Tangible
Property or Books and Records, and that the Sellers shall retain possession (but
not ownership) of such Tangible Property and Books and Records until such time
as Buyer shall direct Sellers to deliver such Assets to an identified location,
at which time Sellers shall promptly deliver such Assets as so directed by
Buyer.
3. Closing; Purchase Price
3.1 Closing Date and Place. Consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place on the date
hereof (the "Closing Date"). The Closing shall take place at the offices of
Blank Rome LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, commencing at
10:00 A.M. (local time), on the Closing Date, or at such other time or place as
the parties may agree in writing.
3.2 Purchase Price. In consideration of the sale, transfer,
conveyance and delivery of the Assets, and in reliance upon the representations
and warranties made herein by Sellers and Principals, Buyer shall, on the
Closing Date, in full payment thereof, pay to Sellers, or their respective
designees, the following consideration: (i) Forty Million Dollars ($40,000,000)
payable in immediately available funds at the Closing (the "Cash Consideration")
and (ii) the issuance of 4,350,000 restricted shares of Buyer's Stock, (the
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"Shares" and together with the Cash Consideration and the Specified Liabilities,
collectively hereinafter referred to as the "Purchase Price") and (iii) the
assumption of the Specified Liabilities. At the Closing, the Purchase Price will
be paid by Buyer in accordance with written instructions delivered by Sellers to
Buyer prior to the Closing.
3.3 Purchase Price Allocation. The Purchase Price for the Assets
shall be allocated in a manner set forth on Schedule 3.3 hereto. In connection
with the determination of such schedule, the parties shall cooperate with each
other and provide such information as any of them shall reasonably request. The
parties shall (a) prepare and, where applicable, file each report relating to
the federal, state, local, foreign and other Tax consequences of the purchase
and sale contemplated hereby (including the filing of IRS Form 8594) in a manner
consistent with such allocation schedule and (b) take no position in any Tax
Return or other Tax filing, proceeding, audit or otherwise which is inconsistent
with such allocation.
4. Representations, Warranties and Covenants of Sellers. Knowing that
Buyer relies thereon, Sellers, jointly and severally, represent, warrant and
covenant to Buyer as of the Closing Date as follows:
4.1 Due Incorporation and Qualification. Each of Sellers is a
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation. Each of Sellers has the limited liability company or limited
partnership power and authority necessary to own, lease and operate the Assets,
to carry on their respective businesses as and where such businesses are now
conducted, except where the failure to have such power and authority would not
have an Asset Material Adverse Effect. Each of Sellers has the limited liability
company or limited partnership power and authority necessary to enter into and
perform this Agreement and to consummate the transactions contemplated hereby
upon the terms and conditions herein provided. Each of Sellers is duly qualified
as a foreign limited liability company or limited partnership in good standing
under the Laws of each jurisdiction in which the nature of their respective
businesses or the location of any of the Assets requires such licensing or
qualification, except where the failure to be so qualified or licensed would not
have an Asset Material Adverse Effect.
4.2 Equity Interests. Except for the Persons listed on Schedule 4.2,
there are no other record or beneficial owners of any equity security of any
Seller or any parent company or entity of any Seller. Except for the interests
listed on Schedule 4.2, there were and currently are no other issued or
outstanding equity interests of any Seller or any parent company or entity of
any Seller.
4.3 Authority to Execute and Perform Agreement. Each Seller has the
requisite limited liability company or limited partnership power and authority
to execute, deliver and perform this Agreement and each of the other Transaction
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and each other Transaction Document to which such Seller is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary limited liability company or limited partnership
action on the part of each Seller. This Agreement and each other Transaction
Document to which a Seller or a Principal is a party constitutes a valid and
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legally binding agreement of the Sellers and Principals party thereto
enforceable against each of the Sellers and Principals party thereto in
accordance with their respective terms and conditions, except that such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws relating to or affecting creditors' rights
generally or general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
4.4 Financial Statements. Attached to Schedule 4.4 are complete
copies of the audited financial statements and notes thereto of JBC Holdings,
LLC and its subsidiaries at and for the twelve months ended December 31, 2003
(the "Audited Financial Statements"). The Audited Financial Statements,
including the footnotes thereto, were audited and reported upon by Weisbart,
Altman, Schaelson & ▇▇▇▇▇▇ LLP, independent certified public accountants, in an
unqualified auditors' opinion without an explanatory paragraph. Schedule 4.4
also sets forth (i) the unaudited financial statements and notes thereto of
Windsong Allegiance Group, LLC and its subsidiaries at and for the twelve months
ended December 31, 2004 (the "2004 Financial Statement"), and (ii) the Sellers'
unaudited income statement for the five (5) months ended May 31, 2005 (together
with the 2004 Financial Statement, the "Unaudited Financial Statements" and
together with the Audited Financial Statements, the "Financial Statements"). The
Financial Statements have been prepared from the books and records of the
applicable entities and present fairly in all material respects the financial
position of the applicable entities as at such dates and the results of its
operations and the changes in its retained earnings and its financial positions
for the periods then ended in accordance with GAAP consistently applied
throughout the periods indicated (except, in the case of the Unaudited Financial
Statements, for normal year-end adjustments and the absence of footnotes). Since
December 31, 2004, there have been no material changes in the accounting
policies of any Seller except for any such changes required pursuant to GAAP.
4.5 No Asset Material Adverse Change. Since December 31, 2004 there
has not occurred an Asset Material Adverse Change.
4.6 Tax Matters. Except to the extent that a failure to file a Tax
Return, pay, collect or withhold Taxes, or any inaccuracy in a Tax Return would
not result in Buyer being liable for such Taxes, (i) the Sellers have timely
filed all Tax Returns (other than franchise Tax Returns) that are required to be
filed before the Closing Date, (ii) the information provided on such Tax Returns
is complete and accurate in all material respects and (iii) all Taxes due on
such Tax Returns have been paid in full. No material claim has ever been made by
any governmental authority in a jurisdiction where any Seller does not file a
Tax Return that it is or may be subject to taxation by that jurisdiction. None
of the Assets is subject to any lien for Taxes, other than in respect of Taxes
not yet past due or duly reserved for and being contested in good faith by
appropriate proceedings which suspend the collection thereof.
t 12 4.7 Compliance with Laws. Since January 1, 2002, the Sellers'
respective businesses have been conducted in compliance with all applicable
Laws, except for any failure to be so conducted that would not have an Asset
Material Adverse Effect. Since January 1, 2002, no Seller has received written
notice of any alleged violation of or claim under any such Law.
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4.8 Permits. Each Seller holds as of the date of signing this
Agreement all Permits which are necessary for it to conduct its business as
presently conducted, expect for any Permit the failure to so hold would not have
an Asset Material Adverse Effect. A true, correct and complete list of each of
the material Permits currently held by the Sellers in respect of their
respective businesses (the "Applicable Permits") is set forth in Schedule 4.8.
Each Applicable Permit is in full force and effect, except where the failure to
so be in full force and effect would not have an Asset Material Adverse Effect.
The Sellers have not received any written notice alleging a current violation
under any Applicable Permit. No Proceeding is pending, or, to the Sellers'
Actual Knowledge, threatened , to revoke or terminate any Permit.
4.9 No Breach. The consummation of the transactions herein
contemplated including, without limitation, the execution, delivery and
performance by the Sellers of this Agreement and each of the other Transaction
Documents to which a Seller is a party do not and will not (1) constitute a
violation of or default under (either immediately or upon notice, lapse of time
or both) or result in a breach of (a) any Seller's limited liability company
agreement or limited partnership agreement, (b) any Judgment relating to the
Assets and binding upon any Seller, (c) any Applicable Permit; or (d) any Law
applicable to the Assets, except, in the cases of clause (b), (c) or (d), any
such violation, default or breach that would not have an Asset Material Adverse
Effect; or (2) result in the creation or imposition of any Encumbrance (other
than any Acknowledged Encumbrance) on any of the Assets, except for any such
Encumbrance created or imposed by, through or under Buyer or any of its
affiliates or any of their respective Indebtedness.
4.10 Consents. Except as set forth in Schedule 4.10, no Consent is
required to be obtained by a Seller or Principal in connection with the
execution, delivery and performance by Sellers or Principals of this Agreement
or the consummation of the transactions contemplated hereby, other than any such
Consent the failure to so obtain would not have an Asset Material Adverse
Effect.
4.11 Judgments and Proceedings. There is no unsatisfied Judgment
against any Seller relating to the Assets. There is no Proceeding pending or, to
the Sellers Actual Knowledge, threatened, against any Seller or against or
affecting any of the Assets, which, if adversely determined, would have an Asset
Material Adverse Effect.
4.12 Employee Relations. As of the Closing Date, no Seller has any
employees.
4.13 Contracts.
(1) Schedule 4.13(1) sets forth a true and correct list of all
material Contracts to which any Asset is bound.
(2) True and correct copies of all of the Tier I Specified
Contracts have been delivered to Buyer. Except as set forth on Schedule 4.13(2),
(a) all of the Tier I Specified Contracts are in full force and effect; (b)
neither any Seller, nor, to the Sellers' Actual Knowledge, any of the other
parties thereto, is in default under any Specified Contracts; and (c) to the
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Sellers' Actual Knowledge, there is no condition or basis for any claim of a
default by any party to any Tier I Specified Contract or event which, with
notice, lapse of time or both, would constitute a default under any Tier I
Specified Contract. The consummation of the transactions herein contemplated
including, without limitation, the execution, delivery and performance by the
Sellers of this Agreement and each of the other Transaction Documents to which a
Seller is a party do not and will not constitute a violation of or default under
(either immediately or upon notice, lapse of time or both) or result in a breach
of a Tier I Specified Contract.
(3) True and correct copies of all of the Tier II Specified
Contracts have been delivered to Buyer. All of the Tier II Specified Contracts
are in full force and effect. Neither any Seller, nor, to the Sellers' Actual
Knowledge, any of the other parties thereto, is in default under any Tier II
Specified Contracts, except for any such default which would not have an Asset
Material Adverse Effect. To the Sellers' Actual Knowledge, there is no condition
or basis for any claim of a default by any party to any Tier II Specified
Contract or event which, with notice, lapse of time or both, would constitute a
default under any Tier II Specified Contract, in each case, except for any such
default which would not have an Asset Material Adverse Effect. The consummation
of the transactions herein contemplated including, without limitation, the
execution, delivery and performance by the Sellers of this Agreement and each of
the other Transaction Documents to which a Seller is a party do not and will not
constitute a violation of or default under (either immediately or upon notice,
lapse of time or both) or result in a breach of a Tier II Specified Contract,
except for any such default which would not have an Asset Material Adverse
Effect.
(4) Except as set forth on Schedule 4.13(2), Sellers have
examined, monitored or otherwise policed, to the extent deemed prudent by
Sellers and in accordance with the customary practices in the industry in which
Sellers participate, the activities of all of the licensee counterparties under
the Specified Contracts to verify that the products manufactured, sold or
offered for sale under the Marks licensed to such licensees pursuant to the
Specified Contracts meet, in all material respects, the quality control
standards set forth in such Specified Contracts.
4.14 Accounts Receivable. As of the Closing Date, no Seller has any
Accounts Receivable.
4.15 Inventory. As of the Closing Date, no Seller has any Inventory.
4.16 Tangible Property. The Tangible Property of the Sellers which
constitute Assets is in good operating condition and repair.
4.17 Intangibles.
(1) All applications and registrations for the Marks, patents,
and copyrights owned by the Sellers are listed on Schedule 4.17. All
Intellectual Property Rights (other than in relation to Software) owned by the
Sellers or that are licensed to the Sellers pursuant to a written license
agreement are listed on Schedule 4.17. Except as disclosed in Schedule 4.17, to
the Sellers' Actual Knowledge, all Sellers' rights in and to the Intangibles set
14
forth in Schedule 4.17 are free and clear of any claims of infringement or
Encumbrance (other than any Acknowledged Encumbrance). No Seller has received
written notice that any Intangibles set forth in Schedule 4.17 is not valid,
rightfully owned or used, and no Seller knows of any basis for any such charge
or claim. To the Sellers' Actual Knowledge, none of the Intangibles set forth on
Schedule 4.17 infringes upon or violates the Intellectual Property Rights or
other proprietary rights of any Person. Except as set forth on Schedule 4.17, no
Seller has licensed any Person to use any Intangible set forth on Schedule 4.17
or other Intellectual Property Rights of any Seller, nor is any Seller obligated
to pay any royalties, licensing fees or similar payments to any Person in
respect thereof.
(2) Schedule 4.17 contains a complete and accurate list and
summary description of all registrations and pending applications for the Marks.
All registered Marks have been registered with the United States Patent and
Trademark Office or the trademark office of the jurisdiction to which the
registration pertains. To the Sellers' Actual Knowledge, the Marks are valid and
enforceable and are not subject to any maintenance fees or taxes or actions
falling due within sixty (60) days after the date hereof, except as set forth on
Schedule 4.17. Except as set forth in Schedule 4.17, (i) no ▇▇▇▇ is now involved
in any opposition, invalidation or cancellation Proceeding and, to the Sellers'
Actual Knowledge, no such action is threatened with respect to any of the Marks;
(ii) to the Sellers' Actual Knowledge, there is no potentially interfering
trademark or trademark application of any other Person with regard to the Marks;
(iii) no Seller has received a written claim from any other Person challenging
or threatening such Seller's ownership of the Marks; and (iv) where applicable,
the Assets bear Marks accompanied by the proper federal registration notice
where permitted by law except for where such failure to comply with proper
federal registration notice is not material to the operation of the Assets,
taken as a whole.
4.18 Title. Except as set forth on Schedule 4.18, each Seller has
good, valid and/or marketable title, as appropriate, to all of the Assets, free
and clear of all Encumbrances (other than any Acknowledged Encumbrance).
4.19 Indebtedness. All Indebtedness of each Seller as at the Closing
Date is set forth on Schedule 4.19, which Schedule 4.19 specifically sets forth
the true and accurate principal amount of Indebtedness outstanding, as of the
Closing Date, under that certain Promissory Note, dated as of August 13, 2001,
issued by ▇▇▇ ▇▇▇▇▇ Licensing, LLC to Kmart Corporation (the "Kmart Promissory
Note"), together with all accrued and unpaid interest thereon as of the Closing
Date. Schedule 4.19 sets forth a true and correct aged list of each Seller's
accounts payable as of the date hereof.
4.20 Undisclosed Liabilities. As of the Closing Date, no Seller has
any material Liabilities in respect of their respective businesses, other than
(1) Liabilities reflected or reserved for on the 2004 Financial Statement or in
the notes thereto, (2) Liabilities that have arisen or been incurred since the
date of the latest 2004 Financial Statement in the ordinary course of business
consistent with past practices, or (3) Retained Liabilities.
15
4.21 Customers and Licensees. To the Sellers' Actual Knowledge, no
customer or licensee of a Seller under a Specified Contract intends to cancel or
materially reduce its ongoing commercial relationship with the businesses of the
Sellers.
4.22 Employee Benefit Plans. Sellers do not sponsor, maintain or
contribute to any Employee Benefit Plans for any employee of the Sellers.
4.23 Insurance. Schedule 4.23 sets forth all Insurance Policies held
by or on behalf of each Seller in respect of the Assets, specifying the insurer,
the policy number (or covering note number with respect to binders), the risks
covered, the premium, the deductibles and the amount of coverage provided and
describing each pending claim thereunder of more than $10,000. No Seller is in
default with respect to any provision contained in any such Insurance Policy
nor, to the Sellers' Actual Knowledge, has any Seller failed to give any notice
or present any claim under any such Insurance Policy in due and timely fashion.
No Seller has received a written notice of cancellation, non-renewal or audit of
any such Insurance Policy.
4.24 Software. Schedule 4.24 is an accurate and complete list and
description of all Software (except for any standard or "off-the-shelf" computer
software) owned, licensed, leased or otherwise used by each Seller in connection
with their respective businesses, and identifies which of such Software is
owned, licensed, leased, or otherwise used, as the case may be. Except as set
forth in Schedule 4.24, each Seller owns, free and clear of any Encumbrances
(other than Acknowledged Encumbrances), or has a valid right to use pursuant to
lease, license, sublicense, agreement or permission, all of the Software
currently used by such Seller in connection with the its business. With respect
to all Software owned by a third party and used by a Seller in connection with
its business pursuant to a valid lease, license, sublicense, agreement or
permission, (1) to the Sellers' Actual Knowledge, the lease, license,
sublicense, agreement or permission covering such Software is valid, legally
binding, enforceable and in full force and effect and may be transferred
pursuant to this Agreement; (2) to the Sellers' Actual Knowledge, no party to
any such lease, license, sublicense, agreement or permission is in breach
thereof and no event has occurred which with notice or lapse of time would
constitute a breach thereof, permitting termination or modification thereof; and
(3) no Seller has granted any sublicense, sublease or similar right with respect
to any such lease, license, sublicense, agreement or permission.
4.25 No Broker. Except as set forth in Schedule 4.25, no broker,
finder, agent or similar intermediary engaged by a Seller has acted for or on
behalf of any Seller in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is
entitled to any broker's fee, finder's fee, or similar fee or commission for
which Buyer will be liable in connection therewith based on any agreement,
arrangement or understanding with any Seller or any action taken by any Seller.
4.26 Investment Matters. The Shares to be issued hereunder are being
acquired for each Seller's and Principal's own account and not on behalf of any
other Person, and all such Shares are being acquired for investment purposes
only and not with a view to, or for sale in connection with, any resale or
distribution of such Shares. Each of the Sellers and Principals has received or
examined the SEC Reports. Each of the Sellers and Principals has had the
opportunity to ask questions and receive answers from Buyer concerning Buyer,
16
and have been furnished with all other information about Buyer which it has
requested (it being understood that each Seller and each Principal is relying on
the representations and warranties of Buyer set forth herein). Each Seller and
Principal is an "accredited investor" as defined in Rule 501(a) of the
Securities Act of 1933, as amended. Each Seller and Principal believes that it
or he has been fully apprised of all facts and circumstances necessary to permit
it or him to make an informed decision about acquiring the Shares, that it or he
has sufficient knowledge and experience in business and financial matters that
it or he is capable of evaluating the merits and risks of an investment in the
Shares, and that it or he has the capacity to protect its or his own interests
in connection with the transactions contemplated hereby. Each of the Sellers and
Principals have been advised by Buyer and understand that, except as otherwise
contemplated by this Agreement, (1) the Shares to be issued hereunder will not
be registered under any federal or state securities laws at the time of the
issuance thereof, (2) such Shares must be held indefinitely unless and until
they are subsequently registered or an exemption from registration becomes
available, (3) the certificates representing such Shares shall bear appropriate
restrictive legends, and (4) Buyer shall have the right to direct the transfer
agent of its common stock to place a stop transfer order against such
certificates.
4.27 Real Property. No Seller owns any Real Property.
4.28 Assets. The Sellers own no material assets other than the
Assets and the Excluded Assets.
5. Representations and Warranties of Buyer. Knowing that Sellers and
Principals rely thereon, Buyer represents, warrants and covenants to Sellers and
Principals on the date hereof and on the Closing Date as follows:
5.1 Subsidiaries. Buyer has no direct or indirect Subsidiaries, and
does not own, directly or indirectly, any equity interest in or control, alone
or in combination with others, any Persons, other than those listed in Schedule
5.1. Except as disclosed in Schedule 5.1, Buyer owns, directly or indirectly,
all of the capital stock of each such Subsidiary free and clear of any and all
Encumbrances, and all the issued and outstanding shares of capital stock of each
such Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.
5.2 Due Incorporation and Qualification. Each of Buyer and each of
its Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, organization or formation (as applicable). Each of Buyer and its
Subsidiaries has the corporate or other similar applicable power and authority
necessary to own, lease and operate their respective assets and business, to
carry on their respective businesses as and where such businesses are now
conducted and, in the case of Buyer, to enter into and perform this Agreement
and each of the other Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby upon the terms and
conditions herein and therein provided. Each of Buyer and its Subsidiaries is
17
duly qualified as a foreign corporation or other entity in good standing under
the Laws of each jurisdiction in which the nature of their respective business
or the location of any of their respective assets requires such licensing or
qualification, except where the failure to be so qualified or licensed would not
have a Buyer Material Adverse Effect.
5.3 Authority to Execute and Perform Agreement. Buyer has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and each of the other Transaction Documents to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and each other Transaction Document
to which Buyer is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement and each other Transaction Document to
which Buyer is a party constitutes a valid and legally binding agreement of
Buyer enforceable against Buyer in accordance with their respective terms and
conditions, except that such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws relating to or
affecting creditors' rights generally or general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
5.4 No Breach. The consummation of the transactions herein
contemplated including, without limitation, the execution, delivery and
performance by Buyer of this Agreement and each of the other Transaction
Documents to which it is a party do not and will not constitute a violation of
or default under (either immediately or upon notice, lapse of time or both) or
result in a breach of (a) Buyer's certificate of incorporation, bylaws or other
organic governing documents, (b) any Contract to which Buyer or any of its
Subsidiaries or any of their respective assets are bound, (c) any Judgment
binding upon Buyer or any of its Subsidiaries, (d) any Permit; or (e) any Law
(including federal and state securities laws) applicable to Buyer or any of its
Subsidiaries or any of their respective assets, except, in the cases of clause
(b), (c), (d) or (e), any such violation, default or breach that would not have
a Buyer Material Adverse Effect.
5.5 No Broker. Except as set forth in Schedule 5.5, no broker,
finder, agent or similar intermediary engaged by Buyer has acted for or on
behalf of Buyer in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is
entitled to any broker's fee, finder's fee, or similar fee or commission for
which any Seller or Principal will be liable in connection therewith based on
any agreement, arrangement or understanding with Buyer or any action taken by
Buyer.
5.6 Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of Buyer as of the date hereof is set forth
in Schedule 5.6. Except as set forth in Schedule 5.6, no securities of Buyer are
entitled to preemptive or similar rights, and no Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement and the other
Transaction Documents. Except as a result of the purchase and sale of the Shares
and except as disclosed in Schedule 5.6, there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Buyer's Stock, or contracts, commitments, understandings or
arrangements by which Buyer or any of its Subsidiaries is or may become bound to
issue additional shares of Buyer's Stock, or securities or rights convertible or
18
exchangeable into shares of Buyer's Stock. Except as set forth in Schedule 5.6,
the issue and sale of the Shares will not, immediately or with the passage of
time, obligate Buyer to issue shares of Buyer's Stock or other securities to any
Person (other than the Sellers and Principals) and will not result in a right of
any holder of Buyer securities to adjust the exercise, conversion, exchange or
reset price under such securities. To the knowledge of Buyer, except as set
forth in the SEC Reports (as hereinafter defined), no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 under the
Exchange Act), or has the right to acquire, by agreement with or by obligation
binding upon Buyer, beneficial ownership of in excess of 5% of the outstanding
Buyer's Stock, ignoring for such purposes any limitation on the number of shares
of Buyer's Stock that may be owned at any single time.
5.7 Tax Matters. (i) The Buyer and its Subsidiaries have timely
filed all Tax Returns (other than franchise Tax Returns) that are required to be
filed before the Closing Date, (ii) the information provided on such Tax Returns
is complete and accurate in all material respects and (iii) all Taxes shown to
be due on such Tax Returns have been paid in full.
5.8 Issuance of Buyer's Stock. The Shares to be issued in connection
with this Agreement are duly authorized and, when issued in accordance herewith,
will be duly and validly issued, fully paid and non-assessable, free and clear
of all Encumbrances and other third party rights and shall not be subject to
preemptive or similar rights. No registration under the Securities Act is
required for the offer and sale of the Shares to the Sellers under this
Agreement. Buyer is eligible to register the Shares for resale by the Sellers
and the Principals under Form S-3 promulgated under the Securities Act. Buyer
has not granted or agreed to grant any Person any rights (including "piggy-back"
registration rights) to have any securities of Buyer registered with the
Commission or any other governmental authority that have not been satisfied or
waived.
5.9 Filings, Consents and Approvals. Buyer is not required to obtain
any Consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, The Nasdaq National Market or other Person in connection
with the execution, delivery and performance by Buyer of this Agreement and the
other Transaction Documents to which it is a party.
5.10 Regulatory Compliance. Since December 31, 2003, Buyer has duly
and timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission (the
"Commission") pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including material filed pursuant
to Section 13(a) or 15(d) of the Exchange Act (the foregoing materials being
collectively referred to herein as the "SEC Reports"). As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
19
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. To the knowledge of
the Buyer, except as set forth in the SEC Reports or as set forth on Schedule
5.10, since December 31, 2004, the Buyer has not entered into any agreement or
arrangement, taken any action or incurred any Liability, nor has any event
occurred, which, pursuant to applicable Laws, would require Buyer to disclose
such agreement, arrangement, action, Liability or event in its annual report on
Form 10-K for Buyer's fiscal year ended December 31, 2005. The financial
statements of Buyer included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with GAAP, except as may
be otherwise specified in such financial statements or the notes thereto, or, in
the case of unaudited financial statements, as permitted by Rule 10-01 of
Regulation S-X promulgated under the Securities Act and the Exchange Act, and
fairly present in all material respects the financial position of Buyer and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.
5.11 No Buyer Material Adverse Change. Since December 31, 2004 there
has not occurred a Buyer Material Adverse Change.
5.12 Internal Accounting Controls. Buyer and its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance in all material respects that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, and (iii) access to assets is permitted only in
accordance with management's general or specific authorization.
5.13 Listing and Maintenance Requirements. Buyer's Stock is
registered pursuant to the Exchange Act and is listed on The Nasdaq National
Market, and Buyer has taken no action designed to terminate the registration of
Buyer's Stock or delisting Buyer's Stock from The Nasdaq National Market. Buyer
has not, in the two years preceding the date hereof, received notice (written or
oral) from The Nasdaq National Market to the effect that Buyer is not in
compliance with the listing or maintenance requirements thereof. Buyer is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with the listing and maintenance requirements for continued
listing of Buyer's Common Stock on The Nasdaq National Market. The issuance and
sale of the Shares hereunder does not contravene the rules and regulations of
The Nasdaq National Market and no approval of the shareholders of Buyer is
required for Buyer to issue and deliver to the Sellers the Shares as
contemplated by this Agreement and the other Transaction Documents.
5.14 Compliance with Laws. Except as set forth in Schedule 5.14,
since January 1, 2002, the business of the Buyer and its Subsidiaries has been
conducted in compliance with all applicable Laws, except for any failure to be
so conducted that would not have a Buyer Material Adverse Effect.
20
5.15 Investment Company. Buyer is not, and is not an Affiliate of,
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
5.16 Application of Takeover Protections. There are no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under Buyer's
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Sellers or the
Principals as a result of the Sellers and Buyer fulfilling their obligations or
exercising their rights under this Agreement and the other Transaction
Documents, including without limitation Buyer's issuance of the Shares.
6. Closing Deliveries of Sellers. At the Closing, the Sellers shall
deliver, or shall cause to be delivered, to Buyer the following:
6.1 Opinion of Counsel. The opinion of Mayer, Brown, ▇▇▇▇ & Maw LLP,
counsel to Sellers, dated the Closing Date and addressed to Buyer, substantially
in the form of Exhibit "A" hereto.
6.2 Transfer Documentation. Appropriate Documents and instruments of
transfer for the Assets including, without limitation, bills of sale for all
Tangible Property, assignments of all Intangibles (including all Intellectual
Property Rights appurtenant thereto) and assignments of all assignable licenses
and Permits relating to the Assets or the use, occupancy or operation thereof.
6.3 Secretary Certificate. Copies of the resolutions of the board of
directors (or its equivalent) and members of Sellers authorizing the execution
and performance of this Agreement and the Organic Amendments, certified by each
Seller's Secretary.
6.4 Organic Amendments. A certificate of amendment to the
certificate of formation of each of the Sellers (the "Organic Amendments")
effecting a change in each such Seller's name to one which is not similar to its
present corporate name.
6.5 Good Standing Certificates. Certificates of good standing for
each of the Sellers and their respective Subsidiaries from the Secretary of
State of the jurisdiction of each such Person's formation dated no earlier than
five days prior to the Closing Date.
6.6 Incumbency Certificates. Certificate of incumbency and specimen
signatures of all signatory officers of Sellers, certified by Sellers'
respective Secretaries.
6.7 Licensing Fees. The Licensing Fees specified in Section 2.1(2)
shall be delivered to Buyer by wire transfer of immediately available funds in
accordance with the written instructions of Buyer delivered to Sellers prior to
the Closing (which Licensing Fees may be netted against the Cash Consideration
if so agreed upon by the parties).
6.8 Employment Agreements.
21
(1) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall execute and deliver an employment
agreement (the "▇▇▇▇▇▇▇▇ Agreement"), substantially in the form of Exhibit "B".
(2) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall execute and deliver an employment
agreement (the "▇▇▇▇▇▇▇ Agreement"), substantially in the form of Exhibit "C".
7. Closing Deliveries of Buyer. At the Closing, Buyer shall deliver, or
shall cause to be delivered, to the Sellers the following:
7.1 Opinion of Counsel. The opinion of Blank Rome LLP, counsel to
Buyer, dated the Closing Date and addressed to Sellers, substantially in the
form of Exhibit "D".
7.2 Transfer Documentation. Appropriate Documents and instruments of
transfer for the Assets including, without limitation, bills of sale for all
Tangible Property, assignments of all Intangibles (including all Intellectual
Property Rights appurtenant thereto) and assignments of all assignable licenses
and Permits relating to the Assets or the use, occupancy or operation thereof.
7.3 Secretary Certificate. Copies of the resolutions of the board of
directors (or its equivalent) of Buyer authorizing the execution and performance
of this Agreement and each other Transaction Document to which it is a party,
certified by Buyer's Secretary.
7.4 Good Standing Certificates. Certificates of good standing for
Buyer and each of its Subsidiaries from the Secretary of State of the
jurisdiction of each such Person's incorporation or formation dated no earlier
than five days prior to the Closing Date.
7.5 Incumbency Certificates. Certificate of incumbency and specimen
signatures of all signatory officers of Buyer, certified by Buyer `s Secretary.
7.6 Employment Agreements.
(1) Buyer shall execute and deliver the ▇▇▇▇▇▇▇▇ Agreement.
(2) Buyer shall execute and deliver the ▇▇▇▇▇▇▇ Agreement.
8. Interpretation and Survival of Representations and Warranties.
Notwithstanding any right of Buyer to fully investigate the affairs of Sellers
(and vice versa) and notwithstanding any knowledge of facts determined or
determinable by Buyer pursuant to such investigation or right of investigation
(and vice versa), Buyer, Sellers and Principals have the right to rely fully
upon the representations, warranties, covenants and agreements contained in this
Agreement or in any document delivered to them or any representatives in
connection with the transactions contemplated by this Agreement. Each warranty,
representation and covenant contained herein is independent of all other
warranties, representations and covenants contained herein (whether or not
22
covering identical or related subject matter) and must be independently and
separately complied with and satisfied. All representations, warranties,
covenants and agreements shall survive the execution and delivery hereof and the
Closing hereunder. Notwithstanding the foregoing:
8.1 the representations and warranties of the Sellers contained in
Sections 4.1, 4.2, 4.3, 4.13(2), 4.17, 4.18, 4.25 and 4.28 of this Agreement,
the representations and warranties of Buyer contained in Sections 5.1, 5.2, 5.3,
5.4(a), 5.5, 5.6, 5.8 and 5.10 of this Agreement and the respective covenants
and agreements of the parties hereto contained in this Agreement, and the
related agreements of the Sellers, the Principals and Buyer to indemnify each
other set forth in this Section 10, shall survive the Closing and continue in
full force and effect indefinitely and the parties hereto shall have the right
to seek indemnification from the Sellers, the Principals or Buyer, as the case
may be, in respect thereof indefinitely; and
8.2 all other representations and warranties of the Sellers and
Buyer hereunder, and the related agreements of the Sellers, the Principals and
Buyer to indemnify each other set forth in Section 10, shall survive the Closing
and continue in full force and effect until, and all indemnification claims with
respect thereto shall be made prior to, the eighteenth (18th) month anniversary
of the Closing Date, except for representations, warranties and related
indemnities for which an indemnification claim shall be pending as of the end of
the applicable period referred to above, in which event such indemnities shall
survive with respect to such indemnification claim until the final disposition
thereof.
With respect to any representation, warranty and related indemnity, the period
commencing on the date hereof and terminating on the date that such
representation, warranty and indemnity expires pursuant to clause 8.1 or 8.2
above shall be referred to herein as the "Applicable Survival Period".
9. Certain Post-Closing Obligations
9.1 Voting Restrictions.
(a) Each Seller and Principal hereby agrees to vote the Shares
owned or held of record by each of them in favor of matters approved by the
Board of Directors of Buyer (the "Board") or at the direction of the Board, in
each case, in connection with all matters seeking Buyer's stockholder approval,
or to take all actions by written consent in lieu of any such meeting as
directed by the Board, other than for Excluded Transactions until the earliest
to occur of (i) the group comprised of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ do not own, in the aggregate, more than
1,000,000 Shares (as such number shall be appropriately adjusted for any stock
split, stock combination or other similar event affecting the outstanding number
of shares of Buyer's Stock occurring after the date hereof) (it being understood
that the provisions of this clause (a) shall not apply to any Shares sold or
otherwise transferred by any of the foregoing Persons to any other Person); (ii)
the fourth (4th) anniversary of the Closing Date; and (iii) the termination of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ employment by Buyer other than for Cause (as such term is
defined in the ▇▇▇▇▇▇▇▇ Agreement).
(b) So long as (i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ is employed by Buyer as a
senior executive officer of Buyer, or (ii) the group composed of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ own, in the
23
aggregate, at least either (x) Two Million (2,000,000) shares of Buyer Stock (as
such number shall be appropriately adjusted for any stock split, stock
combination or other similar event affecting the outstanding number of shares of
Buyer's Stock occurring after the date hereof) or (y) five percent (5%) of the
issued and outstanding Buyer's Stock on a fully diluted basis, then (A) Buyer
will recommend and include ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ on the slate of director nominees to
the Board included in Buyer's proxy statements in connection with its annual
meeting of stockholders relating to the annual election of directors and (B)
▇▇▇▇ ▇▇▇▇ will vote the shares of Buyer's Stock that he is entitled to vote at
such a meeting in favor of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ election or re-election to the
Board.
9.2 Automatic Registration.
(a) Not later than thirty (30) days after the Closing Date, Buyer
shall prepare and file with the Commission a Registration Statement covering the
resale of at least fifty percent (50%) of the Shares. The Registration Statement
shall be on Form S-3 (except if Buyer is not then eligible to register for
resale the Shares on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith) and shall contain a "Plan of
Distribution" in form and substance agreed upon by the parties hereto and
customary for transactions of this type. Buyer shall use its best efforts to
cause the Registration Statement to be declared effective under the Securities
Act as soon as possible but, in any event, no later than one hundred twenty
(120) days after the Closing Date, and shall use its best efforts to keep the
Registration Statement continuously effective under the Securities Act until the
earlier of the date when (i) all the Shares covered by the Registration
Statement have been sold pursuant thereto or, so long as a Registration
Statement covering all of the Shares is then effective, otherwise or (ii) the
Shares may be publicly sold without volume restrictions under Rule 144(k) of the
Securities Act as determined by the counsel to Buyer pursuant to a written
opinion letter to such effect, addressed and acceptable to Buyer's transfer
agent, the Sellers and the Principals (the "Effectiveness Period"). Buyer's
obligation under this Section is subject to the applicable seller of the Shares
being registered providing Buyer with such information regarding such seller and
its ownership of shares of Buyer Stock as Buyer determines necessary to include
in the Registration Statement.
(b) In connection with Buyer's registration obligations hereunder,
Buyer shall:
(i) Not less than two business days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto, Buyer shall furnish to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, who is hereby designated by
the Sellers and Principals as the representative of the Principals and Sellers
for the purposes of this Section 9.2 (in such capacity, the "Principal
Representative") copies of all such documents proposed to be filed which
documents will be subject to the review of the Principal Representative and one
counsel to the Principal Representative. Buyer shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Principal Representative or counsel to the Principal Representative
shall reasonably object in good faith.
24
(ii) (A) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Shares for
the Effectiveness Period; (B) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 under the Securities Act; and (C)
respond as promptly as practicable to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and, as
promptly as reasonably possible provide the Principal Representative true and
complete copies of all correspondence from and to the Commission relating to the
Registration Statement.
(iii) Notify the Principal Representative as promptly as
practicable (and, in the case of (A)(1) below, not less than three business days
prior to such filing) and (if requested by any such Person) confirm such notice
in writing no later than two business days following the day (A)(1) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (2) when the Commission notifies
Buyer whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement
(Buyer shall provide true and complete copies thereof and all written responses
thereto to the Principal Representative); and (3) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (B) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (C) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Shares or the initiation of
any Proceedings for that purpose; (D) of the receipt by Buyer of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and (E) of the
occurrence of any event or passage of time that makes the financial statements
included in the Registration Statement ineligible for inclusion therein or any
statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(iv) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (A) any order suspending the effectiveness of
the Registration Statement, or (B) any suspension of the qualification (or
exemption from qualification) of any of the Shares for sale in any jurisdiction,
at the earliest practicable moment.
25
(v) Furnish to each Seller and each Principal, without charge,
at least one conformed copy of the final Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(vi) Promptly deliver to each Seller and each Principal,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. Buyer hereby consents to the use of such Prospectus and each
amendment or supplement thereto by each of the selling holders in connection
with the offering and sale of the Shares covered by such Prospectus and any
amendment or supplement thereto.
(vii) Prior to any public offering of Shares, use its
commercially reasonable efforts to register or qualify or cooperate with the
selling holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Shares for offer and
sale under the securities or Blue Sky laws of all jurisdictions within the
United States reasonably requested by any Seller or Principal, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Shares covered
by the Registration Statement; provided, that Buyer shall not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or subject Buyer to any material tax in any such jurisdiction where it
is not then so subject.
(viii) Cooperate with the Sellers and the Principals to
facilitate the timely preparation and delivery of certificates representing
Shares to be delivered to a transferee pursuant to the Registration Statement,
which certificates shall be free of all restrictive legends, and to enable such
Shares to be in such denominations and registered in such names as any such
Persons may request.
(ix) Use commercially reasonable efforts to cause all Shares
covered by a Registration Statement to be listed on each securities exchange,
interdealer quotation system or other market on which similar securities issued
by Buyer are then listed.
(x) Upon the occurrence of any event contemplated by clause
(iii)(B) or (C), as promptly as practicable, take all such action as is
necessary to cause the removal of any such stop order or any such suspension of
the qualification or exemption from qualification.
(xi) Upon the occurrence of any event contemplated by clause
(iii)(E), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
26
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(xii) Comply with all applicable rules and regulations
of the Commission, take such other actions as may be
reasonably necessary to facilitate the registration of the
Shares hereunder; and make available to its security holders,
as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement
covering a period of at least twelve (12) months, beginning
after the effective date of each Registration Statement, which
earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act, including Rule 158 promulgated
thereunder (for the purpose of this clause (xii),
"Availability Date" means the 45th day following the end of
the fourth fiscal quarter that includes the effective date of
such Registration Statement, except that, if such fourth
fiscal quarter is the last quarter of Buyer's fiscal year,
"Availability Date" means the 90th day after the end of such
fourth fiscal quarter).
(c) All fees and expenses incident to the performance of or
compliance with the provisions of Section 9 of this Agreement by Buyer shall be
borne by Buyer whether or not any Shares are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with The Nasdaq National Market, and (B) in compliance with applicable
state securities or Blue Sky laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Shares and of printing
prospectuses if the printing of prospectuses is reasonably requested by the
holders of a majority of the Shares included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for Buyer, (v) Securities Act liability insurance, if Buyer so desires
such insurance, and (vi) fees and expenses of all other Persons retained by
Buyer in connection with the consummation of the transactions contemplated by
this Section 9. In addition, Buyer shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Section 9 (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Shares on any securities exchange as required hereunder.
(d) With a view to making available to the holders of Shares
the benefits of Rule 144 (or its successor rule) under the Securities Act and
any other rule or regulation of the Commission that may at any time permit such
holders to sell Shares to the public without registration, Buyer covenants and
agrees to: (i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, until the earlier
of (A) such date as all of the Shares may be resold to the public without volume
restrictions pursuant to Rule 144(k) under the Securities Act or any other rule
of similar effect or (B) such date as all of the Shares shall have been resold;
(ii) file with the Commission in a timely manner all reports and other documents
required to be so filed pursuant to Rule 144(c) under the Securities Act in
order to permit the holders of the Shares to be entitled to transfer the Shares
27
without registration pursuant to Rule 144 under the Securities Act; and (iii)
furnish to each holder of Shares upon request (A) a written statement by Buyer
that it has complied with the reporting requirements of the Exchange Act, (B) a
copy of Buyer's most recent Annual Report on Form 10-K or Quarterly Report on
Form 10-Q, and (C) such other information as may be reasonably requested in
order to avail such holder of any rule or regulation of the Commission that
permits the selling of any such Shares without registration.
(e) It is acknowledged and agreed that any holder of the
Shares (whether or not such holder is a Seller or a Principal) is an intended
third party beneficiary of the provisions of this Section 9.2; provided that (i)
such holder agrees in writing to be bound by the provisions of this Section 9.2
applicable to such holder, (ii) such holder shall become the beneficial owner of
such Shares prior to the effectiveness of the Registration Statement and (iii)
such holder shall have notified Buyer of its intention to be included as a
selling stockholder under the Registration Statement prior to (x) in the event
that the Registration Statement is declared effective without the filing with
the Commission of any amendments to the initial filing of the Registration
Statement, the date of the initial filing of the Registration Statement with the
Commission or (y) in the event that any amendments to the Registration Statement
are filed with the Commission prior to the effectiveness of the Registration
Statement, the date of the last amendment to the Registration Statement so filed
with the Commission prior to the effectiveness of the Registration Statement.
9.3 Other Registration Rights. If Buyer proposes to file a
registration statement under the Securities Act for any underwritten sale of
shares of any of Buyer's Stock, (whether for a secondary offering or for a
primary offering,) Buyer shall give written notice of such registration to each
Seller and Principal no later than 15 days before its filing with the
Commission. If a Seller or Principal so requests in writing within 15 days after
receipt of such notice, Buyer shall subject to the following sentence, allow
such Seller or Principal to participate pro rata with the other selling
stockholders in such offering. To the extent the underwriter or underwriters of
Buyer's Stock being otherwise registered by Buyer shall determine that the
inclusion of any shares of Buyer's Stock held by any stockholder of Buyer would
jeopardize the successful sale at the desired price of Buyer's Stock proposed to
be sold by such underwriter or underwriters, Buyer shall not be obligated to
include all the shares of Buyer's Stock of any stockholder of Buyer desiring to
participate, in which case each participating Seller or Principal shall be
entitled to participate in any such reduced number of shares of Buyer's Stock
(if any) which may be included in such registration along with any stockholders
of Buyer exercising rights with respect to such registration on a pro rata basis
in proportion to their relative holdings of shares of Buyer's Stock (including
shares of Buyer's Stock issuable upon exercise of any vested and immediately
exercisable options held by such holder), in the aggregate. It is acknowledged
and agreed that any holder of the Shares that is a Permitted Holder of a Seller
or Principal is any intended third party beneficiary of the provisions of this
Section 9.3; provided that such Permitted Holder shall have notified Buyer of
its status as a holder of the Shares.
28
9.4 Form D. Buyer shall file on a timely basis a Notice of Sale of
Securities on Form D with respect to the Shares and shall provide a copy thereof
to the Principal Representative.
9.5 Integration. Buyer shall not, and shall use its best efforts to
ensure that no Affiliate of Buyer shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of
Buyer's Stock in a manner that would require the registration under the
Securities Act of the sale of Buyer's Stock to the Sellers, or that would be
integrated with the offer or sale of Buyer's Stock for purposes of the rules and
regulations of The Nasdaq National Market such that the transaction contemplated
hereby would violate any such rule or regulations.
9.6 Cooperation on Tax Matters.
(a) Sellers, the Principals and Buyer shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Agreement and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Sellers and Principals agree to retain all books and records with
respect to Tax matters pertinent to the Sellers relating to any Tax period
beginning before the Closing Date until the expiration of the statute of
limitations (including any applicable extensions) of the respective Tax periods,
and to abide by all record retention agreements entered into with any
governmental authority.
(b) For income tax purposes, the parties hereto acknowledge that
while all of the Assets are hereby being purchased by Buyer, those Assets
comprising Intangibles and Intellectual Property Rights are simultaneously
herewith being contributed by Buyer to the capital of IP Holdings in accordance
with Section 2.5.
9.7 Assistance with Audits. Sellers shall, at Buyer's expense, use
its best efforts to take all actions, including the making available of Sellers'
accountants and the granting of access to Buyer and its accountants to all Books
and Records of the Sellers, to assist Buyer in connection with Buyer's
preparation of financial statements as required by Items 2.01 and 9.01 of Form
8-K in order for Buyer to meet its Form 8-K obligations within the applicable
time period required by such form.
10. Indemnification.
10.1 Obligation of Sellers and Principals to Indemnify. Sellers and
Principals shall, jointly and severally, indemnify, defend and hold harmless
Buyer and its officers, directors, shareholders and affiliates (collectively,
the "Buyer Indemnified Parties") from and against any and all Losses with
respect to the following:
29
(1) any breach of any representation or warranty of Sellers
contained in this Agreement or in any other Transaction Document (a "Seller
Failure of Representation");
(2) any breach of or failure to perform any covenant,
agreement or obligation of any Seller or Principal contained in this Agreement
or in any other Transaction Document (a "Seller Failure of Covenant");
(3) all Retained Liabilities (which, for the avoidance of
doubt, shall include all ▇▇▇▇▇▇ Retained Liabilities) (a "Retained Liability
Loss"); and/or
(4) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding a Seller or
a Principal or such Seller's or Principal's proposed method of distribution of
Shares, in each case, furnished in writing to Buyer by such Seller or Principal
expressly for use therein (a "Seller Securities Law Loss").
For the avoidance of doubt, it is hereby acknowledged and agreed that the
indemnification obligations of Sellers and Principals pursuant to this Section
10 in respect of any Retained Liability Loss shall be enforceable against
Sellers and Principals whether or not any Seller Failure of Representation shall
exist with respect to the subject matter underlying such Retained Liability
Loss.
10.2 Limitation as to the Sellers' and the Principals'
Indemnification Obligations. The following provisions of this Section 10.2 shall
limit the respective indemnification obligations of the Sellers and the
Principals hereunder:
(1) Limitation as to Time. Notwithstanding anything set forth
in this Agreement to the contrary, no Seller nor any Principal shall have any
indemnification liability under this Section 10 to any Buyer Indemnified Party
in respect of any Seller Failure of Representation from and after the Applicable
Survival Period.
(2) Limitation as to Minimum Aggregate Claims. Notwithstanding
anything set forth in this Agreement to the contrary, no Seller nor any
Principal shall have any indemnification liability under this Section 10 to any
Buyer Indemnified Party with respect to any Losses in connection with any First
Level Capped Seller Failure of Representation, Second Level Capped Seller
Failure of Representation, any Seller Failure of Covenant or any Retained
Liability Loss until the aggregate dollar amount of all such Losses
indemnifiable hereunder exceeds $750,000 and then only to the extent such Losses
exceed such $750,000 threshold.
30
(3) Limitation as to Maximum Aggregate Claims.
(a) First Level. Notwithstanding anything set forth in this
Agreement to the contrary, the maximum aggregate collective indemnification
liability of the Sellers and the Principals under this Section 10 in connection
with all First Level Capped Seller Failure of Representations and all Seller
Failure of Covenants shall in no event exceed $7,500,000 in the aggregate.
(b) Second Level. Notwithstanding anything set forth in this
Agreement to the contrary, the maximum aggregate collective indemnification
liability of the Sellers and the Principals under this Section 10 in connection
with all Second Level Capped Seller Failure of Representations shall in no event
exceed $20,000,000 in the aggregate.
(c) Tier I Specified Contracts. Notwithstanding anything set
forth in this Agreement to the contrary, the aggregate collective
indemnification liability of the Sellers and the Principals under this Section
10 in connection with a Tier I Specified Contract Failure of Representation
shall equal the amount, if any, by which (i) the Applicable Royalties in respect
of such Tier I Specified Contract Failure of Representation exceeds (ii) the
aggregate amount of licensing fees received (or accrued) by Buyer or any of
affiliates from the licensing of a ▇▇▇▇ that was otherwise licensed to the
applicable Tier I Specified Contract Counterparty pursuant to the applicable
Tier I Specified Contract to any other Person from the date that the applicable
Tier I Specified Contract Counterparty shall have failed to pay any Applicable
Royalties through the last date of the current term of the applicable Tier I
Specified Contract.
(d) Aggregate Limitation. Notwithstanding anything set forth
in this Agreement to the contrary, the maximum aggregate collective
indemnification liability of the Sellers and the Principals under this Section
10 in respect of any indemnifiable Loss (other than a Seller Securities Law Loss
(which shall be subject to the limitations set forth in clause (e) below)) shall
in no event exceed the sum of (i) $40,000,000 plus (ii) the product of (x)
4,350,000, times (y) the closing sales price per share of Buyer's Stock on The
Nasdaq National Market on the date immediately preceding the Closing Date.
(e) Seller Securities Law Losses. Notwithstanding anything set
forth in this Agreement to the contrary, the maximum aggregate collective
indemnification liability of the Sellers and the Principals under this Section
10 in connection with a Seller Securities Law Loss shall in no event exceed the
dollar amount of the net cash proceeds received by the applicable Seller or the
applicable Principal upon the sale of the Shares giving rise to such
indemnification obligation.
(f) Overlapping Claims. Notwithstanding anything set forth in
this Agreement to the contrary, to the extent that the same or related
underlying facts, events, claims or circumstances gives rise to indemnifiable
Losses in respect of two or more of (x) a First Level Capped Seller Failure of
31
Representations, (y) a Second Level Capped Seller Failure of Representations
and/or (z) a Tier I Specified Contract Failure of Representation, the maximum
aggregate collective indemnification liability of the Sellers and the Principals
under this Section 10 in respect of such underlying facts, events, claims or
circumstances shall be the highest amount then available for indemnification
under clause (a), (b) and/or (c) above, as applicable, and the Seller
Indemnified Parties shall not be entitled to aggregate any two or more of such
available indemnification amounts in respect of such underlying facts, events,
claims or circumstances.
(4) Limitation as to Form of Indemnification Payment. In the
event that any Seller or any Principal shall, pursuant to the terms of this
Agreement, be obligated to make any indemnification payment to Buyer under this
Section 10, such Seller or such Principal may, at such Seller's or such
Principal's option, make such payment in cash, in the form of shares of Buyer's
Stock or any combination thereof; provided, however, that, notwithstanding the
foregoing, in the event that any such Seller or Principal shall be obligated to
make any such indemnification payment in respect of a Tier I Specified Contract
Failure of Representation, such Seller or Principal shall be obligated to make
such payment in cash. For the purpose of the foregoing, in the event that any
Seller or any Principal shall elect to make any indemnification payment (or any
portion thereof) in the form of shares of Buyer's Stock, each such share of
Buyer's Stock shall be deemed to be valued at the closing sales price per share
of Buyer's Stock on The Nasdaq National Market on the trading date immediately
preceding the date such payment is made.
10.3 Obligation of Buyer to Indemnify. Buyer shall indemnify, defend
and hold harmless the Sellers and the Principals and their respective officers,
directors, shareholders and affiliates (collectively, the "Seller Indemnified
Parties") from and against any and all Losses with respect to the following:
(1) any breach of any representation or warranty of Buyer
contained in this Agreement or in any other Transaction Document (a "Buyer
Failure of Representation");
(2) any breach of or failure to perform any covenant,
agreement or obligation of Buyer contained in this Agreement or in any other
Transaction Document (a "Buyer Failure of Covenant");
(3) all Specified Liabilities (a "Specified Liability Loss");
(4) any claim or Proceeding brought by any Person against any
Seller Indemnified Party after the Closing asserting any Liability of the
business of the Buyer or any of its Subsidiaries or the Assets arising from any
event, fact or circumstance arising out of or relating to the ownership or
operation of the business of the Buyer or any of its Subsidiaries or the Assets
by Buyer after the Closing (a "Post-Closing Activity Loss"); and/or
(5) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
32
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent that such untrue statements or omissions
are based solely upon information regarding such Seller Indemnified Party or
such Seller Indemnified Party's proposed method of distribution of Shares, in
each case, furnished in writing to Buyer by such Seller Indemnified Party
expressly for use therein.
10.4 Limitation as to the Buyer's Indemnification Obligations. The
following provisions of this Section 10.4 shall limit the respective
indemnification obligations of the Buyer hereunder:
(1) Limitation as to Time. Notwithstanding anything set forth
in this Agreement to the contrary, Buyer shall not have any indemnification
liability under this Section 10 to any Seller Indemnified Party in respect of
any Buyer Failure of Representation from and after the Applicable Survival
Period.
(2) Limitation as to Minimum Aggregate Claims. Notwithstanding
anything set forth in this Agreement to the contrary, Buyer shall not have any
indemnification liability under this Section 10 to any Seller Indemnified Party
with respect to any Losses in connection with any Buyer Failure of
Representation, any Buyer Failure of Covenant, any Specified Liability Loss or
any Post-Closing Activity Loss until the aggregate dollar amount of all such
Losses indemnifiable hereunder exceeds $750,000 and then only to the extent such
Losses exceed such $750,000 threshold.
(3) Limitation as to Maximum Aggregate Claims. Notwithstanding
anything set forth in this Agreement to the contrary, the maximum aggregate
indemnification liability of Buyer under this Section 10 in connection with all
Buyer Failure of Representations and all Buyer Failure of Covenants shall in no
event exceed $7,500,000 in the aggregate.
10.5 Third Party Claims. If a claim by a third party is made against
any party or parties hereto and the party or parties against whom said claim is
made intends to seek indemnification with respect thereto under Sections 10.1 or
10.3, the party or parties seeking such indemnification shall promptly notify
the indemnifying party or parties, in writing, of such claim; provided, however,
that the failure to give such notice shall not affect the rights of the
indemnified party or parties hereunder except to the extent that such failure
materially and adversely affects the indemnifying party or parties due to the
inability to timely defend such action. The indemnifying party or parties shall
have 10 business days after said notice is given to elect, by written notice
given to the indemnified party or parties, to undertake, conduct and control,
through counsel of their own choosing (subject to the consent of the indemnified
party or parties, such consent not to be unreasonably withheld (it being
understood that such consent shall not be withheld (i) in the event that the
indemnifying party is any Seller or any Principal and such counsel is ▇▇▇▇▇,
33
▇▇▇▇▇, ▇▇▇▇ & Maw LLP or (ii) in the event that the indemnifying party is Buyer
and such counsel is Blank Rome LLP) and at their sole risk and expense, the good
faith settlement or defense of such claim, and the indemnified party or parties
shall cooperate with the indemnifying parties in connection therewith; provided:
(a) all settlements require the prior reasonable consultation with the
indemnified party and the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld (provided, that, no such consent will
be required in the event that such settlement contains (i) no admission of
liability and (ii) an unconditional release of the indemnified party from any
and all Liability in respect thereof), and (b) the indemnified party or parties
shall be entitled to participate in such settlement or defense through counsel
chosen by the indemnified party or parties, provided that the fees and expenses
of such counsel shall be borne exclusively by the indemnified party or parties.
No indemnified party or parties shall have the right to pay or settle any such
claim at any time without the prior consent of the indemnifying party, provided
that in such event they shall waive any right of indemnification therefor by the
indemnifying party or parties. If the indemnifying party or parties do not
contest in good faith any such claim and fail to make a timely election to
undertake the good faith defense or settlement of the claim as aforesaid, or if
the indemnifying parties fail to proceed with the good faith defense or
settlement of the matter after making such election to proceed, then, in either
such event, the indemnified party or parties shall have the right to contest,
settle or compromise (provided that all settlements or compromises require the
prior reasonable consultation with the indemnifying party and the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld) the claim at their exclusive discretion, at the risk and expense of
the indemnifying parties.
10.6 Assistance. Regardless of which party is controlling the
defense of any claim, each party shall act in good faith and shall provide
reasonable documents and cooperation to the party handling the defense.
11. Waiver of Bulk Sales Compliance. Buyer waives compliance by Sellers
with the provisions of Article 6 of the Uniform Commercial Code (Bulk Sales Law)
in each applicable jurisdiction.
12. Expenses. Whether or not the transactions contemplated by this
Agreement shall be consummated, each party shall pay its own expenses incident
to preparing for, entering into and carrying into effect this Agreement and the
transactions contemplated hereby. The Buyer shall pay all stock transfer or
other Taxes which are required to be paid in connection with the sale and
issuance of the Shares pursuant to this Agreement. Except as otherwise set forth
herein, the Sellers, on the one hand, and Buyer, on the other hand, shall each
pay fifty percent of all sales, transfer, stamp, recording and similar Taxes, if
any, incurred in connection with any Intangibles and Tangible Property conveyed
to Buyer hereunder.
13. Further Assurances.
13.1 At any time and from time to time after the Closing Date, at
any party's request and without further consideration, any other party hereto
will promptly execute and deliver all such further Documents or perform such
acts as the requesting party may reasonably request in order to more fully
consummate the transactions contemplated herein.
14. Non-compete.
34
14.1 Each of the Sellers and Principals (other than ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇) hereby agrees for a period of eighteen months after the Closing Date,
not to, within any State within the United States in which the Sellers now
conduct business, (i) conduct any business using any name consisting of the
Marks or any confusingly similar names, or (ii) take any other action which
constitutes a direct and material interference with or a direct and material
disruption of Buyer's operation or use, ownership and enjoyment of the Assets
after the Closing Date, which action directly results in a material reduction in
Buyer's revenues from the licensing of the Marks to Kmart Corporation pursuant
to the Kmart Contract for use in connection with the sale of items in Kmart
stores bearing such Marks. At no time prior to the eighteenth month anniversary
of the Closing Date shall any of the Sellers or Principals, directly or
indirectly, disparage the commercial, business or financial reputation of the
Buyer or any of its Subsidiaries.
14.2 The parties hereto hereby acknowledge and agree that (i) Buyer
would be irreparably injured in the event of a breach by any of the Sellers or
Principals of any of their obligations under this Section 14, (ii) monetary
damages would not be an adequate remedy for any such breach, and (iii) Buyer
shall be entitled to injunctive relief, in addition to any other remedy which it
may have, in the event of any such breach. It is hereby also agreed that the
existence of any claims which Sellers or Principals may have against Buyer,
whether under this Agreement or otherwise, shall not be a defense to the
enforcement by Buyer of any of the rights under this Section 14.
14.3 It is the intent of the parties hereto that the covenants
contained in this Section 14 shall be enforced to the fullest extent permissible
under the laws of and public policies of each jurisdiction in which enforcement
is sought (the Sellers and Principals hereby acknowledge that said restrictions
are reasonably necessary for the protection of Buyer). Accordingly, it is hereby
agreed that if any one or more of the provisions of Section 14 shall be
adjudicated to be invalid or unenforceable for any reason whatsoever, said
provision shall be (only with respect to the operation thereof in the particular
jurisdiction in which such adjudication is made) construed by limiting and
reducing it so as to be enforceable to the extent permissible.
14.4 The provisions of this Section 14 shall be in addition to, and
not in lieu of, any other obligations with respect to the subject matter hereof,
whether arising as a matter of contract, by law or otherwise, including, but not
limited to, any obligations which may be contained in any employment agreements
between the Principals and Buyer entered into at or after the Closing.
15. Miscellaneous.
15.1 Publicity. The parties shall consult with each other before
issuing any press release with respect to the Agreement or the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior consent of the other parties, which shall not
be unreasonably withheld, conditioned or delayed; provided, however, that Buyer
may, without the prior consent of the other parties (but after prior
35
consultation, to the extent practicable in the circumstances) issue such press
release or make such public statement as may upon the advice of outside counsel
be required by law or the rules and regulations of The Nasdaq National Market.
15.2 Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and either delivered personally to
the addressee, or mailed, certified or registered mail or express mail, postage
prepaid, or sent by a nationally recognized courier service, service charges
prepaid, and shall be deemed given when so delivered personally, if by certified
or registered mail, four days after the date of mailing or if express mailed or
sent by a nationally recognized courier service, two days after the date of
mailing, as follows:
(1) If to Buyer:
Iconix Brand Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇, President
With a required copy to:
Blank Rome LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(2) If to Sellers:
▇▇▇ ▇▇▇▇▇ Company, LLC
c/o Windsong Allegiance Group LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With a required copy to:
Mayer, Brown, ▇▇▇▇ & Maw LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(3) If to Principals, to the addresses set forth
on Annex A
With a required copy to:
Mayer, Brown, ▇▇▇▇ & Maw LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
36
and to such other address or addresses as Buyer, Sellers or Principals, as the
case may be, may designate to the other by notice as set forth above.
15.3 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) contains the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior or contemporaneous
agreements, written or oral, with respect thereto. It is hereby acknowledged and
agreed that that certain letter agreement, dated as of June 24, 2005, among ▇▇▇
▇▇▇▇▇ Co., LLC and Candie's Inc., and each of the rights and obligations of the
parties thereto, are hereby terminated in its entirety.
15.4 Waivers and Amendments. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by all the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which any party may otherwise have at law or
in equity. The rights and remedies of any party arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty, covenant
or agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence, or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy or breach.
15.5 Binding Agreement. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
each of the parties hereto and their respective heirs, legal representatives,
executors, successors and assigns.
15.6 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York applicable to agreements
made, delivered and to be performed entirely within such State.
15.7 Assignment. This Agreement and the rights and obligations of
the parties hereto shall not be assigned by any party to any Person without the
prior written consent of each of the other parties hereto (which consent shall
not be unreasonably withheld). Nothing in this Agreement, unless otherwise
expressly provided, is intended to confer upon any Person, other than the
parties hereto and their successors and assigns, any rights or remedies under or
by reason of this Agreement.
37
15.8 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
15.9 Severability. If any provision of this Agreement shall be
determined by a court of competent jurisdiction to be invalid or unenforceable,
such determination shall not affect the remaining provisions of this Agreement,
all of which shall remain in full force and effect.
15.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
15.11 Exhibits and Schedules. The Exhibits and Schedules to this
Agreement are a part of this Agreement as if set forth in full herein.
15.12 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
15.13 Consent to Jurisdiction and Service of Process. Any Proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby may be instituted in any state or federal court in the State of New York,
and each party waives any objection which such party may now or hereafter have
to the laying of the venue of any such Proceeding, and irrevocably submits to
the jurisdiction of any such court in any such Proceeding. Any and all service
of process and any other notice in any such Proceeding shall be effective
against any party if given by registered or certified mail, return receipt
requested, or by any other means of mail which requires a signed receipt,
postage prepaid, mailed to such party as herein provided. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law or to commence legal Proceedings or otherwise
proceed.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BUYER SELLERS
ICONIX BRAND GROUP, INC. ▇▇▇ ▇▇▇▇▇ COMPANY, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------- -----------------------
Name: ▇▇▇▇ ▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and Title:
CEO CEO/Manager
▇▇▇ ▇▇▇▇▇ LICENSING, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
CEO/Manager
▇▇▇▇ ▇▇▇▇ JBC CANADA HOLDINGS, LLC
As to Section 9.1(b) only.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇ ▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------- Title:
CEO/Manager
▇▇▇ ▇▇▇▇▇ CANADA, LP
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
CEO/Member
PRINCIPALS:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------- -----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------- -----------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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List of Omitted Schedules and Exhibits:
---------------------------------------
SCHEDULE DESCRIPTION
2.1(3) Specified Contracts
2.3(3) Assumed Liabilities
3.3 Purchase Price Allocation
4.2 Seller Equity Interests
4.4 Seller Financial Statements
4.6 Seller Tax Matters
4.8 Seller Permits
4.10 Seller Consents
4.13(1) Seller Contracts
4.13(2) Tier I Specified Contracts
4.14 Seller Accounts Receivable
4.15 Seller Inventory
4.17 Seller Intangibles
4.18 Seller Title
4.19 Seller Indebtedness
4.22 Seller Benefit Plans
4.23 Seller Insurance
4.24 Seller Software
4.25 No Seller Broker
5.1 Buyer Subsidiaries
5.5 No Buyer Broker
5.6 Buyer Capitalization
5.10 Buyer Regulatory Compliance
5.15 Buyer Compliance with Laws
Exhibit A Opinion of Sellers' Counsel
Exhibit B Employment Agreement dated July 22, 2005 between Iconix Brand
Group, Inc. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
Exhibit C Employment Agreement dated dated July 22, 2005 between Iconix
Brand Group, Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Exhibit D Opinion of Buyer's Counsel.
40