UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 8, 2015
Joes Jeans Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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0-18926 |
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11-2928178 |
(State or other jurisdiction |
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(Commission |
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(I.R.S. Employer |
of incorporation) |
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File Number) |
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Identification No.) |
2340 South Eastern Avenue, Commerce, California |
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90040 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: 323-837-3700
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 Entry into a Material Definitive Agreement.
Overview
On September 8, 2015, Joes Jeans Inc., a Delaware corporation (the Company), entered into the definitive agreements described below (collectively, the Transaction Agreements) in which, subject to the completion of the conditions described below and in the attached exhibits to this Current Report on Form 8-K, the Company will (i) sell certain of its operating and intellectual property assets related to the Joes® brand and business for a total of $80 million (the Asset Sale), the proceeds of which will be used to repay all of the Companys indebtedness outstanding under its term loan credit agreement with Garrison Loan Agency Service LLC and a portion of the Companys indebtedness outstanding under its revolving credit agreement with CIT Commercial Services, Inc. (CIT), a unit of CIT Group; (ii) combine its remaining business operated under the Hudson® brand with RG Parent, LLC, a Delaware limited liability company (RG), pursuant to the Merger Agreement described below, (iii) issue and sell $50 million of a new series of the Companys preferred stock in a private placement to an affiliate of Tengram Capital Partners, L.P. (TCP), and (iv) exchange the Companys outstanding convertible notes for a combination of cash, shares of the Companys common stock, $0.10 par value per share (the Common Stock), and modified convertible notes (collectively, the Merger Transactions). RG is a portfolio company of TCP and its principal business activity involves the design, development and marketing of luxury lifestyle brand apparel products under the brand Robert Graham®.
After completion of the Asset Sale, the Company expects to change its name to Differential Brands Group, Inc. After the completion of the Merger Transactions, the RG equity holders will own approximately 47.3% of the Common Stock, the preferred stock owned by TCP will be convertible into approximately 23.9% of the Common Stock, the convertible noteholders will own approximately 14.0% of the Common Stock and the existing stockholders (including the outstanding equity awards under the Companys incentive plan) will own approximately 14.2% of the Common Stock, all on a fully diluted basis. In connection with the Merger Transactions, we expect that the Company will enter into new financing arrangements pursuant to which it will have approximately $25 million of indebtedness outstanding under a new revolving credit facility and $50 million of indebtedness outstanding under a new term loan credit facility, the proceeds of which will be used to repay the Companys remaining indebtedness outstanding under the revolving credit agreement with CIT and certain indebtedness owed to the holders of the Companys convertible notes and Joseph M. Dahan.
IP Asset Purchase Agreement
On September 8, 2015, the Company, Joes Holdings LLC, a Delaware limited liability company (IP Assets Purchaser), and solely for the purposes of its related guarantee, Sequential Brands Group, Inc., a Delaware corporation (Parent), entered into an asset purchase agreement (the IP Asset Purchase Agreement), pursuant to which, the IP Assets Purchaser will, among other things, purchase certain intellectual property assets (the Intellectual Property Assets) used or held for use in the Companys business operated under the brand names Joes Jeans, Joes, Joes JD and else (the Joes Business). The aggregate purchase price will be $67 million. Additionally, at the closing of the sale, the IP Assets Purchaser will deposit $2.5 million to an escrow account, which will be used to defer certain costs and expenses which may be incurred by the Company after the closing of the transaction.
The IP Asset Purchase Agreement contains representations and warranties, covenants of the Company, and indemnification rights of both parties after the closing of the transaction that are customary for transactions of this type.
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The closing of the IP Asset Purchase Agreement is subject to certain conditions, including that the transactions contemplated by the Operating Asset Purchase Agreement (defined below) must have been consummated or all conditions to the consummation must be satisfied or waived and other customary closing conditions.
The IP Asset Purchase Agreement may be terminated under certain circumstances, including if the closing date has not occurred on or prior to September 30, 2015.
The Company will retain and operate the 32 Joes® brand retail stores after the closing of the Operating Asset Purchase Agreement and the IP Asset Purchase Agreement and thereafter will proceed with the disposition of certain stores; provided, however that, certain retail stores designated by Operating Assets Purchaser will be transferred to the Operating Assets Purchaser on or prior to December 31, 2016 for no additional consideration. Subject to certain limitations on the Companys aggregate net liability with respect to the net costs and expenses related to the operation of the retail stores if the Merger transactions do not close, such costs and expenses will be borne by the Company, the IP Assets Purchaser and the Operating Assets Purchaser. The Operating Assets Purchaser will supply Joes® branded merchandise to the retail stores for resale under a license from the IP Assets Purchaser.
A copy of the IP Asset Purchase Agreement is filed with this Current Report on Form 8-K as Exhibit 2.2 and is incorporated herein by reference, and the foregoing description of the IP Asset Purchase Agreement is qualified in its entirety by reference to the exhibit filed hereto.
Operating Asset Purchase Agreement
On September 8, 2015, the Company and GBG USA Inc., a Delaware corporation (Operating Assets Purchaser), entered into an asset purchase agreement (the Operating Asset Purchase Agreement), pursuant to which, the Operating Assets Purchaser will, among other things, purchase certain inventory and other assets and assume certain liabilities (the Purchased Assets) from the Company and its subsidiaries related to the Joes Business, including certain employees of the Joes Business and at a later date, specified Joes store leases. The aggregate purchase price will be $13 million. Additionally, at the closing of the sale, the Operating Assets Purchaser will deposit $1.5 million into an escrow account, which will be used to defer certain costs and expenses which may be incurred by the Company after the closing of the transaction.
The Operating Asset Purchase Agreement contains representations and warranties, covenants of the Company, and indemnification rights of both parties after the closing of the transaction that are customary for transactions of this type.
The closing of the Operating Asset Purchase Agreement is subject to certain conditions, including that the transactions contemplated by the IP Asset Purchase Agreement must have been consummated or all conditions to the consummation must be satisfied or waived and other customary closing conditions.
The Operating Asset Purchase Agreement may be terminated under certain circumstances, including if the closing date has not occurred on or prior to September 30, 2015.
A copy of the Operating Asset Purchase Agreement is filed with this Current Report on Form 8-K as Exhibit 2.3 and is incorporated herein by reference, and the foregoing description of the Operating Asset Purchase Agreement is qualified in its entirety by reference to the exhibit filed hereto.
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Agreement and Plan of Merger
On September 8, 2015, the Company, entered into an Agreement and Plan of Merger (the Merger Agreement) with JJ Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (Merger Sub), and RG, pursuant to which Merger Sub will merge with and into RG on the terms and subject to the conditions set forth in the Merger Agreement (the Merger), with RG surviving the Merger as a wholly-owned subsidiary of the Company. Subject to the conditions set forth in the Merger Agreement, the Merger is expected to close in the fourth quarter of 2015.
At the effective time of the Merger (the Effective Time), on the terms and subject to the conditions set forth in the Merger Agreement, all of the common units of RG (the RG Units) outstanding immediately prior to the Effective Time will be converted into the right to receive an aggregate of $81 million in cash (the Aggregate Cash Consideration) and 8,870,968 shares of Common Stock (after giving effect to a one for thirty reverse stock split) (the Aggregate Stock Consideration and, together with the Aggregate Cash Consideration, the Aggregate Merger Consideration). The portion of the Aggregate Merger Consideration constituting the Aggregate Cash Consideration will be reduced by an amount necessary to satisfy certain indebtedness of RG outstanding as of the Effective Time (as adjusted, the Actual Cash Consideration and, together with the Aggregate Stock Consideration, the Actual Merger Consideration).
The Merger Agreement contains customary representations, warranties and covenants of the Company and RG.
The completion of the Merger is subject to customary closing conditions, including, among others, (i) Company stockholder approval of: (x) the issuance of Common Stock in connection with the Merger, (y) the issuance of Common Stock upon conversion of the Companys Series A Preferred Stock (defined below) pursuant to the Stock Purchase Agreement (as defined below), and (z) a charter amendment to effect a 1 for 30 reverse stock split of the Companys Common Stock, (ii) consummation of the asset sales pursuant to each of the IP Asset Purchase Agreement and Operating Asset Purchase Agreement, (iii) consummation of the transactions contemplated by the Stock Purchase Agreement (defined below), (iv) consummation of the transactions contemplated by the Rollover Agreement, (v) RG must have obtained financing or the persons who have committed to provide financing must be prepared to provide the financing immediately following the Effective Time, (vi) the Registration Statement on Form S-4 registering the Common Stock to be issued in connection with the Merger must have become effective, (vii) the Common Stock to be issued in the Merger must be authorized for listing on NASDAQ and (viii) since the date of the Merger Agreement, there must not be any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate would reasonably be expected to have a material adverse effect on the Company or RG, subject to customary exceptions.
The Merger Agreement may be terminated under certain circumstances, including if the Merger has not been consummated on or before February 8, 2016.
The Company has agreed to pay RG a termination fee of $5.25 million, less certain expenses, if the Company: (i) terminates the Merger Agreement under certain circumstances and within twelve months after such termination, consummates a takeover proposal or enters into a definitive agreement with respect to a takeover proposal; (ii) the Merger Agreement is terminated by RG as a result of the Board changing its recommendation with respect to the Merger and related transactions; or (iii) the Merger Agreement is terminated by the Company because the Company has received a superior proposal and enters into a definitive agreement with respect thereto. In the event that the Merger Agreement is terminated by the Company because of RGs failure to obtain financing or by RG because the Merger has not occurred by February 8, 2016 at a time that the Company would have the right to terminate pursuant to a financing issue and has provided notice of such right, in each case, so long as the Company is not in breach of certain obligations related to obtaining the financing, then RG must pay the Company a reverse termination fee of $7.5 million, less certain expenses they may have been previously reimbursed to the
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Company. If either party terminates the Merger Agreement as a result of the other partys breach, then the breaching party must pay the non-breaching party up to an aggregate amount of $3 million for all of the documented out-of-pocket fees and expenses incurred in connection with the Merger Agreement and related transactions.
A copy the Merger Agreement is filed with this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference, and the foregoing descriptions of the Merger Agreement is qualified in its entirety by reference to the exhibit filed hereto.
Stock Purchase Agreement
On September 8, 2015, the Company entered into a stock purchase agreement (the Stock Purchase Agreement) with TCP Denim, LLC, a Delaware limited liability company and affiliate of TCP (the Purchaser), pursuant to which the Company will issue and sell to Purchaser immediately prior to the consummation of the Merger an aggregate of fifty thousand (50,000) shares of the Companys preferred stock, par value $0.10 per share, designated as Series A Convertible Preferred Stock (the Series A Preferred Stock), for an aggregate purchase price of $50 million in cash. Concurrently with the execution of the Stock Purchase Agreement, Tengram Capital Partners Fund II, L.P., a Delaware limited partnership, is entering into a limited guaranty in favor of the Company with respect to the obligations of the Purchaser under the Stock Purchase Agreement to pay the purchase price.
The Stock Purchase Agreement also provides that the proceeds from the sale of Series A Preferred Stock must be used for the purposes of consummating the Merger and the transactions contemplated by the Merger Agreement. The Stock Purchase Agreement provides that at the Effective Time, the applicable number of directors on the Companys Board will resign such that only two directors on the Board immediately prior to the closing will remain on the Board immediately following the closing. Furthermore, as of the Effective Time, the Board shall appoint the three persons designated by Purchaser to fill three of such vacancies as a director of the Company. A remaining vacancy will be filled by the Companys chief executive officer following the Effective Time.
The following is a summary of the terms of the Series A Preferred Stock as set forth in the form of certificate of designation for the Series A Preferred Stock: (i) each share of Series A Preferred Stock entitles the holder thereof to receive cumulative cash dividends, payable quarterly, at an annual rate of 10%, plus accumulated and accrued dividends thereon through such date; additionally, if the Board declares or pays a dividend on the Common Stock, then each holder of the Series A Preferred Stock will be entitled to receive a cash dividend on an as converted basis; (ii) each holder of the Series A Preferred Stock is entitled to vote on an as converted basis and together with the holders of Common Stock as a single class, subject to certain limitations; (iii) for so long as a to be determined percent of the shares of the Series A Preferred Stock remain outstanding, the holders of the Series A Preferred Stock, exclusively and as a separate class, will be entitled to elect three (3) members of the Board (the Series A Directors), and such Series A Director may only be removed without cause by the affirmative vote of the holders of a majority of the shares of Series A Preferred Stock; (iv) the holders of the Series A Preferred Stock have separate class voting rights with respects to certain matters affecting their rights; (v) upon any liquidation event, holders of the Series A Preferred Stock are entitled to receive the greater of the liquidation preference on the date of determination and the amount that would be payable to the holders of the Series A Preferred Stock had such holders converted their shares of Series A Preferred Stock into shares of Common Stock immediately prior to such liquidation event; and (vi) each share of the Series A Preferred Stock is convertible, at the option of the holder thereof, at any time and without the payment of additional consideration by the holder, at an initial conversion price of $11.10 (after taking into account the 1 for 30 reverse stock split).
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A copy of each of the Stock Purchase Agreement and the form of Certificate of Designation for the Series A Preferred Stock is filed with this Current Report on Form 8-K as Exhibits 10.1 and 4.1, respectively, and is incorporated herein by reference, and the foregoing descriptions of each of these agreements is qualified in their entirety by reference to the respective exhibit filed hereto.
Rollover Agreement
On September 8, 2015, the Company entered into a rollover agreement (the Rollover Agreement) with the holders of the Companys convertible notes (the Convertible Notes), pursuant to which the holders of the Convertible Notes have agreed to contribute to the Company the Convertible Notes in exchange for the following:
· issuance by the Company of a number of shares of Common Stock with a value per share of $11.10 of the Companys Common Stock equal to the sum (i) of a specified percentage of the principal amount of Convertible Notes held by such noteholder, which principal amount, as of July 1, 2015, is an aggregate of $33,990,538 and will be increased by any PIK interest payable in accordance with the terms of the Convertible Notes until the time that is immediately prior to the Effective Time (the Rollover Time), and (without duplication) and (ii) all accrued interest, including default interest as applicable, owing on 50% of the principal amount of such Convertible Notes in accordance with the terms of the Convertible Notes as of the Rollover Time, which amount, as of July 1, 2015, is an aggregate of $1,936,617 and which will continue to accrue interest in accordance with the terms of the Convertible Notes until the Rollover Time. The holders of Convertible Notes will receive in the aggregate approximately 14.0% of the Companys Common Stock outstanding immediately after consummation of the Merger;
· a cash payment by the Company to each noteholder equal to twenty-five percent (25%) of the principal amount of Convertible Notes as of the Rollover Time held by each such holder of the Convertible Notes, which principal amount, as of July 1, 2015, is an aggregate of $33,990,538, which will be increased by any PIK interest payable in accordance with the terms of the Convertible Notes until the Rollover Time; and
· a modified convertible note (each, a Modified Convertible Note and collectively, the Modified Convertible Notes) with a principal amount equal to the sum of (i) a specified percentage of the principal amount of Convertible Notes as of the Rollover Time held by each holder of the Convertible Notes, which principal amount, as of July 1, 2015, is an aggregate of $33,990,538 and will be increased by any PIK interest payable in accordance with the terms of the Convertible Notes until the Rollover Time, and (without duplication) (ii) all accrued interest, including default interest as applicable, owing on 50% of the principal amount of the Convertible Notes in accordance with the terms of the Convertible Notes as of the Rollover Time, which amount, as of July 1, 2015, is an aggregate of $1,936,617 and which will continue to accrue interest in accordance with the terms of the convertible notes until the rollover time. The holders of Convertible Notes will receive in the aggregate approximately $16.4 million outstanding principal amount of Modified Convertible Notes.
The Rollover Agreement will be automatically terminated upon termination of the Merger Agreement prior to the Rollover Time. The Rollover Agreement may also be terminated by the Company or by Mr. Kim and Fireman Capital CPF Hudson Co-Invest LP (Fireman) if the Rollover Time has not occurred prior to April 8, 2016.
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The Modified Convertible Notes are structurally and contractually subordinated to the Companys senior debt and will mature five and a half years following the date of such note. The Modified Convertible Notes accrue interest quarterly on the outstanding principal amount at a rate of 6.5% per annum (to be increased to 7% as of October 1, 2016 with respect to the Modified Convertible Notes issued to Fireman Capital CPF Hudson Co-Invest LP), which will be payable 50% in cash and 50% in additional notes (PIK Notes); provided, however, that the Company may, in its sole discretion, elect to pay 100% of such interest in cash. Beginning upon the date of issuance, the Modified Convertible Notes will be convertible by each of the holders into shares of the Companys Common Stock, cash, or a combination of cash and Common Stock, at the Companys election.
If the Company elects to issue only shares of Common Stock upon conversion of the Modified Convertible Notes, each of the Modified Convertible Notes would be convertible, in whole but not in part, into a number of shares equal to the conversion amount divided by the market price. The conversion amount is (a) the product of (i) the market price, multiplied by (ii) the quotient of (A) the principal amount, divided by (B) the conversion price, minus (b) the aggregate Company optional prepayment amounts paid to the holder. The market price is the average of the closing prices for the Common Stock over the 20 trading day period immediately preceding the notice of conversion. If the Company elects to pay cash with respect to a conversion of the Modified Convertible Notes, the amount of cash to be paid per share will be equal to the conversion amount. The Company will have the right to prepay all or any portion of the principal amount of the Modified Convertible Notes at any time so long as it makes a pro rata prepayment on all of the Modified Convertible Notes.
A copy of each of the Rollover Agreement and the form of the Modified Convertible Note is filed with this Current Report on Form 8-K as Exhibits 10.2 and 4.2, respectively, and is incorporated herein by reference, and the foregoing descriptions of each of these agreements is qualified in their entirety by reference to the respective exhibit filed hereto.
Registration Rights Agreement
At the Effective Time, the Company expects to enter into a registration rights agreement (the Registration Rights Agreement) with the Purchaser under the Stock Purchase Agreement and the noteholders party to the Rollover Agreement. Pursuant to the Registration Rights Agreement, the Company will provide certain demand registration rights to register the shares of Common Stock issued in connection with the Rollover Agreement, and issuable upon conversion of the Modified Convertible Notes and Series A Preferred Stock, on registration statements on Form S-1 or Form S-3, subject to certain limitations as described therein, and will also provide certain piggy back registration rights.
A copy of the Form of Registration Rights Agreement is filed with this Current Report on Form 8-K as Exhibit 10.3 and is incorporated herein by reference, and the foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to the exhibit filed hereto.
Voting Agreement
On September 8, 2015, the Company entered into a voting agreement, with RG and Joseph M. Dahan, Creative Director and Director of the Company, pursuant to which Mr. Dahan has agreed to vote all of the Common Stock he holds in a manner so as to facilitate consummation of the Merger. As of the date hereof, Mr. Dahan owns approximately 17% of the Companys outstanding voting stock.
A copy of the Voting Agreement is filed with this Current Report on Form 8-K as Exhibit 10.6 and is incorporated herein by reference, and the foregoing description of the Voting Agreement is qualified in its entirety by reference to the exhibit filed hereto.
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The Transaction Agreements have been included to provide investors with information regarding their terms. They are not intended to provide any other factual information about the Company. In particular, the representations and warranties contained in the Transaction Agreements were made only for the purposes of such agreements as of the specific dates therein, and were solely for the benefit of the parties to the Transaction Agreements. The representations and warranties contained in the Transaction Agreements may be subject to limitations agreed upon by the parties to the Transaction Agreements and are qualified by information in confidential disclosure schedules provided in connection with the signing of the Transaction Agreements. These confidential disclosure schedules contain information that modifies, qualifies, and creates exceptions to the representations and warranties set forth in the Transaction Agreements. Moreover, certain representations and warranties in the Transaction Agreements may be subject to a standard of materiality provided for in the Transaction Agreements and have been used for the purpose of allocating risk among the parties, rather than establishing matters of fact. Investors should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Transaction Agreements, which subsequent information may or may not be fully reflected in the Companys public disclosures.
Item 3.02. Unregistered Sales of Equity Securities.
The disclosure under Item 1.01 of this Current Report on Form 8-K relating to the Common Stock issuable pursuant to the Rollover Agreement, the Common Stock issuable upon conversion of the Modified Convertible Notes, the Series A Preferred Stock to be sold pursuant to the Stock Purchase Agreement and the shares of Common Stock issuable upon conversion of the Series A Preferred Stock and under Item 5.02 of this Current Report on Form 8-K relating to the Restricted Stock Award and Performance Shares is incorporated herein by reference. The issuance of such securities will be made in reliance on the exemption from the registration requirements of the Securities Act of 1933 afforded by Section 4(a)(2).
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with the Asset Sale, the Company has entered into a Separation Agreement and Mutual Limited Release, dated as of September 8, 2015 (the Separation Agreement), with Mr. Dahan, pursuant to which Mr. Dahan will resign as a member of the Board and as Creative Director of the Company, effective as of the closing date of the Operating Asset Purchase Agreement. In exchange for a release of all claims related to Mr. Dahans employment, the Company will pay Mr. Dahan his termination severance as provided in his employment agreement.
On September 8, 2015, the Company entered into a new three-year Employment Agreement with Mr. Kim (the Employment Agreement), to serve as the Chief Executive Officer of Hudson Clothing, LLC, a California limited liability company (Hudson), that will replace Mr. Kims previous employment agreement as of the Effective Time. Mr. Kims annual base salary will initially be $600,000 and Mr. Kim will also be eligible to receive an annual discretionary bonus targeted at 50% of his base salary, based on the satisfaction of criteria and performance standards as established in advance by the Compensation Committee. The Employment Agreement also provides Mr. Kim with certain other benefits and the reimbursement of certain expenses, which are discussed in detail in the Employment Agreement. At the Effective Time, the Company has agreed to grant Mr. Kim (i) restricted stock units in respect of 166,667 shares of Common Stock (the Restricted Stock Award) that will vest and become transferable in three equal, annual installments beginning on the first anniversary of the Effective Time, subject to Mr. Kims continuous employment and (ii) performance share units in respect of 166,667 shares of the Companys Common Stock (the Performance Shares) that will be earned over a three-year
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performance period. One-third of the Performance Shares will be entitled to vest each year based on annual performance metrics established by the Compensation and Stock Option Committee of the Board at the beginning of the applicable year. The Restricted Stock Award and Performance Shares will be settled in cash, unless the Company is able to attain stockholder approval of a new equity incentive plan covering such awards. Mr. Kim will also be entitled to participate in all regular long-term incentive programs maintained by the Company or Hudson on the same basis as similarly-situated employees of the Company and/or Hudson.
Mr. Kim has also entered into a non-competition agreement with the Company and HCH (the Non-Competition Agreement), which also will become effective as of the Effective Time of the Merger, pursuant to which Mr. Kim has agreed not to engage in, compete with or permit his name to be used by or in connection with any premium denim apparel business outside his role with Hudson, that is competitive to the Company, HCH or their respective subsidiaries for a period of up to three years from the Effective Time.
The foregoing descriptions of the Separation Agreement, Employment Agreement and the Non-Competition Agreement, do not purport to be complete and are subject to, and qualified, in their entirety by, the full text of the Separation Agreement, which is attached hereto as Exhibit 10.7, the Employment Agreement, which is attached hereto as Exhibit 10.4, and the Non-Competition Agreement, which is attached hereto as Exhibit 10.5, each of which is incorporated herein by reference.
Item 8.01. Other Events.
On September 8, 2015, the Company issued a press release announcing the Merger Transactions. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Forward Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. The matters discussed in this Current Report on Form 8-K involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. All statements in this Current Report on Form 8-K that are not purely historical facts are forward-looking statements, including statements containing the words may, will, expect, anticipate, intend, estimate, continue, believe, plan, project, will be, will continue, will likely result or similar expressions. Any forward-looking statement inherently involves risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to: the parties ability to close the merger, including, the receipt and terms and conditions of any required governmental approval of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of managements time and attention from the Companys ongoing business during this time period; the impact of the merger on the Companys stock price; the anticipated benefits of the merger on its financial results, business performance and product offerings; the Companys ability to successfully integrate the Robert Graham business and realize cost savings and any other synergies; the risk that the credit ratings of the combined company or its subsidiaries may be different from what the Company expects; continued acceptance of our product, product demand, competition, capital adequacy, general economic conditions and the potential inability to raise additional capital if required; the risk that the Company will be unsuccessful in gauging fashion trends and changing customer preferences; the risk that changes in general economic conditions, consumer confidence, or consumer spending patterns will have a negative impact on the
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Companys financial performance; the highly competitive nature of the Companys business in the United States and internationally and its dependence on consumer spending patterns, which are influenced by numerous other factors; the Companys ability to respond to the business environment and fashion trends; continued acceptance of the Companys brands in the marketplace; and other risks. The Company discusses certain of these factors more fully in its additional filings with the Securities and Exchange Commission (SEC), including its last annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC, and this Current Report on Form 8-K should be read in conjunction with those reports, together with all of the Companys other filings, including its current reports on Form 8-K, through the date of this Current Report on Form 8-K. The Company urges you to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this Current Report on Form 8-K.
Any forward-looking statement is based on information current as of the date of this Current Report on Form 8-K and speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update these statements to reflect events or circumstances after the date on which such statement is made. Readers are cautioned not to place undue reliance on forward-looking statements.
Additional Information about the Proposed Merger and Where to Find It
In connection with the proposed merger, the Company expects to file with the SEC a registration statement on Form S-4 that will include a proxy statement of the Company that also constitutes a prospectus of the Company, which proxy statement will be mailed or otherwise disseminated to the Companys stockholders when it becomes available. The Company also plans to file other relevant documents with the SEC regarding the proposed merger. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the proxy statement/prospectus (if and when it becomes available) and other relevant documents filed by the Company with the SEC at the SECs website www.sec.gov. Copies of the documents filed by the Company will be available free of charge on its website at www.joesjeans.com or by contacting the individual listed below.
Certain Information Regarding Participants
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. You can find information about the Companys executive officers and directors in the Companys Form 10-K/A filed with the SEC on March 30, 2015. Additional information regarding the interests of such potential participants will be included in the proxy statement/prospectus and other relevant documents filed with the SEC if and when they become available. You may obtain free copies of these documents from the Company by contacting the individual listed below.
No Offer or Solicitation
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. |
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Description |
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2.1* |
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Agreement and Plan of Merger, dated as of September 8, 2015, by and among RG Parent, LLC, JJ Merger Sub LLC and Joes Jeans Inc. |
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2.2* |
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IP Asset Purchase Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., Joes Holdings LLC and Sequential Brands Group, Inc. |
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2.3* |
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Operating Asset Purchase Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., Joes Holdings LLC and GBG USA Inc. |
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4.1 |
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Form of Certificate of Designation for 10% Series A Convertible Preferred Stock of Joes Jeans Inc. |
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4.2 |
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Form of Subordinated Convertible Note of Joes Jeans Inc. |
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10.1 |
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Stock Purchase Agreement, dated as of September 8, 2015, by and between TCP Denim, LLC and Joes Jeans Inc. |
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10.2 |
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Rollover Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc. and the noteholders party thereto. |
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10.3 |
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Form of Registration Rights Agreement. |
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10.4 |
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Employment Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., Hudson Clothing Holdings, Inc., HC Acquisition Holdings, Inc., Hudson Clothing, LLC and Peter Kim. |
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10.5 |
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Non-Competition Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., Hudson Clothing Holdings, Inc. and Peter Kim. |
|
|
|
10.6 |
|
Voting Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., RG Parent, LLC and Joseph M. Dahan. |
|
|
|
10.7 |
|
Separation Agreement and Mutual Limited Release, dated as of September 8, 2015, by and between Joes Jeans Inc. and Joseph M. Dahan. |
|
|
|
99.1 |
|
Press Release dated September 8, 2015. |
* Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
Joes Jeans Inc. |
|
|
|
|
September 8, 2015 |
By: |
/s/ Samuel J. Furrow |
|
|
Name: Samuel J. Furrow |
|
|
Title: Interim Chief Executive Officer and Chairman of the Board of Directors |
11
EXHIBIT INDEX
Exhibit No. |
|
Description |
|
|
|
2.1* |
|
Agreement and Plan of Merger, dated as of September 8, 2015, by and among RG Parent, LLC, JJ Merger Sub LLC and Joes Jeans Inc. |
|
|
|
2.2* |
|
IP Asset Purchase Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., Joes Holdings LLC and Sequential Brands Group, Inc. |
|
|
|
2.3* |
|
Operating Asset Purchase Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., Joes Holdings LLC and GBG USA Inc. |
|
|
|
4.1 |
|
Form of Certificate of Designation for 10% Series A Convertible Preferred Stock of Joes Jeans Inc. |
|
|
|
4.2 |
|
Form of Subordinated Convertible Note of Joes Jeans Inc. |
|
|
|
10.1 |
|
Stock Purchase Agreement, dated as of September 8, 2015, by and between TCP Denim, LLC and Joes Jeans Inc. |
|
|
|
10.2 |
|
Rollover Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc. and the noteholders party thereto. |
|
|
|
10.3 |
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Form of Registration Rights Agreement. |
|
|
|
10.4 |
|
Employment Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., Hudson Clothing Holdings, Inc., HC Acquisition Holdings, Inc., Hudson Clothing, LLC and Peter Kim. |
|
|
|
10.5 |
|
Non-Competition Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., Hudson Clothing Holdings, Inc. and Peter Kim. |
|
|
|
10.6 |
|
Voting Agreement, dated as of September 8, 2015, by and among Joes Jeans Inc., RG Parent, LLC and Joseph M. Dahan. |
|
|
|
10.7 |
|
Separation Agreement and Mutual Limited Release, dated as of September 8, 2015, by and between Joes Jeans Inc. and Joseph M. Dahan. |
|
|
|
99.1 |
|
Press Release dated September 8, 2015. |
* Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.
12
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 8, 2015
by and among
RG PARENT, LLC,
JJ MERGER SUB LLC
and
JOES JEANS INC.
TABLE OF CONTENTS
|
|
Page |
|
|
|
ARTICLE I THE MERGER |
2 |
|
|
|
Section 1.1. |
The Merger |
2 |
Section 1.2. |
Closing |
2 |
Section 1.3. |
Effective Time |
3 |
Section 1.4. |
Conversion of the RG Units |
3 |
Section 1.5. |
Organizational Documents |
4 |
Section 1.6. |
Officers of the Surviving Company |
4 |
Section 1.7. |
Exchange Agent |
4 |
Section 1.8. |
Payments |
4 |
Section 1.9. |
Exchange of Certificates |
5 |
Section 1.10. |
Tax Treatment |
7 |
|
|
|
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MERGER SUB |
8 |
|
|
|
Section 2.1. |
Organization, Standing and Corporate Power |
8 |
Section 2.2. |
Capitalization |
9 |
Section 2.3. |
Authority; Noncontravention; Voting Requirements |
10 |
Section 2.4. |
Governmental Approvals |
11 |
Section 2.5. |
Company SEC Documents; Undisclosed Liabilities |
12 |
Section 2.6. |
Absence of Certain Changes or Events |
13 |
Section 2.7. |
Legal Proceedings |
13 |
Section 2.8. |
Compliance With Laws; Permits |
13 |
Section 2.9. |
Tax Matters |
13 |
Section 2.10. |
Employee Benefits |
14 |
Section 2.11. |
Contracts |
16 |
Section 2.12. |
Intellectual Property |
17 |
Section 2.13. |
Brokers and Other Advisors |
18 |
Section 2.14. |
Related Party Transactions |
19 |
Section 2.15. |
Insurance |
19 |
Section 2.16. |
Property |
19 |
Section 2.17. |
Environmental Matters |
19 |
Section 2.18. |
Rights Agreement; Anti-Takeover Provisions |
20 |
Section 2.19. |
Labor Matters; Employees |
20 |
Section 2.20. |
Asset Purchase Agreements |
20 |
Section 2.21. |
Non-Reliance on RG Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans |
21 |
Section 2.22. |
No Other Representations and Warranties |
21 |
|
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF RG |
21 |
|
|
|
Section 3.1. |
Organization |
21 |
Section 3.2. |
Authority; Noncontravention |
22 |
Section 3.3. |
Capitalization |
22 |
Section 3.4. |
Governmental Approvals |
23 |
i
Section 3.5. |
Legal Proceedings |
23 |
Section 3.6. |
Financial Statements; Undisclosed Liabilities |
24 |
Section 3.7. |
Absence of Certain Changes or Events |
24 |
Section 3.8. |
Compliance With Laws; Permits |
24 |
Section 3.9. |
Tax Matters |
25 |
Section 3.10. |
Employee Benefits Matters |
26 |
Section 3.11. |
Contracts |
27 |
Section 3.12. |
Intellectual Property |
29 |
Section 3.13. |
Brokers and Other Advisors |
30 |
Section 3.14. |
Financing |
30 |
Section 3.15. |
Ownership of Company Common Stock |
31 |
Section 3.16. |
Related Party Transactions |
31 |
Section 3.17. |
Insurance |
31 |
Section 3.18. |
Property |
31 |
Section 3.19. |
Environmental Matters |
31 |
Section 3.20. |
Labor Matters; Employees |
32 |
Section 3.21. |
Non-Reliance on Company Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans |
32 |
Section 3.22. |
No Other Representations and Warranties |
33 |
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|
|
ARTICLE IV ADDITIONAL COVENANTS AND AGREEMENTS |
33 |
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|
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Section 4.1. |
Conduct of Business |
33 |
Section 4.2. |
No Solicitation |
39 |
Section 4.3. |
Reasonable best efforts |
43 |
Section 4.4. |
Spinoff Transaction |
44 |
Section 4.5. |
Preparation of Proxy Statement/Form S-4 Registration Statement; Stockholders Meeting |
45 |
Section 4.6. |
Public Announcements |
47 |
Section 4.7. |
Access to Information; Confidentiality |
47 |
Section 4.8. |
Notification of Certain Matters |
48 |
Section 4.9. |
Indemnification and Insurance |
48 |
Section 4.10. |
Fees and Expenses |
51 |
Section 4.11. |
Rule 16b-3 |
51 |
Section 4.12. |
Employee Benefits |
52 |
Section 4.13. |
Financing |
52 |
Section 4.14. |
Financing Cooperation |
54 |
Section 4.15. |
Company Board of Directors |
57 |
Section 4.16. |
Legal Privileges |
57 |
Section 4.17. |
Amendments, Modifications and Waivers of the Asset Purchase Agreements |
57 |
Section 4.18. |
Notification of Certain Matters |
57 |
|
|
|
ARTICLE V CONDITIONS TO THE MERGER |
58 |
|
|
|
Section 5.1. |
Conditions to Each Partys Obligation to Effect the Merger |
58 |
Section 5.2. |
Conditions to Obligations of RG |
59 |
Section 5.3. |
Conditions to Obligation of the Company |
60 |
Section 5.4. |
Frustration of Closing Conditions |
60 |
ii
ARTICLE VI TERMINATION |
60 |
|
|
|
Section 6.1. |
Termination |
60 |
Section 6.2. |
Effect of Termination |
62 |
Section 6.3. |
Termination Fee; Reimbursement of Expenses |
63 |
Section 6.4. |
Reverse Termination Fee |
64 |
|
|
|
ARTICLE VII MISCELLANEOUS |
65 |
|
|
|
Section 7.1. |
No Survival, Etc. |
65 |
Section 7.2. |
Amendment or Supplement |
65 |
Section 7.3. |
Extension of Time, Waiver, Etc. |
65 |
Section 7.4. |
Assignment |
66 |
Section 7.5. |
Counterparts; Scanned Signatures |
66 |
Section 7.6. |
Entire Agreement; No Third-Party Beneficiaries; Representations; Disclosure |
66 |
Section 7.7. |
Governing Law; Jurisdiction; Waiver of Jury Trial |
67 |
Section 7.8. |
Specific Enforcement; Limit on Liability |
69 |
Section 7.9. |
Notices |
69 |
Section 7.10. |
Severability |
70 |
Section 7.11. |
Definitions |
70 |
Section 7.12. |
Interpretation |
85 |
iii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of September 8, 2015 (this Agreement), is by and among RG PARENT, LLC, a Delaware limited liability company (RG), JJ MERGER SUB LLC, a Delaware limited liability company and a wholly owned Subsidiary of the Company (Merger Sub), and JOES JEANS INC., a Delaware corporation (the Company). Certain terms used in this Agreement are defined in Section 7.11.
WHEREAS, the Board of Directors of the Company (the Company Board) has (a) determined that it is fair to, and in the best interest of, the Company and its stockholders (the Company Stockholders) to enter into this Agreement, (b) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the merger of Merger Sub with and into RG (the Merger), with RG as the surviving limited liability company, and adopted resolutions adopting and approving this Agreement and declaring its advisability, and (c) resolved, on the terms and subject to the conditions set forth in this Agreement, to make the Company Recommendation;
WHEREAS, the Board of Managers of RG has (a) determined that it is in the best interests of RG and its members (the RG Members) to enter into this Agreement, and (b) authorized and approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger;
WHEREAS, the Company, as sole member of Merger Sub, has adopted resolutions approving this Agreement;
WHEREAS, the requisite RG Members have duly approved this Agreement;
WHEREAS, prior to or concurrently with the execution of this Agreement, and as a condition and inducement to the Companys and RGs willingness to enter into this Agreement, the holders of Convertible Notes of the Company are entering into a letter agreement in the form attached hereto as Exhibit A, pursuant to which such holders will surrender their Convertible Notes to the Company, subject to the terms and conditions therein, in exchange for cash, Company Common Stock and modified convertible notes (each a Rollover Letter and collectively, the Rollover Letters);
WHEREAS, prior to or concurrently with the execution of this Agreement, and as a condition and inducement to the Companys and RGs willingness to enter into this Agreement, the Company and TCP Denim, LLC, a Delaware limited liability company (the Preferred Stock Purchaser) and an Affiliate of Tengram Capital Partners, L.P. (TCP), are entering into a Stock Purchase Agreement in the form attached hereto as Exhibit B (the Stock Purchase Agreement), pursuant to which such Affiliate will, among other things, purchase $50,000,000 of Company Preferred Stock immediately prior to, or concurrently with, the Effective Time;
WHEREAS, prior to or concurrently with the execution of this Agreement, and as a condition and inducement to the Companys and RGs willingness to enter into this Agreement, the Company, Sequential Brands Group, Inc., a Delaware corporation, and Joes Holdings LLC (the IP Assets Purchaser) are entering into an Asset Purchase Agreement in the form attached hereto as Exhibit C (including all schedules and exhibits thereto, the IP Asset Purchase Agreement), pursuant to which the IP Assets Purchaser will, among other things, purchase certain Intellectual Property Rights and other assets from the Company immediately prior to, or concurrently with, the Effective Time;
WHEREAS, prior to or concurrently with the execution of this Agreement, and as a condition and inducement to the Companys and RGs willingness to enter into this Agreement, the Company and GBG USA, Inc., a Delaware corporation (the Operating Assets Purchaser), are entering into an Asset Purchase Agreement in the form attached hereto as Exhibit D (including all schedules and exhibits thereto, the Operating Asset Purchase Agreement and, together with the IP Asset Purchase Agreement, the Asset Purchase Agreements), pursuant to which the Operating Assets Purchaser will, among other things, purchase certain inventory, store leases and certain other assets from the Company immediately prior to, or concurrently with, the Effective Time; and
WHEREAS, prior to, or concurrently with, the execution of this Agreement, and as a condition and inducement to the Companys and RGs willingness to enter into this Agreement, Tengram Capital Partners Fund II, L.P., a Delaware limited partnership (Guarantor) is entering into a guaranty in favor of the Company (the Guaranty) with respect to the obligations of the Preferred Stock Purchaser under the Stock Purchase Agreement to pay the purchase price thereunder.
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, RG, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into RG, with RG as the surviving limited liability company, in accordance with the DLLCA, and the separate limited liability company existence of Merger Sub shall thereupon cease. RG shall continue as the surviving limited liability company in the Merger (sometimes hereinafter referred to as the Surviving Company), and the separate existence of RG, with all its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Merger, except as set forth in this Article I.
Section 1.2. Closing. Upon the terms and subject to the conditions set forth in this Agreement, the closing of the Merger (the Closing) shall take place at 10:00 a.m. (New York, New York time) on a date to be specified by the parties (the Closing Date), which date shall be no later than the third (3rd) Business Day after satisfaction or waiver of the conditions set forth in Article V (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time), at the offices of Akin Gump Strauss Hauer & Feld LLP, 1333 New Hampshire Avenue NW, Washington DC 20036, unless another time, date or place is agreed to in writing by the parties hereto. By agreement of the parties, the Closing may take place by delivery of the documents to be delivered at the Closing by facsimile or other electronic transmission. All deliveries by one party to any other party at the Closing shall be deemed to have occurred simultaneously and none shall be effective until and unless all have occurred, unless the parties agree otherwise in writing.
2
Section 1.3. Effective Time. Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date, the Company and RG will cause the Certificate of Merger to be duly executed and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DLLCA and shall take all such reasonable further actions as may be required by Law to make the Merger effective. The Merger shall become effective on the Closing Date at the time when the Certificate of Merger has been duly filed with the office of the Secretary of State of the State of Delaware or at such later date and time as RG and the Company may agree and specify in the Certificate of Merger in accordance with the DLLCA (the Effective Time).
Section 1.4. Conversion of the RG Units. At the Effective Time, by virtue of the Merger and without any further action on the part of RG, Merger Sub, the Company or the holders of RG Units, the RG Units shall be converted into the right to receive an aggregate of $81,000,000 in cash (the Aggregate Cash Consideration) and 8,870,968 shares (after giving effect to the Reverse Stock Split) of Company Common Stock (the Aggregate Stock Consideration and, together with the Aggregate Cash Consideration, the Aggregate Merger Consideration) as follows:
(a) Except as provided in Section 1.4(c), each RG Unit issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger, and without any action on the part of the holder thereof, be converted automatically into the right to receive, upon surrender of the Certificate representing such RG Unit as provided in Section 1.9, such portion of (i) Aggregate Cash Consideration less the RG Payoff Amount (such amount, the Actual Cash Consideration) and (ii) the Aggregate Stock Consideration ((i) and (ii) collectively, the Actual Merger Consideration) as indicated in the Merger Consideration Schedule. The Merger Consideration Schedule shall be delivered by RG to the Company at least three (3) Business Days prior to the anticipated Closing Date and the allocations reflected thereon shall be in accordance with RGs limited liability company agreement as of the Effective Time.
(b) All RG Units, when so converted, shall no longer be outstanding and shall automatically be retired and shall cease to exist, and each holder of RG Units shall cease to have any rights with respect thereto, except the right to receive the Actual Merger Consideration into which such RG Units have been converted, as provided herein.
(c) Each RG Unit that is owned by RG or by any Subsidiary of RG and each RG Unit owned by the Company, Merger Sub or any other Subsidiary of the Company immediately prior to the Effective Time shall be retired and cease to exist and no payment or distribution shall be made with respect thereto.
(d) Each common unit of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued common unit of the Surviving Company and shall constitute the only outstanding equity of the Surviving Company.
3
Section 1.5. Organizational Documents. At the Effective Time, pursuant to the Merger, the limited liability company agreement of the Surviving Company shall be amended to read in its entirety the same as the limited liability company agreement of Merger Sub, as in effect immediately prior to the Effective Time, except that the name of the Surviving Company shall remain RG Parent, LLC. Thereafter, the limited liability company agreement of the Surviving Company may be amended in accordance with its terms and as provided by Law.
Section 1.6. Officers of the Surviving Company. The officers of RG shall continue in office as the officers of the Surviving Company, and such officers shall hold office until successors are duly elected or appointed and qualified in accordance with and subject to applicable Law and the limited liability company agreement of the Surviving Company.
Section 1.7. Exchange Agent. Prior to the Effective Time, the Company shall appoint an exchange agent reasonably acceptable to RG (the Exchange Agent) for the purpose of exchanging the Certificates for the Merger Consideration and for such other purposes as otherwise provided herein. All fees and expenses incurred in connection with the Exchange Agent shall be paid by the Company, whether or not the transactions contemplated hereby are consummated.
Section 1.8. Payments.
(a) (i) At least five (5) Business Days prior to the Closing Date, the Company shall provide RG with customary payoff letters and forms of Lien releases, in form reasonably satisfactory to RG, with respect to all Indebtedness of the Company and its Subsidiaries described in clauses (a), (b), (d), (e) and (f) of the definition of Indebtedness, including, but not limited to, that Indebtedness set forth on Section 1.8(a) of the Company Disclosure Schedule. At the Closing, the Company shall pay or cause to be paid (A) to the holders of such Indebtedness (other than the holders of the Convertible Notes), the outstanding principal amount, together with all accrued and unpaid interest through the Closing Date and prepayment or other penalties or premiums, if any, owed with respect to such Indebtedness of the Company and its Subsidiaries, and (B) to the holders of Convertible Notes, the cash, Company Common Stock and modified convertible notes in exchange for their Convertible Notes in accordance with the Rollover Letters (collectively, the Company Payoff Amount). (ii) At least five (5) Business Days prior to the Closing Date, RG shall provide the Company with customary payoff letters and forms of Lien releases, in form reasonably satisfactory to the Company, with respect to all Indebtedness of RG and its Subsidiaries described in clauses (a), (b), (d), (e) and (f) of the definition of Indebtedness, including, but not limited to, that Indebtedness set forth on Section 1.8(a) of the RG Disclosure Schedule (the RG Debt). At the Closing, the Company shall pay or cause to be paid to the holders of such Indebtedness, the outstanding principal amount, together with all accrued and unpaid interest through the Closing Date and prepayment or other penalties or premiums, if any, owed with respect to such Indebtedness of the Company and its Subsidiaries (the RG Payoff Amount).
4
(b) At the Effective Time, the Company shall cause to be deposited with the Exchange Agent cash and Company Common Stock in the aggregate amount required to pay the Actual Merger Consideration in respect of the RG Units (such cash amounts being referred to herein as the Exchange Fund). The Exchange Fund shall be used solely for purposes of paying the Actual Merger Consideration in respect of the RG Units in accordance with Section 1.9 and shall not be used to satisfy any other obligation of the Company or any of its Subsidiaries. Pending distribution of the Exchange Fund in accordance with Section 1.9, the Exchange Agent may invest such cash, provided that such investments are Permitted Investments and shall have maturities that will not prevent or delay payments to be made pursuant to Section 1.9. Any income from investment of the Exchange Fund will be payable solely to the Company. If the Exchange Fund diminishes for any reason below the amount required to make prompt payment of the Actual Merger Consideration, then the Company and Merger Sub shall, jointly and severally, promptly cause to be deposited with the Exchange Agent the amount necessary to replace or restore the lost portion of the Exchange Fund to ensure that it is, at all times, maintained at a level sufficient to make such payments.
Section 1.9. Exchange of Certificates.
(a) Exchange Procedures.
(i) As soon as practicable (but not more than one (1) day) after the Effective Time, the Company and the Surviving Company shall cause the Exchange Agent to mail to each holder of record of Certificates that were subsequently converted into the right to receive the Actual Merger Consideration, as set forth in Section 1.4: (A) a letter of transmittal (a Letter of Transmittal), the form and substance of which shall be reasonably agreed to by the Company and RG at least three (3) days prior to the Closing Date, which shall, among other things, specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Surviving Company (or an affidavit of loss in lieu thereof, together with any bond or indemnity agreement, as contemplated by Section 1.9(e); and (B) instructions for use in effecting the surrender of the Certificates in exchange for payment of the applicable Actual Merger Consideration.
(ii) Upon surrender of a Certificate for cancellation to the Surviving Company, together with a Letter of Transmittal, duly completed and validly executed (A) the holder of such Certificate shall be entitled to receive in exchange therefor the applicable amount of (1) cash, by wire transfer of immediately available funds, and (2) shares of Company Common Stock, in each case equal to the portion of the Actual Merger Consideration for each RG Unit represented by such Certificate in accordance with the Merger Consideration Schedule and (B) the Certificate so surrendered shall forthwith be canceled. No interest will be paid or accrued on the Actual Merger Consideration payable upon surrender of the Certificates. Until surrendered as contemplated by this Section 1.9(a), each such Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Actual Merger Consideration. Notwithstanding anything in this Section 1.9 to the contrary, RG Units that are in non-certificate book-entry form immediately prior to the Effective Time will, at the Effective Time, be deemed to be automatically surrendered for all purposes hereunder.
5
(iii) In the event of a valid transfer of ownership of RG Units prior to the Effective Time that is not registered in the transfer records of RG, the appropriate amount of the Actual Merger Consideration may be paid to the applicable transferee if (i) in the case of certificated RG Units, the Certificate representing such RG Units is presented to the Surviving Company properly endorsed or accompanied by appropriate unit power and otherwise in proper form for transfer and accompanied by all customary documents reasonably required by the Surviving Company to evidence and effect such transfer and to evidence that any applicable Taxes have been paid or (ii) in the case of non-certificate book-entry RG Units, a properly endorsed and appropriate unit power is presented to the Surviving Company and accompanied by all customary documents reasonably required by the Surviving Company to evidence and effect such transfer and to evidence that any applicable Taxes have been paid.
(b) No Further Ownership Rights. All Actual Merger Consideration paid upon the surrender for exchange of the Certificates representing RG Units in accordance with the terms of this Section 1.9 shall be deemed to have been paid in full satisfaction of all rights pertaining to such RG Units and, after the Effective Time, the unit transfer books of RG shall be closed and thereafter there shall be no further registration of transfers on the unit transfer books of the Surviving Company of the RG Units that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Company for any reason, they shall be canceled and exchanged as provided in this Section 1.9.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund (including any interest and other income received with respect thereto) that remains undistributed to the former RG Members on the date twelve (12) months after the Effective Time shall be delivered by the Exchange Agent to the Surviving Company upon demand, and any former holder of RG Units who has not theretofore received any applicable Actual Merger Consideration to which such holder of RG Units is entitled under this Section 1.9 shall thereafter look only to the Surviving Company (subject to abandoned property, escheat or other similar Laws) for payment of their claim for Actual Merger Consideration without any interest thereon and only as a general creditor thereof.
(d) No Liability. None of the Company, the Surviving Company or Merger Sub shall be liable to any holder of RG Units for any part of the Actual Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by holders of any such RG Units at such date as is immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Authority shall, to the extent permitted by applicable Law or Order, become the property of the Company free and clear of any claims or interest of any such holders or their successors, assigns or personal representatives previously entitled thereto.
6
(e) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by the Surviving Company, the posting by such Person of a bond in such reasonable amount as the Surviving Company may direct or the execution and delivery by such Person of an indemnity agreement in such form as the Surviving Company may direct, in each case as indemnity against any claim that may be made against it with respect to such Certificate, the Surviving Company shall issue in exchange for such lost, stolen or destroyed Certificate the appropriate amount of the Actual Merger Consideration.
(f) Withholding of Taxes. Notwithstanding anything to the contrary in this Agreement, the Company, the Surviving Company or any Affiliate thereof shall be entitled to deduct and withhold from amounts otherwise payable pursuant to this Agreement to any Person such amounts as the Company, the Surviving Company or any Affiliate thereof are required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the Code), or under any provision of state, local or foreign Tax Law (including any income Tax Law or other Tax Law). To the extent that amounts are so withheld by the Surviving Company, any Affiliate or the Company, such withheld amounts shall be (i) paid over to the applicable Governmental Authority in accordance with applicable Law or Order and (ii) treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by the Surviving Company, any Affiliate thereof or the Company, as the case may be.
(g) Fractional Shares. No fraction of a share of the Company Common Stock will be issued by virtue of the Merger, and each holder of RG Units who would otherwise be entitled to a fraction of a share of Company Common Stock (after aggregating all fractional shares of Company Common Stock which such holder would otherwise receive) shall, upon compliance with Section 1.9(a), receive from the Company, in lieu of such fractional share, the amount of cash equal to the fair market value of such fractional share.
Section 1.10. Tax Treatment. The parties agree to treat the Merger as a transfer of the Voting Common Units and Non-Voting Common Units in exchange for the Actual Merger Consideration for U.S. federal income tax purposes that is subject to Section 351 of the Code (unless otherwise required by applicable Law). The parties shall file all Tax Returns (and cause their respective Affiliates to file all Tax Returns) consistently with this Section 1.10 and shall not take any position during the course of any audit or other legal proceeding that is inconsistent with this Section 1.10, unless required by a determination of the applicable taxing authority that is final.
7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MERGER SUB
Except (i) as disclosed in the Company SEC Documents or (ii) as set forth in the disclosure schedule delivered by the Company to RG simultaneously with the execution of this Agreement (the Company Disclosure Schedule), the Company and Merger Sub, jointly and severally, represent and warrant to RG as follows (such representations and warranties are given with the assumption that the Asset Sale Transactions have been consummated):
Section 2.1. Organization, Standing and Corporate Power.
(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated. Each of the Companys Subsidiaries, including Merger Sub, is a corporation or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated or formed. Each of the Company and its Subsidiaries, including Merger Sub, has all requisite corporate or other power, as the case may be, and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and its Subsidiaries, including Merger Sub, is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(b) The copies of the Company Charter Documents that are incorporated by reference into the Company SEC Documents are complete and correct copies thereof as in effect on the date hereof. The Company is not in violation of or default under any of the provisions of the Company Charter Documents. No material Subsidiary of the Company, including Merger Sub, is in violation of or default under any of the provisions of its articles of incorporation, bylaws or similar organizational documents.
(c) Section 2.1(c) of the Company Disclosure Schedule lists, as of the date hereof, all Subsidiaries of the Company together with the jurisdiction of organization of each such Subsidiary. (i) The Company is the direct or indirect owner of all outstanding shares of capital stock of, or other equity interests in, each Subsidiary of the Company, (ii) all such shares or other equity interests have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights and are owned directly or indirectly by the Company and (iii) all such shares or other equity interests are free and clear of all liens, pledges, proxies, charges, mortgages, deeds of trust, hypothecations, encumbrances, adverse rights, title defects, restrictions or claims and security interests of any kind or nature whatsoever (including any restriction on the right to vote or transfer the same, except for such transfer restrictions of general applicability as may be provided under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the Securities Act), and the blue sky laws of the various States of the United States) (collectively, Liens). Other than money market accounts, the Company does not own, directly or indirectly, any capital stock of, or voting securities or equity interests in, any Person, other than its Subsidiaries.
(d) The Company owns beneficially and of record all of the outstanding capital stock of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated hereby, has only engaged in business activities related to the transactions contemplated hereby, has no liabilities and is not a party to any agreement other than this Agreement.
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Section 2.2. Capitalization.
(a) The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.10 per share (Company Common Stock), and 5,000,000 shares of preferred stock, par value $0.10 per share (Company Preferred Stock). At the close of business on the date of this Agreement, (i) 70,075,429 shares of Company Common Stock were issued and outstanding, (ii) 727,137 shares of Company Common Stock were held by the Company in its treasury and (iii) no shares of Company Preferred Stock were issued and outstanding. All of the shares of Company Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. None of the Subsidiaries of the Company beneficially owns any shares of Company Common Stock or any other equity securities of the Company.
(b) Since January 1, 2014, the Company has not issued any shares of its capital stock, voting securities or equity interests, or any securities convertible into or exchangeable or exercisable for any shares of its capital stock, voting securities or equity interests, other than pursuant to the outstanding awards under the Company Incentive Plan as disclosed in the Company SEC Documents or as otherwise expressly permitted by this Agreement.
(c) Except (i) as set forth in Section 2.2(a), (ii) for the Convertible Notes (iii) for outstanding awards under the Company Incentive Plan as disclosed in the Company SEC Documents or (iv) as otherwise expressly permitted by Section 4.1 hereof, as of the date of this Agreement there are not, and as of the Effective Time there will not be, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) the Company issued and outstanding or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance of, or obligating the Company or any of its Subsidiaries to transfer or sell, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) the Company, including any representing the right to purchase or otherwise receive any Company Common Stock. Except as provided for by the Company Incentive Plan and the Convertible Notes, none of the Company or any of its Subsidiaries has issued or is bound by any outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance or disposition of any shares of capital stock, voting securities or equity interests of any Subsidiary of the Company. Except as set forth in the Company Incentive Plan, there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock, voting securities or equity interests (or any options, warrants or other rights to acquire any shares of capital stock, voting securities or equity interests) of the Company or any of its Subsidiaries. Except as set forth in Section 2.2(c) of the Company Disclosure Schedule, none of the Company or any Subsidiary of the Company is a party to any stockholders agreement, voting trust
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agreement, registration rights agreement or other similar agreement or understanding relating to capital stock, voting securities or equity interests of the Company or any of its Subsidiaries or any other agreement relating to the disposition, voting or dividends with respect to any such stock, securities or interests.
Section 2.3. Authority; Noncontravention; Voting Requirements.
(a) Each of the Company and Merger Sub has all necessary corporate or other power and authority to execute and deliver this Agreement, to perform its obligations hereunder (other than to consummate the Merger) and, subject to obtaining the Company Stockholder Approval, to consummate the Merger. The execution, delivery and performance by the Company and Merger Sub of this Agreement, and the consummation by them of the Transactions, have been duly authorized and approved by the Company Board (and have been approved and adopted by the Company as the sole Member of Merger Sub), and, except for obtaining the Company Stockholder Approval with respect to consummation of the Merger, no other corporate or other action on the part of the Company or Merger Sub is necessary to authorize the execution, delivery and performance by the Company and Merger Sub of this Agreement and the consummation by them of the Transactions. This Agreement has been duly executed and delivered by the Company and Merger Sub and, assuming due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation of the Company and Merger Sub, enforceable against them in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Laws of general application affecting or relating to the enforcement of creditors rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity (the Bankruptcy and Equity Exception).
(b) The Company Board, at a meeting duly called and held, has (i) determined that it is fair to, and in the best interest of, the Company and the Company Stockholders to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, with RG as the surviving limited liability company, and adopted resolutions adopting and approving this Agreement and declaring its advisability, and (iii) resolved to recommend the authorization or approval, as applicable, by the Company Stockholders of such actions that require the authorization or approval of the Company Stockholders in order to consummate the Transactions (the Company Recommendation), which resolutions, as of the date hereof, have not been subsequently withdrawn or modified in a manner adverse to RG.
(c) Except as set forth in Section 2.3(c) of the Company Disclosure Schedule, none of the execution and delivery of this Agreement by the Company or Merger Sub, the consummation by the Company or Merger Sub of the Transactions or compliance by the Company or Merger Sub with any of the terms or provisions hereof will (i) assuming that the Company Stockholder Approval is obtained, conflict with or violate any provision of the Company Charter Documents or the certificate of formation or limited liability company agreement of Merger Sub or (ii) assuming that the authorizations, consents and
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approvals referred to in Section 2.4 and the Company Stockholder Approval are obtained and the filings referred to in Section 2.4 are made, (A) violate any material Law, judgment, writ or injunction of any Governmental Authority applicable to the Company, Merger Sub or any of their Subsidiaries or any of their respective properties or assets, or (B) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of, the Company, Merger Sub or any of their respective Subsidiaries under, any of the terms, conditions or provisions of any loan or credit agreement, debenture, note, bond, mortgage, indenture, deed of trust, license, lease, contract or other agreement, instrument or obligation (each, a Contract) or Permit, to which the Company, Merger Sub or any of their respective Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except, in the case of clause (ii)(B), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(d) (i) The affirmative vote (in person or by proxy) of the holders of a majority of the shares of Company Common Stock for the adoption of an amendment to the Companys certificate of incorporation to effect a 1 for 30 reverse stock split of the Company Common Stock (the Reverse Stock Split) and (ii) the affirmative vote (in person or by proxy) of the holders of a majority of the shares present at the stockholders meeting for the approval of the issuance of Company Common Stock in connection with the Merger and the issuance of Company Common Stock upon the conversion of Company Preferred Stock in connection with the consummation of the transactions contemplated by the Stock Purchase Agreement, is the only vote or approval of the holders of any class or series of capital stock of the Company or any of its Subsidiaries which is necessary to approve the Transactions (the Company Stockholder Approval).
Section 2.4. Governmental Approvals. Except for (a) the filing with the SEC of a Proxy Statement in definitive form relating to the Company Stockholders Meeting, the Form S-4 Registration Statement and any other filings required under, and compliance with other applicable requirements of, the Securities Exchange Act of 1934, as amended (the Exchange Act), the Securities Act, state securities laws or blue sky laws of the of the various States of the United States and the rules of NASDAQ, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DLLCA and (c) filings required under, and compliance with other applicable requirements of, the HSR Act and any other applicable Antitrust Laws, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement by each of the Company and Merger Sub and the consummation by each of the Company and Merger Sub of the Transactions, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
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Section 2.5. Company SEC Documents; Undisclosed Liabilities.
(a) The Company has filed with and furnished to the SEC all Company SEC Documents required to be filed or furnished by it since January 1, 2014 (collectively, the Company Reports), and the Company will file with and furnish to the SEC all Company SEC Documents required to be filed or furnished after the date of this Agreement. As of their respective effective dates (in the case of Company Reports that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all other Company Reports), and, if amended, as of the date of the last such amendment, the Company Reports complied as to form in all material respects with the requirements of the Exchange Act, the Securities Act and the Sarbanes-Oxley Act, as the case may be, applicable to such Company Reports, and none of the Company Reports as of such respective dates and, if amended, as of the date of the last such amendment, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Companys Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act. As of the date of this Agreement, there are no outstanding or unresolved comments received from the SEC or its staff with respect to the Company Reports.
(b) The consolidated financial statements of the Company included or incorporated by reference in the Company Reports comply as to form, as of their respective dates and, if amended, as of the date of the last such amendment, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except as indicated in the notes thereto) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments, the absence of notes and other adjustments described therein).
(c) Except as set forth in Section 2.5(c) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has any Liabilities of the type required to be disclosed in the liabilities column of a balance sheet prepared in accordance with GAAP, except Liabilities (i) reflected or reserved against on the unaudited balance sheet of the Company and its Subsidiaries as of May 31, 2015 (the Balance Sheet Date) (including the notes thereto), (ii) incurred after the Balance Sheet Date in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would not be material to the Company and its Subsidiaries, taken as a whole, or to the Hudsons Business, (iii) permitted by Section 4.1 of this Agreement or (iv) which have been discharged or paid in full in the ordinary course of business consistent with past practice, as of the date of this Agreement.
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Section 2.6. Absence of Certain Changes or Events. Except as set forth in Section 2.6 of the Company Disclosure Schedule, since November 30, 2014, (a) there have not been any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate, have had or would reasonably be expected to have a Company Material Adverse Effect and (b) the Company and its Subsidiaries have carried on and operated their respective businesses in all material respects in the ordinary course of business consistent with past practice.
Section 2.7. Legal Proceedings. As of the date of this Agreement, except as set forth in Section 2.7 of the Company Disclosure Schedule, there is no pending or, to the Knowledge of the Company, threatened, legal, administrative, arbitral or other proceeding, claim, suit or action against, or, to the Knowledge of the Company, governmental or regulatory audit or investigation of, the Company, any of its Subsidiaries, any of its or their respective properties or assets, or any officer, director or employee of the Company or any of its Subsidiaries in such capacity, that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect. There is no Order imposed (or, to the Knowledge of the Company, threatened to be imposed) upon the Company, any of its Subsidiaries or any of its or their respective properties or assets, by or before any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.
Section 2.8. Compliance With Laws; Permits. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries are (and since January 1, 2014 have been) in compliance with all laws (including common law), statutes, ordinances, codes, rules, regulations, decrees and Orders of Governmental Authorities (collectively, Laws) applicable to the Company or any of its Subsidiaries, any of their properties or other assets or any of their businesses or operations or their employees. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and each of its Subsidiaries hold (and since January 1, 2014 have held) all licenses, franchises, permits, certificates, registrations, approvals and authorizations from Governmental Authorities, or required by Governmental Authorities to be obtained, in each case necessary for the lawful conduct of their respective businesses (collectively, Permits). Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries are (and since January 1, 2014 have been) in compliance with the terms of all such Permits.
Section 2.9. Tax Matters.
(a) Each of the Company and its Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all material Tax Returns required to be filed by it, and has paid all material Taxes shown thereon as owing, and all such Tax Returns were correct and complete in all material respects.
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(b) No material deficiency with respect to Taxes has been proposed, asserted or assessed in writing against the Company or any of its Subsidiaries, except for deficiencies that have been satisfied, settled or withdrawn and other than Permitted Exceptions. There are no Liens for material Taxes on any of the assets of the Company or any of its Subsidiaries, other than Permitted Exceptions. Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Income Taxes or agreed to any extension of time with respect to a material Tax assessment or deficiency. All material amounts of Tax required to be withheld or collected by the Company or any of its Subsidiaries have been timely withheld or collected and timely paid over to the appropriate Governmental Authority. Except as set forth in Section 2.9(b) of the Company Disclosure Schedule, there are no pending audits, examinations, investigations or other proceedings by any taxing authority in respect of a material amount of Taxes.
(c) Neither the Company nor any of its Subsidiaries: (i) is or has been a member of a group filing a consolidated, combined or unitary Tax Return (other than a group the common buyer of which was the Company) or any derivation thereof; (ii) has any material liability for the Taxes of any Person (other than the Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar or analogous provision of state, local or foreign Law), or as a transferee or successor, by contract or otherwise; (iii) is a party to or is bound by any agreement or arrangement relating to the indemnification, allocation or sharing of Taxes (other than any such agreement exclusively between or among the Company and wholly owned subsidiaries of the Company and other than leases and similar ordinary course financing agreements the primary purpose of which does not relate to Taxes); or (iv) is or has been party to any listed transaction, as defined in Section 6707A(c)(2) of the Code and Treasury Regulation Section 1.6011-4(b)(2), or any reportable transaction, as defined in Section 6707(A)(c)(1) of the Code and Treasury Regulation Section 1.6011-4(b)(1).
(d) Neither the Company nor any of its Subsidiaries has been, in the past two (2) years, a party to a transaction intended to qualify as a distribution governed by Section 355 of the Code.
Section 2.10. Employee Benefits.
(a) Section 2.10(a) of the Company Disclosure Schedule sets forth each material plan, program, arrangement or agreement that is a pension, profit-sharing, savings, retirement, employment, consulting, severance pay, termination, compensation, bonus, stock purchase, stock option, phantom stock or other equity-based compensation, change-in-control, retention, salary continuation, vacation, sick leave, disability, death benefit, group insurance, hospitalization, medical, dental, life (including all individual life insurance policies as to which the Company is the owner, the beneficiary, or both), Code Section 125 cafeteria or flexible benefit, employee loan, educational assistance or fringe benefit plan, program or arrangement, including, without limitation, any (i) employee benefit plan within the meaning of Section 3(3) of ERISA; or (ii) other employee benefit plans, agreements, programs, policies, arrangements or payroll practices, whether or not subject to ERISA, under which any current or former employee, director, officer, or consultant (or their respective beneficiaries) of the Company, any Subsidiary or any trade or business which is treated as single employer with any of them under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA (an ERISA Affiliate) has any present or future right to benefits (each such plan, program, arrangement or agreement set forth in such Section being individually, a Company Benefits Plan and collectively the Company Benefits Plans).
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(b) (i) Each Company Benefits Plan has been established and administered in all material respects in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code and all other applicable Laws; (ii) each Company Benefits Plan that is intended to be qualified within the meaning of Section 401(a) of the Code has received a favorable determination letter from the IRS (covering all required Law up through the date of this Agreement) (or is permitted to rely on a favorable opinion or advisory letter) to the effect that the Company Benefits Plan satisfies the requirements of Section 401(a) of the Code and that its related trust is exempt from taxation under Section 501(a) of the Code and to the Knowledge of the Company there are no facts or circumstances that could reasonably be expected to cause the loss of qualification under Section 401(a) or Section 501(a) of the Code; (iii) other than routine claims for benefits, no legal actions have been filed for any material amount against any Company Benefits Plan or the applicable Company with respect to any Company Benefits Plan; and (iv) to the Knowledge of the Company, no event has occurred and no condition exists that would subject the Company to any material tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other applicable Law with respect to an ERISA Affiliate.
(c) Except as set forth on Section 2.10(c) of the Company Disclosure Schedule, the Company has no obligation to provide or make available post-employment benefits under any Company Benefits Plan, including, without limitation, any Company Benefits Plan that is a welfare plan (as defined in Section 3(1) of ERISA) (Welfare Plan), for any current or former officer, director, employee, or consultant (or their respective beneficiaries) of the Company or a Subsidiary, except as may be required under COBRA or as may otherwise be set forth in an individual employment, severance, change in control or similar agreement.
(d) Neither the Company nor any ERISA Affiliate currently maintains, contributes to or has in the preceding six (6) years maintained or contributed to any Company Benefits Plan that is, or has been, (i) subject to Title IV of ERISA or Sections 412 or 430 of the Code; or (ii) a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
(e) Except as set forth in Section 2.10(e) of the Company Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereunder (i) will (either alone or in combination with another event) (A) result in any material payment becoming due, or increase in any material respect the amount of any compensation due, to any current or former employee of the Company; (B) materially increase any benefits otherwise payable under any Company Benefits Plan; (C) result in the acceleration of the time of payment or vesting of any such compensation or benefits; (D) result in any payments that would not be deductible under Code Section 280G; or (ii) could reasonably be expected to result in an obligation to accelerate the funding of, or contribution to any, Company Benefits Plan pursuant to applicable Law, regulation, contractual arrangement or otherwise. No current
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or former officer, director, employee, or consultant (or their respective beneficiaries) has or will obtain a right to receive a gross-up payment from the Company with respect to excise or penalty Taxes that may be imposed upon such individual pursuant to Section 409A of the Code or Section 4999 of the Code.
(f) Other than as set forth in this Section 2.10, the Company does not make any representations or warranties, either express or implied, with respect to any matters relating to employee benefits or matters pertaining to any Law relating thereto.
Section 2.11. Contracts.
(a) Except for this Agreement, the Company Leases and the Contracts set forth in Section 2.11 of the Company Disclosure Schedule and Contracts filed as exhibits to the Company SEC Documents (collectively, Material Contracts), as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or expressly bound by (and none of their respective properties or assets is bound by) any Contract:
(i) that would be required to be filed by the Company as a material contract pursuant to Item 601(b)(10) of Regulation S-K;
(ii) (A) containing restrictions on the right of the Company or any of its Subsidiaries or any Person that controls, or is under common control with, the Company to engage in activities competitive with any Person or to solicit suppliers anywhere in the world or (B) granting a right of exclusivity to any Person which prevents the Company or a Subsidiary from entering any territory, market or field or freely engaging in business anywhere in the world (including, but not limited to Contracts containing most favored nations provisions), other than leases containing customary radius restrictions that would not apply to the Company or its Subsidiaries following the consummation of the Merger;
(iii) relating to the formation, creation, ownership, operation, management or control of any partnership, joint venture, or similar arrangement, including, but not limited to, arrangements that include the sharing of revenue, profits, losses, costs or liabilities, that is material to the business of the Company and its Subsidiaries, taken as a whole, or to the Hudsons Business or the Joes Business;
(iv) relating to (A) indebtedness for borrowed money, whether direct or indirect, or (B) other Indebtedness in excess of $250,000, in each case other than any Indebtedness between or among any of the Company and any of its Subsidiaries;
(v) involving the acquisition from another Person or disposition to another Person, directly or indirectly (by merger, license or otherwise), other than any acquisition or disposition of inventory, raw materials, supplies, fixtures and IT equipment in the ordinary course of business consistent with past practices, of assets or capital stock or equity interests of another Person, including Contracts for any such acquisition or disposition which has already been consummated that
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contains representations, warranties covenants, indemnities or other obligations (including indemnification, earn-out or other contingent obligations), in each case, that are still in effect and, individually, could reasonably be expected to result in payments by or to the Company or any of its Subsidiaries in excess of $250,000;
(vi) prohibiting the payment of dividends or distributions in respect of the capital stock of the Company or any of its wholly owned Subsidiaries, prohibiting the pledging of the capital stock of the Company or any wholly owned Subsidiary of the Company or prohibiting the issuance of any guaranty by the Company or any Subsidiary of the Company;
(vii) that is a collective bargaining agreement or other agreement with a labor union, works council or similar organization; or
(viii) that is a license agreement, non-assertion agreement, co-existence agreement or option agreement material to the business of the Company and its Subsidiaries, taken as a whole, or to the Hudsons Business, pursuant to which the Company or any of its Subsidiaries licenses in Intellectual Property Rights or licenses out or otherwise receives or grants the right to use, register or acquire, Intellectual Property Rights owned by the Company or its Subsidiaries (other than license agreements for commercially available software on standard terms and distribution and sales agreements entered into in the ordinary course of business consistent with past practices).
(b) Each Material Contract is valid and binding on the Company and any Subsidiary party thereto and, to the Knowledge of the Company, each other party thereto, and is in full force and effect and enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception. Neither the Company nor any of its Subsidiaries (i) is in violation or default under any Material Contract or (ii) has received written notice of any asserted violation or default, or of any event or condition which, after notice or lapse of time or both, will constitute, such a violation or default, by the Company or any Subsidiary party thereto under any Material Contract except, in either case, as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 2.12. Intellectual Property.
(a) Section 2.12 of the Company Disclosure Schedule sets forth a current and complete list (in all material respects) of Intellectual Property Rights owned by the Company or any of its Subsidiaries that has been registered or is the subject of a pending application with governmental authorities responsible for such registrations (the Registered Intellectual Property Rights). Except as set forth in Section 2.12 of the Company Disclosure Schedule or as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect: (i) the Company and its Subsidiaries are the sole and exclusive owners of all of the Registered Intellectual Property Rights; (ii) the Registered Intellectual Property Rights are not subject to any
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Lien other than Permitted Exceptions; (iii) the Company or a Subsidiary of the Company owns, or is licensed or otherwise has the right to use, all material Intellectual Property Rights that, in each case, is used in the conduct of the business of the Company and its Subsidiaries as presently conducted, either itself or through a licensee; and (iv) there are no final judgments or decisions by any court or administrative tribunal that prevent the Company or its Subsidiaries or licensees from using or registering the Intellectual Property Rights in any location where the Company is currently doing business, either as to manufacturing or sales.
(b) Except as set forth in Section 2.12 of the Company Disclosure Schedule: (i) the conduct of the business of the Company and its Subsidiaries and licensees as currently conducted does not infringe, misappropriate or otherwise violate any Intellectual Property Rights of any Person and (ii) no claims are pending or, to the Knowledge of the Company, threatened that the Company or any of its Subsidiaries or licensees is infringing the rights of any Person with regard to any Intellectual Property Right, except in the case of (i) and (ii) for such infringements, misappropriations, violations and claims which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(c) To the Knowledge of the Company, as of the date hereof (i) no Person is infringing, misappropriating, or otherwise violating any Intellectual Property Right owned, used, or held for use by the Company or its Subsidiaries in the conduct of the business of the Company and its Subsidiaries as presently conducted and (ii) no such claims have been asserted or threatened against any Person by the Company in the past two (2) years, except in the case of (i) and (ii) for such infringements, misappropriations, violations and claims which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(d) To the Knowledge of the Company, the Company and its Subsidiaries have at all times complied with all applicable Laws, as well as their own rules, policies and procedures, relating to privacy, data protection, and the collection, retention, protection, and use of personal information collected, used, or held for use by the Company and its Subsidiaries. No claims have been asserted or, to the Knowledge of the Company, threatened against the Company or its Subsidiaries alleging a violation of any Persons privacy or personal information or data rights, except for such violations which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(e) Except as set forth in Section 2.12(e) of the Company Disclosure Schedule, to the Knowledge of the Company as of the date hereof, there is no jurisdiction among the Key Jurisdictions in which the trademark HUDSON is not available for use and registration by the Company in connection with the products currently being sold in International Classes 14, 18, 25 or 35 by the Hudsons Business.
Section 2.13. Brokers and Other Advisors. Except for the Company Financial Advisor, the fees and expenses of which will be paid by the Company and have been disclosed to RG, no broker, investment banker, financial advisor or other Person is entitled to any brokers, finders, financial advisors or other similar fee or commission, or the reimbursement of expenses, in connection with the Transactions based upon arrangements made by or on behalf of the Company or any of its Subsidiaries.
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Section 2.14. Related Party Transactions. No related person as defined in Item 404 of Regulation S-K, is a party to any Contract with or binding upon the Company or any of its Subsidiaries that is of a type that would be required to be disclosed in the Company SEC Documents pursuant to Item 404 of Regulation S-K that has not been disclosed in the Company SEC Documents.
Section 2.15. Insurance. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the Company and its Subsidiaries own or hold policies of insurance in amounts providing reasonably adequate coverage against all risks customarily insured against by companies in similar lines of business as the Company and its Subsidiaries and in amounts sufficient to comply with all Material Contracts to which the Company or its Subsidiaries are parties or are otherwise bound, and (ii) except as set forth in Section 2.15 of the Company Disclosure Schedule, all such insurance policies are in full force and effect and will remain so after the Effective Time, no notice of cancellation or modification has been received, and there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a default, by any insured thereunder.
Section 2.16. Property. The Company does not own or have any option to purchase real property. The Company does not use or occupy, or a have a right to use or occupy, any real property except pursuant to a Company Lease. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (a) the Company or one of its Subsidiaries has a good and valid leasehold interest in each Company Lease, free and clear of all Liens (other than Permitted Exceptions), (b) each Company Lease is in full force and effect and there is no violation, breach or default, or any event or condition which, after notice or lapse of time or both, will constitute such a violation, breach or default, by the tenant under any Company Lease or, to the Knowledge of the Company, by any other party thereto, (c) there are no pending or, to the Knowledge of the Company, threatened, condemnation or eminent domain proceedings or other Governmental Authority proceedings affecting any demised premises under a Company Lease and (d) each Company Lease has created a legal, binding and enforceable obligation of (i) the Company or its applicable Subsidiary, and (ii) any other party or parties thereto.
Section 2.17. Environmental Matters. Except for those matters that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (a) each of the Company and its Subsidiaries is and has been in compliance with all Environmental Laws, which compliance includes obtaining, maintaining or complying with all Permits required under Environmental Laws for the operation of their respective businesses, (b) as of the date hereof there is no investigation, suit, claim, action or proceeding relating to or arising under any Environmental Law that is pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries or any real property owned, operated or leased by the Company or any of its Subsidiaries, (c) as of the date hereof neither the Company nor any of its Subsidiaries has received any written notice of or entered into any
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legally-binding Contract, Order or settlement involving uncompleted, outstanding or unresolved requirements on the part of the Company or its Subsidiaries relating to or arising under Environmental Laws and (d) to the Knowledge of the Company, there are and have been no Hazardous Materials present on any real property owned or leased by the Company or any of its Subsidiaries in a manner and concentration that would reasonably be expected to result in any claim against the Company or its Subsidiaries under any Environmental Law.
Section 2.18. Rights Agreement; Anti-Takeover Provisions.
(a) The Company is not party to a stockholder rights agreement, poison pill or similar agreement or plan.
(b) The Company Board has taken all necessary action so that any takeover, anti-takeover, moratorium, fair price, control share or other similar Law enacted under any Law applicable to the Company, including Section 203 of the DGCL, does not, and will not, apply to this Agreement, the Merger or the other Transactions.
Section 2.19. Labor Matters; Employees.
(a) The Company and its Subsidiaries are neither party to, nor bound by, any labor agreement, collective bargaining agreement, work rules or practices, or any other labor-related agreements or arrangements with any labor union, labor organization or works council and, to the Knowledge of the Company, there are no labor organizing activities presently underway or threatened involving any employees of the Company or its Subsidiaries.
(b) Since January 1, 2013, there have been no actual or, to the Knowledge of the Company, threatened material arbitrations, material grievances, material labor disputes, strikes, lockouts, slowdowns or work stoppages or other material concerted action by employees of the Company or any of its Subsidiaries or against or affecting the Company or any of its Subsidiaries. There are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened in writing with respect to the employees of the Company or its Subsidiaries.
(c) To the Knowledge of the Company and its Subsidiaries, the manufacturers, contractors and subcontractors engaged in the manufacturing of products for the Company and its Subsidiaries (Company Manufacturers) are in compliance in all material respects with all applicable Laws respecting employment and employment practices. To the Knowledge of the Company and its Subsidiaries, no complaint, claim, lawsuit or charge has been made against any Company Manufacturers that would reasonably be expected to result in material liability to the Company or its Subsidiaries.
Section 2.20. Asset Purchase Agreements. The Company has provided RG with true and correct copies of the Asset Purchase Agreements, including all agreements executed and delivered pursuant thereto.
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Section 2.21. Non-Reliance on RG Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans. In connection with the due diligence investigation of RG by the Company, the Company has received and may continue to receive from RG certain estimates, projections, forecasts and other forward-looking information, as well as certain business plan information, regarding RG and its business and operations. The Company hereby acknowledges that there are uncertainties inherent in attempting to make such estimates, projections, forecasts and other forward-looking statements, as well as in such business plans, with which the Company is familiar, that the Company is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections, forecasts and other forward-looking information, as well as such business plans, so furnished to them (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, forward-looking information or business plans), and that the Company will have no claim against RG or any of its Subsidiaries, or any of their respective equityholders, directors, managers, officers, employees, Affiliates, advisors, agents or Representatives, with respect thereto.
Section 2.22. No Other Representations and Warranties. EXCEPT AS CONTAINED IN THIS ARTICLE II, NEITHER THE COMPANY NOR MERGER SUB MAKES ANY REPRESENTATIONS OR WARRANTIES TO RG AND THE COMPANY AND MERGER SUB DISCLAIM ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT MADE OR INFORMATION COMMUNICATED (WHETHER ORALLY OR IN WRITING) TO RG AND ITS AFFILIATES AND REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, ADVICE, REPRESENTATION OR WARRANTY WHICH MAY HAVE BEEN PROVIDED TO RG AND ITS AFFILIATES OR REPRESENTATIVES BY THE COMPANY FINANCIAL ADVISOR, ANY DIRECTOR, OFFICER, EMPLOYEE, ACCOUNTING FIRM, LEGAL COUNSEL, OR OTHER AGENT, CONSULTANT, OR REPRESENTATIVE OF THE COMPANY OR ITS SUBSIDIARIES). ANY AND ALL STATEMENTS MADE OR INFORMATION COMMUNICATED BY THE COMPANY OR ITS SUBSIDIARIES, OR ANY OF THEIR REPRESENTATIVES OUTSIDE OF THIS AGREEMENT (INCLUDING BY WAY OF THE DOCUMENTS PROVIDED IN RESPONSE TO RGS WRITTEN DILIGENCE REQUEST(S) AND ANY MANAGEMENT PRESENTATIONS PROVIDED), WHETHER VERBALLY OR IN WRITING, ARE DEEMED TO HAVE BEEN SUPERSEDED BY THIS AGREEMENT, IT BEING INTENDED THAT NO SUCH PRIOR OR CONTEMPORANEOUS STATEMENTS OR COMMUNICATIONS OUTSIDE OF THIS AGREEMENT SHALL SURVIVE THE EXECUTION AND DELIVERY OF THIS AGREEMENT.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF RG
Except as set forth in the disclosure schedule delivered by RG to the Company and Merger Sub simultaneously with the execution of this Agreement (the RG Disclosure Schedule), RG represents and warrants to the Company and Merger Sub as follows:
Section 3.1. Organization. RG is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of Delaware. RG has all requisite limited liability company power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. RG is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it make such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing, individually or in the aggregate, would not reasonably be expected to have a RG Material Adverse Effect.
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Section 3.2. Authority; Noncontravention.
(a) RG has all necessary limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by RG of this Agreement, and the consummation by RG of the transactions contemplated hereby, have been duly authorized and approved by its Board of Managers and duly adopted by the requisite RG Members, and no other limited liability company action on the part of RG is necessary to authorize the execution, delivery and performance by RG of this Agreement and the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by RG and, assuming due authorization, execution and delivery hereof by the Company and Merger Sub, constitutes a legal, valid and binding obligation of RG, enforceable against it in accordance with its terms, subject to the Bankruptcy and Equity Exception.
(b) Except as set forth on Section 3.2(b) of the RG Disclosure Schedule, none of the execution and delivery of this Agreement by RG, the consummation by RG of the transactions contemplated hereby or compliance by RG with any of the terms or provisions hereof will (i) conflict with or violate any provision of the certificate of formation or limited liability company agreement of RG or (ii) assuming that the authorizations, consents and approvals referred to in Section 3.4 are obtained and the filings referred to in Section 3.4 are made, (A) violate any Law, judgment, writ or injunction of any Governmental Authority applicable to RG or any of its Subsidiaries or any of their respective properties or assets, or (B) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of RG or any of its Subsidiaries under, any of the terms, conditions or provisions of any Contract or Permit, to which RG or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected except, in the case of clause (ii), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as, individually or in the aggregate, would not reasonably be expected to have a RG Material Adverse Effect.
Section 3.3. Capitalization.
(a) The authorized equity of RG consists of Preferred Units, Voting Common Units and Non-Voting Common Units (collectively, the RG Units). At the close of business on the date of this Agreement, 5,100,000 Preferred Units, 4,900,000 Voting Common Units and 1,363,636 Non-Voting Common Units were issued and outstanding. All of the RG Units have been duly authorized and validly issued. None of the Subsidiaries of RG beneficially owns any RG Units or any other equity securities of RG.
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(b) Except as set forth on Section 3.3(b) of the RG Disclosure Schedule, since January 1, 2014, RG has not issued any voting securities or equity interests, or any securities convertible into or exchangeable or exercisable for any voting securities or equity interests.
(c) Except as set forth in Section 3.3(a), as of the date of this Agreement there are not, and as of the Effective Time there will not be, any voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) RG issued and outstanding or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance of, or obligating RG or any of its Subsidiaries to transfer or sell, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) RG, including any representing the right to purchase or otherwise receive any RG Units. Except as provided by an RG Benefits Plan, none of RG or any of its Subsidiaries has issued or is bound by any outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance or disposition of any voting securities or equity interests of any Subsidiary of RG. There are no outstanding obligations of RG or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock, voting securities or equity interests (or any options, warrants or other rights to acquire any shares of capital stock, voting securities or equity interests) of RG or any of its Subsidiaries. Except for RGs limited liability company agreement, none of RG or any Subsidiary of RG is a party to any stockholders agreement, voting trust agreement, registration rights agreement or other similar agreement or understanding relating to capital stock, voting securities or equity interests of RG or any of its Subsidiaries or any other agreement relating to the disposition, voting or dividends with respect to any such stock, securities or interests.
Section 3.4. Governmental Approvals. Except for (a) compliance with applicable requirements of the Securities Act, state securities laws or blue sky laws of the various States of the United States, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DLLCA and (c) filings required under, and compliance with other applicable requirements of, the HSR Act and any other applicable Antitrust Laws, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement by RG and the consummation by RG of the transactions contemplated hereby, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to have a RG Material Adverse Effect.
Section 3.5. Legal Proceedings. As of the date of this Agreement, except as set forth in Section 3.5 of the RG Disclosure Schedule, there is no pending or, to the Knowledge of RG, threatened, legal, administrative, arbitral or other proceeding, claim, suit or action against, or, to the Knowledge of RG, governmental or regulatory audit or investigation of, RG, any of its Subsidiaries, any of its or their respective properties or assets, or any officer, director or employee of RG or any of its Subsidiaries in such capacity, that, individually or in the aggregate, would reasonably be expected to have a RG Material Adverse Effect. There is no Order imposed
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(or, to the Knowledge of RG, threatened to be imposed) upon RG, any of its Subsidiaries or any of its or their respective properties or assets, by or before any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a RG Material Adverse Effect.
Section 3.6. Financial Statements; Undisclosed Liabilities.
(a) RG has delivered to the Company: (a) true and complete copies of RGs unaudited consolidated balance sheet, dated May 31, 2015 (the Most Recent Balance Sheet Date) and the related unaudited consolidated statement of income and cash flows for the four month period then ended (together, the Most Recent Financial Statements), and (b) true and complete copies of RGs audited consolidated balance sheets dated December 31, 2014 and December 31, 2013, including the notes thereto, and the related statements of income and cash flows for each of the fiscal years then ended (collectively, the Year-End Financial Statements and together with the Most Recent Financial Statements, the Financial Statements). The Most Recent Financial Statements present fairly, in all material respects, the consolidated financial position of RG as at and for the period then ended, and have been prepared in accordance with GAAP; provided, however, that such Most Recent Financial Statements are subject to normal year-end adjustments and lack footnotes and other presentation items. The Year-End Financial Statements present fairly, in all material respects, the consolidated financial position of RG as at and for the respective periods then ended, and have been prepared in accordance with GAAP.
(b) Except as set forth in Section 3.6(b) of the RG Disclosure Schedule, neither RG nor any of its Subsidiaries has any Liabilities of the type required to be disclosed in the liabilities column of a balance sheet prepared in accordance with GAAP, except Liabilities (i) reflected on or reserved against on the Most Recent Financial Statements, (ii) incurred after the Most Recent Balance Sheet Date in the ordinary course of business consistent with past practices, which, individually or in the aggregate, would not be material to RG and its Subsidiaries, taken as a whole, (iii) which have been discharged or paid in full in the ordinary course of business consistent with past practices as of the date of this Agreement or (iv) obligations incurred in connection with this Agreement and the Transactions.
Section 3.7. Absence of Certain Changes or Events. Except as set forth in Section 3.7 of the RG Disclosure Schedule, since December 31, 2014, (a) there have not been any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate, have had or would reasonably be expected to have a RG Material Adverse Effect and (b) RG and its Subsidiaries have carried on and operated their respective businesses in all material respects in the ordinary course of business consistent with past practices.
Section 3.8. Compliance With Laws; Permits. Except as would not reasonably be expected to have, individually or in the aggregate, a RG Material Adverse Effect, RG and its Subsidiaries are (and since January 1, 2014 have been) in compliance with all Laws applicable to RG or any of its Subsidiaries, any of their properties or other assets or any of their businesses or operations or their employees and service providers. Except as would not reasonably be expected
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to have, individually or in the aggregate, a RG Material Adverse Effect, RG and each of its Subsidiaries hold (and since January 1, 2014 have held) all Permits. Except as would not reasonably be expected to have, individually or in the aggregate, a RG Material Adverse Effect, RG and its Subsidiaries are (and since January 1, 2014 have been) in compliance with the terms of all such Permits.
Section 3.9. Tax Matters.
(a) Each of RG and its Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all material Tax Returns required to be filed by it, and has timely paid all material Taxes shown thereon as owing, and all such Tax Returns were correct and complete in all material respects.
(b) No material deficiency with respect to Taxes has been proposed, asserted or assessed in writing against RG or any of its Subsidiaries, except for deficiencies that have been satisfied, settled or withdrawn and other than Permitted Exceptions. Neither RG nor any of its Subsidiaries has waived any statute of limitations in respect of Income Taxes or agreed to any extension of time with respect to a material Tax assessment or deficiency. There are no Liens for material Taxes on any of the assets of RG or any of its Subsidiaries, other than Permitted Exceptions. All material amounts of Tax required to be withheld or collected by RG or any of its Subsidiaries have been timely withheld or collected and timely paid over to the appropriate Governmental Authority. There are no pending audits, examinations, investigations or other proceedings by any taxing authority in respect of a material amount of Taxes.
(c) Neither RG nor any of its Subsidiaries: (i) is or has been a member of a group filing a consolidated, combined or unitary Tax Return (other than a group the common buyer of which was RG) or any derivation thereof; (ii) has any material liability for the Taxes of any Person (other than RG and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar or analogous provision of state, local or foreign Law), or as a transferee or successor, by contract or otherwise; (iii) is a party to or is bound by any agreement or arrangement relating to the indemnification, allocation or sharing of Taxes (other than any such agreement exclusively between or among RG and wholly owned subsidiaries of RG and other than leases and similar ordinary course financing agreements the primary purpose of which does not relate to Taxes); or (iv) is or has been a party to any listed transaction, as defined in Section 6707A(c)(2) of the Code and Treasury Regulation Section 1.6011-4(b)(2), or any reportable transaction, as defined in Section 6 707(A)(c)(1) of the code and Treasury Regulation Section 1.6011-4(b)(1).
(d) Neither RG nor any of its Subsidiaries has been, in the past two (2) years, a party to a transaction intended to qualify as a distribution governed by Sections 355 of the Code.
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Section 3.10. Employee Benefits Matters.
(a) Section 3.10(a) of the RG Disclosure Schedule sets forth each material plan, program, arrangement or agreement that is a pension, profit-sharing, savings, retirement, employment, consulting, severance pay, termination, compensation, bonus, stock purchase, stock option, phantom stock or other equity-based compensation, change-in-control, retention, salary continuation, vacation, sick leave, disability, death benefit, group insurance, hospitalization, medical, dental, life (including all individual life insurance policies as to which RG is the owner, the beneficiary, or both), Code Section 125 cafeteria or flexible benefit, employee loan, educational assistance or fringe benefit plan, program or arrangement, including, without limitation, any (i) employee benefit plan within the meaning of Section 3(3) of ERISA; or (ii) other employee benefit plans, agreements, programs, policies, arrangements or payroll practices, whether or not subject to ERISA, under which any current or former employee, director, officer, or consultant (or their respective beneficiaries) of RG, any Subsidiary or any trade or business which is treated as single employer with any of them under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA (an RG ERISA Affiliate) has any present or future right to benefits (each such plan, program, arrangement or agreement set forth in such Section being individually, an RG Benefits Plan and collectively the RG Benefits Plans).
(b) (i) Each RG Benefits Plan has been established and administered in all material respects in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code and all other applicable Laws; (ii) each RG Benefits Plan that is intended to be qualified within the meaning of Section 401(a) of the Code has received a favorable determination letter from the IRS (covering all required Law up through the date of this Agreement) (or is permitted to rely on a favorable opinion or advisory letter) to the effect that an RG Benefits Plan satisfies the requirements of Section 401(a) of the Code and that its related trust is exempt from taxation under Section 501(a) of the Code and to the Knowledge of RG there are no facts or circumstances that could reasonably be expected to cause the loss of qualification under Section 401(a) or Section 501(a) of the Code; (iii) other than routine claims for benefits, no legal actions have been filed for any material amount against any RG Benefits Plan or RG with respect to any RG Benefits Plan; and (iv) to the Knowledge of RG, no event has occurred and no condition exists that would subject RG to any material tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other applicable Law with respect to an RG ERISA Affiliate.
(c) Except as set forth in Section 3.10(c) of the RG Disclosure Schedule, RG has no obligation to provide or make available post-employment benefits under any RG Benefits Plan, including, without limitation, an RG Benefits Plan that is a welfare plan (as defined in Section 3(1) of ERISA) (RG Welfare Plan), for any current or former officer, director, employee, or consultant (or their respective beneficiaries) of RG or a Subsidiary, except as may be required under COBRA or as may otherwise be set forth in an individual employment, severance, change in control or similar agreement.
(d) Neither RG nor any RG ERISA Affiliate currently maintains, contributes to or has in the preceding six (6) years maintained or contributed to any RG Benefits Plan that is, or has been, (i) subject to Title IV of ERISA or Sections 412 or 430 of the Code; or (ii) a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
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(e) Except as set forth in Section 3.10(e) of the RG Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereunder (i) will (either alone or in combination with another event) (A) result in any material payment becoming due, or increase in any material respect the amount of any compensation due, to any current or former employee of RG; (B) materially increase any benefits otherwise payable under any RG Benefits Plan; (C) result in the acceleration of the time of payment or vesting of any such compensation or benefits; (D) result in any payments that would not be deductible under Code Section 280G; or (ii) could reasonably be expected to result in an obligation to accelerate the funding of, or contribution to any, RG Benefits Plan pursuant to applicable Law, regulation, contractual arrangement or otherwise. No current or former officer, director, employee, or consultant (or their respective beneficiaries) has or will obtain a right to receive a gross-up payment from a RG with respect to excise or penalty Taxes that may be imposed upon such individual pursuant to Section 409A of the Code or Section 4999 of the Code.
(f) Other than as set forth in this Section 3.10, RG does not make any representations or warranties, either express or implied, with respect to any matters relating to employee benefits or matters pertaining to any Law relating thereto.
Section 3.11. Contracts.
(a) Except for the RG Leases and as set forth in Section 3.11 of the RG Disclosure Schedule (RG Material Contracts), as of the date of this Agreement, neither RG nor any of its Subsidiaries is a party to or expressly bound by (and none of their respective properties or assets is bound by) any Contract:
(i) (A) containing restrictions on the right of RG or any of its Subsidiaries or any Person that controls, or is under common control with, RG to engage in activities competitive with any Person or to solicit suppliers anywhere in the world or (B) granting a right of exclusivity to any Person which prevents RG or a Subsidiary from entering any territory, market or field or freely engaging in business anywhere in the world (including, but not limited to, Contracts containing most favored nations provisions), other than leases containing customary radius restrictions that would not apply to RG or any of its Subsidiaries (other than RG and its Subsidiaries) following the consummation of the Merger;
(ii) relating to the formation, creation, ownership, operation, management or control of any partnership, joint venture, or similar arrangement, including, but not limited to, arrangements that include the sharing of revenue, profits, losses, costs or liabilities, that is material to the business of RG and its Subsidiaries, taken as a whole;
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(iii) relating to (A) indebtedness for borrowed money, whether direct or indirect, or (B) other Indebtedness in excess of $250,000, in each case other than any Indebtedness between or among RG and any of its Subsidiaries;
(iv) involving the acquisition from another Person or disposition to another Person, directly or indirectly (by merger, license or otherwise), other than any acquisition or disposition of inventory, supplies, fixtures and IT equipment in the ordinary course of business consistent with past practices, of assets or capital stock or equity interests of another Person, including Contracts for any such acquisition or disposition which has already been consummated that contains representations, warranties covenants, indemnities or other obligations (including indemnification, earn-out or other contingent obligations), in each case, that are still in effect and, individually, could reasonably be expected to result in payments by or to RG or any of its Subsidiaries in excess of $250,000;
(v) prohibiting the payment of dividends or distributions in respect of the capital stock of RG or any of its wholly owned Subsidiaries, prohibiting the pledging of the capital stock of RG or any wholly owned Subsidiary of RG or prohibiting the issuance of any guaranty by RG or any Subsidiary of RG;
(vi) that is a collective bargaining agreement or other agreement with a labor union, works council or similar organization; or
(vii) that is a license agreement, non-assertion agreement, co-existence agreement or option agreement material to the business of RG and its Subsidiaries, taken as a whole, pursuant to which RG or any of its Subsidiaries licenses in Intellectual Property Rights or licenses out or otherwise receives or grants the right to use, register or acquire, Intellectual Property Rights owned by RG or its Subsidiaries (other than license agreements for commercially available software on standard terms and distribution and sales agreements entered into in the ordinary course of business consistent with past practices).
(b) Each RG Material Contract is valid and binding on RG and any Subsidiary party thereto and, to the Knowledge of RG, each other party thereto, and is in full force and effect and enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception. Neither RG nor any of its Subsidiaries (i) is in violation or default under any RG Material Contract or (ii) has received written notice of any asserted violation or default, or of any event or condition which, after notice or lapse of time or both, will constitute, such a violation or default, by RG and any Subsidiary party thereto under any RG Material Contract except, in either case of clause (i) or (ii) as would not reasonably be expected to have, individually or in the aggregate, a RG Material Adverse Effect.
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Section 3.12. Intellectual Property.
(a) Section 3.12 of the RG Disclosure Schedule sets forth a current and complete list (in all material respects) of RG Intellectual Property Rights owned by RG or any of its Subsidiaries that has been registered or the subject of a pending application with Governmental Authorities responsible for such registrations (the RG Registered Intellectual Property Rights). Except as set forth in Section 3.12 of the RG Disclosure Schedule or as would not reasonably be expected to have, individually or in the aggregate, a RG Material Adverse Effect: (i) RG and its Subsidiaries are the sole and exclusive owners of all of the RG Registered Intellectual Property Rights; (ii) the RG Registered Intellectual Property Rights are not subject to any Lien other than Permitted Exceptions; (iii) RG or a Subsidiary of RG owns, or is licensed or otherwise has the right to use, all material RG Intellectual Property Rights that, in each case, is used in the conduct of the business of RG and its Subsidiaries as presently conducted, either itself or through a licensee; and (iv) there are no final judgments or decisions by any court or administrative tribunal that prevent RG or its Subsidiaries or licensees from using or registering the RG Intellectual Property Rights in any location where RG is currently doing business, either as to manufacturing or sales.
(b) Except as set forth in Section 3.12 of the RG Disclosure Schedule: (i) the conduct of the business of RG and its Subsidiaries and licensees as currently conducted does not infringe, misappropriate or otherwise violate any RG Intellectual Property Rights of any Person and (ii) no claims are pending or, to the Knowledge of RG, threatened that RG or any of its Subsidiaries or licensees is infringing the rights of any Person with regard to any RG Intellectual Property Right, except in the case of (i) and (ii) for such infringements, misappropriations, violations and claims which, individually or in the aggregate, would not reasonably be expected to have a RG Material Adverse Effect.
(c) To the Knowledge of RG, as of the date hereof (i) no Person is infringing, misappropriating, or otherwise violating any RG Intellectual Property Right owned, used, or held for use by RG or its Subsidiaries in the conduct of the business of RG and its Subsidiaries as presently conducted and (ii) no such claims have been asserted or threatened against any Person by RG in the past two (2) years, except in the case of (i) and (ii) for such infringements, misappropriations, violations and claims which, individually or in the aggregate, would not reasonably be expected to have a RG Material Adverse Effect.
(d) To the Knowledge of RG, RG and its Subsidiaries have at all times complied with all applicable Laws, as well as their own rules, policies and procedures, relating to privacy, data protection, and the collection, retention, protection, and use of personal information collected, used, or held for use by RG and its Subsidiaries. No claims have been asserted or, to the Knowledge of RG, threatened against RG or its Subsidiaries alleging a violation of any Persons privacy or personal information or data rights, except for such violations which, individually or in the aggregate, would not reasonably be expected to have a RG Material Adverse Effect.
(e) Except as set forth in Section 3.12(e) of the RG Disclosure Schedule, to the Knowledge of RG as of the date hereof, there is no jurisdiction among the Key Jurisdictions in which the trademark ROBERT GRAHAM is not available for use and registration by RG or its Subsidiaries in connection with the products currently being sold in International Classes 14, 18, 25 or 35 by RG or its Subsidiaries.
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Section 3.13. Brokers and Other Advisors. No broker, investment banker, financial advisor or other Person is entitled to any brokers, finders, financial advisors or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of RG or any of its Subsidiaries except for Persons, if any, whose fees and expenses will be paid by RG or one of its Affiliates.
Section 3.14. Financing. RG has provided to the Company a true, complete and correct copy of each executed commitment letter (the Debt Commitment Letters) from the Debt Financing Parties pursuant to which they have committed, subject to the terms and conditions therein, to provide RG with debt financing in the amount set forth therein (being collectively referred to as the Financing), including all exhibits, schedules, annexes and amendments to such letter in effect as of the date hereof. As of the date of this Agreement, the Debt Commitment Letters, including the financing commitments contained therein, (i) have not been amended, restated, withdrawn, rescinded or otherwise modified or waived, and, no such amendment, restatement, withdrawal, rescission or other modification or waiver of the Debt Commitment Letters is contemplated by RG or, to the Knowledge of RG, any other party thereto, and (ii) are in full force and effect, and constitute the legal, valid and binding obligations of RG and, to the Knowledge of RG, the other parties thereto, subject to the Bankruptcy and Equity Exception. There are no conditions precedent related to the funding of the Financing or contingencies that would permit the Debt Financing Parties to reduce the total amount of the Financing, other than as set forth in or contemplated by the Debt Commitment Letters or the fee letter, if applicable, associated with the Debt Commitment Letters. RG has fully paid any and all commitment fees or other fees or deposits required by the Debt Commitment Letters to be paid on or before the date hereof. As of the date of this Agreement, no event has occurred which, with or without notice, lapse of time or both, would reasonably be expected to constitute a default or breach on the part of RG and, to the Knowledge of RG, any other parties thereto, under the Debt Commitment Letters. As of the date of this Agreement, assuming the accuracy of the Companys representations and warranties set forth in this Agreement and performance by the Company of its obligations under this Agreement, RG has no reason to believe that any of the conditions to the Financing contemplated by the Debt Commitment Letters will not be satisfied or that the Financing will not be available to RG on the Closing Date. As of the date of this Agreement, there are no side letters or other agreements, Contracts or written arrangements to which RG or any of its Affiliates is a party related to the Financing other than as expressly set forth in the Debt Commitment Letters and any customary fee letter, engagement letter and non-disclosure agreements that do not impact the conditionality or amount of the Financing. Assuming the Financing is funded in accordance with the Debt Commitment Letters, the net proceeds contemplated by the Debt Commitment Letters will, together with RG cash, Company cash and the proceeds from the consummation of the Stock Purchase Agreement and the Asset Purchase Agreement, in the aggregate be sufficient for Merger Sub and the Surviving Company to pay the aggregate Merger Consideration (and any repayment or refinancing of debt contemplated by this Agreement or the Debt Commitment Letters) and any other amounts required to be paid by Merger Sub and the Surviving Company in connection with the consummation of the Transactions. RG acknowledges and agrees that obtaining the Financing is not a condition to closing the Transactions.
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Section 3.15. Ownership of Company Common Stock. Neither RG nor any of its Subsidiaries is, nor at any time during the last three (3) years has been, an interested stockholder of the Company as defined in Section 203 of the DGCL or was required to file a Schedule 13D or Schedule 13G with respect to its ownership of securities of the Company pursuant to the Exchange Act (other than as contemplated by this Agreement).
Section 3.16. Related Party Transactions. Section 3.16 of the RG Disclosure Schedule sets forth a list of all Contracts (other than employment Contracts and equity award arrangements) between RG and any of its Affiliates, officers, directors or employees or any of such officers, directors or employees Affiliates. Except as set forth in Section 3.16 of the RG Disclosure Schedule, RG and its Subsidiaries are not indebted or otherwise obligated to any such Person, except for amounts due under normal arrangements applicable to all employees generally as to salary or reimbursement of ordinary business expenses not unusual in amount or significance.
Section 3.17. Insurance. Except as would not reasonably be expected to have, individually or in the aggregate, a RG Material Adverse Effect, (i) RG and its Subsidiaries own or hold policies of insurance in amounts providing reasonably adequate coverage against all risks customarily insured against by companies in similar lines of business as RG and its Subsidiaries and in amounts sufficient to comply with all Material Contracts to which RG or its Subsidiaries are parties or are otherwise bound, and (ii) all such insurance policies are in full force and effect and will remain so after the Effective Time, no notice of cancellation or modification has been received, and there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a default, by any insured thereunder.
Section 3.18. Property. RG does not own or have any option to purchase real property. RG does not use or occupy, or a have a right to use or occupy, any real property except pursuant to a RG Lease. Except as would not reasonably be expected to have, individually or in the aggregate, a RG Material Adverse Effect, (a) RG or one of its Subsidiaries has a good and valid leasehold interest in each RG Lease, free and clear of all Liens (other than Permitted Exceptions), (b) each RG Lease is in full force and effect and there is no violation, breach or default, or any event or condition which, after notice or lapse of time or both, will constitute such a violation, breach or default, by the tenant under any RG Lease or, to the Knowledge of RG, by any other party thereto, (c) there are no pending or, to the Knowledge of RG, threatened, condemnation or eminent domain proceedings, or other Governmental Authority proceedings affecting any demised premises under a RG Lease and (d) each RG Lease has created a legal, binding and enforceable obligation of (i) RG or its applicable Subsidiary, and (ii) any other party or parties thereto.
Section 3.19. Environmental Matters. Except for those matters that would not reasonably be expected to have, individually or in the aggregate, a RG Material Adverse Effect, (a) each of RG and its Subsidiaries is and has been in compliance with all Environmental Laws, which compliance includes obtaining, maintaining or complying with all Permits required under Environmental Laws for the operation of their respective businesses, (b) as of the date hereof there is no investigation, suit, claim, action or proceeding relating to or arising under any Environmental Law that is pending or, to the Knowledge of RG, threatened against RG or any of its Subsidiaries or any real property owned, operated or leased by RG or any of its Subsidiaries, (c) as of the date hereof neither RG nor any of its Subsidiaries has received any written notice of or entered into any legally-binding Contract, Order or settlement involving uncompleted,
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outstanding or unresolved requirements on the part of RG or its Subsidiaries relating to or arising under Environmental Laws and (d) to the Knowledge of RG, there are and have been no Hazardous Materials present on any real property owned or leased by RG or any of its Subsidiaries in a manner and concentration that would reasonably be expected to result in any claim against RG or its Subsidiaries under any Environmental Law.
Section 3.20. Labor Matters; Employees.
(a) Except as set forth in Section 3.21(a) of the RG Disclosure Schedule, RG and its Subsidiaries are neither party to, nor bound by, any labor agreement, collective bargaining agreement, work rules or practices, or any other labor-related agreements or arrangements with any labor union, labor organization or works council and, to the Knowledge of RG, there are no labor union organizing activities presently underway or threatened involving any employees of RG or its Subsidiaries.
(b) Since January 1, 2013, there have been no actual or, to the Knowledge of RG, threatened material arbitrations, material grievances, material labor disputes, strikes, lockouts, slowdowns or work stoppages or other material concerted action by employees of RG or any of its Subsidiaries or against or affecting RG or any of its Subsidiaries. There are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or threatened in writing with respect to the employees of RG or its Subsidiaries.
(c) To the Knowledge of RG, the manufacturers, contractors and subcontractors engaged in the manufacturing of products for RG and its Subsidiaries (RG Manufacturers) are in compliance in all material respects with all applicable Laws respecting employment and employment practices. To the Knowledge of RG, no complaint, claim, lawsuit or charge has been made against any RG Manufacturers that would reasonably be expected to result in material liability to RG or its Subsidiaries.
Section 3.21. Non-Reliance on Company Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans. In connection with the due diligence investigation of the Company by RG, RG has received and may continue to receive from the Company certain estimates, projections, forecasts and other forward-looking information, as well as certain business plan information, regarding the Company and its business and operations. RG hereby acknowledges that there are uncertainties inherent in attempting to make such estimates, projections, forecasts and other forward-looking statements, as well as in such business plans, with which RG is familiar, that RG is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections, forecasts and other forward-looking information, as well as such business plans, so furnished to them (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, forward-looking information or business plans), and that RG will have no claim against the Company or any of its Subsidiaries, or any of their respective stockholders, directors, officers, employees, Affiliates, advisors, agents or Representatives, with respect thereto.
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Section 3.22. No Other Representations and Warranties. EXCEPT AS CONTAINED IN THIS ARTICLE III, RG DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES TO THE COMPANY OR MERGER SUB AND RG DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT MADE OR INFORMATION COMMUNICATED (WHETHER ORALLY OR IN WRITING) TO THE COMPANY AND ITS AFFILIATES AND REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, ADVICE, REPRESENTATION OR WARRANTY WHICH MAY HAVE BEEN PROVIDED TO THE COMPANY AND ITS AFFILIATES OR REPRESENTATIVES BY ANY DIRECTOR, OFFICER, EMPLOYEE, ACCOUNTING FIRM, LEGAL COUNSEL, OR OTHER AGENT, CONSULTANT, OR REPRESENTATIVE OF RG OR ITS AFFILIATES). ANY AND ALL STATEMENTS MADE OR INFORMATION COMMUNICATED BY RG, OR ANY OF ITS REPRESENTATIVES OUTSIDE OF THIS AGREEMENT, WHETHER VERBALLY OR IN WRITING, ARE DEEMED TO HAVE BEEN SUPERSEDED BY THIS AGREEMENT, IT BEING INTENDED THAT NO SUCH PRIOR OR CONTEMPORANEOUS STATEMENTS OR COMMUNICATIONS OUTSIDE OF THIS AGREEMENT SHALL SURVIVE THE EXECUTION AND DELIVERY OF THIS AGREEMENT.
ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS
Section 4.1. Conduct of Business.
(a) Except as expressly permitted by this Agreement or the Asset Purchase Agreements, as set forth in Section 4.1(a) of the Company Disclosure Schedule, as required by applicable Law or as consented to by RG in writing (such consent shall not be unreasonably withheld, conditioned or delayed), during the period from the date of this Agreement until earlier of the Effective Time and the valid termination of this Agreement in accordance with Section 6.1, the Company shall, and shall cause each of its Subsidiaries to, (x) conduct its business in all material respects in the ordinary course consistent with past practice, and (y) use commercially reasonable efforts to maintain and preserve intact its business organization and the goodwill of those having business relationships with it and retain the services of its present executive officers and key employees consistent with past practice. Without limiting the generality of the foregoing, except as expressly permitted by this Agreement, as set forth in Section 4.1 of the Company Disclosure Schedule, as required by applicable Law or as consented to by RG in writing (such consent shall not be unreasonably withheld, conditioned or delayed), during the period from the date of this Agreement until the earlier of the Effective Time and a valid termination of this Agreement in accordance with Section 6.1, the Company shall not, and shall not permit any of its Subsidiaries to:
(i) (A) issue, sell, grant, dispose of, pledge or otherwise encumber any shares of its capital stock, voting securities or equity interests, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of its capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or any other agreements of any character to purchase or acquire any shares of its capital stock, voting securities or equity interests or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for, any
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shares of its capital stock, voting securities or equity interests; other than issuances by any direct or indirect wholly owned Subsidiary to the Company or another direct or indirect wholly owned Subsidiary of the Company; (B) redeem, purchase or otherwise acquire any of its outstanding shares of capital stock, voting securities or equity interests, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of its capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or any other agreements of any character to acquire any shares of its capital stock, voting securities or equity interests, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of its capital stock, voting securities or equity interests; other than the acquisition or withholding by the Company of shares of Company Common Stock to satisfy Tax obligations with respect to awards granted pursuant to the Company Incentive Plan; (C) declare, authorize, set aside for payment or pay any dividend on, or make any other distribution in respect of, any of its outstanding shares of capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or any other agreements of any character to acquire any shares of its capital stock, voting securities or equity interests or otherwise make any payments to the holders of the foregoing in their capacity as such; (D) split, combine, subdivide or reclassify any shares of its capital stock; or (E) amend (including by reducing an exercise price or extending a term) or waive any of its rights under, any provision of the Company Incentive Plans or any agreement evidencing any right to acquire capital stock of the Company or any restricted stock purchase agreement or any similar or related contract;
(ii) incur or assume any indebtedness for borrowed money or guarantee any indebtedness (or enter into a keep well or similar agreement) or issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of the Company or any of its Subsidiaries, other than borrowings (A) listed on Section 4.1(b)(i) of the Company Disclosure Schedule, (B) from RG or a Subsidiary of RG or (C) from the Company by a direct or indirect wholly owned Subsidiary of the Company in the ordinary course of business consistent with past practices;
(iii) sell, transfer, lease, sublease, license, mortgage, encumber or otherwise dispose of or subject to any Lien (including pursuant to a sale-leaseback transaction or an asset securitization transaction), other than Permitted Exceptions, any of its properties (including real properties) or assets (including securities of Subsidiaries) to any Person, except (A) in the ordinary course of business consistent with past practices pursuant to Contracts in force at the date of this Agreement that have been made available to RG prior to the date hereof, (B) for sales of inventory to customers in the ordinary course of business consistent with past practices (which, for the avoidance of doubt, does not include bulk sales or liquidations of inventory) and (C) with respect to Company Intellectual Property to the extent not prohibited by Section 4.1(b)(xi);
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(iv) (A) increase in any manner or accelerate the vesting or payment of the compensation of or benefits payable to (or severance pay for) any of its current or former directors, officers or employees, or consultants who are natural persons, (B) enter into, establish, amend or terminate any collective bargaining agreement or Company Benefits Plan (or any plan, program, agreement or arrangement that would be a Company Benefits Plan if in effect as of the date hereof) with, for or in respect of, any current or former stockholder, director, officer, other employee, consultant who is a natural person or Affiliate of the Company or its Subsidiaries, (C) fund any rabbi trust or similar arrangement, (D) terminate the employment or services of any officer, consultant who is a natural person or employee whose target annual compensation (including annual base salary and target bonus) is greater than $150,000 or (E) hire any officer, consultant who is a natural person or employee who has target annual compensation greater than $75,000, in each case, other than as required pursuant to applicable Law or required by any Company Benefits Plan in force as of the date hereof;
(v) (A) effectuate a plant closing as defined in the WARN Act affecting any site of employment or one or more facilities or operating units within any site of employment of the Company or its Subsidiaries, (B) effectuate a mass layoff as defined in the WARN Act affecting any site of employment of the Company or its Subsidiaries or (C) enter into any labor agreement, collective bargaining agreement, work rules or practices, or any other labor-related agreements or arrangements with any labor organization, works council, trade union or other labor association, with respect to the employees of the Company or any of its Subsidiaries.
(vi) (A) incur any Taxes outside the ordinary course of business consistent with past practices, except as contemplated by this Agreement and the Asset Purchase Agreements, (B) make any material election concerning Taxes or Tax Returns, (C) change or revoke any election concerning Taxes or Tax Returns, (D) file any material amended Tax Return, (E) enter into any closing agreement with respect to any material Tax, (F) settle or compromise any claim or action relating to material Taxes, (G) surrender any right to claim a material refund of Taxes, (H) make any material change in Tax accounting methods, (I) obtain any material Tax ruling, (J) file any material Tax Return other than one prepared in a manner consistent with past practice, or (K) waive or extend any statute of limitations in respect of material Taxes;
(vii) make any material changes in financial accounting methods, principles or practices (or change an annual accounting period), except insofar as may be required by GAAP or Regulation S-X promulgated under the Exchange Act;
(viii) amend the Company Charter Documents or organizational documents of any Subsidiary;
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(ix) adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation or other reorganization;
(x) settle or compromise any litigation, proceeding or pending or threatened claim or action other than settlements or compromises (A) that do not obligate the Company or its Subsidiaries to make payment(s) in excess of amounts reserved on the Companys consolidated balance sheet dated February 28, 2015 by $150,000 in the aggregate, (B) that do not involve any material injunctive or equitable relief or impose material restrictions on the business activities of the Company and its Subsidiaries, taken as a whole, or to the Hudsons Business, (C) that do not relate to the Transactions and (D) that do not involve the issuance of Company securities or equity or voting interests;
(xi) subject to any Lien or otherwise encumber or, except for Permitted Exceptions, permit, allow or suffer to be encumbered, any Company Intellectual Property, except for any Permitted Exceptions;
(xii) sell, assign, license, transfer, convey, lease, abandon or otherwise dispose of any of the Company Intellectual Property Rights, other than licenses made in the ordinary course of business consistent with past practice that are terminable by the Company on 90 days or fewer notice without liability (including, without limitation, penalty or interest);
(xiii) (A) fail to make any material filing, pay any fee, or take another action necessary to maintain in full force and effect any trademark or trade name that is material to the conduct of the business of the Company and its Subsidiaries, as a whole, as currently conducted or material to the Hudson Business or the Joes Business, each as currently conducted, other than such failures that can be cured before the Closing and without resulting in an adverse impact on the Company; or (B) enter into any license or transfer agreement granting or transferring to a third party an exclusive right to use any such trademark or trade name, other than distribution agreements, sales agent agreements and commission arrangements entered into in the ordinary course of business consistent with past practices;
(xiv) (A) modify or amend in any material respect, or renew, terminate or waive any material rights under, any Material Contract or (B) enter into any Contract that would have been a Material Contract if entered into prior to the date hereof and that is not terminable by the Company on 90 days or fewer notice without liability (including, without limitation, penalty or interest); or
(xv) authorize, commit, resolve, propose or agree (in writing or otherwise) to take any of the foregoing actions.
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Notwithstanding anything set forth in this Agreement, nothing contained in this Agreement shall give RG, directly or indirectly, the right to control or direct the operations of the Company or any of its Subsidiaries prior to the Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, control and supervision over its and its Subsidiaries business operations.
(b) Except as expressly permitted by this Agreement, as set forth in Section 4.1(b) of the RG Disclosure Schedule, as required by applicable Law or as consented to by the Company in writing (such consent shall not be unreasonably withheld, conditioned or delayed), during the period from the date of this Agreement until earlier of the Effective Time and the valid termination of this Agreement in accordance with Section 6.1, RG shall, and shall cause each of its Subsidiaries to, (x) conduct its business in all material respects in the ordinary course consistent with past practice, and (y) use commercially reasonable efforts to maintain and preserve intact its business organization and the goodwill of those having business relationships with it and retain the services of its present executive officers and key employees consistent with past practice. Without limiting the generality of the foregoing, except as expressly permitted by this Agreement, as set forth in Section 4.1(b) of the RG Disclosure Schedule, as required by applicable Law or as consented to by the Company in writing (such consent shall not be unreasonably withheld, conditioned or delayed), during the period from the date of this Agreement until the earlier of the Effective Time and a valid termination of this Agreement in accordance with Section 6.1, RG shall not, and shall not permit any of its Subsidiaries to:
(i) incur or assume any indebtedness for borrowed money that will not be repaid at Closing and reduce the Aggregate Cash Consideration payable to RG or guarantee any material indebtedness (or enter into a keep well or similar agreement) or issue or sell any debt securities or options, warrants, calls or other rights, in each case, other than in the ordinary course of business consistent with past practices;
(ii) sell, transfer, lease, sublease, license, mortgage, encumber or otherwise dispose of or subject to any Lien (including pursuant to a sale-leaseback transaction or an asset securitization transaction), other than Permitted Exceptions, any of its material properties (including real properties) or material assets (including securities of Subsidiaries) to any Person, except (A) in the ordinary course of business consistent with past practices or pursuant to Contracts in force at the date of this Agreement that have been made available to the Company prior to the date hereof and (B) with respect to RG Intellectual Property to the extent not prohibited by Section 4.1(b)(x);
(iii) (A) increase in any material manner the compensation of or benefits payable to (or severance pay for) any of its current or former directors, officers or employees, or consultants who are natural persons, (B) enter into, establish, amend or terminate any collective bargaining agreement or RG Benefits Plan (or any plan, program, agreement or arrangement that would be a RG Benefits Plan if in effect as of the date hereof) with, for or in respect of, any current or former stockholder, director, officer, other employee, consultant who is
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a natural person or Affiliate of RG or its Subsidiaries, (C) fund any rabbi trust or similar arrangement, (D) terminate the employment or services of any officer, consultant who is a natural person or employee whose target annual compensation (including annual base salary and target bonus) is greater than $200,000 or (E) hire any officer, consultant who is a natural person or employee who has target annual compensation greater than $200,000, in each case, other than as contemplated by this Agreement, in the ordinary course of business consistent with past practice, as required pursuant to applicable Law or as required by any RG Benefits Plan in force as of the date hereof;
(iv) (A) incur any Taxes outside the ordinary course of business consistent with past practices, except as contemplated by this Agreement and the Asset Purchase Agreements (B) make any material election concerning Taxes or Tax Returns, (C) change or revoke any election concerning Taxes or Tax Returns, (D) file any material amended Tax Return, (E) enter into any closing agreement with respect to any material Tax, (F) settle or compromise any claim or action relating to material Taxes, (G) surrender any right to claim a material refund of Taxes, (H) make any material change in Tax accounting methods, (I) obtain any material Tax ruling, (J) file any material Tax Return other than one prepared in a manner consistent with past practice, or (K) waive or extend any statute of limitations in respect of material Taxes;
(v) make any material changes in financial accounting methods, principles or practices (or change an annual accounting period), except insofar as may be required by GAAP or Regulation S-X promulgated under the Exchange Act;
(vi) other than amendments to Exhibit A to the limited liability company agreement of RG, amend RG Charter Documents or organizational documents of any Subsidiary of RG;
(vii) other than in connection with distributions by direct and indirect holders of RG equity interests of equity interests in such holder, adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation or other reorganization;
(viii) settle or compromise any litigation, proceeding or pending or threatened claim or action other than settlements or compromises (A) that do not obligate RG or its Subsidiaries to make payment(s) in excess of amounts reserved on RGs consolidated balance sheet dated April 30, 2015 by $350,000 in the aggregate, (B) that do not involve any material injunctive or equitable relief or impose material restrictions on the business activities of RG and its Subsidiaries, taken as a whole and (C) that do not relate to the Transactions;
(ix) other than in the ordinary course of business consistent with past practices, subject to any Lien or otherwise encumber or, permit, allow or suffer to be encumbered, any RG Intellectual Property Rights, in each case except for any Permitted Exceptions;
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(x) sell, assign, license, transfer, convey, lease, abandon or otherwise dispose of any material RG Intellectual Property Rights, other than licenses made in the ordinary course of business consistent with past practice;
(xi) (A) fail to make any material filing, pay any fee, or take another action necessary to maintain in full force and effect any trademark or trade name that is material to the conduct of the business of RG and its Subsidiaries, as a whole, as currently conducted, other than such failures that can be cured before the Closing and without resulting in an adverse impact on RG; or (B) enter into any license or transfer agreement granting or transferring to a third party an exclusive right to use any such trademark or trade name, other than licenses or transfer agreements entered into in the ordinary course of business consistent with past practices;
(xii) (A) modify or amend in any material respect, or renew, terminate or waive any material rights under, any Material Contract (except for any modifications or amendments that are beneficial to or not materially less favorable to RG), or (B) enter into any Contract that would have been a Material Contract if entered into prior to the date hereof and that is not terminable by RG on 90 days or fewer notice without liability (including, without limitation, penalty or interest); or
(xiii) authorize, commit, resolve, propose or agree (in writing or otherwise) to take any of the foregoing actions.
Notwithstanding anything set forth in this Agreement, nothing contained in this Agreement shall (1) give the Company, directly or indirectly, the right to control or direct the operations of RG or any of its Subsidiaries prior to the Effective Time or (2) limit, or be deemed to limit, (X) the liquidation of any direct or indirect holder of RG Units or (Y) the distribution of RG Units by any holder of RG Units, in each case prior to the Effective Time. Prior to the Effective Time, RG shall exercise, consistent with the terms and conditions of this Agreement, control and supervision over its and its Subsidiaries business operations.
Section 4.2. No Solicitation.
(a) No Solicitation by RG. RG shall, and shall cause its Subsidiaries and Affiliates and each of its and its Subsidiaries and Affiliates respective directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives (collectively, Representatives) to, immediately cease and cause to be terminated any solicitation, encouragement, discussions or negotiations with any Person conducted heretofore with respect to a RG Takeover Proposal; provided, however, that nothing in this Section 4.2(a) shall preclude RG or its Representatives from contacting any such party or parties solely for the purpose of complying with the provisions of the first clause of this sentence. Subject to the terms and provisions of this
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Section 4.2(a), from the date hereof until the Closing Date, or, if earlier, the termination of this Agreement in accordance with Section 6.1, RG shall not, and shall cause its Subsidiaries and Affiliates and each of its and its Subsidiaries and Affiliates respective Representatives not to, directly or indirectly, (i) solicit, initiate, facilitate or encourage (including by way of providing or making available information for the purpose of soliciting, initiating, encouraging or facilitating) any inquiries, discussions or negotiations regarding, or the submission or announcement of any proposals or offers that constitute, or would reasonably be expected to lead to, any RG Takeover Proposal, (ii) provide any information concerning RG or any of its Subsidiaries to any Person or group who would reasonably be expected to make any RG Takeover Proposal or otherwise in connection with, or for the purpose of soliciting, initiating, encouraging or facilitating, any RG Takeover Proposal or any inquiries, discussions or negotiations with respect to a RG Takeover Proposal or that would reasonably be expected to lead to a RG Takeover Proposal, (iii) engage in any discussions or negotiations regarding any RG Takeover Proposal or that would reasonably be expected to lead to a RG Takeover Proposal, (iv) by resolution of the RG Board of Managers, any committee thereof, or otherwise (A) approve, support, recommend, enter into or adopt, or (B) propose to approve, support, recommend, enter into or adopt, (X) any RG Takeover Proposal or (Y) any Contract providing for or any letter of intent or similar document, agreement, commitment, understanding or agreement in principle (whether written or oral, binding or nonbinding) with respect to a RG Takeover Proposal or that would reasonably be expected to lead to a RG Takeover Proposal, or (v) otherwise cooperate with or assist or participate in, or facilitate or encourage any such inquiries, proposals, offers, discussions or negotiations.
(b) No Solicitation by the Company. The Company shall, and shall cause its Subsidiaries and Affiliates and each of its and its Subsidiaries and Affiliates respective Representatives to, immediately cease and cause to be terminated any solicitation, encouragement, discussions or negotiations with any Person conducted heretofore with respect to, or which would reasonably be expected to lead to, a Takeover Proposal; provided, however, that nothing in this Section 4.2(b) shall preclude the Company or its Representatives from contacting any such party or parties solely for the purpose of complying with the provisions of the first clause of this sentence. Subject to the terms and provisions of this Section 4.2(b), from the date hereof until the Effective Time, or, if earlier, the termination of this Agreement in accordance with Section 6.1, the Company shall not, and shall cause its Subsidiaries and Affiliates and each of its and its Subsidiaries and Affiliates respective Representatives not to, directly or indirectly, (i) solicit, initiate, facilitate or encourage (including by way of providing or making available information for the purpose of soliciting, initiating, encouraging or facilitating) any inquiries, discussions or negotiations regarding, or the submission or announcement of any proposals or offers that constitute, or would reasonably be expected to lead to, any Takeover Proposal, (ii) provide any information concerning the Company or any of its Subsidiaries to any Person or group who would reasonably be expected to make any Takeover Proposal or otherwise in connection with, or for the purpose of soliciting, initiating, encouraging or facilitating, any Takeover Proposal or any inquiries, discussions or negotiations with respect to a Takeover Proposal or that would reasonably be expected to lead to a Takeover Proposal, (iii) engage in any discussions or negotiations regarding any Takeover Proposal or that would reasonably be expected to
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lead to a Takeover Proposal, (iv) by resolution of the Company Board, any committee thereof, or otherwise (A) approve, support, recommend, enter into or adopt, or (B) propose to approve, support, recommend, enter into or adopt, (X) any Takeover Proposal (other than a Superior Proposal in accordance with the terms and conditions hereof) or (Y) any Contract providing for or any letter of intent or similar document, agreement, commitment, understanding or agreement in principle (whether written or oral, binding or nonbinding) with respect to a Takeover Proposal or that would reasonably be expected to lead to a Takeover Proposal, or (v) otherwise cooperate with or assist or participate in, or facilitate or encourage any such inquiries, proposals, offers, discussions or negotiations. Wherever the term group is used in this Section 4.2(b), it is used as defined for purposes of Rule 13d-3 under the Exchange Act.
(c) Permitted Response to Unsolicited Takeover Proposals. Notwithstanding anything to the contrary contained in this Section 4.2(c) or any other provision of this Agreement, if at any time after the date hereof and prior to the Companys receipt of the Company Stockholder Approval, (i) the Company receives an unsolicited, bona fide, written Takeover Proposal from a third party, and (ii) the Company Board determines in good faith, After Consultation, that such Takeover Proposal constitutes or would reasonably be expected to lead to a Superior Proposal, then the Company shall be permitted to (A) furnish information (including non-public information) with respect to the Company and its Subsidiaries to the Person making such Takeover Proposal pursuant to an Acceptable Confidentiality Agreement; provided, that all such information has previously been made available to RG or is made available to RG and such third party concurrently and (B) engage in discussions and negotiations with the Person making such Takeover Proposal regarding such Takeover Proposal.
(d) Notice to RG of Takeover Proposals. If the Company or any of its Representatives receives any Takeover Proposal (including any material changes to a Takeover Proposal) then the Company shall, promptly (but in no event later than one (1) Business Day) after becoming aware thereof, notify RG (orally and in writing) and, in connection with such notice, provide (i) the identity of the Person or group making such Takeover Proposal and the material terms and conditions thereof (including, if applicable, copies of any written proposals, indications of interest or offers, including proposed agreements), and thereafter the Company shall keep RG reasonably informed, on a prompt basis, as to the status thereof (including any material changes to the terms thereof, and any change to the price, and any other material developments with respect thereto), including by promptly providing to RG copies of any additional or revised written proposals, indications of interest, offers, or proposed agreements relating to such Takeover Proposal and (ii) a representation that the Company and each of its and its Subsidiaries and Affiliates respective Representatives have complied with Section 4.2(d) in all respects.
(e) Further Prohibited Activities. Except as otherwise permitted by Section 4.2(f), neither the Company Board nor any committee thereof shall (i) withdraw or rescind (or modify in a manner adverse to RG), or authorize or publicly announce an intention to withdraw or rescind (or modify in a manner adverse to RG), the Company Recommendation, (ii) fail to include the Company Recommendation in the Proxy
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Statement, (iii) approve, declare the advisability of or recommend to the Company Stockholders the adoption of, or authorize or publicly announce an intention to approve, declare the advisability of or recommend the adoption of, any Takeover Proposal or any Contract or action that would reasonably be expected to lead to a Takeover Proposal, (iv) take any formal action or make any recommendation or public statement in connection with a tender offer or exchange offer (other than a recommendation against such offer or a customary stop, look and listen communication of the type contemplated by Rule 14d-9(f) under the Exchange Act, in each case that includes a reaffirmation of the Company Recommendation) (it being understood that the Company Board may refrain from taking a position with respect to such a tender offer or exchange offer until the close of business as of the tenth (10th) Business Day after the commencement of such tender offer or exchange offer pursuant to Rule 14d-9(f) under the Exchange Act without such action being considered a Change in Recommendation), (v) cause, authorize or permit the Company or any of its Subsidiaries to execute or enter into any letter of intent, memorandum of understanding, agreement-in-principle, Contract, merger agreement, acquisition agreement or other similar agreement related to any Takeover Proposal or that would reasonably be expected to lead to a Takeover Proposal, other than an Acceptable Confidentiality Agreement referred to in Section 4.2(c) (a Company Acquisition Agreement), or (vi) publicly propose or announce an intention to take any of the foregoing actions (any action described in clauses (i), (ii), (iii), (iv), (v) or (vi) being referred to as a Change in Recommendation).
(f) Change in Recommendation. Notwithstanding anything to the contrary in this Agreement, at any time prior to the Companys receipt of the Company Stockholder Approval, the Company Board may effect a Change in Recommendation only if (i) the Company has received an unsolicited, bona fide, written Takeover Proposal and the Company Board determines in good faith, After Consultation, that such Takeover Proposal constitutes a Superior Proposal or (ii) the Company Board determines in good faith, after consulting with its legal representatives, that in the light of an Intervening Event the taking of such action is necessary for the Company Board to comply with its fiduciary duties under applicable Law; provided, however, that (w) the Company Board may not effect such Change in Recommendation until after the fifth (5th) Business Day following RGs receipt of notice from the Company Board that the Company Board intends to effect such Change in Recommendation and specifying the reasons therefor, including the material terms and conditions of any Superior Proposal or Intervening Event that is the basis of the Change in Recommendation (it being understood and agreed that any amendment to the material terms or conditions of the Superior Proposal or Intervening Event shall require a new notice and a new five (5) Business Day period) and a representation that the Company and each of its and its Subsidiaries and Affiliates respective Representatives have complied with Section 4.2(b) in all respects, (x) during such five (5) Business Day Period, the Company shall negotiate with RG in good faith to make such adjustments to the terms and conditions of this Agreement as would enable the Company Board to proceed with its recommendation of this Agreement and not effect the Change in Recommendation, (y) the Company Board shall not effect the Change in Recommendation if, prior to the expiration of such five (5) Business Day period, RG makes a proposal to adjust the terms and conditions of this Agreement that the Company Board determines in good faith, After Consultation, to be at least as favorable as the Superior Proposal or otherwise appropriately addresses the Intervening Event.
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(g) Communications With Stockholders. Nothing contained in Section 4.2 shall prohibit the Company from (i) taking and disclosing to the Company Stockholders a position contemplated by Item 1012 of Regulation M-A under the Exchange Act or (ii) making any disclosure to the Company Stockholders that the Company Board determines in good faith is required by applicable Law; provided, however, that this Section 4.2(g) shall not be deemed to permit the Company Board to make a Change in Recommendation except to the extent permitted by Section 4.2(f), and that any such position or disclosure in connection with a tender offer or exchange offer, other than a recommendation against such offer or a customary stop, look and listen communication of the type contemplated by Rule 14d-9(f) under the Exchange Act (in each case that includes a reaffirmation of the Company Recommendation), shall be deemed to be a Change in Recommendation.
Section 4.3. Reasonable best efforts.
(a) Subject to the terms and conditions of this Agreement, each of the parties hereto shall cooperate with the other parties and use (and shall cause their respective Subsidiaries to use) their respective reasonable best efforts to promptly (i) take, or cause to be taken, all actions, and do, or cause to be done, all things necessary, proper or advisable to cause the conditions to Closing to be satisfied and to consummate and make effective the Transactions as promptly as reasonably practicable and in any event prior to the Outside Date, including preparing and filing promptly and fully all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents (including any required or recommended filings under applicable Antitrust Laws), and (ii) obtain all approvals, consents, waivers, registrations, permits, authorizations and other confirmations from any Governmental Authority or third party necessary, proper or advisable to consummate the Transactions, including preparing and filing promptly and fully all documentation to effect all filings, notices, and other documents necessary, proper or advisable to obtain the foregoing. Notwithstanding anything in this Agreement to the contrary, it is expressly understood and agreed that neither RG nor its Subsidiaries shall be obligated to litigate or contest any administrative or judicial action or proceeding or any decree, judgment, injunction or other order.
(b) In furtherance and not in limitation of the foregoing, (i) each party hereto agrees to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the Transactions as promptly as reasonably practicable and in any event within five (5) Business Days (or such longer period as the parties may mutually agree) following the date hereof, to make all appropriate filings and submissions (and filings and submissions considered by RG to be advisable) with any other Governmental Authority pursuant to any other applicable Antitrust Laws, to not withdraw its filing under the HSR Act or other Antitrust Laws without the written permission of the other parties, and to supply as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to the
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HSR Act and use its reasonable best efforts to take, or cause to be taken, as promptly as practicable all other actions consistent with this Section 4.3 necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act and any applicable foreign Antitrust Laws as soon as practicable and (ii) the Company shall use its reasonable best efforts to (A) take all action necessary to ensure that no state takeover statute or similar Law is or becomes applicable to any of the Transactions and (B) if any state takeover statute or similar Law becomes applicable to any of the Transactions, take all action necessary to ensure that the Transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise minimize the effect of such Law on the Transactions.
(c) Each of the parties hereto shall use its reasonable best efforts to (i) cooperate in all respects with each other in connection with any filing or submission with a Governmental Authority in connection with the Transactions and in connection with any investigation or other inquiry by or before a Governmental Authority relating to the Transactions, including any proceeding initiated by a private party, (ii) keep the other party informed in all material respects and on a reasonably timely basis of any material communication received by such party from, or any filing by such party with or material communication given by such party to, the Federal Trade Commission, the Antitrust Division of the Department of Justice, or any other Governmental Authority and of any material communication received or given in connection with any proceeding by a private party, in each case regarding any of the Transactions (including, in the case of written correspondence or filings, by promptly providing the other parties (or their counsel) copies thereof), and (iii) consult with each other in advance of and be permitted to attend any meeting or conference (including teleconference) with such Governmental Authorities (to the extent permitted by such Governmental Authorities; provided that such party shall use its reasonable best efforts to obtain such permission). Subject to applicable Laws relating to the exchange of information, each of the parties hereto shall have the right to review in advance, and to the extent practicable each will consult the other on, any filing made with, or written materials submitted to any Governmental Authority in connection with the Transactions. RG and the Company may, as each deems advisable and necessary, reasonably designate any competitively sensitive material provided to the other under this Section 4.3 as Antitrust Counsel Only Material. Such materials and the information contained therein shall be given only to outside antitrust counsel of the recipient and will not be disclosed by such outside counsel to employees, officers, or directors of the recipient unless express permission is obtained in advance from the source of the materials (RG or the Company, as the case may be) or its legal counsel.
Section 4.4. Spinoff Transaction. The parties acknowledge that the Company has entered into agreements to sell certain assets of the Joes Jeans business to certain third parties pursuant to the Asset Purchase Agreements (the Asset Sale Transactions). The Company shall use (and shall cause its Subsidiaries to use) its reasonable best efforts to promptly (i) take, or cause to be taken, all actions, and do, or cause to be done, all things necessary, proper or advisable to cause the conditions to the closing of the Asset Sale Transactions to be satisfied and to consummate and make effective the Asset Sale Transactions, including preparing and filing promptly and fully all documentation to effect all necessary filings, notices, petitions, statements,
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registrations, submissions of information, applications and other documents (including any required or recommended filings under applicable Antitrust Laws) and (ii) obtain all approvals, consents, waivers, registrations, permits, authorizations and other confirmations from any Governmental Authority or third party necessary, proper or advisable to consummate the Asset Sale Transactions, including preparing and filing promptly and fully all documentation to effect all filings, notices, and other documents necessary, proper or advisable to obtain the foregoing. With respect to the Asset Sale Transactions, and the termination of employment of current or former Joes Employees in connection therewith, the Company and its Subsidiaries shall make all required payments for any wages, services, or amounts required to be reimbursed or otherwise paid to current or former Joes Employees as required by applicable Laws. With respect to the Asset Sale Transactions, the parties acknowledge and agree that the consummation, timing and structure of the Asset Sale Transactions shall occur in a manner that takes into account U.S. federal income tax considerations and minimizes any U.S. federal income tax.
Section 4.5. Preparation of Proxy Statement/Form S-4 Registration Statement; Stockholders Meeting.
(a) As promptly as practicable, and in no event later than fifteen (15) Business Days after the date of this Agreement, the Company and RG shall prepare the Proxy Statement and the Form S-4 Registration Statement, in which the Proxy Statement will be included, with respect to (i) the adoption of an amendment to the Companys certificate of incorporation to increase the authorized shares of Company Common Stock and to effect the Reverse Stock Split and (ii) the approval of the issuance of Company Common Stock in connection with the Merger and the issuance of Company Common Stock upon the conversion of Company Preferred Stock in connection with the consummation of the transactions contemplated by the Stock Purchase Agreement, and cause it to be filed with the SEC. The Company and RG shall each furnish all information concerning it and the holders of its capital stock or other equity as the other may reasonably request in connection with the preparation of the Form S-4 Registration Statement and the Proxy Statement and any amendment thereto. The Company shall use reasonable best efforts to cause the Form S-4 Registration Statement and the Proxy Statement to comply with the rules and regulations promulgated by the SEC, to respond promptly to any comments of the SEC or its staff, and to have the Form S-4 Registration Statement declared effective under the Securities Act as promptly as practicable after it is filed with the SEC. The Company shall use reasonable best efforts to cause all documents that it is responsible for filing with the SEC in connection with the Transactions to comply as to form and substance in all material respects with the applicable requirements of the Securities Act and the Exchange Act.
(b) If at any time prior to the Effective Time either Party becomes aware of any event or circumstance which is required to be set forth in an amendment or supplement to the Form S-4 Registration Statement or Proxy Statement, it shall promptly inform the other Party.
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(c) The Company will notify RG in writing promptly after it receives notice thereof, of the time when the Form S-4 Registration Statement has become effective or any supplement or amendment thereto has been filed, the issuance of any stop order, or any request by the staff of the SEC for amendment of the Proxy Statement or Form S-4 Registration Statement or comments thereon or responses thereto. Each of RG, Merger Sub and the Company agrees that if it becomes aware that any information furnished by it would cause any of the statements in the Proxy Statement or the Form S-4 Registration Statement to be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein not false or misleading, to promptly inform the other parties and to take appropriate steps to correct the Proxy Statement or the Form S-4 Registration Statement.
(d) Prior to the Effective Time, the Company shall use reasonable best efforts to (i) qualify the Company Common Stock under the Blue Sky Laws of such jurisdictions as may be required and (ii) apply for and obtain a NASDAQ listing with respect to such Company Common Stock; provided, however, that the Company shall not be required to (x) qualify to do business as a foreign corporation in any jurisdiction in which it is not now so qualified, (y) file a general consent to service of process in any jurisdiction or (z) subject itself to taxation in any jurisdiction in which it is not so subject.
(e) As promptly as practicable after the Proxy Statement Clearance Date, the Company shall, in accordance with applicable Law, its constituent documents and the rules of NASDAQ (i) establish a record date for and give notice of a meeting of Company Stockholders (the Stockholders Meeting), and (ii) mail to the Company Stockholders as of the record date established for the Stockholders Meeting a Proxy Statement (the date the Company elects to take such action or is required to take such action, the Proxy Date). The Company shall duly call, convene and hold the Stockholders Meeting as promptly as reasonably practicable after the Proxy Date; provided, however, that in no event shall such meeting be held later than sixty (60) days following the date the Proxy Statement is mailed to the Company Stockholders other than in the case in which the Company is required to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the SEC or its staff or a court of competent jurisdiction has instructed the Company is necessary under applicable Law or Order and for such supplemental or amended disclosure to be disseminated and reviewed by the holders of shares of Company Common Stock prior to the Stockholders Meeting. Notwithstanding anything to the contrary contained in this Agreement, the Company (A) shall adjourn or postpone the Stockholders Meeting if as of the time for which the Stockholders Meeting is originally scheduled (as set forth in the Proxy Statement) there are insufficient shares of Company Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Stockholders Meeting or insufficient proxies returned to obtain the Company Stockholder Approval and (B) may otherwise only adjourn or postpone the Stockholders Meeting after consultation with RG, and with RGs consent (not to be unreasonably withheld, conditioned or delayed), to the extent necessary to ensure that any required supplement or amendment to the Proxy Statement is provided to the Company Stockholders within a reasonable amount of time in advance of the Stockholders Meeting. Once the Company has established a record date for the Stockholders Meeting, the Company shall not change such record date or establish a different record date for the Stockholders Meeting without the prior written consent of RG (which consent shall not be unreasonably withheld, conditioned or delayed), unless required to
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do so by applicable Law or the Company Charter Documents. The Company shall ensure that all proxies solicited in connection with the Stockholders Meeting are solicited in compliance with all applicable Laws (including all applicable rules of NASDAQ) and, unless the Company Board shall have made a Change in Recommendation in accordance with Section 4.2(f), the Company shall use its reasonable best efforts to solicit proxies in favor of the Company Proposal. Notwithstanding any Change in Recommendation, unless this Agreement shall have been properly terminated in accordance with its terms, the Company shall (x) submit this Agreement to the holders of shares of Company Common Stock as promptly as reasonably practicable for the purpose of obtaining the Company Stockholder Approval at the Stockholders Meeting and (y) not submit any Takeover Proposal for approval by the shareholders of the Company. The Company shall, upon the reasonable request of RG, advise RG in writing at least on a daily basis on each of the last ten (10) Business Days prior to the date of the Stockholders Meeting as to the aggregate tally of proxies received by the Company with respect to the Company Stockholder Approval.
Section 4.6. Public Announcements. The initial press release with respect to the execution of this Agreement shall be a joint press release to be reasonably agreed upon by RG and the Company. Except for a Change in Recommendation permitted pursuant to Section 4.2(f) or any communication contemplated by Section 4.2(g), neither the Company nor RG shall issue or cause the publication of any press release or other public announcement (to the extent not previously issued or made in accordance with this Agreement) with respect to the Merger, this Agreement or the other Transactions without the prior consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), except as may be required by Law, judicial or regulatory process or by any applicable listing agreement with, or applicable rules of, a national securities exchange or NASDAQ as determined in the good faith judgment of the party proposing to make such release (in which case such party shall allow the other party to comment on such press release or public announcement in advance of such issuance or publication).
Section 4.7. Access to Information; Confidentiality.
(a) Subject to applicable Laws relating to the exchange of information, the Company shall, and shall cause each of its Subsidiaries to, afford to RG and RGs Representatives reasonable access during normal business hours, during the period commencing on the date hereof and ending on the earlier of the Effective Time and the termination of this Agreement, to the Companys and its Subsidiaries officers, employees, agents, properties, offices and other facilities and to the Companys and its Subsidiaries books and records and furnish RG and its Representatives with such financial and operating data and other information with respect to the business, personnel, properties and Contracts of the Company and its Subsidiaries as RG may from time to time reasonably request. Notwithstanding the foregoing, (x) the Company shall not be required to afford such access if it would cause a violation of any Material Contract or would cause a loss of attorney/client privilege to the Company or the Companys Subsidiaries or would constitute a violation of any applicable Laws, provided that the Company shall have used reasonable best efforts to make such disclosure in a form or manner that would not jeopardize such privilege or protection or violate such Law or
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contractual restriction (including by redacting or otherwise not disclosing any portion thereof the disclosure of which would jeopardize such privilege or entering into a joint defense agreement) and (y) any such investigation or consultation shall be conducted in such a manner so as not to interfere unreasonably with the business or operations of the Company or any of its Subsidiaries or otherwise result in any significant interference with the prompt and timely discharge by such officers of their normal duties. The information provided will be subject to the terms of the Confidentiality Agreement, dated as of February 17, 2015, between TCP and the Company, as amended (the Confidentiality Agreement).
(b) No investigation, or information received, pursuant to this Section 4.7 will modify any of the representations and warranties of the Company.
Section 4.8. Notification of Certain Matters. The Company shall give prompt notice to RG, and RG shall give prompt notice to the Company, of (i) any notice or other communication received by such party from any Governmental Authority in connection with the Transactions or from any Person alleging that the consent of such Person is or may be required in connection with the Transactions, (ii) any actions, suits, claims, investigations or proceedings commenced or, to such partys knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its Subsidiaries which relate to the Transactions, (iii) the discovery of any fact or circumstance that, or the occurrence or nonoccurrence of any event the occurrence or non-occurrence of which, is reasonably likely to (A) in the case of the Company, cause the conditions set forth in Section 5.2(a) or Section 5.2(b) not to be satisfied and (B) in the case of RG, cause the conditions set forth in Section 5.3(a) or Section 5.3(b) not to be satisfied; provided, however, that the delivery of any notice pursuant to this Section 4.8 shall not (x) cure any breach of, or non-compliance with, any provision of this Agreement or (y) limit the remedies available to the party receiving such notice.
Section 4.9. Indemnification and Insurance.
(a) From and after the Effective Time, the Company shall and, to the extent applicable, shall cause each of its Subsidiaries (including the Surviving Company and its Subsidiaries) to indemnify and hold harmless each Indemnitee against all claims, losses, liabilities, damages, judgments, inquiries, fines, penalties and reasonable fees, costs and expenses, including attorneys fees and disbursements, incurred in connection with any threatened, pending or completed claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative (an Action), to which such Indemnitee is or was made a party or is threatened to be made a party to or is otherwise involved by reason of the fact that such Indemnitee is or was a director, manager or officer, as applicable, of the Company or RG or any of their respective Subsidiaries or, while a director, manager or officer, as applicable, of the Company or RG or any of their respective Subsidiaries, such Indemnitee is or was serving at the request of the Company or RG or any of their respective Subsidiaries, as applicable, as a director, manager, officer, employee or agent of another corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise (including with respect to this Agreement, the negotiation, execution, announcement, performance and consummation of all Transactions contemplated by this Agreement and all acts or
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omissions of each Indemnitee leading thereto and in furtherance thereof on behalf of the Company, the holders of shares of Company Common Stock, RG or the holders of RG Units, as applicable), whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under applicable Law. In the event of any such Action after the Effective Time, (A) each Indemnitee will be entitled to advancement of expenses incurred in the defense of any such Action from the Company or a Subsidiary of the Company (including the Surviving Company and its Subsidiaries), as applicable, within ten (10) calendar days of receipt by the Company from the Indemnitee of a written request therefor; provided, however, that, if required by the DGCL, the Company Charter Documents or the organizational and governing documents of a Subsidiary of the Company, as applicable, any Indemnitee to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined by a court of competent jurisdiction that such Indemnitee is not entitled to be indemnified by the Company or a Subsidiary of the Company (including the Surviving Company and its Subsidiaries), as applicable, pursuant to the DGCL, (B) the Company shall have the right to assume the defense of any such matter with counsel reasonably satisfactory to such Indemnitee, with such Indemnitees approval not to be unreasonably withheld, (C) if the Company assumes the defense of any such matter, the Company shall not settle, compromise or consent to the entry of any judgment in any proceeding or threatened Action (and in which indemnification or advancements could be sought by such Indemnitee hereunder), unless such settlement, compromise or consent includes an unconditional release of such Indemnitee from all liability arising out of such Action or such Indemnitee otherwise consents in writing and (D) notwithstanding the foregoing, if such Indemnitee reasonably concludes that a conflict of interest or potential conflict of interest exists between Indemnitee and the Company or between Indemnitee and another Indemnitee who is defended by the Company with the same counsel as counsel representing Indemnitee, or if the Company fails to assume the defense of such proceeding, such Indemnitee may retain one (1) independent legal counsel reasonably satisfactory to the Company, and the Company shall pay all reasonable fees and expenses of such counsel for the Indemnitee promptly after statements therefor are received. For purposes of this Agreement, Indemnitee means each individual who is or was a director, manager or officer of the Company or RG or any of their respective Subsidiaries.
(b) From and after the Effective Time, the respective certificate of incorporation and bylaws or similar organizational or governing documents of the Company and the Companys Subsidiaries shall contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of Indemnitees for the period prior to and including the Effective Time than are currently set forth in the Company Charter Documents and the certificate of incorporation, bylaws, or similar organizational and governing documents of the Companys Subsidiaries, respectively; provided, however, that, from and after the Effective Time, no director, manager, officer, employee or agent of RG or any of its Subsidiaries shall be subject to provisions with respect to indemnification, advancement of expenses or exculpation for the period prior to and including the Effective Time that are less favorable than are currently set forth in the applicable certificate of incorporation, bylaws or similar organizational and governing documents of RG or any of its Subsidiaries.
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(c) The Company shall and, to the extent applicable, shall cause each of the its Subsidiaries (including the Surviving Company and its Subsidiaries) to maintain and extend all existing officers and directors liability insurance of the Company and, to the extent applicable, its Subsidiaries (including the Surviving Company and its Subsidiaries) (D&O Insurance) for a period of not less than six (6) years from and after the Effective Time with respect to claims arising from acts, omissions, facts or events that occurred on or before the Effective Time, including in connection with the approval of this Agreement and the Transactions; provided, however, that the Company may substitute therefor policies of substantially equivalent coverage and amounts containing terms no less favorable to the Indemnitees than the existing D&O Insurance (so long as such policies are provided by the Companys current insurance carrier or by a carrier with a rating no lower than A.M. Best rating of A); and provided, further, that if the existing D&O Insurance expires or is terminated or canceled during such period through no fault of the Company, then the Company shall obtain and maintain substantially similar D&O Insurance (with such replacement policies to be provided by the Companys current insurance carrier or by a carrier with a rating no lower than A.M. Best rating of A). Notwithstanding the foregoing, in no event shall the Company be required to pay aggregate premiums for insurance under this Section 4.9(c) in excess of 300% of the most recent aggregate annual premiums paid by the Company for such purpose (the Maximum Amount); and provided, further, that if the Company is unable to obtain the amount of insurance required by this Section 4.9(c) for such aggregate premium, the Company shall obtain as much insurance as can be obtained for aggregate premiums not in excess of the Maximum Amount. At the Companys option, it may elect to obtain prepaid tail or runoff policies prior to the Effective Time covering a period of six (6) years from and after the Effective Time with respect to acts, omissions, facts or events occurring on or prior to the Effective Time. Any such tail or runoff policy purchased by the Company shall be in lieu of all other obligations of the Company in the first sentence of this Section 4.9(c) for so long as any such tail or runoff policy remains in full force and effect. In the event the Company purchases a tail or runoff policy prior to the Effective Time, the Company shall use its reasonable best efforts to maintain such tail or runoff policy in full force and effect for its term.
(d) The rights of each Indemnitee hereunder shall be in addition to, and not in limitation of, any other rights such Indemnitee may have under the certificates of incorporation or bylaws or other organizational or governing documents of the Company or RG or any of their respective Subsidiaries (including, following the Effective Time, the Surviving Company), any indemnification or other agreements of the Company or RG or any of their respective Subsidiaries (including, following the Effective Time, the Surviving Company), the DGCL or otherwise. Subsequent amendment of the certificate of incorporation, bylaws or other organizational or governing documents of the Company or RG or any of their respective Subsidiaries (including, following the Effective Time, the Surviving Company) or any indemnification or other agreements of the Company or RG or any of their respective Subsidiaries (including, following the Effective Time, the Surviving Company) shall not diminish or impair the rights of any Indemnitee thereunder or hereunder.
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(e) In the event the Company or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving company or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then and in each such case, provision shall be made so that such continuing or surviving company or entity or transferee of such assets, as the case may be, shall assume all of the applicable obligations set forth in this Section 4.9. In addition, the Company shall not distribute, sell, transfer or otherwise dispose of any of its assets in a manner that would reasonably be expected to render the Company unable to satisfy its obligations under this Section 4.9.
(f) The provisions of this Section 4.9 shall survive the consummation of the Transactions. Each Indemnitee (and his or her respective representatives, executors, administrators, spouse, estate, successors and heirs) are intended third-party beneficiaries of this Section 4.9, and this Section 4.9 shall not be amended in a manner that is adverse to any Indemnitee (including his or her respective representatives, executors, administrators, spouse, estate, successors and heirs) or terminated without the consent of such Indemnitee (including his or her respective representatives, executors, administrators, spouse, estate, successors and heirs) affected thereby.
Section 4.10. Fees and Expenses; Taxes.
(a) Except as otherwise provided herein, all fees and expenses incurred in connection with the Transactions (including, without limitation, all fees and expenses incurred in connection with the Financing, the Stock Purchase Agreement and filings made under the HSR Act) shall be paid or reimbursed by the Company upon consummation of the Transactions. Except as otherwise provided in Section 6.3(b), if the Transactions are not consummated, all fees and expenses incurred in connection with the Transactions shall be paid by the party incurring such fees or expenses, which, for the avoidance of doubt, means that the Company shall pay all fees and expense incurred in connection with the filings made under the HSR Act.
(b) Other than any income or withholding Taxes imposed upon a holder of RG Units or RG Debt, the Company shall pay all Taxes incident to preparing for, entering into and carrying out this Agreement and the consummation of the Merger (including (a) transfer, stamp and documentary Taxes or fees and (b) sales, use, gains, real property transfer and other or similar Taxes or fees).
Section 4.11. Rule 16b-3. The Company, Merger Sub and RG shall take all such steps as may be reasonably requested by any party hereto to cause the transactions contemplated by Article I and any other acquisitions of equity securities of the Company in connection with this Agreement by each individual who (a) is a director or officer of the Company subject to Section 16 of the Exchange Act, or (b) at the Effective Time is or will become a director, officer or ten percent (10%) shareholder of the Company subject to Section 16 of the Exchange Act, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
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Section 4.12. Employee Benefits.
(a) Except as set forth on Section 4.12(a) of the Company Disclosure Schedule, the Company shall provide, or cause to be provided to, employees of the Company and RG and each of their respective Subsidiaries, in each case as of immediately prior to the Effective Time, who continue as employees of the Company or the Surviving Company or any of their respective Subsidiaries immediately following the Effective Time (a Continuing Employee), for a period extending until the earlier of the termination of such Continuing Employees employment with such entities or twelve (12) months following the Closing Date (i) a base wage or salary substantially similar to such base wage or salary in effect immediately prior to the Effective Time and (ii) 401(k) benefits, severance benefit eligibility, medical benefits and other welfare benefit plans, programs and arrangements (excluding any equity and equity-based arrangements) that (A) in the case of Continuing Employees that were employed by the Company or any of its Subsidiaries immediately prior to the Effective Time, are, in the aggregate, substantially comparable to those provided under the Company Benefits Plans as in effect at the Effective Time and (B) in the case of Continuing Employees that were employed by RG or any of its Subsidiaries immediately prior to the Effective Time, are substantially comparable to those provided to employees of RG or its Subsidiaries, in the aggregate, from time to time. The provisions of this Section 4.12 shall not be construed or interpreted to restrict in any way the Surviving Companys or the Companys ability to amend, modify or terminate any Company Benefits Plan or RG Benefits Plan (including to change the entities who administer such Company Benefits Plans or RG Benefits Plan, as applicable, or the manner in which such Company Benefits Plans or RG Benefits Plans, as applicable, are administered) to the extent not inconsistent with such foregoing restrictions or any other plan made available to the Continuing Employees or to terminate any Persons employment at any time or for any reason.
(b) The Company and each of its Subsidiaries shall, after the date hereof and prior to the Effective Time, (i) provide any and all notices to, (ii) make any and all filings or registrations with, and (iii) obtain any and all consents or approvals of, any labor organization, works council or any similar entity, council or organization, required to be made or obtained in connection with this Agreement or the consummation of the Transactions.
(c) Without limiting the generality of Section 7.6, nothing contained in this Section 4.12 shall confer upon any Person, other than the parties hereto, any rights or remedies or any right to employment or continued employment. Nothing in this Agreement shall be deemed to amend or modify any compensation or benefit plan, policy, agreement or arrangement sponsored or maintained by RG, the Company or any of their respective Affiliates.
Section 4.13. Financing.
(a) RG shall use its commercially reasonable best efforts to obtain the Financing on the terms and conditions (including, if applicable, any market flex provisions contained in the related fee letter) described in the Debt Commitment Letters with respect to the conditionality, timing, availability, and aggregate amount of the Financing (including the amounts to be funded thereunder at the Closing). RG shall not
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permit any amendment or modification to be made to, or any waiver of any provision or remedy under, the Debt Commitment Letters without the Companys prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed) if such amendment, modification or waiver (i) reduces the aggregate amount of the Financing to an amount below the amount required to satisfy the applicable payment obligations of the Company under this Agreement, (ii) impairs in any material respect the availability of the Financing, (iii) amends the conditions precedent to the Financing in a manner that would reasonably be expected to delay in any material respect or prevent the Closing, or (iv) adversely impacts in any material respect the ability of RG to enforce or cause the enforcement of the rights of RG under the Debt Commitment Letters (provided, that RG may amend, supplement or replace the Debt Commitment Letters to add or replace lenders, lead arrangers, bookrunners, agents or similar entities so long as such action would not reasonably be expected to materially delay or prevent the Closing). RG shall use its commercially reasonable best efforts (i) to maintain in effect the Debt Commitment Letters until the funding of the Financing at or prior to Closing and to negotiate and enter into definitive agreements with respect to the Debt Commitment Letters on the terms and conditions contained in the Debt Commitment Letters (including, if applicable, giving effect to any market flex provisions contained in any related fee letter) (or on terms no less favorable (taken as a whole) to RG, as applicable), (ii) to satisfy on a timely basis all conditions to receipt of the Financing that are within RGs control, (iii) upon satisfaction of such conditions and the conditions set forth in Section 5.1 and Section 5.2, to consummate the Financing at or prior to the Closing (with respect to amounts required to consummate the Merger and make other payments due at such time in accordance with the terms hereof) and (iv) to comply in all material respects with its obligations under the Debt Commitment Letters.
(b) If any portion of the Financing contemplated by the Debt Commitment Letters becomes unavailable on the terms and conditions (including, if applicable, market flex provisions) contemplated by the Debt Commitment Letters, (i) RG shall promptly notify the Company and (ii) RG shall use its commercially reasonable best efforts to arrange and obtain alternative financing from the same or alternative sources in an amount sufficient to consummate the Transactions with terms and conditions that are not materially less favorable in any respect from the standpoint of RG (as reasonably determined by RG) than the terms and conditions set forth in the Debt Commitment Letters and any related fee letters as promptly as reasonably practicable following the occurrence of such event (the Alternative Debt Financing). RG shall promptly provide a true, correct and complete copy of each alternative financing commitment letter in respect of such Alternative Debt Financing (New Debt Commitment Letter) to the Company. In the event any New Debt Commitment Letters are obtained, (i) any reference in this Agreement to the Financing shall include the debt financing contemplated by the Debt Commitment Letters as modified pursuant to clause (ii) below, (ii) any reference in this Agreement to the Commitment Letters or the Debt Commitment Letter shall be deemed to include the Debt Commitment Letters that are not superseded by a New Debt Commitment Letters at the time in question and the New Debt Commitment Letters to the extent then in effect, and (iii) any reference in this Agreement to fee letter shall be deemed to include any fee letter relating to the Debt Commitment Letters that are not superseded by a New Debt Commitment Letters at the time in question and the New Debt Commitment Letters to the extent then in effect.
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(c) Upon the Companys request, RG shall keep the Company reasonably informed of the status of its efforts to arrange the Financing and provide to the Company copies of the material definitive documents for the Financing. RG shall give the Company prompt notice: (i) of any breach of any material provisions of the Debt Commitment Letters by any party to the Debt Commitment Letters related to the Financing of which RG has knowledge; and (ii) of the receipt of any written notice or other written communication from a financing source for the Financing with respect to any actual breach, default, termination or repudiation by any party to the Debt Commitment Letters or any definitive document related to the Financing or any material provisions of the Debt Commitment Letters or any definitive document related to the Financing; provided, that in each case, in no event will RG be under any obligation to disclose any information that is subject to attorney-client or similar privilege if RG shall have used its reasonable best efforts to disclose such information in a manner that would not waive such privilege.
Section 4.14. Financing Cooperation.
(a) During the period from the date of this Agreement to the Effective Time, the Company and its Subsidiaries shall, and the Company shall use its reasonable best efforts to cause its and its Subsidiaries respective Representatives to, provide to RG all cooperation that is reasonably requested by RG in connection with the debt and equity financings (including without limitation, any portion of the contemplated Financing) the proceeds of which shall be used to consummate the Transactions, which cooperation shall include, in any event:
(i) participation in a reasonable number of meetings, presentations, road shows, due diligence sessions (including accounting due diligence sessions), drafting sessions, sessions with prospective lenders and sessions with rating agencies;
(ii) making the Companys officers reasonably available to assist the Debt Financing Parties;
(iii) cooperating reasonably with the Debt Financing Parties due diligence, to the extent customary and reasonable;
(iv) assisting RG and the Debt Financing Parties with the preparation of customary materials for rating agency presentations (and assisting in the obtaining of corporate, credit and facility ratings from ratings agencies), offering documents, bank information memoranda (including the delivery of customary authorization and representation letters authorizing the distribution of information to prospective lenders or investors and containing a representation that the public side
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versions of such documents, if any, do not include material non-public information regarding the Company or its Subsidiaries or securities), and all other material required in connection with the Financing and all documentation and other information reasonably required in connection with applicable know your customer and anti-money laundering rules and regulations, including the PATRIOT Act; provided, that prior to the Closing, the Company shall provide all such documentation and information about the Company and its Subsidiaries as is reasonably requested in writing by RG to the extent required under applicable know your customer and anti-money laundering rules and regulations including the USA PATRIOT Act;
(v) assisting with the preparation of, and executing and delivering, any pledge and security documents, any loan agreement, notes, other definitive financing documents (including a certificate of the chief financial officer with respect to solvency of the Company and its Subsidiaries after giving effect to the transactions contemplated hereby), legal opinions, or documents as may be reasonably requested by RG in connection with the Financing;
(vi) facilitating the pledging of collateral and any collateral audits and appraisals required in connection with the Financing;
(vii) assisting RG in preparing customary financial information and disclosures regarding the Company and its Subsidiaries, as may be reasonably requested by RG and identifying any portion of such information that constitutes material non-public information;
(viii) using reasonable best efforts to obtain such legal opinions, surveys and title insurance as reasonably requested by RG or any of the Debt Financing Parties in connection with the Financing;
(ix) instructing its independent accountants to cooperate with and assist RG in preparing customary and appropriate information packages and offering materials as any of the Debt Financing Parties or other prospective lenders may reasonably request for use in connection with the Financing and using reasonable best efforts to cause such accountants to consent to the use of their reports in any material relating to the Financing;
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(x) using reasonable best efforts to obtain customary payoff letters, lien releases, instruments of termination, waivers, consents, estoppels, approvals or discharge and legal opinions, in each case reasonably requested by RG in connection with the Financing and collateral arrangements;
(xi) taking such corporate or entity actions, subject to the occurrence of the Closing, reasonably requested by RG to permit the consummation of the Financing and to permit the proceeds thereof to be made available at the Closing; and
(xii) ensuring that there is no competing issue of debt securities or commercial bank or other credit facilities (other than the Financing) by or on behalf of the Company or any of its Subsidiaries (it being understood and agreed that any deferred purchase price obligations and ordinary course capital lease, purchase money and equipment financings are not restricted by the foregoing);
provided, however, that (A) no such requested cooperation may unreasonably interfere with the ongoing operations of the Company and its Subsidiaries, (B) no obligation of the Company or any of its Subsidiaries under any certificate, agreement, notice or other document or instrument shall be effective until the Effective Time, and none of the Company or any of its Subsidiaries shall be required to pay or incur any liability for any commitment or other similar fee, pay or incur any liability for any expense (other than as provided in this Agreement) or incur any other obligation or liability in connection with the Financing prior to the Effective Time unless promptly reimbursed by RG (provided that notice of such fee, liability or expense is provided to RG) and (C) neither the Company nor any of its Subsidiaries, nor any of their respective directors or officers, shall be required to take any action to authorize or approve the Financing (or any Alternative Debt Financing), except at or contemporaneously with the Effective Time.
(b) The Company shall use reasonable best efforts to, as promptly as practicable, update or correct any Required Information determined to contain any untrue statement of material fact or omit to state any material fact necessary to make the statements contained therein not materially misleading. The Company hereby consents to the reasonable use of the Companys and its Subsidiaries logos in connection with the Financing, provided that such logos are used solely in a manner that is not intended to or reasonably likely to harm or disparage the Company and its Subsidiaries or the reputation or goodwill of the Company and its Subsidiaries or any of their logos.
(c) The Company shall prepare and furnish to RG and the Debt Financing Parties, as promptly as reasonably practicable (and, in any event, no later than the time periods specified in the definition of Required Information), the Required Information.
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Section 4.15. Company Board of Directors. At the Effective Time, the applicable number of directors on the Company Board shall resign such that only two directors on the Company Board immediately prior to the Effective Time shall remain on the Company Board immediately following the Effective Time and, as of the Effective Time, the Company Board shall appoint the three (3) persons designated by the Preferred Stock Purchaser in writing at least five (5) Business Days prior to the anticipated Closing Date to fill three of such vacancies as a director of the Company. A remaining vacancy will be filled by the Companys Chief Executive Officer following the Effective Time.
Section 4.16. Legal Privileges. The Company acknowledges and agrees that all attorney-client, work product and other legal privileges (collectively, Legal Privileges) that may exist with respect to RG shall, from and after the Effective Time, be deemed joint privileges of the holders of RG Units, the Surviving Company and the Company. Each of the holders of RG Units, the Surviving Company and the Company shall use all commercially reasonable efforts after the Effective Time to preserve all privileges and none of the holders of RG Units, the Surviving Company or the Company shall knowingly waive any such privilege without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, from and after the Effective Time, (i) the holders of RG Units shall be the sole holder of the Legal Privileges with respect to the engagement of Skadden by RG (which shall not pass to the Surviving Company or the Company upon the consummation of the transactions contemplated by this Agreement) and none of the Surviving Company, the Company or any of their respective Affiliates shall be a holder thereof, (ii) to the extent that files of Skadden in respect of such engagement constitute property of RG (as the client), only the holders of RG Units (and none of the Surviving Company, the Company or any of their respective Affiliates) shall hold such property rights and (iii) Skadden shall not have any duty of any type or manner to reveal or disclose all or any portion of any communications subject to any Legal Privilege or any files to the Surviving Company, the Company or any of their respective Affiliates by reason of any attorney-client relationship between Skadden and RG or any of their respective Affiliates or otherwise. The preceding sentence is irrevocable, and no term thereof may be amended, waived or modified in any respect, without the prior written consent of Skadden and TCP, on behalf of the holders of RG Units.
Section 4.17. Amendments, Modifications and Waivers of the Asset Purchase Agreements. Without the prior written consent of RG, the Company shall not amend, modify or waive any provision of the Asset Purchase Agreements that would decrease the aggregate cash consideration to the Company or that would have, or would be reasonably likely to have, a material adverse effect on (a) RG and its Subsidiaries (taken as a whole), (b) the Company or any of its Subsidiaries (taken as a whole) or (c) the ability of the parties hereto to consummate the transactions contemplated by this Agreement in accordance with the terms hereof.
Section 4.18. Notification of Certain Matters. The Company shall promptly provide RG with (i) any notice delivered to the Company pursuant to, or in connection with, either Asset Purchase Agreement and (ii) any notice delivered by the Company pursuant to, or in connection with, either Asset Purchase Agreement.
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ARTICLE V
CONDITIONS TO THE MERGER
Section 5.1. Conditions to Each Partys Obligation to Effect the Merger. The respective obligations of each party hereto to effect the Merger shall be subject to the satisfaction (or waiver, if permissible under applicable Law, by RG and the Company) on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval shall have been obtained.
(b) Antitrust. All waiting periods applicable to the consummation of the Merger under the HSR Act and any other applicable Antitrust Laws shall have expired or been terminated; and
(c) No Injunctions or Restraints. No Law or Order enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining, preventing or prohibiting consummation of the Merger or making the consummation of the Merger illegal.
(d) Validity of Rollover Letters. The Rollover Letters shall be in full force and effect and the valid, binding obligation of each Convertible Noteholder and the consummation of the transactions contemplated thereby shall occur at or immediately prior to the Effective Time.
(e) Financing. RG shall have obtained the Financing as contemplated by Section 4.13, or the Debt Financing Parties shall be prepared to provide the Financing immediately following the Effective Time.
(f) Consummation of the Stock Purchase Agreement. The transactions contemplated by the Stock Purchase Agreement shall have been consummated, or all conditions to the consummation thereof immediately following the Effective Time shall have been satisfied or waived.
(g) Consummation of the IP Asset Purchase Agreement. The transactions contemplated by the IP Asset Purchase Agreement shall have been consummated without any amendment or modification to, or waiver of, (i) Section 8.02(d) of the IP Asset Purchase Agreement for which the Company will have, or could reasonably be expected to have, liability for indemnification to the IP Asset Purchaser under the IP Asset Purchase Agreement or (ii) other than in accordance with Section 4.17, any other provision of the IP Asset Purchase Agreement.
(h) Consummation of the Operating Asset Purchase Agreement. The transactions contemplated by the Operating Asset Purchase Agreement shall have been consummated without any amendment or modification to, or waiver of, (i) Section 8.02(i) of the Operating Asset Purchase Agreement for which the Company will have, or could reasonably be expected to have, liability for indemnification to the Operating Asset Purchaser under the Operating Asset Purchase Agreement or (ii) other than in accordance with Section 4.17, any other provision of the Operating Asset Purchase Agreement.
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Section 5.2. Conditions to Obligations of RG. The obligations of RG to effect the Merger are further subject to the satisfaction or (to the extent permitted by Law) waiver by RG at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of the Company and Merger Sub set forth in Sections 2.1, 2.2, 2.3(a), 2.3(d), 2.6(a), 2.13, 2.18 and 2.20 shall be true and correct in all respects (other than, in the case of Section 2.2, for such failures to be true and correct as are de minimis in effect and, in the case of the first and last sentence of Section 2.1(c), for such failures to be true and correct that are not material to the Company and its Subsidiaries (taken as a whole)) as of the date of this Agreement and as of the Closing Date (assuming for purposes thereof that the Asset Sale Transactions have been consummated), as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date) and (ii) all other representations and warranties of the Company and Merger Sub set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date (assuming for purposes thereof that the Asset Sale Transactions have been consummated), as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to not be so true and correct (without giving effect to any limitation as to materiality or Company Material Adverse Effect set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. RG shall have received a certificate signed on behalf of the Company by the Interim Chief Executive Officer and Chief Financial Officer thereof to such effect.
(b) Performance of Obligations of Company. The Company shall have performed or complied in all material respects with its obligations, agreements and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing Date and RG shall have received a certificate signed on behalf of the Company by the Interim Chief Executive Officer and Chief Financial Officer thereof to such effect.
(c) Listing. The shares of Company Common Stock to be issued in the Merger shall have been authorized for listing on the NASDAQ, subject to official notice of issuance.
(d) Registration Statement. The Form S-4 Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the S-4 Registration Statement shall have been issued and be in effect and no proceeding for that purpose shall have been initiated by the SEC and not withdrawn.
(e) No Company Material Adverse Effect. Since the date of this Agreement, there shall not have occurred a Company Material Adverse Effect and there shall not have been any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.
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Section 5.3. Conditions to Obligation of the Company. The obligation of the Company to effect the Merger is further subject to the satisfaction or (to the extent permitted by Law) waiver by the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of the RG set forth in Sections 3.1, 3.2(a), 3.3, 3.7(a) and 3.13 shall be true and correct in all respects (other than, in the case of Section 3.3, for such failures to be true and correct as are de minimis in effect) as of the date of this Agreement and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date) and (ii) all other representations and warranties of RG set forth in this Agreement shall be true and correct (disregarding all qualifications or limitations as to materiality, RG Material Adverse Effect and words of similar import set forth therein) as of the date of this Agreement and as of the Closing Date as though made on the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a RG Material Adverse Effect. The Company shall have received a certificate signed on behalf of RG by an executive officer thereof to such effect.
(b) Performance of Obligations of RG. RG shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date and the Company shall have received a certificate signed on behalf of RG by an executive officer of RG to such effect.
(c) No RG Material Adverse Effect. Since the date of this Agreement, there shall not have occurred a RG Material Adverse Effect and there shall not have been any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate, would reasonably be expected to have a RG Material Adverse Effect.
(d) Validity of the Guaranty. The Guaranty shall be in full force and effect and the valid, binding obligation of the Guarantor.
Section 5.4. Frustration of Closing Conditions. None of the Company or RG may rely on the failure of any condition set forth in Sections 5.1, 5.2 or 5.3, as the case may be, to be satisfied if such failure was caused by such partys failure to use the efforts to consummate the Merger and the other Transactions required hereunder, including as required by and subject to Section 4.3.
ARTICLE VI
TERMINATION
Section 6.1. Termination. This Agreement may be terminated and the Transactions abandoned at any time prior to the Effective Time, whether before or after receipt of the Company Stockholder Approval:
(a) by the mutual written consent of the Company and RG;
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(b) by either of the Company or RG:
(i) if any Governmental Authority shall have enacted, promulgated, issued, entered, amended or enforced (A) a Law prohibiting the Merger or making the Merger illegal, or (B) an Order, in each case, permanently enjoining, restraining, preventing or prohibiting the Merger and such Order shall have become final and non-appealable; provided that the right to terminate this Agreement under this Section 6.1(b)(i) shall not be available to a party if the issuance of such final, non-appealable Order was primarily due to the failure of such party to perform any of its obligations under this Agreement;
(ii) if the Merger shall not have been consummated on or before the Outside Date; provided that the right to terminate this Agreement under this Section 6.1(b)(ii) shall not be available to any party if the failure of the Merger to be so consummated on or before the Outside Date was primarily due to the failure of such party to perform any of its obligations under this Agreement; or
(iii) if the Stockholders Meeting (including any adjournments or postponements thereof) shall have been held and concluded without the Company Stockholder Approval having been obtained;
(c) by the Company:
(i) if the Company enters into a definitive Company Acquisition Agreement providing for a Superior Proposal in accordance with Section 4.2(f); provided that, notwithstanding anything to the contrary in this Section 6.1, the Company shall not have the right to terminate this Agreement pursuant to this Section 6.1(c)(i) if the Company Stockholder Approval shall have been obtained;
(ii) if there shall be any breach of or inaccuracy in any of RGs representations or warranties set forth in this Agreement or RG has failed to perform any of its covenants or agreements set forth in this Agreement, which inaccuracy, breach or failure to perform (A) would give rise to the failure of any condition set forth in Section 5.3(a) or Section 5.3(b) and (B) (1) is not capable of being cured prior to the Outside Date or (2) is not cured within thirty (30) days following the Companys delivery of written notice to RG of such breach; provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 6.1(c)(ii) if the Company is then in breach of any of its representations, warranties, covenants or agreements hereunder such that the conditions set forth in Section 5.2(a) or Section 5.2(b) would not be satisfied;
(iii) if (A) all conditions precedent set forth in Sections 5.1 and 5.2 have been timely satisfied or waived (other than the condition precedent set forth in Section 5.1(e)), (B) all conditions precedent to consummation of the Financing have been timely satisfied or waived, (C) RG fails to consummate the Merger by the date the Closing is required to occur pursuant to Section 1.2 as a result of the failure of the Financing to be funded and (D) the Company has given RG written
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notice at least two (2) Business Days prior to such termination stating that the Company is willing and able to consummate the transactions contemplated hereby and that the Company intends to terminate this Agreement pursuant to this Section 6.1(c)(iii) (the occurrence of (A) through (D) collectively, the Financing Issue);
(d) by RG:
(i) if (A) a Change in Recommendation shall have been made, (B) the Company shall have breached in any material respect its obligations under Section 4.2, or (C)(x) following the public disclosure or announcement of a Takeover Proposal (other than a tender offer or exchange offer contemplated in clause (y)) the Company Board shall have failed to reconfirm publicly the Company Recommendation within three (3) Business Days after such disclosure or announcement or (y) a tender offer or exchange offer relating to the shares of Company Common Stock is commenced (within the meaning of Rule 14d-2 under the Exchange Act) and, not later than the tenth (10th) day next following such commencement, the Company shall not have publicly announced its recommendation that holders of shares of Company Common Stock reject such tender offer or exchange offer (it being hereby understood and agreed that for purposes of this clause (y) of this Section 6.1(d)(i), the Companys public disclosure or announcement of a position pursuant to Rule 14e-2(a)(2) or (3) under the Exchange Act with respect to such tender offer or exchange offer shall be deemed a failure by the Company to publicly disclose or announce the rejection of such tender offer or exchange offer); or
(ii) if there shall be any breach of or inaccuracy in any of the Companys representations or warranties set forth in this Agreement or the Company has failed to perform any of its covenants or agreements set forth in this Agreement, which inaccuracy, breach or failure to perform would give rise to the failure of any condition set forth in Section 5.2(a) or Section 5.2(b), and (B) (1) is not capable of being cured prior to the Outside Date or (2) is not cured within thirty (30) days following RGs delivery of written notice to the Company of such breach; provided that RG shall not have the right to terminate this Agreement pursuant to this Section 6.1(d)(ii) if RG is then in breach of any of its representations, warranties, covenants or agreements contained in this Agreement such that any condition set forth in Section 5.3(a) or Section 5.3(b) would not be satisfied.
Section 6.2. Effect of Termination. In the event of the termination of this Agreement as provided in Section 6.1, written notice thereof shall be given to the other party or parties, specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void (other than Sections 4.6, 4.10, 6.2, 6.3 and 6.4 and Article VII, the first sentence of Section 2.21 and of Section 3.22 and the expense reimbursement provisions contained in Section 4.14(a), all of which shall survive termination of this Agreement), and there shall be no liability on the part of RG or the Company or their Affiliates or Representatives, except (a) the Company shall have liability to the extent provided in Section 6.3, (b) RG shall have liability to the extent provided in Section 6.4; (c) no such
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termination shall relieve RG or the Company for any liabilities or damages incurred or suffered by the Company or RG, as the case may be, to the extent such liabilities or damages were the result of the breach by RG or the Company, as the case may be, of any of its representations, warranties, covenants or other agreements set forth in this Agreement and (c) nothing shall relieve any party to this Agreement from liability for any damages for a knowing and intentional breach of a representation or warranty or a knowing and intentional breach of any obligation hereunder made or allowed to occur or actual (not constructive) fraud.
Section 6.3. Termination Fee; Reimbursement of Expenses.
(a) In the event that:
(i) (A) a Takeover Proposal shall have been made known to the Company, publicly disclosed or made publicly known or made directly to the Company Stockholders or the intention (whether or not conditional) of any Person to make a Takeover Proposal shall have been made known to the Company, publicly disclosed or made publicly known or made directly to the Company Stockholders, and thereafter, (B) this Agreement is terminated by the Company or RG pursuant to Section 6.1(b)(ii) (Outside Date) or Section 6.1(b)(iii) (Company Stockholder Approval) or by RG pursuant to Section 6.1(d)(ii) (Breach) and (C) within twelve (12) months after the date this Agreement is terminated the Company or any of its Subsidiaries consummates any Takeover Proposal or enters into a definitive agreement with respect to any Takeover Proposal that is subsequently consummated; provided that solely for this Section 6.3(a)(i), all references to 20% in the definition of Takeover Proposal shall be deemed to be references to 50%;
(ii) this Agreement is terminated by RG pursuant to Section 6.1(d)(i) (Change in Recommendation, Etc.) whether or not the Stockholder Meeting has been held; or
(iii) this Agreement is terminated by the Company pursuant to Section 6.1(c)(i) (Superior Proposal);
then in any such event under Section 6.3(a)(i), Section 6.3(a)(ii) or Section 6.3(a)(iii) of this Section 6.3(a), the Company shall pay to RG the Termination Fee, less the amount of any expenses previously reimbursed by the Company to RG pursuant to Section 6.3(b).
(b) In the event that this Agreement is terminated by RG pursuant to Section 6.1(d)(ii) (Breach), then the Company shall reimburse RG, up to an aggregate amount of Three Million Dollars ($3,000,000), for all of the documented out-of-pocket fees and expenses incurred by RG or its Affiliates in connection with this Agreement and the Transactions, including (i) all fees and expenses of accountants, counsel, investment banking firms or financial advisors (and their respective counsel and representatives), professional advisors and consultants to RG or any of its Affiliates in connection with this Agreement and the Transactions, including such fees and expenses incurred in connection with due diligence or other activities and (ii) all fees and expenses paid or
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payable to banks, investment banking firms and other financial institutions (and their respective counsel and representatives) in connection with arranging or providing the Financing. In the event that this Agreement is terminated by the Company pursuant to Section 6.1(c)(ii) (Breach), then RG shall reimburse the Company, up to an aggregate amount of Three Million Dollars ($3,000,000), for all of the documented out-of-pocket fees and expenses incurred by the Company or its Affiliates in connection with this Agreement and the Transactions, including (i) all fees and expenses of accountants, counsel, investment banking firms or financial advisors (and their respective counsel and representatives), professional advisors and consultants to the Company or any of its Affiliates in connection with this Agreement and the Transactions, including such fees and expenses incurred in connection with due diligence or other activities and (ii) all fees and expenses paid or payable to banks, investment banking firms and other financial institutions (and their respective counsel and representatives) in connection with arranging or providing the Financing.
(c) Any payment required to be made pursuant to Section 6.3(a)(i), shall be made to RG upon the consummation of the transactions contemplated by a Takeover Proposal; any payment required to be made pursuant to Section 6.3(a)(ii) or Section 6.3(b) shall be made to RG or the Company, respectively, promptly following termination of this Agreement (and in any event not later than two (2) Business Days after such termination); and any payment required to be made pursuant to Section 6.3(a)(iii) shall be made to RG simultaneously with and as a condition to the termination of this Agreement by the Company pursuant to Section 6.1(c)(i). All such payments shall be made by wire transfer of immediately available funds to an account to be designated by the recipient.
(d) The parties hereto acknowledge that the damages resulting from termination of this Agreement under circumstances in which the Termination Fee is payable are uncertain and incapable of accurate calculation and that the amounts payable pursuant to Section 6.3(a) are reasonable forecasts of the actual damages which may be incurred, and in the event that RG shall receive full payment pursuant to Section 6.3(a), the receipt of the Termination Fee shall be deemed to be liquidated damages, and not a penalty, for any and all losses or damages suffered or incurred by RG, any of its Affiliates or any other Person in connection with this Agreement (and the termination hereof), the Transactions (and the abandonment thereof) or any matter forming the basis for such termination, and upon such payment of such amount none of the Company or any of its Affiliates or Representatives shall have any further liability or obligation relating to or arising out of this Agreement or the Transactions. Under no circumstances shall the Company be obligated to pay more than one (1) Termination Fee.
Section 6.4. Reverse Termination Fee. In the event that this Agreement is terminated by the Company pursuant to Section 6.1(c)(iii) or by RG pursuant to Section 6.1(b)(ii) at a time when (a) the Company would have the right to terminate this Agreement pursuant to Section 6.1(c)(iii) and (b) the Company had provided the notice contemplated by Section 6.1(c)(iii)(D), then RG shall pay the Company the Reverse Termination Fee less the amount of any expenses previously reimbursed to the Company pursuant to Section 6.3(b). Any payment required to be made pursuant to this Section 6.4 shall be made to the Company promptly
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following termination of this Agreement (and in any event not later than two (2) Business Days after such termination) and such payment shall be made by wire transfer of immediately available funds to an account to be designated by the Company. The parties hereto acknowledge that the damages resulting from termination of this Agreement under circumstances in which the Reverse Termination Fee is payable are uncertain and incapable of accurate calculation and that the amounts payable pursuant to this Section 6.4 are reasonable forecasts of the actual damages which may be incurred, and in the event that the Company shall receive full payment pursuant to this Section 6.4, the receipt of the Reverse Termination Fee shall be deemed to be liquidated damages, and not a penalty, for any and all losses or damages suffered or incurred by the Company, any of its Subsidiaries or Affiliates or any other Person in connection with this Agreement (and the termination hereof), the Transactions (and the abandonment thereof) or any matter forming the basis for such termination, and upon such payment of such amount none of RG or any of its Subsidiaries, Affiliates or Representatives shall have any further liability or obligation relating to or arising out of this Agreement or the Transactions. Under no circumstances shall RG be obligated to pay more than one (1) Reverse Termination Fee.
ARTICLE VII
MISCELLANEOUS
Section 7.1. No Survival, Etc. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or, except as otherwise provided in Section 6.2, upon the termination of this Agreement pursuant to Section 6.1, as the case may be, except that the agreements set forth in Article I, Sections 4.9, 4.10 and 4.12, this Article VII and any other agreement in this Agreement which contemplates performance after the Effective Time shall survive the Effective Time indefinitely. The Confidentiality Agreement shall (i) survive termination of this Agreement in accordance with its terms and (ii) terminate as of the Effective Time.
Section 7.2. Amendment or Supplement. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects, whether before or after receipt of the Company Stockholder Approval, by written agreement of the parties hereto, by action taken or authorized by their Board of Directors or Board of Managers, as applicable; provided, however, (a) that following receipt of the Company Stockholder Approval, there shall be no amendment or change to the provisions hereof which by Law would require further approval by the Company Stockholders without such approval and (b) no amendments or waivers of any Financing Source Provisions shall be effective without the written consent of each Debt Financing Party.
Section 7.3. Extension of Time, Waiver, Etc. At any time prior to the Effective Time, any party may, subject to applicable Law, (a) waive any inaccuracies in the representations and warranties of any other party hereto, (b) extend the time for the performance of any of the obligations or acts of any other party hereto or (c) waive compliance by the other party with any of the agreements contained herein or, except as otherwise provided herein, waive any of such partys conditions. Notwithstanding the foregoing, no failure or delay by the Company or RG in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
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Section 7.4. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated, in whole or in part, by operation of Law or otherwise, by any of the parties without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 7.4 shall be null and void.
Section 7.5. Counterparts; Scanned Signatures. This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile or other electronically scanned and transmitted signatures shall be deemed originals for all purposes of this Agreement.
Section 7.6. Entire Agreement; No Third-Party Beneficiaries; Representations; Disclosure.
(a) This Agreement, together with the Company Disclosure Schedule, the RG Disclosure Schedule and the Confidentiality Agreement (i) constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof and (ii) except for the provisions of Section 4.9, are not intended to and shall not confer upon any Person other than the parties hereto any rights or remedies hereunder provided, however, that the Debt Financing Parties shall be third-party beneficiaries of Section 7.2(b), Section 7.6(a), Section 7.6(b), Section 7.7 and Section 7.8 (in each case, together with any related definition and other provisions of this Agreement to the extent a modification or termination would serve to modify the substance or provisions or such Sections, the Financing Source Provisions). Notwithstanding the immediately preceding sentence, following the Effective Time, the provisions of Article I relating solely to the payment of the Merger Consideration shall be enforceable by holders of RG Units, as applicable, solely to receive such payment.
(b) Notwithstanding anything to the contrary contained in this Agreement, (a) the Company and its Subsidiaries and their Affiliates and Representatives shall not have any rights or claims against any Debt Financing Parties in any way relating to this Agreement or any of the transactions contemplated by this Agreement, or in respect of any oral representations made or alleged to have been made in connection herewith or therewith, including any dispute arising out of or relating in any way to any Debt Commitment Letters or the performance thereof or the financings contemplated thereby, whether at law or equity, in contract, in tort or otherwise and (b) no Debt Financing Party shall have any liability (whether in contract, in tort or otherwise) to any of the Company, its Subsidiaries or their Affiliates or Representatives for any obligations or liabilities of any party hereto under this Agreement or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby and thereby or in respect of any oral
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representations made or alleged to have been made in connection herewith or therewith, including any dispute arising out of or relating in any way to the Debt Commitment Letters or the performance thereof or the financings contemplated thereby, whether at law or equity, in contract, in tort or otherwise.
(c) The Company Disclosure Schedule shall be arranged in sections corresponding to the numbered sections contained in this Agreement, and the disclosure in any section shall qualify (i) the corresponding section of this Agreement and (ii) the other sections of this Agreement, to the extent that it is reasonably apparent on the face of such disclosure that it also qualifies or applies to such other sections notwithstanding the absence of a cross reference contained therein. The inclusion of any information in the Company Disclosure Schedule shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material, constitutes or has resulted in or would reasonably be expected to result in a Company Material Adverse Effect or is outside the ordinary course of business consistent with past practices.
(d) The RG Disclosure Schedule shall be arranged in sections corresponding to the numbered sections contained in this Agreement, and the disclosure in any section shall qualify (i) the corresponding section of this Agreement and (ii) the other sections of this Agreement, to the extent that it is reasonably apparent on the face of such disclosure that it also qualifies or applies to such other sections notwithstanding the absence of a cross reference contained therein. The inclusion of any information in the RG Disclosure Schedule shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material, constitutes or has resulted in or would reasonably be expected to result in a RG Material Adverse Effect or is outside the ordinary course of business consistent with past practices.
Section 7.7. Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware, without regard to its rules of conflict of laws. To the fullest extent permitted by Law, any action against any party to this Agreement arising out of or in any way relating to this Agreement shall be brought in the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), and each of the parties submits to the exclusive jurisdiction of such courts for the purpose of any such action. To the fullest extent permitted by Law, each party irrevocably and unconditionally agrees not to assert (i) any objection which it may ever have to the laying of venue of any such action in the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), (ii) any claim that any such action brought in any such court has been brought in an inconvenient forum, and (iii) any claim that such court does not have jurisdiction with respect to such
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action. Notwithstanding the foregoing, (i) all matters relating to the interpretation, construction, validity and enforcement (whether at law, in equity, in contract, in tort, or otherwise) against any of the Debt Financing Parties and each of their respective Affiliates and their respective Representatives or Affiliates in any way relating to the Debt Commitment Letters and related fee letters or the performance thereof or the financings contemplated thereby, shall, except as expressly provided in the Debt Commitment Letter, be exclusively governed by, and construed in accordance with, the domestic Law of the State of New York without giving effect to any choice or conflict of law provision or rule whether of the State of New York or any other jurisdiction that would cause the application of Law of any jurisdiction other than the State of New York, (ii) any action against any of the Debt Financing Parties and each of their respective Affiliates and their respective Representatives or Affiliates arising out of or in any way relating to this Agreement, the Financing or the transactions contemplated hereby or thereby shall be brought in any state or federal court sitting in the Borough of Manhattan, New York, New York and any state appellate court thereof, and each of the parties submits to the exclusive jurisdiction of such courts for the purpose of any such action, and (iii) each party irrevocably and unconditionally agrees (a) not to bring or permit any of its Affiliates or Representatives to bring or support anyone else in bringing any such action in any other court, (b) that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law, (c) that the laws described in subsection (i) of this sentence shall govern any such action and (d) not to assert, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of venue of, and the defense of an inconvenient forum to the maintenance of, any such action in any such court.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE DEBT COMMITMENT LETTERS OR THE DOCUMENTS RELATED THERETO IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE DEBT COMMITMENT LETTERS OR THE DOCUMENTS RELATED THERETO. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.7.
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Section 7.8. Specific Enforcement; Limit on Liability.
(a) The parties agree that irreparable damage would occur and the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, except as provided in the following sentence. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement from the Chancery Court of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Chancery Court of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), without proof of actual damages, without bond or other security being required, this being in addition to any other remedy to which they are entitled at law or in equity. The parties hereto further agree that (i) by seeking the remedies provided for in this Section 7.8, a party shall not in any respect waive its right to seek any other form of relief that may be available to a party under this Agreement (including monetary damages) in the event that the remedies provided for in this Section 7.8 are not available or otherwise are not granted, and (ii) nothing set forth in this Section 7.8 shall require any party hereto to institute any proceeding for (or limit any partys right to institute any proceeding for) specific performance under this Section 7.8 prior or as a condition to exercising any termination right under Article VI (and pursuing damages after such termination), nor shall the commencement of any legal proceeding pursuant to this Section 7.8 or anything set forth in this Section 7.8 restrict or limit any partys right to terminate this Agreement in accordance with the terms of Article VI or pursue any other remedies under this Agreement that may be available then or thereafter.
(b) Notwithstanding Section 7.8(a), in the event that the Financing Issue occurs, the Company shall not be entitled to specifically enforce the terms and provisions of this Agreement and its sole and exclusive remedy shall be to terminate this Agreement in accordance with Section 6.1(c)(iii) and receive the Reverse Termination Fee in accordance with Section 6.4. Furthermore, in no event shall the Company or any of its Subsidiaries or any of their respective Affiliates, or any of their Representatives or Affiliates, be entitled to seek the remedy of specific performance of the Financing against any of the Debt Financing Parties.
Section 7.9. Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
If to RG, to:
RG Parent, LLC
c/o Tengram Capital Partners
33 Riverside Avenue, First Floor
Westport, CT 06880
Attention: Andrew R. Tarshis
Facsimile: (203) 454-6998
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with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Jeffrey H. Cohen
Andrew D. Garelick
Facsimile: (213) 687-5600
If to the Company or Merger Sub, to:
Joes Jeans Inc.
2340 S. Eastern Avenue
Commerce, CA 90040
Attention: Interim Chief Executive Officer
Facsimile: (323) 837-3791
with a copy (which shall not constitute notice) to:
Akin Gump Strauss Hauer & Feld LLP
1333 New Hampshire Avenue NW
Washington DC 20036
Attention: Russell W. Parks, Jr.
Erica D. McGrady
Facsimile: (202) 887-4288
or such other address or facsimile number as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
Section 7.10. Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the Transactions are fulfilled to the extent possible.
Section 7.11. Definitions.
(a) As used in this Agreement, the following terms have the meanings ascribed thereto below:
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Acceptable Confidentiality Agreement means a confidentiality agreement, which need not contain a standstill agreement, with terms no less favorable to the Company or beneficial to the counterparty in any substantive respect than those contained in the Confidentiality Agreement.
Action has the meaning set forth in Section 4.9(a).
Actual Cash Consideration has the meaning set forth in Section 1.4(a).
Actual Merger Consideration has the meaning set forth in Section 1.4(a).
Affiliate means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For this purpose, control (including, with its correlative meanings, controlled by and under common control with) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.
After Consultation means, with respect to the Company Board, after consultation with the Company Financial Advisor and the Companys outside legal counsel.
Agreement has the meaning set forth in the preamble.
Aggregate Cash Consideration has the meaning set forth in Section 1.4.
Aggregate Merger Consideration has the meaning set forth in Section 1.4(a).
Aggregate Stock Consideration has the meaning set forth in Section 1.4.
Alternative Debt Financing has the meaning set forth in Section 4.13(b).
Antitrust Laws means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other applicable Laws issued by a Governmental Authority that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.
Asset Purchase Agreements has the meaning set forth in the recitals.
Asset Sale Transaction has the meaning set forth in Section 4.4.
Balance Sheet Date has the meaning set forth in Section 2.5(c).
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Bankruptcy and Equity Exception has the meaning set forth in Section 2.3(a).
Business Day means a day except a Saturday, a Sunday or other day on which the SEC or banks in New York, New York are authorized or required by Law to be closed.
Certificate of Merger means the certificate of merger with respect to the Merger, containing the provisions required by, and executed in accordance with, the DLLCA.
Certificates means, to the extent applicable, (i) a certificate or certificates representing RG Units or (ii) RG Units that are in non-certificated book-entry form, in either case that are outstanding immediately prior to the Effective Time.
Change in Recommendation has the meaning set forth in Section 4.2(e).
Closing has the meaning set forth in Section 1.2.
Closing Date has the meaning set forth in Section 1.2.
Code has the meaning set forth in Section 1.9(f).
Commitment Letters has the meaning set forth in Section 3.14.
Common Units means the units of limited liability company interests as defined in the limited liability company agreement of RG dated as of June 10, 2011, as amended.
Company has the meaning set forth in the preamble.
Company 10-K means the Companys Annual Report on Form 10-K for the fiscal year ended November 30, 2014, as amended.
Company Acquisition Agreement has the meaning set forth in Section 4.2(e).
Company Benefits Plan(s) has the meaning set forth in Section 2.10(a).
Company Board has the meaning set forth in the recitals.
Company Charter Documents means the Certificate of Incorporation and Bylaws of the Company, each as amended.
Company Common Stock has the meaning set forth in Section 2.2(a).
Company Disclosure Schedule has the meaning set forth in Article II.
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Company Financial Advisor means Carl Marks Advisory Group.
Company Incentive Plan means the Amended and Restated 2004 Stock Incentive Plan, as amended, of the Company.
Company Intellectual Property means all Intellectual Property Rights owned, used or held for use by or licensed to the Company or any of its Subsidiaries used in or necessary for the conduct of the business of the Company or any of its Subsidiaries as currently conducted.
Company Lease means any lease, sublease, sub-sublease, license or other agreement under which the Company or any of its Subsidiaries leases, subleases, licenses, uses or occupies (in each case whether as landlord, tenant, sublandlord, subtenant or by other occupancy arrangement), or has the right to use or occupy, now or in the future, any real property.
Company Manufacturers has the meaning set forth in Section 2.19(d).
Company Material Adverse Effect means any change, event, circumstance, effect, development, occurrence or state of facts that, individually or in the aggregate: (i) has or would be reasonably likely to have a material adverse effect on the business, condition, properties, assets, liabilities (contingent or otherwise), results of operations or financial condition of (x) the Company and its Subsidiaries, taken as a whole, or on the Hudsons Business; provided, however, that none of the following shall be deemed in itself to constitute, and that none of the following shall be taken into account in determining whether there has been or would reasonably be expected to be, a Company Material Adverse Effect: (a) any change generally affecting the economy, financial markets or political, economic or regulatory conditions in the United States or any other geographic region in which the Company and its Subsidiaries conduct business (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (b) general financial, credit or capital market conditions, including interest rates or exchange rates, or any changes therein (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (c) conditions (or changes therein) in any industries in which the Company and its Subsidiaries operate (excluding seasonal fluctuations) (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (d) the taking of any action required by this Agreement or the announcement of the transactions contemplated hereby, (e) changes in applicable Law or GAAP (or, in each case, any interpretations thereof) (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole,
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or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (f) a decline in the price of the Company Common Stock on NASDAQ or any other market in which such securities are quoted for purchase and sale (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Company Material Adverse Effect), (g) any acts of terrorism or war or any escalation thereof or any weather related event, fire or natural disaster (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), or (h) any failure by the Company and its Subsidiaries to meet internal or published projections, forecasts, performance measures, operating statistics or revenue or earnings predictions for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Company Material Adverse Effect); or (ii) has a material adverse effect on the Companys ability to, in a timely manner, perform its obligations under this Agreement, consummate the transactions contemplated by this Agreement or consummate the Transactions.
Company Payoff Amount has the meaning set forth in Section 1.8(a).
Company Preferred Stock has the meaning set forth in Section 2.2(a).
Company Recommendation has the meaning set forth in Section 2.3(b).
Company Reports has the meaning set forth in Section 2.5(a).
Company SEC Documents means all reports, schedules, forms, certifications, prospectuses, and registration, proxy and other statements required to be filed with or furnished to the SEC, together with all documents filed on a voluntary basis on Form 8-K, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein.
Company Stockholder Approval has the meaning set forth in Section 2.3(d).
Company Stockholders has the meaning set forth in the recitals.
Confidentiality Agreement has the meaning set forth in Section 4.7(a).
Contract has the meaning set forth in Section 2.3(c).
Continuing Employee has the meaning set forth in Section 4.12(a).
Convertible Notes means those certain subordinated convertible notes issued on September 30, 2013, and all payment in kind notes issued as interest thereon, to the former stockholders and optionholders of Hudson Clothing Holdings, Inc.
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Copyrights has the meaning set forth in the definition of Intellectual Property Rights.
D&O Insurance has the meaning set forth in Section 4.9(c).
Debt Commitment Letter has the meaning set forth in Section 3.14.
Debt Financing Parties means the Persons that have committed to provide or otherwise entered into agreements to provide the Financing (or any alternative or replacement Financing) in connection with the Transactions contemplated hereby and any agent or arrangers thereof, including the parties to the financing commitments in the Debt Commitment Letters and in any joinder agreements, credit agreements or other financing agreements relating thereto, together with each former, current and future Affiliate thereof and each former, current and future officer, director, employee, partner, controlling person, advisor, attorney, agent and representative of each such person or Affiliate or the heirs, executors, successors and assigns of any of the foregoing.
DGCL means the Delaware General Corporation Law.
Distribution means any dividend on, or any other distribution in respect of, any of the Companys outstanding shares of capital stock, voting securities or equity interests, or any rights, warrants, options, calls, commitments or any other agreements of any character to acquire any shares of its capital stock, voting securities or equity interests.
DLLCA means the Delaware Limited Liability Company Act.
Effective Time has the meaning set forth in Section 1.3.
Environmental Laws means all Laws concerning pollution or protection of the environment, greenhouse gases, natural resources, wildlife, wetlands or health and safety, including all laws relating to the presence, use, generation, handling, treatment, storage, disposal, management, Release or threatened Release of, or exposure to, any Hazardous Materials, or preservation or reclamation of natural resources.
ERISA means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
ERISA Affiliate has the meaning set forth in Section 2.10(a).
Exchange Act has the meaning set forth in Section 2.4.
Exchange Agent has the meaning set forth in Section 1.7.
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Exchange Fund has the meaning set forth in Section 1.8(b).
Financing has the meaning set forth in Section 3.14.
Financing Issue has the meaning set forth in Section 6.1(c)(iii).
Financing Source Provisions has the meaning set forth in Section 7.6(a).
Financial Statements has the meaning set forth in Section 3.6(a).
Form S-4 Registration Statement means the registration statement on Form S-4 to be filed with the SEC by the Company in connection with issuance of Company Common Stock in the Merger, as such registration statement may be amended prior to the time it is declared effective by the SEC.
GAAP means generally accepted accounting principles in the United States.
Governmental Authority means any supranational, foreign, domestic, state, municipal or local government, political subdivision or any department, court, arbitrator, commission, board, bureau, regulatory or administrative agency, instrumentality or other authority thereof, or any other governmental or quasi-governmental authority (including any government-sponsored enterprise such as Fannie Mae or Freddie Mac).
Guarantor has the meaning set forth in the preamble.
Guaranty has the meaning set forth in the preamble.
Hazardous Materials means any material, substance or waste that is regulated, classified, or otherwise characterized under or pursuant to any Environmental Law as hazardous, toxic, a pollutant, a contaminant, radioactive, a universal waste or words of similar meaning or effect or which can give rise to liability under any Environmental Law.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Hudsons Business means the business of the Company operated as of the date hereof under the brand names Hudsons and Hudson Jeans.
Indebtedness means without duplication (a) all indebtedness for borrowed money, whether direct or indirect; (b) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired and subject thereto; (c) all guarantees, endorsements and other contingent obligations in respect of Indebtedness of others; (d) the deferred portion or installments of purchase price, and any amounts reserved for the payment of a contingent purchase price, in connection with the acquisition of
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any business; (e) obligations to reimburse issuers of any letters of credit (but only to the extent drawn without duplication of other indebtedness supported or guaranteed thereby); (f) any obligation evidenced by bonds, debentures, notes or similar instruments; and (g) capital lease obligations, with such lease obligations to be determined in accordance with GAAP; provided that Indebtedness shall not include (x) operating leases or (y) accounts payable, accrued expenses, accrued income Taxes and deferred income Tax liability.
Indemnitee has the meaning set forth in Section 4.9(a).
Intellectual Property Rights means all of the rights arising from or in respect of the following, whether protected, created or arising under the Laws of the United States or any foreign jurisdiction: (i) patents, patent applications, any reissues, reexaminations, divisionals, continuations, continuations-in-part and extensions thereof (collectively, Patents); (ii) trademarks, service marks, trade names (whether registered or unregistered), fictitious names, industrial designs, brand names, domain names, social media handles and accounts, trade dress rights, identifying symbols, logos, emblems, signs or insignia, and including all goodwill associated with the foregoing; (iii) copyrights, whether registered or unregistered (including copyrights in computer software programs), mask work rights and registrations and applications therefore (collectively, Copyrights); (iv) confidential, proprietary or other nonpublic information, or non-public processes, designs, specifications, technology, know-how, techniques, formulas, inventions (whether or not patentable and whether or not reduced to practice), concepts, trade secrets, discoveries, ideas and technical data and information, in each case which derive economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other Persons who can obtain economic value from its disclosure or use, and which is the subject of commercially reasonable efforts to maintain its secrecy, excluding any rights in respect of any of the foregoing that comprise or are protected by Copyrights or Patents; (v) rights of publicity and moral rights; (vi) any other intellectual property rights; and (vii) all applications and registrations related to any of the foregoing clauses (i) through (iv).
Intervening Event means a material event, development, occurrence, state of facts or change that was not known or reasonably foreseeable to the Company Board, on the date of this Agreement, which event, development, occurrence, state of facts or change becomes known to the Company Board before the Company Stockholder Approval; provided, however, that a Takeover Proposal shall not be, and shall not be deemed to be, an Intervening Event.
IP Asset Purchase Agreement has the meaning set forth in the recitals.
IP Assets Purchaser has the meaning set forth in the recitals.
Joes Business means the business of the Company operated as of the date hereof under the brand names Joes Jeans, Joes, Joes JD and else.
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Key Jurisdictions means the following jurisdictions: Argentina, Australia, Brazil, Canada, Chile, European Community, Hong Kong, India, International Registration, Japan, Korea (South), Kuwait, Malaysia, Mexico, Macau, New Zealand, Norway, Peru, Russia, Singapore, Switzerland, Taiwan, Turkey, United Arab Emirates, United States of America and Uruguay.
Knowledge of the Company means the actual knowledge, after reasonable inquiry under the circumstances (but only to the extent of each such individuals area of responsibility), of Samuel Furrow, Hamish Sandhu, Lori Nembirkow, Peter Kim and Robert Otto.
Knowledge of RG means the actual knowledge, after reasonable inquiry under the circumstances (but only to the extent of each such individuals area of responsibility), of Michael Buckley and Scott Vogel.
Laws has the meaning set forth in Section 2.8.
Letter of Transmittal has the meaning set forth in Section 1.9(a)(i).
Liabilities means any and all debts, liabilities and obligations of any nature whatsoever, whether accrued or fixed, absolute or contingent, known or unknown matured or unmatured or determined or determinable, including those arising under any Law, those arising under any contract or permit and those arising as a result of any act or omission.
Liens has the meaning set forth in Section 2.1(c).
Material Contract has the meaning set forth in Section 2.11(a).
Merger has the meaning set forth in the recitals.
Merger Sub has the meaning set forth in the preamble.
Most Recent Balance Sheet Date has the meaning set forth in Section 3.6(a).
NASDAQ means the Nasdaq Capital Market.
New Debt Commitment Letter has the meaning set forth in Section 4.13(b).
Non-Voting Common Units means the units of limited liability company interests as defined in the limited liability company agreement of RG dated as of June 10, 2011, as amended.
Operating Asset Purchase Agreement has the meaning set forth in the recitals.
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Operating Assets Purchaser has the meaning set forth in the recitals.
Order means any writ, judgment, injunction, consent, order, decree, stipulation, award or executive order of or by any Governmental Authority.
Outside Date means February 8, 2016.
Patents has the meaning set forth in the definition of Intellectual Property Rights.
Paying Agent means a bank or trust company reasonably satisfactory to the Company appointed by RG to act as paying agent for payment of the Merger Consideration.
Permits has the meaning set forth in Section 2.8.
Permitted Exceptions means: (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance which have been made available to RG or incurred subsequent to the date of any of such policies of title insurance which do not impair in any material respect the continued use or occupation of the property to which they relate in the conduct of the business currently conducted thereon; (ii) statutory liens for current Taxes, assessments or other governmental charges not yet due or the amount or validity of which is being contested in good faith by appropriate proceedings, provided an appropriate reserve has been established therefor in the Company SEC Documents in accordance with GAAP; (iii) mechanics, materialmens, architects, carriers, workers, repairers or other similar Liens arising or incurred in the ordinary course of business consistent with past practices that are not material to the business, operations and financial condition of the Company and its Subsidiaries taken as a whole and are not delinquent; and (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Authority, that, individually or in the aggregate, would not be reasonably expected to impair in any material respect the continued use or occupation of the property to which they relate in the conduct of the business currently conducted thereon.
Permitted Investments means (i) bank deposits with commercial banks with capital exceeding $1 billion (based on the most recent financial statements of such bank that are then publicly available); (ii) investments in any readily accessible money market fund with assets under management of at least $10 billion that invests solely in U.S. Government Securities; provided, however, that the funds deposited in any such fund may not represent more than 2% of the assets in such fund; (iii) investments in any prime money market fund with assets in excess of $35 billion, provided that no more than $750 million of the funds may be invested in any single such fund; or (iv) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than six (6) months from the date hereof.
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Person means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity, including a Governmental Authority.
Preferred Stock Purchaser has the meaning set forth in the recitals.
Preferred Units means the units of limited liability company interests as defined in the limited liability company agreement of RG dated as of June 10, 2011, as amended.
Proxy Date has the meaning set forth in Section 4.5(e).
Proxy Statement means a proxy statement/prospectus to be sent to the Companys stockholders in connection with the Stockholders Meeting.
Proxy Statement Clearance Date means the date on which the SEC has, orally or in writing, confirmed that it has no further comments on the Proxy Statement and Form S-4 Registration Statement.
Registered Intellectual Property has the meaning set forth in Section 2.12(a).
Release means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing of or migrating into or through the environment or any natural or man-made structure.
Representatives has the meaning set forth in Section 4.2(a).
Required Information means all financial and other information regarding the Company and its Subsidiaries as is reasonably requested by RG or any of the Debt Financing Parties in connection with the Financing, in each case as is customarily required in connection with the execution of debt financings similar to the Financing (provided that the Company will have no obligation to prepare pro forma financial information or post-closing financial information), including (i) all customary financial information of the Company and its Subsidiaries that is required to permit RG Parent or its affiliates to prepare a pro forma EBITDA of Company and its Subsidiaries (after giving pro forma effect to the Merger and the other transactions contemplated hereby) for the most recent twelve (12)-month period ending at least 30 days prior to the Closing Date, (ii) all customary financial information of the Company and its Subsidiaries that is required to permit RG Parent or its affiliates to prepare a pro forma consolidated balance sheet and related pro forma consolidated statement of income of the Company and its Subsidiaries (giving pro forma effect to the Merger and the other transactions contemplated hereby) as of a date, and for a 12-month period ending,
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not more than 30 days prior to the Closing Date, (iii) all customary financial information of the Company and its Subsidiaries that is required to permit RG Parent or its affiliates to prepare pro forma financial projections of the Company and its Subsidiaries (after giving pro forma effect to the Merger and the other transactions contemplated hereby) in the format, and for the periods, required by the Debt Financing Parties and (iv) internally-prepared monthly financial statements for the Company and its Subsidiaries on a consolidated basis, to be delivered to RG Parent no later than 30 days after the end of each month.
Reverse Stock Split has the meaning set forth in the recitals.
Reverse Termination Fee means Seven Million Five Hundred Thousand Dollars ($7,500,000).
RG has the meaning set forth in the preamble.
RG Benefits Plan(s) has the meaning set forth in Section 3.10(a).
RG Debt has the meaning set forth in Section 1.8(a).
RG ERISA Affiliate has the meaning set forth in Section 3.10(a).
RG Lease means any lease, sublease, sub-sublease, license or other agreement under which RG or any of its Subsidiaries leases, subleases, licenses, uses or occupies (in each case whether as landlord, tenant, sublandlord, subtenant or by other occupancy arrangement), or has the right to use or occupy, now or in the future, any real property.
RG Manufacturers has the meaning set forth in Section 3.21(d).
RG Material Adverse Effect means any change, event, circumstance, effect, development, occurrence or state of facts that, individually or in the aggregate: (i) has or would reasonably be likely to have a material adverse effect on to the business, condition, properties, assets, liabilities (contingent or otherwise), results of operations or financial condition of RG and its Subsidiaries, taken as a whole; provided, however, that none of the following shall be deemed in itself to constitute, and that none of the following shall be taken into account in determining whether there has been or would reasonably be expected to be, a RG Material Adverse Effect: (a) any change generally affecting the economy, financial markets or political, economic or regulatory conditions in the United States or any other geographic region in which RG and its Subsidiaries conduct business (except, in each case, to the extent that RG and its Subsidiaries, taken as a whole, are disproportionately adversely affected relative to other participants in the industries in RG and its Subsidiaries participate), (b) general financial, credit or capital market conditions, including interest rates or exchange rates, or any changes therein (except, in each case, to the extent that RG and its Subsidiaries, taken as a whole, are disproportionately adversely affected relative to other participants in the industries in RG and its Subsidiaries participate), (c) conditions
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(or changes therein) in any industries in which RG and its Subsidiaries operate (excluding seasonal fluctuations) (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (d) the taking of any action required by this Agreement or the announcement of the transactions contemplated hereby, (e) changes in applicable Law or GAAP (or, in each case, any interpretations thereof) (except, in each case, to the extent that RG and its Subsidiaries, taken as a whole, are disproportionately adversely affected relative to other participants in the industries in RG and its Subsidiaries participate), (f) any acts of terrorism or war or any escalation thereof or any weather related event, fire or natural disaster (except, in each case, to the extent that RG and its Subsidiaries, taken as a whole, are disproportionately adversely affected relative to other participants in the industries in which RG and its Subsidiaries participate), or (g) any failure by RG to meet internal or published projections, forecasts, performance measures, operating statistics or revenue or earnings predictions for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Material Adverse Effect); or (ii) has a material adverse effect on RGs ability to, in a timely manner, perform its obligations under this Agreement or consummate the Transactions.
RG Material Contracts has the meaning set forth in Section 3.11(a).
RG Members has the meaning set forth in the recitals.
RG Payoff Amount has the meaning set forth in Section 1.8(a).
RG Registered Intellectual Property has the meaning set forth in Section 3.12(a).
RG Takeover Proposal means any inquiry, proposal or offer from any Person or group (as defined for purposes of Section 13(d) of the Exchange Act), other than the Company and its Subsidiaries, relating to any of the following, or an expression by any Person or group (as defined for purposes of Section 13(d) of the Exchange Act) that it is considering or may engage in the following: (A) a direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of RG and its Subsidiaries (including securities of Subsidiaries) equal to 20% or more of RGs consolidated assets or to which 20% or more of RGs revenues or earnings on a consolidated basis are attributable, (B) a direct or indirect acquisition (whether in a single transaction or a series of related transactions) of 20% or more of the outstanding shares of any class of equity securities of RG or securities of RG representing more than 20% of the voting power of RG, (C) a tender offer or exchange offer that if consummated would result in any Person or group (as defined in Section 13(d) of the Exchange Act) beneficially owning 20% or more of any class of equity securities of RG or securities of RG representing more than 20% of the voting power of RG
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or (D) a merger, consolidation, share exchange, business combination, joint venture, recapitalization, liquidation, dissolution or similar transaction involving RG or any of its Subsidiaries that, if consummated, would have the effect set forth in clause (A) or clause (B); in each case, other than the Transactions.
RG Units has the meaning set forth in Section 3.3(a).
RG Welfare Plan has the meaning set forth in Section 3.10(c).
Rollover Letter has the meaning set forth in the preamble.
SEC means the Securities and Exchange Commission.
Securities Act has the meaning set forth in Section 2.1(c).
RG Units has the meaning set forth in Section 1.4(a).
Skadden means Skadden, Arps, Slate, Meagher & Flom LLP.
Stock Purchase Agreement has the meaning set forth in the recitals.
Stockholders Meeting has the meaning set forth in Section 4.5(e).
Subsidiary when used with respect to any party, means any corporation, limited liability company, partnership, association, trust or other entity the accounts of which would be consolidated with those of such party in such partys consolidated financial statements if such financial statements were prepared in accordance with GAAP, as well as any other corporation, limited liability company, partnership, association, trust or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership interests) are, as of such date, owned or controlled by such party or one or more Subsidiaries of such party or by such party and one or more Subsidiaries of such party.
Superior Proposal means an unsolicited, bona fide, written Takeover Proposal (provided that for purposes of this definition all references to 20% contained in the definition of Takeover Proposal shall be deemed to be references to 50%) which the Company Board determines in good faith, After Consultation, to be more favorable to the Company Stockholders, from a financial point of view, than the Transactions, in each case taking into account all financial, legal, financing, regulatory and other aspects of such Takeover Proposal that are reasonably relevant to a determination of the likelihood of consummation of such Takeover Proposal (including the reputation of the Person or group making the Takeover Proposal) and further taking into account at any time of determination, collectively, any changes to (a) the terms and conditions of this Agreement and the transactions contemplated hereby that are then offered in writing by RG (b) the terms and conditions of the Stock Purchase Agreement and the transactions
83
contemplated thereby that are then offered in writing by TCP Denim LLC and (c) the terms and conditions of the Asset Purchase Agreement and the transactions contemplated thereby that are then offered in writing by Sequential Brands Group, Inc. and GBG USA, Inc.
Surviving Company has the meaning set forth in Section 1.1.
Takeover Proposal means any inquiry, proposal or offer from any Person or group (as defined for purposes of Section 13(d) of the Exchange Act), other than RG and its Subsidiaries, relating to any of the following, or an expression by any Person or group (as defined for purposes of Section 13(d) of the Exchange Act) that it is considering or may engage in the following: (A) a direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of the Company and its Subsidiaries (including securities of Subsidiaries) equal to 20% or more of the Companys consolidated assets or to which 20% or more of the Companys revenues or earnings on a consolidated basis are attributable, (B) a direct or indirect acquisition (whether in a single transaction or a series of related transactions) of 20% or more of the outstanding shares of any class of equity securities of the Company or securities of the Company representing more than 20% of the voting power of the Company, (C) a tender offer or exchange offer that if consummated would result in any Person or group (as defined in Section 13(d) of the Exchange Act) beneficially owning 20% or more of any class of equity securities of the Company or securities of the Company representing more than 20% of the voting power of the Company or (D) a merger, consolidation, share exchange, business combination, joint venture, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its Subsidiaries that, if consummated, would have the effect set forth in clause (A) or clause (B); in each case, other than the Transactions.
Tax or Taxes means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes (in the case of all such taxes, whether the tax base is modified or not), customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Authority in connection with any item described in clause (i), and (iii) any liability in respect of any items described in clauses (i) or (ii) payable by reason of contract, assumption, transferee or successor liability, operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar provision under Law) or otherwise.
Tax Returns means any return, report, claim for refund, estimate, information return or statement or other similar document relating to or required to be filed with any Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
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Termination Fee means Five Million Two Hundred Fifty Thousand Dollars ($5,250,000).
Transactions refers collectively to the transactions contemplated by the Agreement, including the Merger and the transactions contemplated by the Stock Purchase Agreement.
U.S. Government Securities means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America which, in either case, are not callable or redeemable at the option of the issuer thereof and shall also include (a) a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian, with respect to any such U.S. Government Securities or a specific payment of principal of or interest on any such U.S. Government Securities held by such custodian for the account of the holder of such depository receipt; provided, however, that (except as required by Law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Securities or the specific payment of principal of or interest on the U.S. Government Securities evidenced by such depository receipt and (b) reverse repurchase agreements in respect of the securities described above.
Voting Common Units means the units of limited liability company interests as defined in the limited liability company agreement of RG dated as of June 10, 2011, as amended.
WARN Act means the Worker Adjustment and Retraining Notification Act of 1988, or any similar state or local law.
Welfare Plan has the meaning set forth in Section 2.10(c).
Year-End Financial Statements has the meaning set forth in Section 3.6(a).
Section 7.12. Interpretation.
(a) When a reference is made in this Agreement to an Article, a Section, Annex or Schedule, such reference shall be to an Article of, a Section of, or an Annex or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words include, includes or including are used in this Agreement, they shall be deemed to be followed by the words without limitation. The words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word will when used in this Agreement shall be construed to have the same meaning and
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effect of the word shall. The word or when used in this Agreement is not exclusive. All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein. Any documents or information made available, provided, delivered or furnished (or any similar terms) shall include only (i) Company Reports and (ii) such documents or information available in the electronic dataroom maintained on behalf of the Company and RG, respectively, by Intralinks, Inc. not later than 9:00 am (California time) on the day prior to the date of this Agreement. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.
(b) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be duly executed and delivered as of the date first above written.
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RG PARENT, LLC |
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By: |
/s/ William Sweedler |
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Name: William Sweedler |
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Title: Chairman |
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JJ MERGER SUB, LLC |
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By: |
/s/ Hamish Sandhu |
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Name: Hamish Sandhu |
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Title: CFO |
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JOES JEANS INC. |
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By: |
/s/ Hamish Sandhu |
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Name: Hamish Sandhu |
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Title: CFO |
[Signature Page to Merger Agreement]
Exhibit 2.2
EXECUTION VERSION
ASSET PURCHASE AGREEMENT
by and among
JOES JEANS INC.,
JOES HOLDINGS LLC
and
SEQUENTIAL BRANDS GROUP, INC.
dated as of
September 8, 2015
TABLE OF CONTENTS
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Page |
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Article I Definitions |
1 |
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Section 1.01 |
Defined Terms |
1 |
Section 1.02 |
Construction |
9 |
Section 1.03 |
Annexes, Exhibits, and Disclosure Letters |
10 |
Section 1.04 |
Knowledge |
10 |
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Article II Purchase and Sale |
10 |
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Section 2.01 |
Purchase and Sale of Assets |
10 |
Section 2.02 |
Excluded Assets |
11 |
Section 2.03 |
Assumed Liabilities |
11 |
Section 2.04 |
Excluded Liabilities |
12 |
Section 2.05 |
Purchase Price |
12 |
Section 2.06 |
Allocation of Purchase Price |
12 |
Section 2.07 |
Transfer of Purchased Assets and Assumed Liabilities |
13 |
Section 2.08 |
Required Consents |
13 |
Section 2.09 |
Reconciliation of Royalty Payments |
14 |
Section 2.10 |
Withholding Rights |
16 |
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Article III Closing |
16 |
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Section 3.01 |
Closing |
16 |
Section 3.02 |
Closing Deliverables |
16 |
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Article IV Representations and Warranties of Seller |
18 |
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Section 4.01 |
Organization and Qualification of Seller |
18 |
Section 4.02 |
Authority of Seller |
18 |
Section 4.03 |
No Conflicts; Consents |
19 |
Section 4.04 |
Absence of Certain Changes, Events and Conditions |
19 |
Section 4.05 |
Material Contracts |
20 |
Section 4.06 |
Intellectual Property |
20 |
Section 4.07 |
Legal Proceedings; Governmental Orders |
21 |
Section 4.08 |
Compliance with Laws |
21 |
Section 4.09 |
Taxes |
21 |
Section 4.10 |
Customers and Suppliers |
23 |
Section 4.11 |
Brokers |
23 |
Section 4.12 |
Solvency |
23 |
Section 4.13 |
No Other Representations and Warranties |
23 |
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Article V Representations and Warranties of Buyer |
24 |
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Section 5.01 |
Organization of Buyer |
24 |
Section 5.02 |
Authority of Buyer |
24 |
Section 5.03 |
No Conflicts; Consents |
24 |
Section 5.04 |
Brokers |
25 |
Section 5.05 |
Legal Proceedings |
25 |
Section 5.06 |
Financing |
25 |
Section 5.07 |
No Other Representations and Warranties |
26 |
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Article VI Covenants |
26 |
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Section 6.01 |
Access to Information Concerning Purchased Assets and Records |
26 |
Section 6.02 |
Confidentiality |
27 |
Section 6.03 |
Conduct of Seller and the Business Pending the Closing Date |
28 |
Section 6.04 |
Commercially Reasonable Best Efforts; Consents |
29 |
Section 6.05 |
Intellectual Property Title Matters |
29 |
Section 6.06 |
Use of Transferred Marks; Transaction Documents |
30 |
Section 6.07 |
Notification of Certain Matters |
30 |
Section 6.08 |
Public Announcements |
31 |
Section 6.09 |
Bulk Sales Laws |
31 |
Section 6.10 |
Transfer Taxes |
31 |
Section 6.11 |
Tax Matters |
31 |
Section 6.12 |
Communication with Customers, Licensees and Suppliers |
31 |
Section 6.13 |
Financing |
32 |
Section 6.14 |
Further Assurances |
35 |
Section 6.15 |
Guarantee |
35 |
Section 6.16 |
Miscellaneous |
37 |
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Article VII Indemnification |
37 |
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Section 7.01 |
Survival |
37 |
Section 7.02 |
Indemnification by Seller |
37 |
Section 7.03 |
Indemnification by Buyer |
38 |
Section 7.04 |
Certain Limitations |
38 |
Section 7.05 |
Indemnification Procedures |
39 |
Section 7.06 |
Sellers Obligation to Cause Subsidiaries to Act |
42 |
Section 7.07 |
Sole Remedy/Waiver |
42 |
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Article VIII Conditions Precedent |
43 |
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Section 8.01 |
Conditions to the Obligations of Each Party |
43 |
Section 8.02 |
Conditions to the Obligations of Buyer |
43 |
Section 8.03 |
Conditions to the Obligations of Seller |
44 |
Section 8.04 |
Frustration of Closing Conditions |
44 |
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Article IX Termination |
44 |
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Section 9.01 |
Termination Events |
44 |
Section 9.02 |
Effect of Termination |
45 |
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Article X Miscellaneous |
46 |
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Section 10.01 |
Expenses |
46 |
Section 10.02 |
Notices |
46 |
Section 10.03 |
Headings |
48 |
Section 10.04 |
Severability |
48 |
Section 10.05 |
Entire Agreement |
48 |
Section 10.06 |
Binding Effect; Successors and Assigns |
48 |
Section 10.07 |
Amendment and Modification; Waiver |
49 |
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Page |
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Section 10.08 |
Governing Law; Submission to Jurisdiction; Waiver of Jury Trial |
49 |
Section 10.09 |
Specific Performance |
50 |
Section 10.10 |
Counterparts |
51 |
EXHIBIT A BILL OF SALE |
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1 |
EXHIBIT B ASSIGNMENT AND ASSUMPTION AGREEMENT |
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1 |
EXHIBIT C FORMS OF INTELLECTUAL PROPERTY ASSIGNMENTS |
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1 |
EXHIBIT D DAHAN CONSULTING AGREEMENT |
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1 |
EXHIBIT E FORM OF ESCROW AGREEMENT |
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this Agreement), dated as of September 8, 2015, is entered into by and between Joes Jeans Inc., a Delaware corporation (Seller), Joes Holdings LLC, a Delaware limited liability company (Buyer), and solely for purposes of Section 6.15 and Article X, Sequential Brands Group, Inc., a Delaware corporation (Parent).
RECITALS
WHEREAS, Seller wishes, for itself and on behalf of its applicable Subsidiaries, to sell and assign to Buyer, and Buyer wishes to purchase and assume from Seller and its applicable Subsidiaries, certain intellectual property assets used or held for use in the Joes Business, together with certain contracts and other related assets and liabilities of the Joes Business, subject to the terms and conditions set forth herein;
WHEREAS, prior to or concurrently with the execution of this Agreement, and as a condition and inducement to Sellers and Buyers willingness to enter into this Agreement, Seller is entering into an Asset Purchase Agreement (the Operating Asset Purchase Agreement) with GBG USA Inc. (the Operating Assets Purchaser), pursuant to which, among other things, the Operating Assets Purchaser will purchase certain inventory, store leases and certain other assets and assume certain liabilities from Seller and its applicable Subsidiaries related to the Joes Business; and
WHEREAS, prior to or concurrently with the execution of this Agreement, Parent is entering into a Consulting Agreement with Joe Dahan (Dahan) in the form attached hereto as Exhibit E (the Dahan Consulting Agreement), pursuant to which, among other things, Dahan will, after the Closing, provide certain consulting services to Parent and/or its Subsidiaries.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. The following terms have the meanings specified or referred to in this Article I:
Accounting Arbitrator has the meaning set forth in Section 2.09(c).
Advances has the meaning set forth in Section 2.09(a)(i).
Affiliate of a Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.
Agreed Claims has the meaning set forth in Section 7.05(c).
Agreement has the meaning set forth in the preamble.
Alternative Financing has the meaning set forth in Section 6.14(b).
Alternative Financing Commitment Letter has the meaning set forth in Section 6.14(b).
Assigned Contracts has the meaning set forth in Section 2.01(b).
Assignment and Assumption Agreement has the meaning set forth in Section 3.02(a)(iii).
Assumed Liabilities has the meaning set forth in Section 2.03.
Bill of Sale has the meaning set forth in Section 3.02(a)(ii).
Business Day means any day except Saturday, Sunday or any other day on which commercial banks located in New York, New York are authorized or required by Law to be closed for business.
Buyer has the meaning set forth in the preamble.
Buyer Disclosure Letter means the Disclosure Letter delivered by Buyer concurrently with the execution and delivery of this Agreement.
Buyer Escrow Funds has the meaning set forth in Section 2.05.
Buyer Indemnitees has the meaning set forth in Section 7.02.
Claim Certificate has the meaning set forth in Section 7.05(a).
Closing has the meaning set forth in Section 3.01.
Closing Date has the meaning set forth in Section 3.01.
Code means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated and the rulings listed thereunder.
Confidential Material means all information (written or oral) that is confidential or proprietary to Seller or any of its Subsidiaries or is not otherwise generally available to the public regarding the Joes Business. The term Confidential Material shall not include any information (written or oral) (a) regarding Seller or any of its Subsidiaries, including, without limitation, any information (written or oral) regarding the Hudsons Business, other than, in each case, to the extent relating to the Joes Business, (b) that is or becomes generally available to the public or is or becomes generally known within the industries in which the Joes Business is conducted, in each case other than as a result of disclosure by Seller or its Representatives in violation of this Agreement, (c) that becomes available to Seller or any of its Subsidiaries or Representatives after the Closing Date from a Person other than Buyer on a non-confidential basis, provided that such Person was not known by Seller or its Representatives to be bound by
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a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to Buyer with respect to such materials, or (d) that is independently developed by Seller or any of its Subsidiaries or Representatives without reference to or use of any Confidential Material.
Confidentiality Agreement means that certain Confidentiality and Nondisclosure Agreement, dated as of February 17, 2015, by and between Tengram Capital Partners, L.P. and Seller to which Parent was made a party by that certain side letter, dated April 23, 2015, between Parent and Tengram Capital Partners, L.P.
Contracts means all contracts, leases, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, bonds, guarantees, franchises, and other legally binding agreements, understandings, arrangements and letters of intent, and any amendments thereto, in each case whether written or oral.
Control (including the terms controlled by and under common control with), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise.
Dahan has the meaning set forth in the recitals.
Dahan Consulting Agreement has the meaning set forth in the recitals.
Debt Commitment Letter has the meaning set forth in Section 5.06.
Deductible has the meaning set forth in Section 7.04(a).
Direct Claim has the meaning set forth in Section 7.05(c).
Disclosure Letters means the Seller Disclosure Letter and the Buyer Disclosure Letter.
Encumbrances means any liens, security interests, options, rights of first refusal, claims, easements, mortgages, charges, indentures, deeds of trust, rights of way, restrictions on the use of real property, encroachments, leases to third parties, security agreements, or any other encumbrances, and other restrictions or limitations on the ownership or use of property or assets or irregularities in title thereto.
End Date has the meaning set forth in Section 9.01(b).
Escrow Agent shall mean Wilmington Trust, National Association.
Escrow Agreement has the meaning set forth in Section 3.02(a)(vi).
Excluded Assets has the meaning set forth in Section 2.02.
Excluded Liabilities has the meaning set forth in Section 2.04.
Final Reconciliation has the meaning set forth in Section 2.09(b).
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Financing means the debt financing described in the Debt Commitment Letter.
Financing Failure Event means, for any reason, all or a portion of the Financing becoming unavailable on the terms and conditions in the Debt Commitment Letter (including, as necessary, any flex provisions contained in the Debt Commitment Letter or any related fee letter).
Fundamental Representations means collectively, those representations and warranties contained in Section 4.01 (Organization and Qualification of Seller), Section 4.02 (Authority of Seller), Section 4.06(a) and Section 4.06(b) (Intellectual Property), Section 4.11 (Brokers), Section 5.01 (Organization of Buyer), Section 5.02 (Authority of Buyer), and Section 5.04 (Brokers).
GAAP means generally accepted accounting principles.
Governmental Authority means any United States or non-United States federal, state, provincial or local government or political subdivision thereof, or any agency, commission or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction or any securities exchange.
Governmental Order means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
Guaranteed Obligations has the meaning set forth in Section 6.15(a).
Hudsons Business means the business of Seller and its applicable Subsidiaries operated as of the date hereof under the brand names Hudsons, and Hudson Jeans.
Indemnified Party has the meaning set forth in Section 7.04.
Indemnifying Party has the meaning set forth in Section 7.04.
Intellectual Property means any and all of the following in any jurisdiction throughout the world: (a) logos, brand names, slogans, trade names, trademarks and service marks, trade dress, and other indicia of origin, whether registered or unregistered, including all applications for registration and registrations of any of the foregoing and all renewals thereof, and, the goodwill connected with the use of and symbolized by any of the foregoing (collectively, Trademarks); (b) copyrights, including all applications for registration and registrations, and works of authorship, registered or unregistered, and all moral and economic and other similar rights of authors; (c) proprietary inventions (whether or not patentable), trade secrets and confidential information, know-how, concepts, processes, methods, techniques, technology and formulae; (d) patents and patent applications, including divisionals, continuations, continuations-in-part and foreign equivalents thereof; (e) technology, Internet domain names and related registrations; (f) rights in computer code and programs and all related documentation, and rights in all databases, database rights and compilations; (g) rights of publicity (including all rights in a Persons name, voice, signature, biography, likeness, image and persona); (h) rights in advertising material, molds, trade show booths, displays, designs, design archives, patterns, prototypes, prints and samples; and (i) all other intellectual property and industrial property rights and assets.
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Intellectual Property Assets has the meaning set forth in Section 2.01(a).
IP Title Defect Correction Actions has the meaning set forth in Section 6.05.
Joes Business means the business of Seller and its applicable Subsidiaries operated as of the date hereof under the brand names Joes Jeans, Joes, Joes JD and else.
Key Customers and Suppliers has the meaning set forth in Section 4.10.
Key Jurisdictions means the following jurisdictions: Argentina, Australia, Brazil, Canada, Chile, European Community, Hong Kong, India, International Registration, Japan, Korea (South), Kuwait, Malaysia, Mexico, Macau, New Zealand, Norway, Peru, Russia, Singapore, Switzerland, Taiwan, Turkey, United Arab Emirates, United States of America and Uruguay.
Law means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
Lender has the meaning set forth in Section 5.06.
Losses means without duplication (a) any and all claims, actions, cause of actions, judgment, awards, losses, damages, liabilities, Taxes, costs or expenses, including reasonable attorneys, accountants and other professional advisors fees and expenses and (b) any losses or costs incurred in investigating, defending or settling any claim, action or cause of action described in clause (a) whether or not the underlying claim, action or cause of action is actually asserted or is merely alleged or threatened.
Material Adverse Effect means any change, event, circumstance, effect, development, occurrence or state of facts that, individually or in the aggregate: (i) has or would reasonably be expected to have a material adverse effect on the business, condition, properties, assets, liabilities (contingent or otherwise), results of operations or financial condition of the Joes Business, taken as a whole; provided, that none of the following shall be deemed in itself to constitute, and that none of the following shall be taken into account in determining whether there has been or would reasonably be expected to be, a Material Adverse Effect: (a) any change generally affecting the economy, financial markets or political, economic or regulatory conditions in the United States or any other geographic region in which the Joes Business is conducted (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), (b) general financial, credit or capital market conditions, including interest rates or exchange rates, or any changes therein (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), (c) conditions (or changes therein) in any industries in which the Joes Business is conducted (excluding seasonal fluctuations) (except, in each case, to
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the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), (d) the taking of any action required by this Agreement, the Operating Assets Purchase Agreement or the announcement of the transactions contemplated hereby or thereby, (e) changes in applicable Law or GAAP (or, in each case, any interpretations thereof) (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), (f) any acts of terrorism or war or any escalation thereof or any weather related event, fire or natural disaster (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), or (g) any failure of the Joes Business to meet internal or published projections, forecasts, performance measures, operating statistics or revenue or earnings predictions for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Material Adverse Effect); or (ii) has a material adverse effect on Sellers ability to, in a timely manner, perform its obligations under this Agreement or consummate the transactions contemplated by this Agreement.
Material Contracts means all Contracts (a) by which any of the Purchased Assets or Assumed Liabilities are bound or affected or (b) to which Seller or any of its Subsidiaries are parties or by which Seller or any of its Subsidiaries are bound in connection with the Joes Business, the Purchased Assets or the Assumed Liabilities, in each case, (i) that relate to the manufacture, design, marketing, promotion, production, distribution, sale or licensing of any of the Purchased Assets, other than such Contracts that relate solely to the sale of inventory in the ordinary course of business; (ii) granting or evidencing an Encumbrance (other than Permitted Encumbrances) on any Purchased Asset or any other property or asset of Seller or any of its Subsidiaries and used in connection with the Joes Business; (iii) limiting the ability of Seller or any of its Subsidiaries to (1) engage in the Joes Business in any capacity or (2) compete with any Person or in any geographical area with respect to the Joes Business; (iv) relating to the Joes Business (other than this Agreement and any agreement or instrument entered into pursuant to this Agreement) with (1) Seller or any of its Affiliates or (2) Seller or any of its Subsidiaries or any current or former officer or director of Seller or any of its Subsidiaries; (v) involving any joint venture, partnership, strategic alliance, shareholders agreement, co-marketing, co-promotion, co-packaging, joint development or similar arrangement; (vi) relating primarily to the Joes Business involving aggregate consideration in excess of One Hundred Twenty-Five Thousand Dollars ($125,000) and requiring performance by any party after the Closing Date, which, in each case, cannot be cancelled without penalty or without more than sixty (60) days notice; provided, that in no event shall any Contract be deemed a Material Contract if, following the Closing, such Contract will not be binding or otherwise affect any of the Purchased Assets or Assumed Liabilities.
Neutral Accounting Firm means an independent accounting firm of nationally recognized standing that is not at the time it is to be engaged hereunder rendering services to any party hereto, or any Affiliate of either, and has not done so within the two (2) year period prior thereto.
Notice of Objections has the meaning set forth in Section 2.09(b).
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Operating Asset Purchase Agreement has the meaning set forth in the recitals.
Operating Assets Purchaser has the meaning set forth in the recitals.
Overlap Period shall mean any taxable year or other taxable period beginning on or before and ending after the Closing Date.
Paid-Up Fees has the meaning set forth in Section 2.09(a)(ii).
Parent has the meaning set forth in the preamble.
PATRIOT Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001).
Permits means all permits, licenses, franchises, approvals, certificates, rights, exemptions, authorizations and consents granted from or issued by Governmental Authorities.
Permitted Encumbrance means each of the following: (i) Encumbrances approved in writing by Buyer; and (ii) licenses of or with respect to Intellectual Property that constitute an Assigned Contract.
Person means and includes an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association, limited liability partnership, limited partnership, group or other entity.
Post-Closing Period shall mean all taxable years or other taxable periods that begin on the Closing Date and, with respect to any Overlap Period, the portion of such taxable year or period beginning on the Closing Date.
Pre-Closing Period shall mean all taxable years or other taxable periods that end on the date immediately before the Closing Date and, with respect to any Overlap Period, the portion of such taxable year or period ending on the date immediately before the Closing Date.
Products means clothing, jeans, activewear, pants, jeggings, trousers, tops, tee shirts, tank tops, shirts, dresses, skirts, sweaters, hoodies, jackets, outerwear, shorts, lingerie/intimates, underwear, loungewear, jumpsuits, shoes, sandals, sneakers, hats, scarves, jewelry, belts, and other fashion accessories.
Purchase Price has the meaning set forth in Section 2.05.
Purchased Assets has the meaning set forth in Section 2.01.
Representative means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants, agents, managers and other agents of such Person.
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Required Information means all financial and other information regarding the Purchased Assets or the Joes Business as is reasonably requested by Buyer or the Lender in connection with the Financing as is customarily required in connection with the execution of debt financings similar to the Financing including, but not limited to, for any quarter ended after May 31, 2015 and at least 45 days prior to the Closing Date, the interim consolidated financial statements of Seller and its subsidiaries currently owning or holding any of the Purchased Assets or Joes Business; provided that Seller will have no obligation to prepare pro forma financial information or post-closing financial information.
Revolving Credit Agreement means that certain Revolving Credit Agreement, dated as of September 30, 2013, by and among Joes Jeans Subsidiary, Inc. and Hudson Clothing, LLC, Joes Jeans Inc., certain subsidiaries of Joes Jeans Inc. party thereto, The CIT Group/Commercial Services, Inc., as administrative agent, collateral agent, documentation agent and syndication agent (CIT), CIT Finance LLC, as sole lead arranger and sole bookrunner, and the lenders party thereto, as amended by Omnibus Amendment 1 to Revolving Credit Agreement and Guarantee and Collateral Agreement dated December 20, 2013, as further amended by Amendment 2 to Revolving Credit Agreement dated April 23, 2015, and as further amended by Forbearance Agreement and Amendment 3 to Revolving Credit Agreement dated June 26, 2015.
Royalties has the meaning set forth in Section 2.09(b)(i).
Seller has the meaning set forth in the preamble.
Seller Disclosure Letter means the Disclosure Letter delivered by Seller concurrently with the execution and delivery of this Agreement.
Seller Indemnitees has the meaning set forth in Section 7.03.
Seller Royalty Statement has the meaning set forth in Section 2.09(a).
Seller Termination Fee has the meaning set forth in Section 9.02(b).
Sellers Royalties has the meaning set forth in Section 2.09(b)(ii).
Special Damages has the meaning set forth in Section 7.04(d).
Subsidiary of a Person means any other Person that directly or indirectly, through one or more intermediaries, is Controlled by such Person.
Tax Contest has the meaning set forth in Section 7.05(a).
Tax Return means any return, amended return, disclosure, election, estimate, form, declaration, report, claim for refund, information return or statement or other document required to be filed with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
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Taxes means all federal, state, local, foreign and other income, gross receipts, sales, use, value added, capital gain, capital stock, social security, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments, levies, or other governmental charges in the nature of a tax, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties, and any liability for such amounts as a result of a contractual obligation to indemnify any Person.
Term Loan Agreement means that certain Term Loan Credit Agreement, dated as of September 30, 2013, by and among Joes Jeans Subsidiary, Inc. and Hudson Clothing, LLC, Joes Jeans Inc., certain subsidiaries of Joes Jeans Inc. party thereto, Garrison Loan Agency Services LLC, as administrative agent, collateral agent, lead arranger, documentation agent and syndication agent, and the lenders party thereto (Garrison), as amended.
Third Party Claim has the meaning set forth in Section 7.05(a).
Trademarks has the meaning set forth in the definition of Intellectual Property.
Transaction Documents means this Agreement, the Bill of Sale, the Assignment and Assumption Agreement and the other agreements, instruments and documents required to be delivered at the Closing, including all assignment documents relating to the Intellectual Property Assets that are prepared by Buyer and required for recordation with Governmental Authorities to effect or evidence the assignment of such Intellectual Property Assets to Buyer.
Transferred Marks mean the trade name JOES JEANS and all Trademarks, websites and domain names owned by Seller or its Subsidiaries that include the term Joes Jeans, Joes, JD or any terms confusingly similar thereto, and all other Trademarks that are used primarily in connection with the Joes Business, including the Trademarks set forth in Section 4.06(a) of the Seller Disclosure Letter.
Withholding Amounts has the meaning set forth in Section 2.09(b)(i).
Section 1.02 Construction. In this Agreement, unless the context otherwise requires:
(a) references to writing or comparable expressions include a reference to facsimile transmission or comparable means of communication (including e-mail, provided the sender complies with the provisions of Section 10.02);
(b) the phrases delivered or made available shall mean that the information referred to has been physically or electronically delivered to the relevant parties;
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(c) words expressed in the singular number shall include the plural and vice versa; words expressed in the masculine shall include the feminine and neuter gender and vice versa;
(d) the descriptive headings of the several Articles and Sections of this Agreement, the Seller Disclosure Letter and the Buyer Disclosure Letter (as applicable) are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement;
(e) whenever this Agreement refers to a number of days, that number shall refer to calendar days unless Business Days are specified and whenever any action must be taken under this Agreement on or by a day that is not a Business Day, then, unless otherwise indicated herein, that action may be validly taken on or by the next day that is a Business Day;
(f) the words hereof, herein, hereto and hereunder, and words of similar import, shall refer to this Agreement as a whole and not to any provision of this Agreement;
(g) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented;
(h) include, includes, and including are deemed to be followed by without limitation whether or not they are in fact followed by such words or words of similar import; and
(i) references to Dollars, dollars or $, without more are to the lawful currency of United States of America.
Section 1.03 Annexes, Exhibits, and Disclosure Letters. The Annexes, Exhibits, the Seller Disclosure Letter and the Buyer Disclosure Letter are incorporated into and form an integral part of this Agreement.
Section 1.04 Knowledge. When any representation, warranty, covenant or agreement contained in this Agreement is expressly qualified by reference to (i) the Knowledge of Seller or words of similar import, it shall mean the actual knowledge of Lori Nembirkow and Hamish Sandhu and the knowledge such individuals would have after reasonable inquiry, and (ii) the Knowledge of Buyer or words of similar import, it shall mean the actual knowledge of Gary Klein, Chad Wagenheim and Yehuda Shmidman and the knowledge such individuals would have after reasonable inquiry.
ARTICLE II
PURCHASE AND SALE
Section 2.01 Purchase and Sale of Assets. On the terms and subject to the conditions set forth herein, at the Closing, Seller shall (and shall cause its applicable Subsidiaries to) sell, assign, transfer, convey and deliver, and Buyer shall purchase, all of Sellers and its applicable Subsidiaries right, title and interest in, to and under the Purchased Assets free and clear of all Encumbrances (other than Permitted Encumbrances). Purchased Assets means only the following assets owned by Seller or its applicable Subsidiaries:
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(a) the Transferred Marks, the other Intellectual Property set forth on Section 4.06(a) of the Seller Disclosure Letter and all other Intellectual Property primarily used in the Joes Business, together with all rights to enforce such Intellectual Property with respect to past, present and future infringements and misappropriations thereof (the Intellectual Property Assets);
(b) the Contracts set forth on Section 2.01(b) of the Seller Disclosure Letter (collectively, the Assigned Contracts);
(c) copies of all books, records, files (whether in paper or electronic format) relating primarily to the assets described in Sections 2.01(a) through 2.01(b), including copies of all prosecution histories and legal files in the possession of Sellers or its applicable Subsidiaries legal departments primarily related to or concerning the Intellectual Property Assets;
(d) copies of all lists of commercial customers and licensees that (i) are or (ii) have been used or held for use in the last five (5) years by Seller or its applicable Subsidiaries in connection with the assets described in Section 2.01(a) and primarily in connection with the assets described in Section 2.01(b);
(e) to the extent transferrable, all express or implied warranties, indemnities and guarantees to the extent primarily related to any of the assets described in Sections 2.01(a) through 2.01(b);
(f) any amounts to be paid to Buyer pursuant to Section 2.09; and
(g) all goodwill associated with any of the assets described in Sections 2.01(a) through 2.01(b).
Seller and Buyer shall review Sections 2.01(a), 2.01(b) and 4.06(a) of the Seller Disclosure Letter to determine at least two (2) Business Days prior to the anticipated Closing Date whether any updates thereto are necessary; provided, that notwithstanding anything to the contrary contained herein, any such update to the Seller Disclosure Letter pursuant to this sentence shall require the prior written consent of Buyer.
Section 2.02 Excluded Assets. Buyer expressly understands and agrees that it is not purchasing or acquiring, and neither Seller nor any of its applicable Subsidiaries is selling or assigning, any properties, assets or rights other than the Purchased Assets (such properties, rights and assets that are not Purchased Assets, collectively, the Excluded Assets).
Section 2.03 Assumed Liabilities. On the terms and subject to the conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge when due only the following liabilities and obligations of Seller or any of its applicable Subsidiaries to the extent arising out of or relating to the Purchased Assets and not included among the Excluded Liabilities (collectively, the Assumed Liabilities):
(a) all liabilities and obligations arising under or relating to the Assigned Contracts in respect of periods on or after the Closing Date, provided, that Buyer shall not assume or agree to pay, discharge or perform any liabilities or obligations arising out of any breach by Seller or any of its applicable Subsidiaries prior to the Closing of any provision of any Assigned Contract;
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(b) any liabilities or obligations for Taxes for which Buyer is liable pursuant to Section 6.10 and Section 6.11; and
(c) subject to Section 2.03(a), all liabilities and obligations arising out of or relating to (i) the ownership or operation of the Purchased Assets in respect of periods on or after the Closing Date and (ii) expenses and filing fees solely and exclusively related to Buyers recordation of Intellectual Property Assets with applicable Governmental Authorities after Closing, but excluding all expenses related to assignments or transfers of Intellectual Property Assets made to Seller by Affiliates of Seller or predecessors-in-interest of the Purchased Assets prior to Closing (or on or after Closing in connection with any IP Title Defect Corrections Actions required under and pursuant to Section 6.05), including all such legal expenses and filing fees for recordation with applicable Governmental Authorities.
Section 2.04 Excluded Liabilities. Notwithstanding anything contained herein to the contrary, Buyer shall not assume or cause to be assumed, or be deemed to have assumed and shall not be liable or responsible to pay, perform or discharge any liabilities or obligations (whether known or unknown, fixed, absolute, matured, unmatured, accrued or contingent, now existing or after the date hereof) of Seller or any of its Subsidiaries, other than Assumed Liabilities, including, but not limited to, (i) all expenses related to assignments or transfers of Intellectual Property Assets made to Seller by Affiliates of Seller or predecessors-in-interest of the Purchased Assets prior to Closing (or on or after the Closing Date in connection with any IP Title Defect Corrections Actions required under and pursuant to Section 6.05), including all such legal expenses and filing fees for recordation with applicable Governmental Authorities, (ii) any liabilities or obligations for Taxes for which Seller is liable pursuant to Section 6.10 and Section 6.11 and (iii) any liabilities or obligations arising out of or relating to the employment or termination of employment of any employee or consultant of Seller or any of its Subsidiaries, including, without limitation, all liabilities or obligations arising out of or relating to the termination of any such employee on or after the Closing (such liabilities or obligations that are not Assumed Liabilities, collectively, the Excluded Liabilities).
Section 2.05 Purchase Price. The aggregate purchase price for the Purchased Assets shall be Sixty-Seven Million Dollars ($67,000,000.00) (the Purchase Price). The Purchase Price shall be paid at Closing by wire transfer of immediately available funds to accounts designated in writing by Seller to Buyer at least two (2) Business Days prior to the Closing. In addition, Buyer shall pay an additional amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000.00) (the Buyer Escrow Funds) by wire transfer of immediately available funds to an account designated in writing by the Escrow Agent, which Buyer Escrow Funds shall be governed by Section 6.16.
Section 2.06 Allocation of Purchase Price. Seller and Buyer agree to allocate the Purchase Price to be paid for the Assets including any Assumed Liabilities and any other amounts treated as consideration for federal income tax purposes in accordance with Section 1060 of the Code. Seller and Buyer agree that Buyer shall prepare and provide to Seller a draft allocation of the purchase price among the Assets within ninety (90) days after the Closing Date.
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Seller shall notify Buyer within thirty (30) days of receipt of such draft allocation of any objection Seller may have thereto. Seller and Buyer agree to resolve any disagreement with respect to such allocation in good faith. In addition, Seller and Buyer hereby undertake and agree to file timely any information that may be required to be filed pursuant to Treasury Regulations promulgated under Section 1060(b) of the Code, and shall use the allocation determined pursuant to this Section 2.06 in connection with the preparation of Internal Revenue Service Form 8594 as such form relates to the transactions contemplated by this Agreement. Neither Seller nor Buyer shall file any Tax Return or other document or otherwise take any position which is inconsistent with the allocation determined pursuant to this Section 2.06 except as may be adjusted by subsequent agreement following an audit by the IRS or by court decision. If Seller and Buyer cannot agree on all or a portion of the allocation within sixty (60) days of the Sellers objection to the allocation, each party shall use its own allocation of the unagreed portion as it deems appropriate.
Section 2.07 Transfer of Purchased Assets and Assumed Liabilities. At the Closing, except as otherwise provided in Section 2.08, the Purchased Assets shall be sold, conveyed, transferred, assigned and delivered to Buyer, free and clear of all Encumbrances (other than Permitted Encumbrances), and the Assumed Liabilities shall be assumed by Buyer, pursuant to transfer and assumption Contracts, bills of sale, endorsements, assurances, conveyances, releases, discharges, assignments, certificates, drafts, checks or other instruments in such form as is necessary to effect a sale, conveyance, transfer and assignment of the Purchased Assets and an assumption of the Assumed Liabilities as Buyer and Seller shall reasonably deem necessary, or as required by Law in order to consummate the transaction and, except as otherwise provided herein, to vest in Buyer valid title to the Purchased Assets free and clear of any Encumbrances (other than Permitted Encumbrances), which documents and instruments shall be executed (upon the terms and subject to the conditions hereof) on the Closing Date by Seller (and, as applicable, its Subsidiaries) and Buyer.
Section 2.08 Required Consents.
(a) Absence of Consents, Obtaining Consents. Notwithstanding anything to the contrary contained in this Agreement, to the extent that the sale, conveyance, transfer, assignment or delivery or attempted sale, conveyance, transfer, assignment or delivery to Buyer of any Purchased Asset or right is prohibited by any applicable Law or would require any third partys or any Governmental Authoritys authorization, approval, consent, negative clearance or waiver and such authorization, approval, consent, negative clearance or waiver shall not have been obtained prior to the Closing, this Agreement shall not constitute a sale, conveyance, transfer, assignment or delivery, or an attempted sale, conveyance, transfer, assignment or delivery thereof. Following the Closing, the parties hereto shall have a continuing obligation to use their commercially reasonable best efforts to cooperate with each other and to obtain promptly all such authorizations, approvals, consents, negative clearances or waivers; provided, that neither Seller nor any of its Affiliates shall be required to commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party to obtain such authorizations, approvals, consents, negative clearances or waivers. Upon obtaining the requisite authorization, approval, consent, negative clearance or waiver, Seller or its applicable Subsidiary shall promptly convey, transfer, assign and deliver, or cause to be conveyed, transferred, assigned and delivered, such Purchased Asset or right to Buyer hereunder.
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(b) Benefit of Purchased Assets. Pending, or in the absence of, such authorization, approval, consent, negative clearance or waiver referenced in Section 2.08(a), the parties hereto shall cooperate with each other in any reasonable and lawful arrangements designed to provide to Buyer the economic claims, rights and benefits and liabilities of use of such Purchased Asset or right, and Seller or its applicable Subsidiary shall continue to use, exercise or perform such Purchased Asset or right upon the reasonable direction of Buyer; provided, that Seller shall bear the economic burden resulting from implementation of any such alternative arrangement pursuant to this Section 2.08(b). If such arrangements with respect to any particular Purchased Asset or right does not provide Buyer with all of the economic claims, rights, and benefits under such Purchased Asset or right, Buyer shall not be responsible for the Assumed Liabilities, if any, arising under such Purchased Asset or right.
Section 2.09 Reconciliation of Royalty Payments.
(a) Within sixty days (60) following the Closing Date, Seller shall provide Buyer with a statement (Royalty Statement) setting forth, with respect to each Assigned Contract, its good faith calculation of the following, together with reasonable supporting documentation for such calculations:
(i) the amount of royalty advances and other payments (less applicable prepaid commissions and agency fees) received by Seller or its Subsidiaries in connection with an Assigned Contract but unearned as of the Closing Date (Advances); and
(ii) for Assigned Contracts that require the counterparty to pay a flat fee, the amount of any fees fully paid before the Closing Date but expressly applicable to periods on or after the Closing Date Date (Paid-Up Fees).
(b) Within thirty (30) days after the later of (x) the last day of the first full calendar quarter on or after the Closing Date and (y) the date the Royalty Statement is delivered to Buyer, Buyer shall prepare in good faith, subject to the review and approval by Seller, a written calculation with respect to each Assigned Contract (the Final Reconciliation) of:
(i) for Assigned Contracts that require the counterparty to pay a percentage-based royalty, the actual amount of the license fees, franchise fees, royalty fees, common marketing fund fees, or other fees, payments, consideration or compensation with respect to each such Assigned Contract (Royalties) paid to Buyer or its Affiliates on or after the Closing Date (but including amounts of any tax withholding by a licensee that is a party to an Assigned Contract (Withholding Amounts));
(ii) any pro rata portion of the Royalties and Withholding Amounts (less applicable commissions and agency fees) received by Buyer but attributable to periods before the Closing Date (Sellers Royalties);
(iii) the Advances; and
(iv) the Paid-Up Fees.
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Exhibit A sets forth examples of how the amounts described in this Section 2.09(b) will be determined. Seller will have thirty (30) days following delivery of the Final Reconciliation by Buyer to review the Final Reconciliation and, if applicable, deliver a written notice of objections to Buyer (the Notice of Objections) specifying all disagreements with items, calculations or methodologies utilized in preparing the Final Reconciliation. Buyer shall make all Assigned Contracts, work papers and books and records relating to payments under the Assigned Contracts, and any other information and materials reasonably requested by Seller, available to Seller and its Representatives during such review period. Buyer shall use the same efforts to collect Sellers Royalties as it uses to collect Royalties for its own account, and shall reasonably cooperate with Seller in connection therewith. If Seller does not deliver a Notice of Objections, the Final Reconciliation shall be final and binding on the parties hereto.
(c) If Buyer and Seller are unable to resolve any disagreements with respect to the Final Reconciliation within ninety (90) days of delivery to Buyer of the Notice of Objection, then either Buyer or Seller may submit such disagreements for final and binding resolution to a Neutral Accounting Firm to resolve such disagreements (the Accounting Arbitrator). Each of Buyer, on the one hand, and Seller, on the other hand, shall be permitted to present supporting documentation to the Accounting Arbitrator (which supporting documentation shall also be concurrently provided to the other party(ies)) within fifteen (15) days of the appointment of the Accounting Arbitrator. Within fifteen (15) days of receipt of supporting documentation, the receiving party(ies) may present responsive documentation to the Accounting Arbitrator (which responsive documentation shall also be concurrently provided to the other party(ies)). The Accounting Arbitrator shall only consider the documentation of the parties, and shall not conduct any independent review, in determining those items and amounts disputed by the parties. The Accounting Arbitrator shall select either the position of Buyer or Seller as a resolution for each item or amount disputed and may not impose an alternative resolution with respect to any item or amount disputed and must resolve the matter in accordance with the terms and provisions of this Agreement. The Accounting Arbitrator shall deliver to Buyer and Seller, as promptly as practicable and in any event within sixty (60) days after its appointment, a written report setting forth the resolution of any such disagreement determined in accordance with the terms of this Agreement. The determination of the Accounting Arbitrator shall be final and binding on the parties hereto. The fees of the Accounting Arbitrator shall be borne by Buyer, on the one hand, and Seller, on the other hand, in such amount(s) as shall be determined by the Accounting Arbitrator based on the proportion that the aggregate number of disputed items submitted to the Accounting Arbitrator that is unsuccessfully disputed by Buyer, on the one hand, or Seller, on the other hand, as determined by the Accounting Arbitrator, bears to the total number of such disputed items so referred to the Accounting Arbitrator for resolution.
(d) If the amount set forth on the Final Reconciliation with respect to Sellers Royalties is greater than the aggregate amounts set forth with respect to Advances and Paid-Up Fees, then Buyer shall pay the difference to Seller by wire transfer within ten (10) days after the later of the date of the Final Reconciliation or the date that the Accounting Arbitrator has delivered its written report.
(e) If the amount set forth on the Final Reconciliation with respect to Sellers Royalties is less than the aggregate amounts set forth with respect to Advances and Paid-Up Fees, then Seller shall pay the difference to Buyer by wire transfer within ten (10) days after the later of the date of the Final Reconciliation or the date that the Accounting Arbitrator has delivered its written report.
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Section 2.10 Withholding Rights. Buyer shall be entitled to deduct and withhold from the consideration otherwise payable to Seller pursuant to Article III hereof, such amount as it is required to deduct and withhold with respect to the making of such payment any provision of U.S. federal, state, local or foreign Tax law; provided that such Tax would not be the liability of Buyer under this Agreement; and provided further that, at least five (5) Business Days prior to such withholding, the Buyer will provide Seller with notice of such withholding and the parties jointly discuss the necessity of or how to reduce or eliminate such withholding. If Buyer so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to Seller in respect of which Buyer made such deduction and withholding.
ARTICLE III
CLOSING
Section 3.01 Closing. On the terms and subject to the conditions of this Agreement, the closing of the transactions contemplated hereby (the Closing) shall take place on the date that is two (2) Business Days following the satisfaction or waiver of all of the conditions set forth in Article VIII hereof (other than those conditions to be satisfied on the Closing Date, but subject to the satisfaction or waiver, if permissible, of such conditions) at the offices of Akin Gump Strauss Hauer & Feld LLP, 1333 New Hampshire Avenue NW, Washington DC 20036, or at such other time, date or place as the parties hereto shall agree in writing; provided, that in no event shall Buyer be required to consummate the Closing prior to September 8, 2015; provided, further, that the Closing shall be consummated concurrently with the consummation of the transactions contemplated by the Operating Asset Purchase Agreement. The date upon which the Closing occurs is herein referred to as the Closing Date. Upon consummation of the Closing, the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities hereunder, and the Closing, shall be deemed to have occurred as of 12:01 a.m. (New York time) on the Closing Date.
Section 3.02 Closing Deliverables.
(a) At the Closing, Seller shall deliver (or cause to be delivered) to Buyer the following:
(i) a certificate signed by an authorized officer of Seller, dated as of the Closing Date, confirming the matters set forth in Sections 8.02(a), (b) and (d);
(ii) a counterpart to the bill of sale in the form of Exhibit B hereto (the Bill of Sale), duly executed by Seller and/or its applicable Subsidiaries;
(iii) a counterpart to the assignment and assumption agreement in the form of Exhibit C hereto (the Assignment and Assumption Agreement), duly executed by Seller and/or its applicable Subsidiaries;
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(iv) a non-foreign person affidavit from Seller and/or its applicable Subsidiaries dated as of the Closing Date as required by, and satisfying the requirements of, Section 1445 of the Code;
(v) counterparts to all assignments or documents of transfer to effect the assignment of all patents, copyrights, trademarks and internet domain names, and related registrations and applications, comprising Intellectual Property Assets, duly executed by Seller and/or its applicable Subsidiaries, in the forms attached hereto as Exhibit D or the forms that are prepared by Buyer and required for recordation with Governmental Authorities to effect or evidence the assignment of such Intellectual Property Assets to Buyer;
(vi) a counterpart to the escrow agreement in the form of Exhibit F hereto (the Escrow Agreement), duly executed by Seller and the Escrow Agent;
(vii) a duly executed pay-off letter from Garrison, in a form reasonably satisfactory to Buyer, certifying that all indebtedness under the Term Loan Agreement with respect to the Joes Business owing to the lenders thereunder has been fully paid and that all Encumbrances imposed by or in connection with the Term Loan Agreement upon the Purchased Assets have been released;
(viii) a duly executed pay-off letter from CIT, in a form reasonably satisfactory to Buyer, certifying that all indebtedness under the Revolving Credit Agreement with respect to the Joes Business owing to the lenders thereunder has been fully paid and that all Encumbrances imposed by or in connection with the Revolving Credit Agreement upon the Purchased Assets have been released; and
(ix) such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer and Seller, as may be required to give effect to this Agreement.
(b) At the Closing, Buyer shall deliver (or cause to be delivered) to Seller or its applicable Subsidiary the following:
(i) an amount in cash equal to the Purchase Price (subject to any withholding rights under Section 2.10), payable by wire transfer of immediately available funds in accordance with Section 2.05;
(ii) a certificate signed by an authorized officer of Buyer, dated as of the Closing Date, confirming the matters set forth in Sections 8.03(a) and (b);
(iii) a counterpart to the Bill of Sale duly executed by Buyer;
(iv) a counterpart to the Assignment and Assumption Agreement duly executed by Buyer;
(v) a counterpart to the Escrow Agreement duly executed by Buyer; and
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(vi) such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer and Seller, as may be required to give effect to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Seller Disclosure Letter, Seller represents and warrants to Buyer that the statements contained in this Article IV are true and correct.
Section 4.01 Organization and Qualification of Seller. Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Seller and its applicable Subsidiaries have all necessary corporate or other power and authority to own the Purchased Assets and to carry on the Joes Business as currently conducted. Seller and its applicable Subsidiaries are duly licensed or qualified to do business and are in good standing in each jurisdiction in which the ownership of the Purchased Assets or the operation of the Joes Business as currently conducted makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 4.02 Authority of Seller. Seller has all necessary corporate or other power and authority to enter into this Agreement and the other Transaction Documents to which Seller is a party, to carry out its respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Each applicable Subsidiary of Seller has all necessary corporate or other power and authority to enter into the Transaction Documents to which such Subsidiary is a party, to carry out its respective obligations thereunder and to consummate the transactions contemplated thereby. The execution and delivery by Seller of this Agreement and any other Transaction Document to which Seller is a party, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller and its Subsidiary of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Seller. The execution and delivery by each applicable Subsidiary of Seller of any Transaction Document to which such Subsidiary is a party, the performance by such Subsidiary of its obligations thereunder and the consummation by such Subsidiary of the transactions contemplated thereby have been duly authorized by all requisite corporate or other action on the part of such Subsidiary. This Agreement has been duly executed and delivered by Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). At the Closing, each Transaction Document shall have been duly executed and delivered by Seller and/or its Subsidiaries, as applicable, and (assuming due authorization, execution and delivery by Buyer) each such Transaction Document shall constitute a legal, valid and binding obligation of Seller and/or such Subsidiary, enforceable against Seller and/or such Subsidiary in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
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Section 4.03 No Conflicts; Consents. (a) The execution, delivery and performance by Seller of this Agreement and the Transaction Documents to which Seller is a party, and the consummation of the transactions contemplated hereby and thereby and (b) the execution, delivery and performance by each applicable Subsidiary of Seller of the Transaction Documents to which such Subsidiary is a party, and the consummation of the transactions contemplated thereby do not and will not: (i) result in a violation or breach of or conflict with any provision of the certificate of incorporation or by-laws (or equivalent organizational documents) of Seller or such Subsidiaries, as applicable, in each case, amended to the date of this Agreement; (ii) create any Encumbrance (other than Permitted Encumbrances) upon any Purchased Asset; (iii) result in a violation or breach of or conflict with any provision of any Law or Governmental Order applicable to Seller, any of such Subsidiaries, the Joes Business or the Purchased Assets; or (iv) except as set forth in Section 4.03 of the Seller Disclosure Letter, require the consent, notice or other action by any Person under, conflict with, result in a material violation or breach of, constitute a material default under or result in the acceleration of any Assigned Contract. Except as set forth on Section 4.03 of the Seller Disclosure Letter, no material consent, approval, Permit, or Governmental Order of, material declaration or filing with, or material notice to, any Governmental Authority is required by or with respect to Seller or any of its Subsidiaries in connection with the execution and delivery of this Agreement or any of the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby. Except as set forth in Section 4.03 of the Seller Disclosure Letter, no consents or approvals of any non-governmental Person are necessary for the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, including the transfer of all the Purchased Assets.
Section 4.04 Absence of Certain Changes, Events and Conditions. Except as set forth on Section 4.04 of the Seller Disclosure Letter, since November 30, 2014, Seller and its Subsidiaries have operated the Joes Business in the ordinary course of business in all material respects and there has not been any:
(a) sale, assignment, abandonment, cancellation, transfer, license or other disposition of any material assets or rights that would otherwise constitute Purchased Assets hereunder, except in the ordinary course of business consistent with past practice;
(b) action taken or omitted to be taken by either Seller or any of its Subsidiaries that would, individually or in the aggregate, constitute a breach of Section 6.03, if such action had been taken or omitted to be taken after the date hereof;
(c) imposition of any Encumbrance (other than Permitted Encumbrances) upon any of the Purchased Assets; or
(d) event, circumstance, development, state of facts, occurrence, change or effect which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
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Section 4.05 Material Contracts. Section 4.05(a) of the Seller Disclosure Letter sets forth an accurate and complete list as of the date hereof of each of the Material Contracts. Other than the Assigned Contracts included within the Material Contracts, there are no Contracts which license any of the Intellectual Property Assets, including the Transferred Marks, to any other Person or allow any Person to procure, distribute, import or sell any Product branded with or offered for sale under any of the Transferred Marks or otherwise limit the ability of Seller or any of its Subsidiaries to use any Intellectual Property Assets in any capacity. Except as set forth on Section 4.05(b) of the Seller Disclosure Letter, neither Seller nor any of its Subsidiaries is in breach of, and there exists no default or event of default, nor any event, occurrence, condition or act (including the transactions contemplated hereby) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a default or event of default thereunder with respect to any provision under any Assigned Contract. Each Assigned Contract has not been terminated or been repudiated by Seller or any of its Subsidiaries nor, to the Knowledge of Seller, any other party thereto. Each Assigned Contract is in full force and effect and is the legal, valid and binding obligation of Seller and its Subsidiaries, as applicable, and, to the Knowledge of Seller, each of the other parties thereto, enforceable in accordance with the terms thereof, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, fraudulent conveyance, moratorium and other similar Laws relating to or affecting creditors rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and implied covenant of good faith and fair dealing. All the material covenants to be performed by Seller or its Subsidiaries under any Assigned Contract have been fully performed in all material respects. Except as set forth on Section 4.05(c) of the Seller Disclosure Letter, to the Knowledge of Seller, all of the material covenants to be performed by any other party to any Assigned Contract have been fully performed in all material respects.
Section 4.06 Intellectual Property.
(a) Section 4.06(a) of the Seller Disclosure Letter contains a complete and accurate list of all patents, patent applications, registered copyrights and applications for registration thereof, registered trademarks and service marks and applications for registration thereof and Internet domain names that are included in the Intellectual Property Assets. To the extent indicated on such schedule, the Intellectual Property Assets listed on Section 4.06(a) of the Seller Disclosure Letter have been duly registered in, filed in or issued by the United States Patent and Trademark Office, the United States Copyright Office, a duly accredited and appropriate domain name registrar, or the appropriate Governmental Authorities of other jurisdictions (foreign and domestic).
(b) Except as set forth in Section 4.06(b) of the Seller Disclosure Letter, Seller or one of its Subsidiaries owns, free and clear of all Encumbrances (other than Permitted Encumbrances) or has the right to use all Intellectual Property owned or used by Seller and/or its Subsidiaries in connection with the Joes Business.
(c) The Intellectual Property Assets represent (in all material respects) all of the Intellectual Property necessary to manufacture, distribute and sell Products consistent with the Products branded with or offered under any of the Transferred Marks manufactured, distributed and sold as of Closing, and conduct the Joes Business in substantially the same manner as currently conducted.
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(d) Except as set forth in Section 4.06(d) of the Seller Disclosure Letter, (i) the conduct of the Joes Business and the use of the Intellectual Property Assets in the Joes Business (including the manufacturing, marketing, licensing, sale or distribution of Products branded with or offered under any of the Transferred Marks) do not infringe, violate, dilute or misappropriate the Intellectual Property of any Person; and (ii) as of the date hereof, neither Seller nor its Subsidiaries have received in the past three (3) years any notice or claim (including threats or offers to license and cease and desist communications) from any Person challenging the right of Seller or its Subsidiaries, or any of their respective manufacturers, contractors or licensees to use any of the Intellectual Property Assets, or alleging any infringement, misappropriation, or violation of any Persons Intellectual Property rights in connection with the Joes Business; and (iii) neither Seller nor its Affiliates have asserted in the past three (3) years any claim of a violation, infringement, misappropriation or misuse by any Person of any Intellectual Property Assets. To the Knowledge of Seller, except as set forth in Section 4.06(d) of the Seller Disclosure Letter, as of the date hereof, no Person is infringing, violating, or misappropriating any Intellectual Property Assets.
(e) Except as set forth in Section 4.06(e) of the Seller Disclosure Letter, to the Knowledge of Seller as of the date hereof, there is no jurisdiction among the Key Jurisdictions in which the tradename JOES JEANS is not available for use and registration in connection with the Products currently being sold in International Classes 14, 18, 25 or 35 by the Joes Business.
Section 4.07 Legal Proceedings; Governmental Orders.
(a) Except as set forth in Section 4.07(a) of the Seller Disclosure Letter, as of the date hereof there are no actions, suits, claims, litigations, investigations, audits or other legal proceedings (including arbitration or administrative proceedings, interferences, cancellation proceedings, oppositions or other contested proceedings), at law or in equity, pending or, to the Knowledge of Seller, threatened against or by Seller or any of its Subsidiaries either (i) relating to the Joes Business, the Purchased Assets or the Assumed Liabilities or (ii) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
(b) Except as set forth in Section 4.07(b) of the Seller Disclosure Letter, there are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting the Joes Business, the Purchased Assets or the Assumed Liabilities.
Section 4.08 Compliance with Laws. Except as set forth in Section 4.08 of the Seller Disclosure Letter, Seller and each of its applicable Subsidiaries are in compliance in all material respects with all Laws applicable to the conduct of the Joes Business as currently conducted and the ownership and use of the Purchased Assets.
Section 4.09 Taxes. Except as set forth in Section 4.09 of the Seller Disclosure Letter,
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(a) Seller and its Subsidiaries have timely filed, or will timely file (taking into account any valid extensions), all material Tax Returns with respect to the Joes Business or the Purchased Assets required to be filed on or prior to the Closing Date. Neither Seller nor any of its Subsidiaries is currently the beneficiary of any extension of time within which to file any material Tax Return other than extensions of time to file Tax Returns obtained in the ordinary course of business.
(b) All material Taxes due by or with respect to the income or operations of the Joes Business or the ownership of the Purchased Assets for all Pre-Closing Periods have been timely paid or will be timely paid in full.
(c) (i) neither Seller nor any of its Subsidiaries has been, in the past two (2) years, or is currently the subject of an audit or other examination of Taxes by the tax authorities of any nation, state or locality with respect to the Joes Business or the Purchased Assets and (ii) no such audit is contemplated in writing or, to the Knowledge of Seller, pending.
(d) Neither Seller nor its Subsidiaries, as of the Closing Date, (i) has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes with respect to the income or operations of the Business or the Purchased Assets that has not expired (other than extensions of time to file Tax Returns obtained in the ordinary course) or (ii) is presently contesting the Tax liability with respect to the income or operations of the Business or the Purchased Assets before any Governmental Authority.
(e) In the past two (2) years, no written claim has been made by any Governmental Authority in a jurisdiction where Seller does not file Tax Returns with respect to the income or operations of the Business or the ownership of the Purchased Assets, which has not been resolved and remains outstanding, that Seller is or may be subject to taxation by that jurisdiction with respect to the income or operations of the Business or the ownership of the Purchased Assets.
(f) There are no material Encumbrances on any of the Purchased Assets that arose in connection with any failure (or alleged failure) to pay any Taxes, other than Taxes not yet due and payable.
(g) Seller and its Subsidiaries are in compliance in all material respects with obligations to withhold or collect Taxes with respect to all material Taxes that Seller or any of its Subsidiaries is (or was) required by Law to withhold or collect with respect to the income or operations of the Business or the Purchased Assets in connection with amounts paid or owing to any employee, independent contractor, creditor, equity holder or other third party have been duly withheld or collected, and such Taxes have been timely paid over to the proper authorities to the extent due and payable.
(h) None of the Purchased Assets is an equity interest in a partnership or a corporation (or an entity treated as a partnership or a corporation) for U.S. federal income tax purposes.
(i) Seller is not a foreign person within the meaning of Section 1445 of the Code.
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The representations in this Section 4.09 shall constitute the sole and exclusive representations in this Agreement concerning any Tax matters relating to Seller or any of its Subsidiaries or the Purchased Assets.
Section 4.10 Customers and Suppliers. Section 4.10 of the Seller Disclosure Letter sets forth an accurate and complete list of each supplier, licensee and customer accounting for more than ten percent (10%) of the consolidated purchases, royalties and sales, as the case may be, of Seller and its applicable Subsidiaries in respect of the Joes Business, for the twelve (12) month period ended May 31, 2015 (Key Customers and Suppliers). Except as set forth in Section 4.10 of the Seller Disclosure Letter, since November 30, 2014 through the date hereof, no Key Customer or Supplier has cancelled or otherwise terminated, or to the Knowledge of Seller, threatened to cancel or otherwise terminate, its relationship with Seller or any of its Subsidiaries with respect to the Joes Business. Since November 30, 2014, neither Seller nor any of its Subsidiaries has received any written notice that any Key Customer or Supplier may cancel or otherwise materially and adversely (i) modify its relationship with Seller or any of its applicable Subsidiaries or (ii) limit its (A) services, supplies, or materials to Seller or any of its applicable Subsidiaries in respect of the Joes Business or (B) usage or purchase of the services and products of Seller and its applicable Subsidiaries with respect to the Joes Business.
Section 4.11 Brokers. Except as set forth on Section 4.11 of the Seller Disclosure Letter, no broker, finder, firm or investment banker or any other Person is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Seller.
Section 4.12 Solvency. Immediately prior to, and immediately subsequent to, the consummation of the sale of the Purchased Assets pursuant to the provisions of this Agreement, Seller will be solvent, with the ability to pay its debts as they become due. For purposes of this Agreement, solvent shall mean that the present fair saleable value of Sellers assets is greater than the amount that will be required to pay Sellers liability on its existing debts as they become absolute and matured.
Section 4.13 No Other Representations and Warranties. Except for the representations and warranties contained in this Article IV (as qualified by the Seller Disclosure Letter), neither Seller, nor any other Person on behalf of Seller, has made or makes any other express or implied representation or warranty, either written or oral, including any representation or warranty as to the accuracy or completeness of any information regarding the Joes Business and the Purchased Assets furnished or made available to Buyer and its Representatives, or as to the future revenue, profitability or success of the Joes Business, or any representation or warranty arising from statute or otherwise in law. Any and all statements made or information communicated by Seller, any of its Subsidiaries or any of their respective Representatives outside of this Agreement (including by way of documents provided in response to Buyers written diligence request(s) and any management presentation provided), whether verbally, in writing or otherwise, are deemed to have been superseded by this Agreement, it being intended that no such prior or contemporaneous statements or communications outside of this Agreement shall survive the execution and delivery of this Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Buyer Disclosure Letter, Buyer represents and warrants to Seller that the statements contained in this Article V are true and correct.
Section 5.01 Organization of Buyer. Buyer is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of Delaware and has all necessary limited liability company power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as currently conducted.
Section 5.02 Authority of Buyer. Buyer has all necessary limited liability company power and authority to enter into this Agreement and the other Transaction Documents to which Buyer is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and any other Transaction Document to which Buyer is a party, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite limited liability company action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller) this Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). At the Closing, each other Transaction Document shall have been duly executed and delivered by Buyer and (assuming due authorization, execution and delivery by Seller and/or its Subsidiaries, as applicable,) each such Transaction Document shall constitute a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 5.03 No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) result in a violation or breach of or conflict with any provision of the organizational documents of Buyer, in each case, amended as of the date of this Agreement; (b) result in a violation or breach of or conflict with any provision of any Law or Governmental Order applicable to Buyer; or (c) except as set forth in Section 5.03 of the Buyer Disclosure Letter, require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any agreement to which Buyer is a party, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not reasonably be expected to have a material adverse effect on Buyers ability to consummate the transactions contemplated hereby. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any
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Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, except for such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which would not have a material adverse effect on Buyers ability to consummate the transactions contemplated hereby and thereby.
Section 5.04 Brokers. No broker, finder, firm or investment banker or any other Person is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer.
Section 5.05 Legal Proceedings. There are no actions, suits, claims, investigations or other legal proceedings pending or, to the Knowledge of Buyer, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
Section 5.06 Financing. Buyer or Parent has obtained a commitment letter (the Debt Commitment Letter) from GSO Capital Partners LP (together with any other lender that becomes a party thereto, the Lender), a true and complete copy of which has been provided to Seller (together with each related fee letter (subject to redaction so long as such redaction does not cover terms that would adversely affect the conditionality, availability or term of the Financing)), providing for, subject to the conditions and qualifications set forth therein, all funds necessary, which, subject to fulfilment of the conditions set forth in this Agreement, are available to Buyer, together with its cash on hand, to consummate the transactions contemplated by this Agreement. As of the date of this Agreement, the Debt Commitment Letter and the financing commitment contained therein, (i) have not been amended, restated, withdrawn, rescinded or otherwise modified or waived, and, no such amendment, restatement, withdrawal, rescission or other modification or waiver of the Debt Commitment Letter is contemplated and (ii) is in full force and effect, and constitute the legal, valid and binding obligations of Buyer and, to the Knowledge of Buyer, the other parties thereto, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). There are no conditions precedent related to the funding of the financing described in the Debt Commitment Letter or contingencies that would permit the Lender, Buyer or Parent to reduce the total amount of the Financing, other than as set forth in the Debt Commitment Letter. Buyer has fully paid any and all commitment fees or other fees or deposits required by the Debt Commitment Letter to be paid on or before the date hereof. As of the date of this Agreement, no event has occurred which, with or without notice, lapse of time or both, that constitutes or would reasonably be expected to constitute a default or breach on the part of Buyer and, to the Knowledge of Buyer, any other parties thereto, under the Debt Commitment Letter. As of the date of this Agreement, assuming the accuracy of Sellers representations and warranties set forth in this Agreement and performance by Seller of its obligations under this Agreement, Buyer has no reason to believe that any of the conditions to the Financing contemplated by the Debt Commitment Letter will not be satisfied or that the Financing will not be available to Buyer on the Closing Date. As of the date of this Agreement, there are no side letters or other agreements, Contracts or written arrangements to which Buyer or any of its Affiliates is a party related to the Financing other than as expressly set forth in the Debt Commitment Letter and any customary fee letters (a redacted version of which has been provided to Seller as described above) and non-disclosure agreements that do not impact the conditionality or amount of the Financing.
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Section 5.07 No Other Representations and Warranties. Except for the representations and warranties contained in this Article V, neither Buyer nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Buyer. Buyer hereby disclaims any other express or implied representations or warranties with respect to itself or such other Person. Any and all statements made or information communicated by Buyer, Parent or any of their respective Representatives outside of this Agreement (including by way of documents provided in response to Sellers questions), whether verbally, in writing or otherwise, are deemed to have been superseded by this Agreement, it being intended that no such prior or contemporaneous statements or communications outside of this Agreement shall survive the execution and delivery of this Agreement.
ARTICLE VI
COVENANTS
Section 6.01 Access to Information Concerning Purchased Assets and Records.
(a) Seller shall, and shall cause its Subsidiaries to, upon reasonable prior notice and during regular business hours, afford Buyer and its Representatives reasonable access to the Representatives, properties, books and records of Seller and its Subsidiaries relating to the Joes Business, the Purchased Assets and the Assumed Liabilities to the extent Buyer reasonably believes necessary or advisable to familiarize itself with such properties and other matters and, during such period, Seller shall furnish promptly to Buyer all financial and operating data and other information concerning the Joes Business as Buyer may reasonably request; provided, that such access shall not unreasonably disrupt the operations of Seller or any of its Subsidiaries. Notwithstanding the foregoing, neither Seller nor any of its Subsidiaries shall be required to afford such access if it would cause a violation of any Contract, would cause a loss of attorney/client privilege to Seller or any of its Subsidiaries, would violate the privacy rights of or confidentiality obligations to any Person or would constitute a violation under applicable Laws.
(b) No review by Buyer or any knowledge acquired therefrom shall affect the representations and warranties made by Seller pursuant to this Agreement or the remedies of Buyer for breaches of those representations and warranties.
(c) After the Closing Date, Buyer and Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance (including access to books, records, work papers and Tax Returns for Pre-Closing Periods) relating to the Purchased Assets or the Joes Business for Pre-Closing Periods as is reasonably necessary for the preparation of any Tax Return, claim for refund or audit, and the prosecution or defense of any claim, suit or proceeding relating to any proposed Tax adjustment.
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(d) Any request for information or documents pursuant to Section 6.01(c) shall be made by the requesting party in writing. The other party hereto shall promptly (and in no event later than thirty (30) days after receipt of the request) provide the requested information. The requesting party shall indemnify the other party for any reasonable and documented out of pocket expenses incurred by such party in connection with providing any information or documentation pursuant to Section 6.01(c). Any information obtained under Section 6.01(c) shall be kept confidential, except (i) as otherwise reasonably may be necessary in connection with the filing of Tax Returns or claims for refund or in conducting any Tax audit, dispute or contest, (ii) as required by applicable Law and (iii) in connection with the enforcement or defense of this Agreement.
Section 6.02 Confidentiality.
(a) From and after the date of this Agreement until Closing, Buyer and Seller agree they will be bound by and comply with the obligations of the Confidentiality Agreement. After the Closing Date, the Confidentiality Agreement shall, solely with respect to Confidential Material, be deemed to have been terminated by the parties thereto and shall, solely with respect to Confidential Material, no longer be binding.
(b) Seller acknowledges that it is in possession of Confidential Material. For three (3) years following the Closing (other than with respect to Confidential Material relating to the Intellectual Property Assets and Assigned Contracts, for which this provision shall apply in perpetuity), Seller shall, and shall cause its Affiliates and Representatives to, treat confidentially and not disclose any portion of such Confidential Material and will use such Confidential Material solely for the purpose of consummating the transactions contemplated by this Agreement and for no other purpose; provided, that Seller and its Subsidiaries may also use the Confidential Material for the purpose of operating their respective businesses in the ordinary course; provided, further, that Seller and its Subsidiaries may also disclose Confidential Material, to the extent necessary, in connection with (x) the negotiation of the Operating Asset Purchase Agreement and the consummation of the transactions contemplated thereby, (y) the performance of Sellers obligations thereunder and (z) any disputes that may arise in connection herewith or therewith. Seller acknowledges and agrees that such Confidential Material is proprietary and confidential in nature and may be disclosed to its Representatives only to the extent necessary for Seller to consummate the transactions contemplated by this Agreement, for purposes of operating their respective businesses in the ordinary course or in connection with the enforcement or defense of this Agreement (it being understood that Seller shall be responsible for any disclosure by any such Representative not permitted by this Agreement). If Seller or any of its Affiliates or Representatives are requested or required to disclose (after, to the extent legally permitted, Seller has used its commercially reasonable best efforts to avoid such disclosure and after, to the extent legally permitted, promptly advising and consulting with Buyer about Sellers intention to make, and the proposed contents of, such disclosure) any of the Confidential Material (whether by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process), Seller shall, or shall cause such Affiliate or Representative, to provide, to the extent legally permitted, Buyer with prompt written notice of such request so that Buyer may seek an appropriate protective order or other appropriate remedy. At any time that such protective order or remedy has not been obtained or Buyer waives Sellers obligations hereunder, Seller or such Affiliate or Representative may disclose only that portion
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of the Confidential Material which such Person is legally required to disclose or of which disclosure is required to avoid sanction for contempt or any similar sanction, and Seller shall exercise its commercially reasonable best efforts to obtain assurance that confidential treatment will be accorded to such Confidential Material so disclosed. Seller further agrees that, from and after the Closing Date, Seller and its Affiliates and Representatives, upon the request of Buyer, promptly will deliver to Buyer all documents, or other tangible embodiments, constituting Confidential Material or other information with respect to the Joes Business, without retaining any copy thereof, and shall promptly destroy all other information and documents constituting or containing Confidential Material; provided, that Seller and its Affiliates and Representatives shall be entitled to retain copies of Confidential Material for legal and regulatory compliance purposes and in connection with any applicable document retention policies, and shall not be required to identify or delete Confidential Material held electronically in archive or back-up systems in accordance with general systems archiving or backup policies.
Section 6.03 Conduct of Seller and the Business Pending the Closing Date.
(a) Seller agrees that, during the period commencing on the date hereof and ending on the Closing Date, except as set forth in Section 6.03(a) of the Seller Disclosure Letter (but subject to Section 6.16(a) of the Seller Disclosure Letter), it shall, and shall cause its applicable Subsidiaries to, conduct the Joes Business only in the ordinary course of business consistent with past practice and to use their commercially reasonable best efforts to preserve intact the Joes Business and the Purchased Assets and maintain satisfactory relationships with licensors, licensees, suppliers, distributors, clients and others having business relationships with the Joes Business.
(b) In furtherance and not in limitation of Section 6.03(a) (but subject to Section 6.16(a) of the Seller Disclosure Letter), Seller agrees that during the period commencing on the date hereof and ending on the Closing Date, it shall not, and shall cause each of its applicable Subsidiaries not to, effect any of the following (as each pertains to or is related to the Joes Business, the Purchased Assets or the Assumed Liabilities) without the prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed):
(i) amend, renew or terminate any Assigned Contract;
(ii) sell, transfer, lease, abandon, cancel, license or otherwise dispose of any Intellectual Property Asset;
(iii) sell, transfer, lease, abandon, cancel, license or otherwise dispose of any Purchased Assets (other than any Intellectual Property Asset) other than in the ordinary course of business consistent with past practices;
(iv) pay, discharge, settle or satisfy any Assumed Liabilities other than in the ordinary course of business, consistent with past practice;
(v) other than in the ordinary course of business, consistent with past practice, enter into any transaction that would constitute an Assumed Liability;
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(vi) subject any of the Purchased Assets to any Encumbrance (other than Permitted Encumbrances); or
(vii) subject to the foregoing clause (ii), enter into any Contract involving aggregate consideration in excess of Fifty Thousand Dollars ($50,000) which, if entered into prior to the date hereof would be required to be set forth in Section 4.05(a) of the Seller Disclosure Letter or commit or agree (whether or not such Contract, commitment or agreement is legally binding) to do, or authorize, any of the foregoing.
(c) During the period from the date of this Agreement to the Closing Date, Seller shall and shall cause its Subsidiaries to, upon request of Buyer, confer with one (1) or more designated Representatives of Buyer to report material operational matters and to report the general status of ongoing operations, in each case, solely with respect to the Joes Business.
(d) Seller shall keep, or cause its Subsidiaries to keep, all material insurance policies currently maintained with respect to the Joes Business, or suitable replacements or renewals, in full force and effect until the Closing.
Section 6.04 Commercially Reasonable Best Efforts; Consents.
(a) Subject to the terms and conditions contained in this Section 6.04, Seller and Buyer shall, and Seller shall cause each of its Subsidiaries to, cooperate and use their respective commercially reasonable best efforts to take, or cause to be taken, all appropriate action, and to make, or cause to be made, all filings necessary, proper or advisable under applicable Laws and to consummate and make effective the transactions contemplated by this Agreement, including their respective commercially reasonable best efforts to obtain, prior to the Closing Date, all Permits, consents, approvals, authorizations, qualifications and Governmental Orders as are necessary for consummation of the transactions contemplated by this Agreement and to fulfill the conditions to consummation of the transactions contemplated hereby set forth in Article VIII hereof; provided, that no indebtedness for borrowed money shall be repaid, except as otherwise required pursuant to the terms of the applicable loan agreement, and no Assigned Contract shall be amended to increase the amount payable thereunder or otherwise to be materially more burdensome to Seller or any of its Subsidiaries (or Buyer after the Closing), to obtain any such consent, approval or authorization, without first obtaining the written approval of Buyer; provided, further, that neither Seller nor any of its Affiliates shall be required to offer or grant any accommodation (financial or otherwise) to any third party to obtain any such Permit, consent, approval, authorization, qualifications or Governmental Order.
Section 6.05 Intellectual Property Title Matters. To the extent that any Intellectual Property Assets set forth on Section 4.06(a) of the Seller Disclosure Letter are not in the current legal name of Seller or one of its Subsidiaries (including any such asset or license agreement that is used by or in connection with the Joes Business that is in the name of an Affiliate of Seller (which is not also a Subsidiary of Seller), or any predecessor to Seller or its Subsidiaries), is subject to a chain of title defect, or is subject to any form of Encumbrance (other than Permitted Encumbrances), Seller shall, and shall cause each of its applicable Subsidiaries to, prior to Closing, prepare, execute and file for record such instruments and documents necessary to cure such title defects, provide for current ownership of the asset by Seller or one of its
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Subsidiaries and remove the Encumbrance (other than Permitted Encumbrances) in such Intellectual Property Asset prior to Closing so as to allow for the assignment thereof to Buyer as part of the transactions contemplated herein (all such actions, the IP Title Defect Correction Actions); provided, that if Seller or its applicable Subsidiaries are unable to cure such title defect, provide for current ownership of the asset by Seller or one of its Subsidiaries or remove the Encumbrance (other than Permitted Encumbrances) in such Intellectual Property prior to the Closing and Buyer waives the requirement of such IP Title Defect Correction Actions as a condition precedent to the Closing, Seller and each of its applicable Subsidiaries shall have a continuing obligation following the Closing to use commercially reasonable best efforts to take IP Title Defect Correction Actions to promptly resolve such issue. Seller and each of its Subsidiaries shall be responsible for and pay its own expenses incurred in connection with any IP Title Defect Correction Actions, and shall deliver all documentation that is filed concerning the IP Title Defect Correction Actions to Buyer at such time the IP Title Defect Correction Actions are taken.
Section 6.06 Use of Transferred Marks; Transaction Documents. From and after the Closing, Seller shall not, and shall cause its Subsidiaries not to, use any of the Intellectual Property Assets or any Trademarks confusingly similar to the Transferred Marks (except for references in historical, tax, and similar records, other permissible fair use and as otherwise required by Law); provided, that Seller shall change its name (and amend its certificate of incorporation to reflect such change) to a name that does not use any of the Intellectual Property Assets or any Trademarks confusingly similar to the Transferred Marks as promptly as practicable after the Closing, but in no event later than fifteen (15) days after the Closing. Seller shall, and shall cause its Subsidiaries to, comply with the terms of the Transaction Documents (except as otherwise required by Law).
Section 6.07 Notification of Certain Matters. Seller shall promptly notify Buyer of (a) any material actions, suits, claims or proceedings in connection with the transactions contemplated by this Agreement commenced or, to the Knowledge of Seller, threatened, against Seller or any of its Subsidiaries relating to the Joes Business, the Purchased Assets or the Assumed Liabilities, or Buyer, as the case may be, (b) the occurrence or non-occurrence of any fact or event which would be reasonably likely to cause any condition set forth in Article VII hereof not to be satisfied, (c) any notice of, or other communication relating to, a default or event that, with notice or lapse of time or both, would become a default under any Contract disclosed (or required to be disclosed) on Section 4.05 of the Seller Disclosure Letter, (d) the occurrence or existence of any fact, circumstance or event of which Seller obtain Knowledge which would reasonably be likely to result in any representation or warranty made by Seller in this Agreement to be materially untrue or inaccurate, (e) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement, or (f) the occurrence of any event, circumstance, development, state of facts, occurrence, change or effect which has had a Material Adverse Effect or the occurrence or non-occurrence of any event, circumstance, development, state of facts, occurrence, change or effect which would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; provided, that no such notification, nor the obligation to make such notification, shall affect the representations, warranties or covenants, or the conditions to the obligations of, Seller.
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Section 6.08 Public Announcements. Seller and Buyer each shall (a) consult with each other before issuing any press release or otherwise making any public statement with respect to the transactions contemplated by this Agreement, (b) provide to the other party for review a copy of any such press release or public statement and (c) not issue any such press release or make any such public statement prior to such consultation and review and the receipt of the prior consent of the other party to this Agreement, unless required by applicable Law or regulations of any applicable stock exchange.
Section 6.09 Bulk Sales Laws. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer. If requested by Seller, Buyer agrees to provide applicable resale certificate(s) to Seller. In the event any claim is made by any creditor of Seller against Buyer or related to the transactions contemplated hereby which could have been asserted under any bulk sales, bulk transfer or similar Laws of any jurisdiction, Buyer shall notify Seller of such claim and Seller shall have thirty (30) days in which to satisfy or discharge such claim, or to take appropriate defensive action to dispute such claim in accordance with Article VII hereof. Seller shall indemnify Buyer for all Losses (including any Tax liabilities) resulting from non-compliance with any such Laws.
Section 6.10 Transfer Taxes. All transfer, documentary, sales and use, value added, stamp, registration and similar Taxes and fees (including any penalties and interest) (collectively, Transfer Taxes) incurred in connection with this Agreement and the other Transaction Documents shall be split equally between Buyer and Seller. The parties shall cooperate in good faith in preparing and filing all Tax Returns or other applicable documents in connection with Transfer Taxes and to apply for and establish exemptions from or otherwise reduce Transfer Taxes.
Section 6.11 Tax Matters. All Taxes and Tax liabilities with respect to the income or operations of the Joes Business or the ownership of the Purchased Assets that relate to the Overlap Period shall be apportioned between Seller and Buyer as follows: (i) in the case of Taxes, other than income, sales and use, withholding, gross receipt and other similar Taxes, on a per diem basis; and (ii) in the case of income, sales and use, withholding, gross receipt and other similar Taxes, as determined as if there was a closing of the books and records at the end of the date immediately preceding the Closing Date. Seller shall be liable for any Taxes with respect to the income or operations of the Joes Business or the ownership of the Purchased Assets that are, in each case, attributable to all Pre-Closing Periods. Buyer shall be liable for any Taxes with respect to the income or operations of the Joes Business or the ownership of the Purchased Assets that are attributable to all Post-Closing Periods.
Section 6.12 Communication with Customers, Licensees and Suppliers. Prior to the Closing, upon reasonable advance notice, Seller and its Subsidiaries will permit Buyer and its Representatives to discuss, and will, if requested by Buyer, assist Buyer and its Representatives (including by making introductions) in any discussions of, the affairs, finances and accounts of the Joes Business with customers, licensees, distributors and suppliers of or to the Joes Business. Notwithstanding the foregoing, Buyer acknowledges and agrees that, prior to the Closing, other than in the ordinary course of business consistent with past practices of Buyer or its Subsidiaries, Buyer shall not, and shall cause each of its Representatives not to, contact or
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otherwise communicate with any current or known potential customer, licensee, distributor or supplier of Seller or any of its Subsidiaries regarding the Joes Business, the Purchased Assets or the Assumed Liabilities, without the prior written consent of Seller (which shall not be unreasonably withheld, conditioned or delayed).
Section 6.13 Financing.
(a) Prior to the Closing, Buyer shall use its commercially reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things, in each case, within its control, necessary, proper or advisable to arrange financing on the terms and conditions described in the Debt Commitment Letter. Buyer shall not permit any amendment or modification to be made to, or any waiver of any provision or remedy under, the Debt Commitment Letter without Sellers prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed) if such amendment, modification or waiver (i) reduces the aggregate amount of the Financing, when taken together with Buyers cash on hand, to an amount below the amount required to satisfy Buyers obligations under this Agreement, (ii) impairs in any material respect the availability of the Financing, or (iii) amends the conditions precedent to the Financing in a manner that would reasonably be expected to delay in any material respect or prevent the Closing (provided that Buyer may, after consultation with Seller, replace or amend the Debt Commitment Letter to add lenders, lead arrangers, bookrunners, syndication agents or similar entities who had not executed the Debt Commitment Letter as of the date hereof so long as such action would not reasonably be expected to materially delay or prevent the Closing), including using its commercially reasonable best efforts to (a) maintain in effect the Debt Commitment Letter, (b) satisfy on a timely basis, to the extent within its control, all terms and conditions applicable to Buyer to obtaining the debt financing set forth therein, (c) negotiate and enter into definitive agreements with respect to the Debt Commitment Letter on the terms and conditions contained in the Debt Commitment Letter, and (d) comply with its obligations under the Debt Commitment Letter.
(b) In the event of any Financing Failure Event (other than a Financing Failure Event caused by the breach by Seller of this Agreement), to the extent any portion of the Financing is required to fund the Purchase Price and any other amounts required to be provided by Buyer for the consummation of the transactions contemplated hereby, Buyer shall use its commercially reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary for and obtain as promptly as practicable following the occurrence of any such Financing Failure Event alternative debt financing (the Alternative Financing), on substantially equivalent or more favorable terms in the aggregate from the same or other sources and which do not include any incremental conditionality to the consummation of such alternative debt financing that are materially more onerous to Buyer (in the aggregate) than the conditions set forth in the Debt Commitment Letter in effect as of the date of this Agreement in an amount sufficient, which, subject to fulfilment of the conditions set forth in this Agreement, are available to Buyer, together with its cash on hand, to consummate the transactions contemplated hereby and to pay related fees and expenses earned, due and payable as of the Closing Date, it being understood and agreed that if Buyer proceeds with any Alternative Financing, Buyer shall be subject to the same obligations with respect to such Alternative Financing as set forth in this Agreement with respect to the Financing. In the event that Alternative Financing is obtained, Buyer shall promptly provide Seller with a true and correct
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copy of the new financing commitment letter that provides for such Alternative Financing (the Alternative Financing Commitment Letter), together with each fee letter (subject to redaction so long as such redaction does not cover terms that would adversely affect the conditionality, availability or term of the Financing). If applicable, any reference in this Agreement to Financing shall include Alternative Financing, and any reference to Debt Commitment Letter shall include the Alternative Financing Commitment Letter.
(c) Notwithstanding the foregoing, in no event shall the commercially reasonable best efforts of Buyer be deemed or construed to require Buyer to, and Buyer shall not be required to (i) pay in the aggregate any fees in excess of $25,000 more than the fees contemplated by the Debt Commitment Letter or any related fee letter, (ii) agree to conditionality terms in connection with the Financing that are materially less favorable than those contemplated by the Debt Commitment Letter, (iii) agree to economic terms of the Financing (including cost of capital, maturity and fees) that are less favorable than those contemplated by the Debt Commitment Letter or any related fee letter (including any flex provisions therein), (iv) waive any terms or conditions of this Agreement or of the Debt Commitment Letter or (v) require Buyer to initiate, prosecute or maintain any action, suit, claim, arbitration or other legal proceeding against the Lender, other potential lenders or other Persons providing the Financing under the Debt Commitment Letter.
(d) During the period from the date of this Agreement to the Closing Date, Seller shall use its commercially reasonable best efforts, and to cause its Representatives to, provide Buyer all cooperation that is reasonably requested by Buyer in connection with the Financing, the proceeds of which shall be used to consummate the transactions contemplated hereby, which cooperation shall include, in any event:
(i) participation in a reasonable number of meetings, presentations, road shows, due diligence sessions (including accounting due diligence sessions), drafting sessions, sessions with prospective lenders and sessions with rating agencies;
(ii) making Sellers officers reasonably available to assist the Lender;
(iii) cooperating reasonably with the Lenders due diligence, to the extent customary and reasonable, including delivery of corporate organizational documents, and lien searches contemplated by the Debt Commitment Letter;
(iv) assisting Buyer and the Lender with the preparation of customary materials for rating agency presentations (and assisting in the obtaining of corporate, credit and facility ratings from ratings agencies), offering documents, bank information memoranda (including the delivery of customary authorization and representation letters authorizing the distribution of information to prospective lenders or investors and containing a representation that the public side versions of such documents, if any, do not include material non-public information regarding Purchased Assets and the Joes Business), and all other material required in connection with the Financing and all documentation and other information reasonably required in connection with applicable know your
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customer and anti-money laundering rules and regulations, including the PATRIOT Act; provided that, at least 5 Business Days prior to the Closing, Seller shall provide all such documentation and information about the Purchased Assets and the Joes Business as is reasonably requested in writing by Buyer at least 7 Business Days prior to the Closing to the extent required under applicable know your customer and anti-money laundering rules and regulations including the PATRIOT Act;
(v) assisting with the preparation of, and executing and delivering, any pledge and security documents, any loan agreement, notes, other definitive financing documents, legal opinions, or any other documents that facilitate the preparation of the definitive documentation for the Financing or the creation, perfection of liens securing the Financing as may be reasonably requested by Buyer in connection therewith;
(vi) facilitating the pledging of collateral and providing reasonable access in connection with any collateral audits and appraisals required in connection with the Financing;
(vii) assisting Buyer in preparing customary financial information and disclosures regarding the Purchased Assets or the Joes Business, as may be reasonably requested by Buyer and identifying any portion of such information that constitutes material non-public information;
(viii) instructing its independent accountants to cooperate with and assist Buyer in preparing customary and appropriate information packages and offering materials as the Lender or other prospective lenders may reasonably request for use in connection with the Financing and using commercially reasonable best efforts to cause such accountants to consent to the use of their reports in any material relating to the Financing (including, but not limited to, the audited financial statements referred to in the definition of Required Information set forth herein);
(ix) using commercially reasonable best efforts to obtain customary payoff letters, lien releases, instruments of termination, waivers, consents, estoppels, approvals or discharge, in each case reasonably requested by Buyer in connection with the Financing and collateral arrangements; and
(x) taking such corporate or entity actions, subject to the occurrence of the Closing, reasonably requested by Buyer to permit the consummation of the Financing and to permit the proceeds thereof to be made available at the Closing;
provided, that (A) no such requested cooperation may unreasonably interfere with the ongoing operations of Seller, (B) no obligation of Seller under any certificate, agreement, notice or other document or instrument shall be effective until the Closing, and Seller shall not be required to pay or incur any liability for any commitment or other similar fee, pay or incur any liability for any expense (other than as provided in this Agreement) or
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incur any other obligation or liability in connection with the Financing prior to the Closing unless promptly reimbursed by Buyer (provided that notice of such fee, liability or expense is provided to Buyer) and (C) neither Seller nor its directors or officers shall be required to take any action to authorize or approve the Financing (or any Alternative Financing).
(e) Seller shall use reasonable best efforts to, as promptly as practicable, update or correct any Required Information determined to contain any untrue statement of material fact or omit to state any material fact necessary to make the statements contained therein not materially misleading. Seller hereby consents to the reasonable use of its and its Subsidiaries logos in connection with the Financing, provided that such logos are used solely in a manner that is not intended to or reasonably likely to harm or disparage Seller or its Subsidiaries or the reputation or goodwill of Seller or its Subsidiaries or any of their logos.
(f) Seller shall prepare and furnish to Buyer and Parent, as promptly as reasonably practicable (and, in any event, no later than the time periods (if applicable) specified in the definition of Required Information), the Required Information.
Section 6.14 Further Assurances Following the Closing, without further consideration, each of the parties hereto shall, and shall cause their respective Subsidiaries to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents, including (a) such further actions, at Buyers expense, as may be reasonably required to register in the name of Buyer the assignment of the Intellectual Property Assets in any appropriate governmental agency or registrar, (b) such further actions, at Buyers expense, as may be reasonably required to substitute Buyer as a party in the actions, suits, claims, investigations, audits and other legal proceedings identified on Section 4.07(a) of the Seller Disclosure Letter and (c) the use of reasonable best efforts to provide information reasonably requested by Buyer pertaining to the Intellectual Property Assets in order for Buyer to prosecute, maintain and enforce the Intellectual Property Assets.
Section 6.15 Guarantee.
(a) Parent irrevocably guarantees each payment obligation of Buyer to Seller (and the full and timely performance thereof) under Section 6.16, Article II, Article VI and Article VII of this Agreement, if, as and when those obligations become payable under this Agreement (the Guaranteed Obligations). This is a guaranty of payment, and not of collection and a separate action or actions may be brought and prosecuted against Parent to enforce this guaranty, irrespective of whether any action is brought against Buyer or whether Buyer or any other Person is joined in any such action or actions or whether Parent or Buyer was primarily responsible for causing the payment obligations of Parent or Buyer under this Agreement. Notwithstanding anything to the contrary herein, Parent reserves the right to assert any and all defenses which Buyer may have to payment of the Guaranteed Obligations.
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(b) Parent acknowledges and agrees that this guarantee is full and unconditional, and no release or extinguishments of Buyers payment obligations hereunder (other than in accordance with the terms of this Agreement), whether by decree in any bankruptcy proceeding or otherwise, will affect the continuing validity and enforceability of this guarantee. The Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein. Parent hereby waives, for the benefit of Seller, (i) any right to require Seller as a condition of payment by Parent to proceed against Buyer or pursue any other remedies against any other Person and (ii) to the fullest extent permitted by Law, any defenses or benefits that may be derived from or afforded by Law that limit the liability of or exonerate guarantors or sureties, except to the extent that any such defense is available to Buyer.
(c) The liability of Parent under this guaranty shall, to the fullest extent permitted under applicable law, be absolute and unconditional irrespective of:
(i) the value, genuineness, validity, regularity, illegality or enforceability of this Agreement or any other agreement or instrument referred to herein other than by reason of fraud by Seller;
(ii) any insolvency, bankruptcy, reorganization or other similar proceeding affecting Parent, Buyer or any other person or their assets;
(iii) any amendment or modification of this Agreement, or any change in the manner, place or terms of payment or performance, or any change or extension of the time of payment or performance of, renewal or alteration of, any Guaranteed Obligation, any escrow arrangement or other security therefor, any liability incurred directly or indirectly in respect thereof, or any amendment or waiver of or any consent to any departure from the terms of this Agreement or the documents entered into in connection therewith;
(iv) any other circumstances that might otherwise constitute a legal or equitable discharge of a surety or guarantor;
(v) the existence of any claim, set-off or other right that Parent may have at any time against Buyer or Seller, whether in connection with any Guaranteed Obligation or otherwise;
(vi) the addition, substitution, or release of any person now or hereafter liable with respect to the Guaranteed Obligations or otherwise interested in the transactions contemplated hereby; or
(vii) the adequacy of any other means Seller may have of obtaining repayment of any of the Guaranteed Obligations.
(d) Parent acknowledges that it will receive substantial direct and indirect benefits from the transactions contemplated by this Agreement and that the waivers set forth in this Section 6.15 are knowingly made in contemplation of such benefits.
(e) Parent understands that Seller is relying on this guarantee in entering into this Agreement.
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Section 6.16 Miscellaneous. The parties agree to comply with Section 6.16 of the Seller Disclosure Letter.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the date that is eighteen (18) months from the Closing Date except that (a) the Fundamental Representations shall survive indefinitely, (b) the representations and warranties contained in Section 4.09 shall survive until thirty (30) days following the expiration of the applicable statute of limitations (giving effect to any extensions and waivers thereof), and (c) the representations and warranties contained in Sections 4.06(c), 4.06(d) and 4.06(e) shall survive until the date that is two (2) years from the Closing Date. Each covenant and other agreement contained in this Agreement which by their terms contemplate actions or impose obligations following the Closing shall survive the Closing until the full performance of such covenant or agreement in accordance with its terms; provided, that, for the avoidance of doubt, each covenant and other agreement contained in this Agreement which by their terms contemplate actions or impose obligations prior to or at the Closing shall terminate on the date that is the six (6) month anniversary of the Closing Date. Notwithstanding the foregoing, any claims asserted in accordance herewith in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of such survival period and such claims shall survive until finally resolved, whether or not the amount of the Losses resulting from such breach has been finally determined at the time the notice is given.
Section 7.02 Indemnification by Seller. On the other terms and subject to the other conditions of this Article VII, from and after the Closing, Seller agrees to indemnify Buyer, its Affiliates and its and their respective Representatives (the Buyer Indemnitees) against, and shall hold each of them harmless from and against, any and all Losses suffered, incurred, paid, sustained by, or imposed upon, any Buyer Indemnitee arising out of or resulting from:
(a) any failure of any representation or warranty made by Seller in Article IV of this Agreement to be true and correct in all respects (without giving effect to any material, materially, materiality, Material Adverse Effect, material adverse effect, material adverse change or similar qualification contained in any such representation or warranty) on and as of the Closing Date as if made at and as of such time (other than those made on a specified date, which shall be true and correct in all respects as of such specified date);
(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller or any of its Subsidiaries pursuant to this Agreement or any Transaction Document (including, without limitation, any covenants, agreements or obligations contained in Section 6.16 of the Seller Disclosure Letter);
(c) any Excluded Asset or any Excluded Liability; or
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(d) any failure by Seller or any of its Subsidiaries, or claim by a creditor of Seller or any of its Subsidiaries that any of them has failed, in each case, to comply with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction.
Section 7.03 Indemnification by Buyer. On the other terms and subject to the other conditions of this Article VII, Buyer shall indemnify Seller, its Affiliates and its and their respective Representatives (the Seller Indemnitees), and shall hold each of them harmless from and against, any and all Losses suffered, incurred, paid, sustained by, or imposed upon, any Seller Indemnitee arising out of or resulting from:
(a) any failure of any representation or warranty made by Buyer in Article V of this Agreement to be true and correct in all respects on and as of the Closing Date as if made at and as of such time (other than those made on a specified date, which shall be true and correct in all respects as of such specified date);
(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement or any Transaction Document (including, without limitation, any covenants, agreements or obligations contained in Section 6.16 of the Seller Disclosure Letter); or
(c) any Assumed Liability.
Section 7.04 Certain Limitations. The party making a claim under this Article VII is referred to as the Indemnified Party, and the party against whom such claims are asserted under this Article VII is referred to as the Indemnifying Party. The indemnification provided for in Section 7.02 and Section 7.03 shall be subject to the following limitations:
(a) The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 7.02(a) or Section 7.03(a), as the case may be, until the aggregate amount of all Losses in respect of indemnification under Section 7.02(a) or Section 7.03(a) exceeds Five-Hundred Thousand Dollars ($500,000.00) (the Deductible), in which event the Indemnifying Party shall only be required to pay or be liable for Losses in excess of the Deductible. The parties agree that any claim for any individual Loss or group of related Losses indemnifiable pursuant to Section 7.02(a) or Section 7.03(a), as applicable, in an amount less than Twenty-Five Thousand Dollars ($25,000.00) shall not count towards the applicable Deductible. Notwithstanding anything herein to the contrary, the limitations set forth in this Section 7.04(a) shall not apply to Losses described in Section 7.02(b)-(d) or Section 7.03(b)-(c), or to Losses incurred by (i) any Buyer Indemnitee in connection with or arising from any breach of any Fundamental Representation of Seller or any representation or warranty of Seller in Section 4.09, and (ii) any Seller Indemnitee in connection with or arising from any breach of any Fundamental Representation of Buyer.
(b) The aggregate amount of all Losses for which an Indemnifying Party shall be liable pursuant to (x) Section 7.02(a) and Section 7.02(b) or (y) Section 7.03(a) and Section 7.03(b), as the case may be, shall not exceed Seven Million Five-Hundred Thousand Dollars ($7,500,000.00); provided, that the limitation set forth in the first clause of this Section 7.04(b) shall not apply to (i) Losses described in Section 7.02(b) or Section 7.03(b) as a result of
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any willful or intentional breach or non-fulfillment, (ii) Losses resulting from any breach or non-fulfillment of any covenant, agreement or obligation contained in Section 6.16 of the Seller Disclosure Letter, or (iii) Losses incurred by (A) any Buyer Indemnitee in connection with or arising from any breach of any Fundamental Representation of Seller or any representation or warranty of Seller in Section 4.09, or (B) any Seller Indemnitee in connection with or arising from any breach of any Fundamental Representation of Buyer; provided, further, that the maximum aggregate amount of all Losses for which an Indemnifying Party shall be liable pursuant to Section 7.02 or Section 7.03, as the case may be, shall not exceed the Purchase Price.
(c) Payments by an Indemnifying Party pursuant to Section 7.02 or Section 7.03 in respect of any Loss shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds (net of any costs of investigation of the underlying claim and collection), any Tax benefit realized, contribution or other similar payment actually received by the Indemnified Party in respect of such Loss. If the Indemnified Party receives or realizes such insurance proceeds, Tax benefit, indemnity, contribution or similar payments after being indemnified and held harmless by an Indemnifying Party with respect to a Loss, the Indemnified Party shall promptly return such indemnification up to the amount of such insurance proceeds, Tax benefit, indemnity, contribution or similar payments.
(d) No Indemnifying Party shall be liable to any Indemnified Party for any punitive, incidental, consequential, special or indirect damages or damages based on any type of multiple (collectively, Special Damages); provided, that Special Damages shall be indemnifiable pursuant to Section 7.02 or Section 7.03, as applicable, to the extent Special Damages are (i) actually paid to a third party pursuant to any settlement entered into by the Indemnified Party in accordance with Section 7.05, provided that the Indemnifying Party has consented in writing to any such settlement, or (ii) ordered, by a court of competent jurisdiction, to be paid by the Indemnified Party to a third party.
(e) Each Indemnified Party shall take, and cause its Subsidiaries to take, commercially reasonable steps to mitigate any Loss as soon as reasonably practicable upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, such Loss.
Section 7.05 Indemnification Procedures
(a) Third Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any action, suit, claim or other legal proceeding made or brought by any Person who is not a party to this Agreement (a Third Party Claim) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall deliver as promptly as practicable a written notice (a Claim Certificate), which Claim Certificate shall describe the Third Party Claim (or Direct Claim, if delivered pursuant to Section 7.05(c)) in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The failure to provide such Claim Certificate shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits
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rights or defenses by reason of such failure or is materially prejudiced thereby. The Indemnifying Party shall have the right to participate in or, by giving written notice to the Indemnified Party within thirty (30) Business Days after its receipt of a Claim Certificate, to assume the defense of, the Third Party Claim described in such Claim Certificate at the Indemnifying Partys expense and by the Indemnifying Partys own counsel, and the Indemnified Party shall cooperate in good faith in such defense; provided, that in the event that the Indemnifying Party assumes the defense of any Third Party Claim, then (x) subject to Section 7.05(b), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claim in the name and on behalf of the Indemnified Party and (y) the Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third Party Claim with counsel selected by it. Notwithstanding anything to the contrary contained in this Agreement, the Indemnifying Party shall not be entitled to assume control of the defense of a Third Party Claim and shall pay, subject to the limitations of liability set forth in Section 7.04, the fees and expenses of counsel retained by the Indemnified Party if: (i) such Third Party Claim is reasonably likely to give rise to Losses which are more than 100% of the amount indemnifiable by such Indemnifying Party pursuant to this Article VII; (ii) such Third Party Claim for indemnification relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation; (iii) such Third Party Claim seeks a material injunction or equitable relief against the Indemnified Party, (iv) the named parties to such Third Party Claim (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and such Indemnified Party has been advised in writing by such counsel that there is one (1) or more legal defenses available to the Indemnified Party which are not available to the Indemnifying Party, or are available to the Indemnifying Party but the assertion of which would be adverse to the interests of the Indemnified Party or (v) upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to prosecute or defend such Third Party Claim. Notwithstanding any other provision of this Agreement, with respect to any audit, assessment, inquiry, claim, adjustment or proposed adjustment with respect to Taxes (a Tax Contest), (A) Seller shall have the right to control such Tax Contest if, but only if, such Tax Contest relates to Taxes (1) attributable to the Purchased Assets or the Joes Business with respect to any Pre-Closing Period or (2) imposed on Seller, and (B) if such Tax Contest could reasonably be expected to increase the Taxes for any Post-Closing Period for which Buyer is responsible, Seller shall not consent to have any settlement or compromise of any such Tax Contest without the written consent of Buyer, which consent shall not be unreasonably withheld, delayed or conditioned. If the Indemnifying Party elects not to compromise or defend such Third Party Claim, the Indemnified Party may, subject to Section 7.05(b), pay, compromise, defend such Third Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. Seller and Buyer shall cooperate with each other in all commercially reasonable respects in connection with the defense of any Third Party Claim, including making available records relating to such Third Party Claim.
(b) Settlement of Third Party Claims.
(i) Any Indemnified Party shall have the right to employ separate counsel and to participate in the defense of any Third Party Claim (including any Tax Contest), but the fees and expenses of such counsel shall not be at the expense of the Indemnifying Party unless (A) the Indemnifying Party shall have failed, or is not entitled,
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to assume the defense of such Third Party Claim in accordance with Section 7.05(a), (B) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party or (C) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party and such Indemnified Party shall have been advised in writing by such counsel that there is one (1) or more legal defenses available to the Indemnified Party which are not available to the Indemnifying Party, or are available to the Indemnifying Party but the assertion of which would be adverse to the interests of the Indemnified Party. So long as the Indemnifying Party is reasonably contesting any such Third Party Claim in good faith, the Indemnified Party shall not pay or settle any such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such Third Party Claim; provided that in such event it shall waive any right to indemnity therefor by the Indemnifying Party for such Third Party Claim unless the Indemnifying Party shall have consented to such payment or settlement.
(ii) If the Indemnifying Party does not notify the Indemnified Party within thirty (30) Business Days after the receipt of a Claim Certificate with respect to a Third Party Claim hereunder that it elects to undertake the defense thereof, or if the Indemnified Party assumes the defense of such Third Party Claim pursuant to Section 7.05(a), the Indemnified Party shall have the right to contest, settle or compromise the Third Party Claim but shall not thereby waive any right to indemnity therefor pursuant to this Agreement; provided, that the Indemnified Party shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed).
(iii) Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not, without the prior written consent of the Indemnified Party, enter into any settlement of a Third Party Claim that is not entirely indemnifiable by the Indemnifying Party pursuant to this Article VII and does not include as an unconditional term thereof the giving by the Person or Persons asserting such Third Party Claim to all Indemnified Parties of an unconditional release from all liability with respect to such Third Party Claim or consent to entry of any judgment.
(c) Direct Claims. Any claim by an Indemnified Party on account of a Loss which does not result from a Third Party Claim (a Direct Claim) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written notice thereof in a Claim Certificate. The failure to provide such Claim Certificate shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure or is materially prejudiced thereby. In the event that the Indemnifying Party objects to the indemnification of an Indemnified Party in respect of any claim or claims specified in any Claim Certificate, the Indemnifying Party shall, within thirty (30) days after receipt by the Indemnifying Party of such Claim Certificate, deliver to the Indemnified Party a notice to such effect, specifying in reasonable detail the basis for such objection, and the Indemnifying Party and the Indemnified Party shall, within the sixty (60) day period beginning on the date of receipt by the Indemnified Party of such objection, attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims to which the Indemnifying Party shall have so objected.
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During such sixty (60) day period, the Indemnified Party shall allow the Indemnifying Party and its Representatives to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Partys investigation by giving such reasonable information and assistance (including a copy of any accounts, documents or records) as the Indemnifying Party or any of its Representatives may reasonably request. If the Indemnified Party and the Indemnifying Party shall succeed in reaching agreement on their respective rights with respect to any of such claims, the Indemnified Party and the Indemnifying Party shall promptly prepare and sign a memorandum setting forth such agreement. Should the Indemnified Party and the Indemnifying Party be unable to agree as to any particular item or items or amount or amounts within such time period, then the Indemnified Party shall be permitted to submit such dispute to the courts set forth in Section 10.08. Claims for Losses (i) specified in any Claim Certificate to which an Indemnifying Party claims for Losses covered by a memorandum of agreement of the nature described above and (ii) the validity and amount of which have been the subject of judicial determination as described above and in Section 10.08 or shall have been settled with the consent of the Indemnified Party, as described in Section 7.05(b) are hereinafter referred to, collectively, as Agreed Claims. Within ten (10) Business Days of the final determination of the amount of any Agreed Claim, the Indemnifying Party shall pay to the Indemnified Party an amount equal to the Agreed Claim by wire transfer in immediately available funds to the bank account or accounts designated by the Indemnified Party in a notice to the Indemnifying Party not less than two (2) Business Days prior to such payment.
(d) Right of Offset. Notwithstanding anything to contrary contained in this Agreement, Buyer acknowledges and agrees that in the event that it is obligated to make an indemnification payment to any Seller Indemnitee under Section 7.03, (i) such Seller Indemnitee shall have the right to offset all or any portion of the amount of such indemnification obligation against any amounts owed to Buyer or any of its Subsidiaries or licensees under any Transaction Documents and (ii) Seller may, and may cause each Seller Indemnitee to, effect any such offset.
Section 7.06 Sellers Obligation to Cause Subsidiaries to Act. Seller acknowledges and agrees that, to the extent any provision of this Agreement requires any of Sellers Subsidiaries, or Seller agrees on behalf of its Subsidiaries, to perform, take or refrain from taking any action, (a) Seller shall have an obligation to cause such Affiliate to perform, take and/or refrain from taking such action, as applicable, and (b) the failure of such Affiliate to perform, take or refrain from taking such action shall constitute a breach by Seller of such provision (notwithstanding any lack of an express obligation on the part of Seller to cause such Affiliate to take such action).
Section 7.07 Sole Remedy/Waiver. Except in the case of fraud, the parties hereto acknowledge and agree that, in the event that the Closing occurs, the remedies provided for in this Article VII shall be the sole and exclusive remedies for any breach of the representations and warranties or covenants contained in this Agreement or any claims relating to this Agreement, other documents, certificates or agreements delivered in connection with this Agreement, the Joes Business, the Assumed Liabilities, the Purchased Assets, the Excluded Liabilities or otherwise. The parties hereto expressly intend that the remedies provided for in this Article VII shall apply to direct claims between the parties hereto for breach of this Agreement (whether or not involving a third party).
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ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.01 Conditions to the Obligations of Each Party. The respective obligations of Buyer and Seller to consummate and cause the consummation of the transactions contemplated herein at the Closing are subject to the satisfaction or waiver in writing by Seller and Buyer at or before the Closing Date of each of the following conditions:
(a) Injunctions; Illegality. No Governmental Authority shall have issued, enacted, entered, promulgated or enforced any Law or Governmental Order (that is final and non-appealable and that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement.
(b) Consummation of the Operating Asset Purchase Agreement. The transactions contemplated by the Operating Asset Purchase Agreement shall have been consummated, or all conditions to the consummation thereof shall have been satisfied or waived (or shall be satisfied or waived contemporaneously with the Closing).
Section 8.02 Conditions to the Obligations of Buyer. The obligations of Buyer to consummate and cause the consummation of the transactions contemplated herein are subject to the satisfaction or waiver by Buyer on or prior to the Closing Date of the following further conditions:
(a) Performance. All of the agreements and covenants of Seller to be performed prior to the Closing pursuant to this Agreement shall have been duly performed in all material respects.
(b) Representations and Warranties. (i) The Fundamental Representations applicable to Seller shall be true and correct in all respects as of the Closing Date as if made at and as of such time (other than those representations and warranties made as of a specified date, which such representations and warranties shall be true and correct in all respects as of such specified date) and (ii) all other representations and warranties of Seller contained in Article IV hereof shall be true and correct (without giving effect to any material, materially, materiality, Material Adverse Effect, material adverse effect, material adverse change or similar qualifiers contained in any of such representations and warranties) as of the Closing Date as if made at and as of such time (other than those representations and warranties made as of a specified date, which such representations and warranties shall be true and correct in all respects as of such specified date), except for such failures to be true and correct that do not have and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(c) Closing Deliverables. Seller shall have delivered or caused to be delivered to Buyer the items set forth in Section 3.02(a).
(d) No Material Adverse Effect. Since the date hereof there shall not have occurred any event, circumstance, development, state of facts, occurrence, change or effect that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
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(e) IP Title Defect Correction Actions. Seller and its Subsidiaries shall have completed all of the IP Title Defect Correction Actions and delivered documentary evidence thereof to Buyer.
Section 8.03 Conditions to the Obligations of Seller. The obligations of Seller to consummate and cause the consummation of the transactions contemplated herein are subject to the satisfaction or waiver by Seller, on or prior to the Closing Date, of the following further conditions:
(a) Performance. All of the agreements and covenants of Buyer to be performed prior to the Closing pursuant to this Agreement shall have been duly performed in all material respects.
(b) Representations and Warranties. (i) The Fundamental Representations applicable to Buyer shall be true and correct in all respects as of the Closing Date as if made at and as of such time (other than those representations and warranties made as of a specified date, which such representations and warranties shall be true and correct in all respects as of such specified date) and (ii) all other representations and warranties of Buyer contained in Article V hereof shall be true and correct (without giving effect to any material, materially, materiality, Material Adverse Effect, material adverse effect, material adverse change or similar qualifiers contained in any of such representations and warranties) and as of the Closing Date as if made at and as of such time (other than those representations and warranties made as of a specified date, which such representations and warranties shall be true and correct in all respects as of such specified date), except for such failures to be true and correct that do not have and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Buyers ability to consummate the transactions contemplated hereby.
(c) Closing Deliverables. Buyer shall have delivered or caused to be delivered to Seller the items set forth in Section 3.02(b).
Section 8.04 Frustration of Closing Conditions. Neither Buyer nor Seller may rely on the failure of any condition set forth in this Article VIII to be satisfied if such failure were caused by such partys failure to act in good faith or such partys failure to use its reasonable best efforts to cause the Closing to occur, as required by Section 6.04.
ARTICLE IX
TERMINATION
Section 9.01 Termination Events. This Agreement may be terminated and the transactions contemplated herein may be abandoned, at any time prior to the Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by either Seller or Buyer, if: (i) the Closing Date shall not have occurred on or prior to September 30, 2015 (the End Date); provided, that neither party may terminate this Agreement pursuant to this Section 9.01 if such party is in material breach of this Agreement (other than, in the case of Buyers right under this Section 9.01(b), a failure by Buyer to perform its obligation to consummate the Closing solely as a result of a failure to secure the
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proceeds of the Financing in an amount sufficient to consummate the transactions contemplated hereby (other than a Financing Failure Event arising out of or related to Buyers breach) in which case Buyer shall pay the Seller Termination Fee in accordance with Section 9.02(b)) or (ii) any court or other Governmental Authority shall have issued, enacted, entered, promulgated or enforced any Law or Governmental Order (that is final and non-appealable and that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement; provided, that the party seeking to terminate pursuant to this Section 9.01(b) shall have complied with its obligations, if any, under Section 6.04;
(c) by Seller, if: (i) any of the representations and warranties of Buyer contained in Article V hereof shall fail to be true and correct or (ii) there shall be a breach by Buyer of any covenant or agreement of Buyer in this Agreement that, in either case, (A) would result in the failure of a condition set forth in Section 8.03(a) or Section 8.03(b) and (B) which is not curable or, if curable, is not cured upon the occurrence of the earlier of (1) the thirtieth (30th) day after written notice thereof is given by Seller to Buyer and (2) the day that is five (5) Business Days prior to the End Date; provided that Seller may not terminate this Agreement pursuant to this Section 9.01(c) if Seller is in material breach of this Agreement; or
(d) by Buyer, if: (i) any of the representations and warranties of Seller contained in Article IV hereof shall fail to be true and correct or (ii) there shall be a breach by Seller of any covenant or agreement of Seller in this Agreement that, in either case, (A) would result in the failure of a condition set forth in Section 8.02(a) or Section 8.02(b) and (B) which is not curable or, if curable, is not cured upon the occurrence of the earlier of (1) the thirtieth (30th) day after written notice thereof is given by Buyer to Seller and (2) the day that is five (5) Business Days prior to the End Date; provided that Buyer may not terminate this Agreement pursuant to this Section 9.01(d) if Buyer is in material breach of this Agreement.
Section 9.02 Effect of Termination.
(a) In the event of a termination of this Agreement pursuant to Section 9.01 by Buyer, on the one hand, or Seller, on the other hand, written notice thereof shall forthwith be given to the other party specifying the provision hereof pursuant to which such termination is made, and except as otherwise set forth in this Section 9.02, this Agreement shall be terminated and become void and have no effect and there shall be no liability hereunder on the part of Seller or Buyer, except that this Section 9.02 and Article X hereof shall survive any termination of this Agreement. Nothing in this Section 9.02 shall relieve any party of liability for any willful breach of this Agreement.
(b) In the event that the conditions to the Closing set forth in Section 8.03(a) or Section 8.03(b) herein (other than those conditions that by their nature cannot be satisfied until the Closing) are satisfied or waived and Buyer fails (whether or not intentionally) to effect the Closing pursuant to Article III and make the payment pursuant to Section 2.05 because of a Financing Failure Event, then, upon Sellers termination of this Agreement pursuant to Section 9.01(c) or the termination by either party pursuant to Section 9.01(b), Buyer shall pay a termination fee of Three Million Two Hundred Fifty Thousand Dollars ($3,250,000.00) (the Seller Termination Fee) to Seller or as directed by Seller as promptly as reasonably
45
practicable (and, in any event, within two (2) Business Days following such termination). The parties acknowledge and agree that the right of Seller to receive the Seller Termination Fee in accordance with this Section 9.02(b) shall be the sole and exclusive remedy of Seller and its Affiliates against Buyer or any potential source of Financing (including without limitation any Lender) for any Loss suffered as a result of the failure of the transactions contemplated hereby to be consummated due to a Financing Failure Event (other than a Financing Failure Event arising out of or relating to Buyers breach), and Buyer will have no further liability to, and no potential source of Financing (including without limitation any Lender) shall have any liability to, Seller or any of its Affiliates, or any of their respective representatives, for any Loss suffered by any of them as a result thereof, in each case whether based on contract, tort or strict liability, by the enforcement of any assessment, by any action, suit, claim, arbitration or other legal proceeding, by virtue of any Law, and whether by or through any attempted piercing of the corporate veil, by or through a claim by or on behalf of a party hereto or another Person, or otherwise. It is agreed that the Seller Termination Fee is liquidated damages and not a penalty, and the payment of the Seller Termination Fee in the circumstances specified herein is supported by due and sufficient consideration. The parties acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, in no event and in no circumstances will (x) Buyer be required to pay the Seller Termination Fee, or any portion thereof, more than once or if specific performance has been ordered and performed pursuant to Section 10.9, or (y) Buyer be required pay any amount of damages if Seller has received the Seller Termination Fee in accordance herewith or if specific performance has been ordered pursuant to Section 10.9. Each of the parties hereto acknowledges and agrees that the agreements contained in this Section 9.2 are an integral part of this Agreement, and that without these agreements, the other parties would not enter into this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.
Section 10.02 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when received by the addressee if delivered by hand or sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document if sent between 9:00 A.M, and 6:00 P.M. New York City time on any Business Day, and on the next Business Day if sent outside of such hours or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. In the case of facsimile or e-mail of a PDF document, such copies shall also be sent by overnight courier service or by registered mail. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02):
46
If to Seller to:
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Joes Jeans Inc. |
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2340 S. Eastern Avenue |
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Commerce, CA 90040 |
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Attention: Interim Chief Executive Officer |
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Facsimile: (323) 837-3791 |
with a copy (which shall not constitute notice) to:
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Akin Gump Strauss Hauer & Feld LLP |
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1333 New Hampshire Avenue NW |
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Washington DC 20036 |
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Attention: |
Russell W. Parks, Jr. |
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Erica D. McGrady |
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Facsimile: (202) 887-4288 |
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|
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Skadden, Arps, Slate, Meagher & Flom LLP |
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300 South Grand Avenue, Suite 3400 |
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Los Angeles, California 90071 |
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Attention: Jeffrey H. Cohen |
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Andrew D. Garelick |
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Facsimile: (213) 687-5600 |
or to such other person or address as Seller shall furnish to Buyer in writing.
If to Buyer or Parent to:
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c/o Sequential Brands Group, Inc. |
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5 Bryant Park, 30th Floor |
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New York, New York 10018 |
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Attn: Chad Wagenheim |
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Email: CWagenheim@sbg-ny.com |
with a copy (which shall not constitute notice) to:
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White & Case LLP |
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1155 Avenue of the Americas |
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New York, NY 10036 |
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Fax No.: 212.354.8113 |
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Attn: |
Nazim Zilkha |
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Daren Orzechowski |
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Email: |
nzilkha@whitecase.com |
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|
do@whitecase.com |
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|
|
or to such other person or address as Buyer shall furnish to Seller in writing.
47
Notices sent by multiple means, each of which is in compliance with the provisions of this Agreement will be deemed to have been received at the earliest time provided for by this Agreement.
Section 10.03 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
Section 10.04 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
Section 10.05 Entire Agreement. This Agreement, together with the Confidentiality Agreement, Exhibits hereto, the Seller Disclosure Letter, the Buyer Disclosure Letter and the other Transaction Documents, constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous representations, warranties, understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the Exhibits and Disclosure Letters (other than an exception expressly set forth as such in the Seller Disclosure Letter), the statements in the body of this Agreement will control.
Section 10.06 Binding Effect; Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to (a) Article VII hereof, which shall inure to the benefit of each Buyer Indemnitee and Seller Indemnitee, and (b) Sections 9.02, 10.06, 10.07 and 10.08, which shall inure to the benefit of any Lender (and each such Lender shall be entitled to rely on such Sections), all of such Persons identified in the foregoing clauses (a) and (b) are intended as express third-party beneficiaries thereof, no other Person not party to this Agreement shall be entitled to the benefits of this Agreement. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, that after the Closing Date either party may (i) assign its rights hereunder to any of its respective Subsidiaries, (ii) assign its rights, interests and obligations hereunder in connection with a merger, exchange, consolidation or sale of all or substantially of its stock or assets or other similar transaction, and (iii) assign its rights hereunder as collateral to its lenders and financing sources, in each case, without the prior written consent of the other party hereto. Each party shall provide written notice to the other party of any such assignment. Any attempted assignment in violation of this Section 10.06 will be void. Notwithstanding any assignment by any party pursuant to this Section 10.06, such party shall be responsible for full performance of such partys covenants, agreements and obligations hereunder.
48
Section 10.07 Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Notwithstanding anything herein to the contrary, any amendment Section 9.02, 10.06, 10.07 or 10.08 shall not be made without the prior written consent of such Lender or its respective Affiliate or representative.
Section 10.08 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to its rules of conflict of laws.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE AND ANY STATE APPELLATE COURT THEREFROM WITHIN THE STATE OF DELAWARE (OR, IF THE COURT OF CHANCERY OF THE STATE OF DELAWARE DECLINES TO ACCEPT JURISDICTION OVER A PARTICULAR MATTER, ANY STATE OR FEDERAL COURT WITHIN THE STATE OF DELAWARE), AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTYS ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT
49
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 10.09 Specific Performance.
(a) The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that an award of money damages would be inadequate in such event. Accordingly, it is acknowledged that, subject to the limitations set forth in Section 9.02(b) and Section 10.09(b), Seller and Buyer shall be entitled to equitable relief without proof of actual damages, including an injunction or injunctions or Governmental Orders for specific performance to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with its terms, in addition to any other remedy to which they are entitled at law or in equity as a remedy for any such breach. Each party further agrees that no other party hereto or any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 10.09, and each party hereto irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.
(b) Notwithstanding anything in this Agreement to the contrary, including Section 10.09(a), it is acknowledged and agreed that Seller shall be entitled to specific performance of Buyers obligation to satisfy its obligation to make the payment pursuant to Section 2.05 and to consummate the transactions contemplated herein if, and only if, each of the following shall have been satisfied (i) all of the conditions set forth in Section 8.02 (other than those conditions that by their terms or nature are to be satisfied at the Closing (but subject to their satisfaction at Closing) have been satisfied or waived by Buyer as of the time when Closing is required to have occurred pursuant to Section 3.01 and Seller is not then in breach of this Agreement, (ii) Buyer fails to consummate the Closing by three (3) Business Days following the date on which the Closing is required to have occurred pursuant to Section 3.01 or would have been required to close but for breach hereof by Buyer, (iii) a Financing Failure Event (other than a Financing Failure Event arising out of or related to a Buyers breach) has not occurred, (iv) Seller has not terminated this Agreement and (v) Seller has irrevocably confirmed in writing that, if (x) specific performance is granted and (y) the Financing is funded in accordance with the terms of the Debt Commitment Letter, the Closing will occur on the terms contemplated by this Agreement.
(c) For the avoidance of doubt, while Seller may pursue both a grant of specific performance of Buyers obligations to consummate the Closing in accordance with the provisions set forth in Section 10.09(b) prior to the termination of this Agreement, and after the termination of this Agreement, the payment of the Seller Termination Fee, in no event shall Seller be permitted or entitled to receive both such grant of specific performance and payment of any monetary damages, including all or any portion of the Seller Termination Fee in accordance with the first sentence of Section 9.02(b).
50
Section 10.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[SIGNATURE PAGE FOLLOWS]
51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
SELLER: |
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BUYER: |
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JOES JEANS INC. |
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JOES HOLDINGS LLC |
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By: |
/s/ Hamish Sandhu |
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By: |
/s/ Hamish Sandhu |
Name: Hamish Sandhu |
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Name: Hamish Sandhu |
Title: CFO |
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Title: CFO |
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PARENT: |
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SEQUENTIAL BRANDS GROUP, INC., solely for purposes of Section 6.15 and Article X |
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By: |
/s/ Yehuda Shmidman |
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Name: Yehuda Shmidman |
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Title: CEO |
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52
Exhibit 2.3
ASSET PURCHASE AGREEMENT
by and among
JOES JEANS INC.
and
GBG USA INC.
dated as of
September 8, 2015
TABLE OF CONTENTS
|
|
Page |
|
|
Article I Definitions |
1 |
|
|
|
Section 1.01 |
Defined Terms |
1 |
Section 1.02 |
Construction |
10 |
Section 1.03 |
Exhibits and Disclosure Letters |
11 |
Section 1.04 |
Knowledge |
11 |
|
|
Article II Purchase and Sale |
12 |
|
|
Section 2.01 |
Purchase and Sale of Assets |
12 |
Section 2.02 |
Excluded Assets |
13 |
Section 2.03 |
Assumed Liabilities |
13 |
Section 2.04 |
Excluded Liabilities |
14 |
Section 2.05 |
Purchase Price |
15 |
Section 2.06 |
Allocation of Purchase Price |
15 |
Section 2.07 |
Sellers Working Capital Statement; Transfer of Purchased Assets and Assumed Liabilities |
15 |
Section 2.08 |
Required Consents |
16 |
|
|
Article III Closing |
17 |
|
|
Section 3.01 |
Closing |
17 |
Section 3.02 |
Closing Deliverables |
17 |
|
|
Article IV Representations and Warranties of Seller |
19 |
|
|
Section 4.01 |
Organization and Qualification of Seller |
19 |
Section 4.02 |
Authority of Seller |
19 |
Section 4.03 |
No Conflicts; Consents |
20 |
Section 4.04 |
Financial Statements |
20 |
Section 4.05 |
Absence of Certain Changes, Events and Conditions |
20 |
Section 4.06 |
Assigned Contracts |
21 |
Section 4.07 |
Legal Proceedings; Governmental Orders |
22 |
Section 4.08 |
Compliance with Laws |
22 |
Section 4.09 |
Taxes |
23 |
Section 4.10 |
Inventory |
23 |
Section 4.11 |
Accounts Receivable |
23 |
Section 4.12 |
Customer Purchase Orders |
24 |
Section 4.13 |
Customer and Suppliers |
24 |
Section 4.14 |
Tangible Personal Property |
25 |
Section 4.15 |
Employees and Related Matters; Employee Benefits |
25 |
Section 4.16 |
Labor Matters; Employees |
27 |
Section 4.17 |
Seller Leases |
27 |
Section 4.18 |
Environmental Matters |
27 |
i
Section 4.19 |
Brokers |
27 |
Section 4.20 |
Title to Purchased Assets |
28 |
Section 4.21 |
Products Liability |
28 |
Section 4.22 |
Anti-Bribery Laws |
28 |
Section 4.23 |
Insurance |
28 |
Section 4.24 |
Transactions with Affiliates |
29 |
Section 4.25 |
No Other Representations and Warranties |
29 |
|
|
Article V Representations and Warranties of Buyer |
29 |
|
|
Section 5.01 |
Organization of Buyer |
29 |
Section 5.02 |
Authority of Buyer |
29 |
Section 5.03 |
No Conflicts; Consents |
30 |
Section 5.04 |
Brokers |
30 |
Section 5.05 |
Legal Proceedings |
30 |
Section 5.06 |
Sufficiency of Funds |
30 |
Section 5.07 |
No Other Representations and Warranties |
31 |
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|
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Article VI Covenants |
31 |
|
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Section 6.01 |
Access to Information Concerning Purchased Assets and Records |
31 |
Section 6.02 |
Confidentiality |
32 |
Section 6.03 |
Conduct of Seller and the Joes Business Pending the Closing Date |
33 |
Section 6.04 |
Commercially Reasonable Efforts; Consents |
34 |
Section 6.05 |
Notification of Certain Matters |
34 |
Section 6.06 |
Public Announcements |
35 |
Section 6.07 |
Bulk Sales Laws |
35 |
Section 6.08 |
Transfer Taxes |
36 |
Section 6.09 |
Tax Matters |
36 |
Section 6.10 |
Employee Benefits |
36 |
Section 6.11 |
Non-Solicitation |
39 |
Section 6.12 |
Product Claims; Compliance |
39 |
Section 6.13 |
Further Assurances |
40 |
Section 6.14 |
Sellers Disclosure Letter |
40 |
Section 6.15 |
Certain Purchased Assets |
40 |
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|
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Article VII Indemnification |
41 |
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Section 7.01 |
Survival |
41 |
Section 7.02 |
Indemnification by Seller |
42 |
Section 7.03 |
Indemnification by Buyer |
42 |
Section 7.04 |
Certain Limitations |
43 |
Section 7.05 |
Indemnification Procedures. |
44 |
Section 7.06 |
Sellers Obligation to Cause Subsidiaries to Act |
47 |
Section 7.07 |
Tax Treatment of Indemnification Payments |
47 |
ii
Article VIII Conditions Precedent |
47 |
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|
Section 8.01 |
Conditions to the Obligations of Each Party |
47 |
Section 8.02 |
Conditions to the Obligations of Buyer |
48 |
Section 8.03 |
Conditions to the Obligations of Seller |
49 |
Section 8.04 |
Frustration of Closing Conditions |
49 |
|
|
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Article IX Termination |
49 |
|
|
Section 9.01 |
Termination Events |
49 |
Section 9.02 |
Effect of Termination |
50 |
|
|
|
Article X Miscellaneous |
50 |
|
|
Section 10.01 |
Expenses |
50 |
Section 10.02 |
Notices |
51 |
Section 10.03 |
Headings |
52 |
Section 10.04 |
Severability |
52 |
Section 10.05 |
Entire Agreement |
52 |
Section 10.06 |
Binding Effect; Successors and Assigns |
53 |
Section 10.07 |
Amendment and Modification; Waiver |
53 |
Section 10.08 |
Governing Law; Submission to Jurisdiction; Waiver of Jury Trial |
53 |
Section 10.09 |
Specific Performance |
54 |
Section 10.10 |
Counterparts |
54 |
|
|
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EXHIBIT A WORKING CAPITAL EXAMPLE |
A-1 |
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EXHIBIT B BILL OF SALE |
B-1 |
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|
EXHIBIT C ASSIGNMENT OF LEASE |
C-1 |
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|
EXHIBIT D TERM SHEET FOR TRANSITION SERVICES AGREEMENT |
D-1 |
iii
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this Agreement), dated as of September 8, 2015, is entered into by and between Joes Jeans, Inc., a Delaware corporation (Seller), and GBG USA Inc., a Delaware corporation (Buyer).
RECITALS
WHEREAS, Seller wishes, for itself and on behalf of the Seller Subsidiaries, to sell and assign to Buyer, and Buyer wishes to purchase and assume from Seller or the Seller Subsidiaries, certain assets and liabilities of the Joes Business, subject to the terms and conditions set forth herein;
WHEREAS, prior to or concurrently with the execution of this Agreement, and as a condition and inducement to Sellers and Buyers willingness to enter into this Agreement, Seller is entering into an Asset Purchase Agreement (the IP Asset Purchase Agreement) with Joes Holdings LLC (the IP Assets Purchaser) and Sequential Brands Group, Inc., pursuant to which, among other things, the IP Assets Purchaser will purchase and assume from Seller or its applicable Subsidiaries certain intellectual property assets used or held for use in the Joes Business, together with certain contract and other related assets and liabilities of the Joes Business; and
WHEREAS, prior to or concurrently with the execution of this Agreement, Buyer is entering into an offer letter for the employment of Joe Dahan (Dahan), pursuant to which, among other things, Dahan will be employed by Buyer.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. The following terms have the meanings specified or referred to in this Article I:
Acquired Purchase Orders means customer purchase orders of the Joes Business.
Affiliate of a Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.
Agreed Claims has the meaning set forth in Section 7.05(c).
Agreement has the meaning set forth in the preamble.
Assigned Contracts has the meaning set forth in Section 2.01(c).
Assignment of Lease has the meaning set forth in Section 3.02(a)(iii).
Assumed Accounts Payable has the meaning set forth in Section 2.03(b).
Assumed Liabilities has the meaning set forth in Section 2.03.
Bill of Sale has the meaning set forth in Section 3.02(a)(ii).
Books and Records means books and records relating to the Purchased Assets and Assumed Liabilities in whatever form, including without limitation invoices, credit records, payroll, personnel, files and all customer lists and records in any form (and all software related to such customer records, to the extent transferable), whether of past or present customers or potential future customers, supplier lists and records, price lists, purchasing materials and records, manufacturing, maintenance and quality control records and procedures, warranty and service records, accounts payable records and files, manuals, standard operating procedures, correspondence, and confidential or proprietary information, but excluding any records relating to Sellers Taxes or other personal records of Seller to the extent such records do not relate solely to the Purchased Assets or Assumed Liabilities.
Business Day means any day except Saturday, Sunday or any other day on which commercial banks located in New York, New York are authorized or required by Law to be closed for business.
Business Working Capital means the sum of the Current Assets of the Joes Business minus the Current Liabilities of the Joes Business as of the close of business on the Closing Date, calculated in accordance with Exhibit A.
Buyer has the meaning set forth in the preamble.
Buyer Designee has the meaning set forth in Section 10.06.
Buyer Disclosure Letter means the Disclosure Letter delivered by Buyer concurrently with the execution and delivery of this Agreement.
Buyer Indemnitees has the meaning set forth in Section 7.02.
Cap has the meaning set forth in Section 7.04(b).
Claim Certificate has the meaning set forth in Section 7.05(b).
Closing has the meaning set forth in Section 3.01.
Closing Date has the meaning set forth in Section 3.01.
COBRA has the meaning set forth in Section 4.15(e).
Code means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated and the rulings listed thereunder.
2
Company SEC Documents means all periodic filings (i.e., 10-Ks, 10-Qs and 8-Ks) made by Seller pursuant to the Securities Exchange Act of 1934, as amended, in each case including all exhibits and schedules thereto since July 1, 2015 (excluding, in each case, any disclosures set forth in any risk factor section, in any section relating to forward-looking statements, and any other disclosures included therein, to the extent that they are cautionary, predictive or forward-looking).
Confidential Material means all information (written or oral) that is confidential or proprietary to Seller or any of its Subsidiaries or is not otherwise generally available to the public regarding the Joes Business. The term Confidential Material shall not include any information (written or oral) (a) regarding Seller or any of its Subsidiaries, including, without limitation, any information (written or oral) regarding the Hudsons Business, (b) that is or becomes generally available to the public or is or becomes generally known within the industries in which the Joes Business is conducted, in each case other than as a result of disclosure by Seller or its Representatives in violation of this Agreement, (c) becomes available to Seller or any of its Subsidiaries or Representatives from a Person other than Buyer on a non-confidential basis, provided that such Person was not known by Seller or its Representatives to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to Buyer with respect to such materials, or (d) is independently developed by Seller or any of Subsidiaries or Representatives without reference to Confidential Material.
Confidentiality Agreement means that certain Confidentiality and Nondisclosure Agreement, dated as of May 20, 2015, by and between Buyer and Seller.
Consents has the meaning set forth in Section 4.03.
Continuing Joes Employee has the meaning set forth in Section 6.10(a).
Contracts means all contracts, leases, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, bonds, guarantees, franchises, and other legally binding agreements, understandings, arrangements and letters of intent, and any amendments thereto, in each case whether written or oral.
Control (including the terms controlled by and under common control with), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise.
Covered Real Property means any real property that is currently occupied by Seller or the Seller Subsidiaries pursuant to a Seller Lease that is an Assigned Contract.
Current Assets means net Purchased Accounts Receivable, Inventory and prepaid expenses of the Joes Business and the other assets set forth in the line items included on Exhibit A and acquired pursuant to the terms of this Agreement, but excluding (a) the portion of any prepaid expense of which Buyer will not receive the benefit following the Closing, (b) deferred Tax assets and (c) receivables from any of Sellers Affiliates (excluding the Seller Subsidiaries), directors, employees, officers or shareholders and any of their respective Affiliates, determined in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the audited financial statements for the most recent fiscal year.
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Current Liabilities means accounts payable and accrued expenses of the Joes Business and the other liabilities set forth in the line items included on Exhibit A and assumed pursuant to the terms of this Agreement, but excluding (a) payables to any of Sellers Affiliates (excluding the Seller Subsidiaries), directors, employees, officers or shareholders and any of their respective Affiliates, (b) deferred Tax liabilities, (c) the current portion of long term debt, (d) any other debt instruments, and (e) any amounts due for Taxes of Joes Business, determined in accordance with GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the audited financial statements for the most recent fiscal year.
Dahan has the meaning set forth in the recitals.
Dahan Offer Letter means that certain Offer Letter, dated as of the date of this Agreement, between Joe Dahan and GBG USA Inc.
Deductible has the meaning set forth in Section 7.04(a).
Delayed Transfer Assets has the meaning set forth in Section 6.15.
Delayed Transfer Date means the earlier of (i) the date upon which the Merger (as defined in the Merger Agreement) is consummated, (ii) the date that the Wind-Down (as defined in the IP Asset Purchase Agreement) has been completed in accordance with the terms of the IP Asset Purchase Agreement and (iii) December 31, 2016.
Delayed Transfer Liabilities has the meaning set forth in Section 6.15.
Direct Claim has the meaning set forth in Section 7.05(c).
Disclosure Letters means the Seller Disclosure Letter and the Buyer Disclosure Letter.
Employee Transition Date has the meaning set forth in Section 6.10(b).
Encumbrances means any liens, security interests, options, rights of first refusal, claims, easements, mortgages, charges, indentures, deeds of trust, rights of way, restrictions on the use of real property, encroachments, leases to third parties, security agreements, or any other restriction of any kind.
End Date has the meaning set forth in Section 9.01(b).
Environmental Laws means Laws regulating pollution or protection of human health or the environment, including all laws regulating the use, generation, handling, treatment, storage, disposal, management, release or threatened release of, or exposure to, Hazardous Materials.
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ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Escrow Agent shall mean Wilmington Trust, National Association.
Escrow Amount has the meaning set forth in Section 2.05.
Excluded Assets has the meaning set forth in Section 2.02.
Excluded Accounts Receivable means amounts payable to Seller pursuant to agreements that are being acquired by the IP Assets Purchaser pursuant to the IP Asset Purchase Agreement and accounts receivable related to the promissory note issued to Seller in connection with the Advanced Retail distribution arrangement sale.
Excluded Liabilities has the meaning set forth in Section 2.04.
Excluded Real Property means any real property that is currently occupied by Seller or any of the Seller Subsidiaries other than Covered Real Property.
Financial Statements has the meaning set forth in Section 4.04.
Fundamental Representations means collectively, those representations and warranties contained in Section 4.01 (Organization and Qualification of Seller), Section 4.02 (Authority of Seller); Section 4.19 (Brokers), Section 4.20 (Title to Purchased Assets), Section 5.01 (Organization of Buyer), Section 5.02 (Authority of Buyer), and Section 5.04 (Brokers).
GAAP means United States generally accepted accounting principles as in effect from time to time.
Governmental Authority means any United States or non-United States federal, state, provincial or local government or political subdivision thereof, or any agency, commission or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction or any securities exchange.
Governmental Order means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
Hazardous Materials means any material, substance or waste that is regulated as hazardous, toxic, a pollutant, or a contaminant under applicable Environmental Laws.
Hudsons Business means the business of Seller and its applicable Subsidiaries operated as of the date hereof under the brand names Hudsons, and Hudson Jeans.
Indemnified Party has the meaning set forth in Section 7.04.
Indemnifying Party has the meaning set forth in Section 7.04.
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Insurance Policies has the meaning set forth in Section 4.23.
Inventory has the meaning set forth in Section 2.01(a).
IP Asset Purchase Agreement has the meaning set forth in the recitals.
IP Assets Purchaser has the meaning set forth in the recitals.
Joes Business means the business of Seller and the Seller Subsidiaries operated as of the date hereof under the brand names Joes Jeans, Joes, Joes JD and else.
Joes Employee means employees of the Seller or its Subsidiaries who exclusively or primarily perform services for the Joes Business.
Latest Balance Sheet Date has the meaning set forth in Section 4.04(b).
Law means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
Losses means without duplication (a) any and all claims, actions, cause of actions, judgment, awards, losses, damages, liabilities, costs or expenses (including any costs and expenses related to an Indemnified Partys obligation to mitigate in Section 7.04(e)), including reasonable attorneys, accountants and other professional advisors fees and expenses and (b) any losses or costs incurred in investigating, defending or settling any claim, action or cause of action described in clause (a) whether or not the underlying claim, action or cause of action is actually asserted or is merely alleged or threatened.
Mark-Down has the meaning set forth in Section 4.12.
Material Adverse Effect means any change, event, circumstance, effect, development, occurrence or state of facts that, individually or in the aggregate: (i) has or would reasonably be likely to have a material adverse effect on to the business, condition, properties, assets, liabilities (contingent or otherwise), results of operations or financial condition of the Joes Business, taken as a whole; provided, that none of the following shall be deemed in itself to constitute, and that none of the following shall be taken into account in determining whether there has been or would reasonably be expected to be, a Material Adverse Effect: (a) any change generally affecting the economy, financial markets or political, economic or regulatory conditions in the United States or any other geographic region in which the Joes Business is conducted (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), (b) general financial, credit or capital market conditions, including interest rates or exchange rates, or any changes therein (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), (c) conditions (or changes therein) in any industries in which the Joes Business is conducted (excluding seasonal fluctuations) (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), (d) the
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taking of any action required by this Agreement or the IP Asset Purchase Agreement or the announcement of the transactions contemplated hereby or thereby, in accordance with their respective terms (e) changes in applicable Law or GAAP (or, in each case, any interpretations thereof) (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), (f) any acts of terrorism or war or any escalation thereof or any weather related event, fire or natural disaster (except, in each case, to the extent that the Joes Business, taken as a whole, is disproportionately adversely affected relative to other participants in the industries in which the Joes Business is conducted), or (g) any failure of the Joes Business to meet internal or published projections, forecasts, performance measures, operating statistics or revenue or earnings predictions for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Material Adverse Effect); or (ii) has a material adverse effect on Sellers ability to, in a timely manner, perform its obligations under this Agreement or consummate the transactions contemplated by this Agreement.
Material Contracts means all Contracts (a) by which any of the Purchased Assets or Assumed Liabilities are bound or affected or (b) to which Seller or any of its Subsidiaries are parties or by which Seller or any of its Subsidiaries are bound in connection with the Joes Business, the Purchased Assets or the Assumed Liabilities, in each case, (i) that relate to the manufacture, design, marketing, promotion, production, distribution, sale or licensing of any of the Purchased Assets, other than sales of inventory in the ordinary course of business; (ii) granting or evidencing an Encumbrance (other than Permitted Encumbrances) on any Purchased Asset or any other property or asset of Seller or any of its Subsidiaries and used in connection with the Joes Business; (iii) limiting the ability of Seller or any of its Subsidiaries to (1) engage in the Joes Business in any capacity or (2) compete with any Person or in any geographical area with respect to the Joes Business; (iv) relating to the Joes Business (other than this Agreement and any agreement or instrument entered into pursuant to this Agreement) among (1) Seller or any of its Affiliates or (2) Seller or any of its Subsidiaries or any current or former officer or director of Seller or any of its Subsidiaries; (v) involving any joint venture, partnership, strategic alliance, shareholders agreement, co-marketing, co-promotion, co-packaging, joint development or similar arrangement; (vi) providing for employment, consulting, collectively bargaining or other agreement with a labor organization; (vii) other than as provided in any Seller Benefit Plan, any plan, program, arrangement or contract that providing for the payment of (x) severance, termination or similar type compensation or benefits upon the termination or resignation of any employees employment, or (y) compensation or benefits to any employee in excess of Seventy Five Thousand Dollars ($75,000), which is directly contingent on the retention of such employee; (viii) entered into with suppliers or customers other than in the ordinary course of business; (ix) granting another party most favored nation or similar status or license to or franchise in respect of any material right, property or asset of the Joes Business; (x) with any Material Customer or Material Supplier (other than in the ordinary course of business); and (xi) relating to the Joes Business involving aggregate consideration in excess of One Hundred Thousand Dollars ($100,000) or requiring performance by any party more than one (1) year from the date hereof, which, in each case, cannot be cancelled without penalty or without more than sixty (60) days notice; provided, however, that in no event will any Contract be deemed to be a Material Contact if, following the Closing, such Contract will not be binding on or otherwise affect any of the Purchased Assets or Assumed Liabilities.
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Material Customers has the meaning set forth in Section 4.13.
Material Suppliers has the meaning set forth in Section 4.13.
Merger Agreement means that certain Agreement and Plan of Merger, dated as of the date hereof by and among RG Parent, LLC, a Delaware limited liability company, JJ Merger Sub LLC, a Delaware limited liability company and a wholly owned Subsidiary of Seller, and Seller.
Overlap Period shall mean any taxable year or other taxable period beginning on or before and ending after the Closing Date.
Participant means each current or former director, officer, employee or individual independent contractor of Seller or any Seller Subsidiary.
Permits means all permits, licenses, franchises, approvals, certificates, rights, exemptions, authorizations and consents granted from or issued by Governmental Authorities.
Permitted Encumbrance means each of the following: (i) Encumbrances incurred or deposits made in the ordinary course of business in connection with workers compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government Contracts, performance and return of money bonds and similar obligations; (ii) mechanics, carriers, workers, repairers, materialmens, warehousemens and other similar Encumbrances which have arisen in the ordinary course of business; (iii) Encumbrances for Taxes not yet due and payable or contested in good faith; (iv) requirements and restrictions of zoning, building and other Laws, rules and regulations; (v) statutory liens of landlords for amounts not yet due and payable; (vi) Encumbrances arising under conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; and (vii) imperfections of title or liens affecting any assets of the Joes Business that are de minimus with respect to the value or use of such asset by Buyer.
Person means and includes an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association, limited liability partnership, limited partnership, group or other entity.
Post-Closing Period shall mean all taxable years or other taxable periods that begin on or after the Closing Date and, with respect to any Overlap Period, the portion of such taxable year or period beginning on the Closing Date.
Pre-Closing Period shall mean all taxable years or other taxable periods that end on or before the day before the Closing Date and, with respect to any Overlap Period, the portion of such taxable year or period ending on the day before the Closing Date.
Purchase Price has the meaning set forth in Section 2.05.
Purchased Accounts Receivable has the meaning set forth in Section 2.01(b).
Purchased Assets has the meaning set forth in Section 2.01.
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Representative means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants, agents, managers and other agents of such Person.
Required Consents means the Consents listed in Section 3.02(a)(v) of the Seller Disclosure Letter.
Safety Requirements has the meaning set forth in Section 4.08(d).
Seller has the meaning set forth in the preamble.
Seller Benefits Plans has the meaning set forth in Section 4.15(a).
Seller Disclosure Letter means the Disclosure Letter delivered by Seller concurrently with the execution and delivery of this Agreement.
Seller Indemnitees has the meaning set forth in Section 7.03.
Seller Lease means any lease, sublease, sub-sublease, license or other agreement under which Seller or any of its Subsidiaries leases, subleases, licenses, uses or occupies (in each case whether as landlord, tenant, sublandlord, subtenant or by other occupancy arrangement), or has the right to use or occupy, now or in the future, any real property.
Seller Subsidiary means Joes Jeans Subsidiary Inc. and Joes Jeans Retail Subsidiary Inc.
Sellers Counsel means Richards, Layton & Finger P.A.
Sellers Counsel Opinion has the meaning set forth in Section 3.02(a)(iv).
Sellers Working Capital Statement has the meaning set forth in Section 2.07(a).
Special Damages has the meaning set forth in Section 7.04(d).
Subsidiary of a Person means any other Person that directly or indirectly, through one or more intermediaries, is Controlled by such Person.
Tangible Personal Property means all office equipment, machinery, equipment and supplies, furniture and fixtures and other items of tangible personal property (other than Inventory) owned by Seller or any of its Subsidiaries that is physically located at any Covered Real Property and that is used exclusively in connection with the ownership, maintenance or operation of any Covered Real Property and the Joes Business or by the Joes Employees; other than the items set forth in Section 1.01 of the Seller Disclosure Letter.
Tax Clearance Certificate has the meaning set forth in Section 6.07(b).
Tax Contest has the meaning set forth in Section 7.05(b).
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Tax Return means any return, amended return, disclosure, election, estimate, form, declaration, report, claim for refund, information return or statement or other document required to be filed with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
Taxes means all federal, state, local, foreign and other income, gross receipts, sales, use, value added, capital gain, capital stock, social security, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments, levies, or other governmental charges in the nature of a tax, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties, and any liability for such amounts payable as a result of a contractual obligation to indemnify any Person.
Third Party Claim has the meaning set forth in Section 7.05(b).
Transaction Documents means this Agreement, the Bill of Sale, and the other agreements, instruments and documents required to be delivered at the Closing.
Transition Employees has the meaning set forth in Section 6.10(a).
Transition Services Agreement has the meaning set forth in Section 3.02(a)(ix).
WARN Act has the meaning set forth in Section 6.10(a).
Willful Breach means a breach of any representation, warranty or covenant or other agreement set forth in this Agreement that is a consequence of an act or failure to act by any party hereto with the actual knowledge that the taking of such act or failure to take such act would cause or would be reasonably likely to cause a breach of this Agreement, in each case, that causes the conditions to Closing of Buyer under Section 8.02 (in the event of a breach by Seller) or of Seller under Section 8.03 (in the event of a breach by Buyer) to be incapable of being satisfied prior to the End Date.
Section 1.02 Construction. In this Agreement, unless the context otherwise requires:
(a) references to writing or comparable expressions include a reference to facsimile transmission or comparable means of communication (including e-mail, provided the sender complies with the provisions of Section 10.02);
(b) the phrases delivered or made available shall mean that the information referred to has been physically or electronically delivered to the relevant parties;
(c) words expressed in the singular number shall include the plural and vice versa; words expressed in the masculine shall include the feminine and neuter gender and vice versa;
(d) the descriptive headings of the several Articles and Sections of this Agreement, the Seller Disclosure Letter and the Buyer Disclosure Letter (as applicable) are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement;
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(e) whenever this Agreement refers to a number of days, that number shall refer to calendar days unless Business Days are specified and whenever any action must be taken under this Agreement on or by a day that is not a Business Day, then, unless otherwise indicated herein, that action may be validly taken on or by the next day that is a Business Day;
(f) the words hereof, herein, hereto and hereunder, and words of similar import, shall refer to this Agreement as a whole and not to any provision of this Agreement;
(g) this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented;
(h) include, includes, and including are deemed to be followed by without limitation whether or not they are in fact followed by such words or words of similar import;
(i) references to Dollars, dollars or $, without more are to the lawful currency of United States of America
(j) the use of or is not intended to be exclusive unless expressly indicated otherwise;
(k) unless expressly stated otherwise, assets shall include rights, including rights under contracts; and
(l) reasonable efforts or similar terms shall not require the waiver of any rights under this Agreement.
Section 1.03 Exhibits and Disclosure Letters. The Exhibits, the Seller Disclosure Letter and the Buyer Disclosure Letter are incorporated into and form an integral part of this Agreement.
Section 1.04 Knowledge. When any representation, warranty, covenant or agreement contained in this Agreement is expressly qualified by reference to (i) the Knowledge of Seller or words of similar import, it shall mean the actual knowledge of the individuals set forth on Section 1.04 of the Seller Disclosure Letter and the knowledge such individuals would or should have after reasonable inquiry, and (ii) the Knowledge of Buyer or words of similar import, it shall mean the actual knowledge of the individuals set forth on Section 1.04 of the Buyer Disclosure Letter and the knowledge such individuals would or should have after reasonable inquiry.
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ARTICLE II
PURCHASE AND SALE
Section 2.01 Purchase and Sale of Assets. On the terms and subject to the conditions set forth herein, at the Closing, Seller shall (and shall cause the Seller Subsidiaries to) sell, assign, transfer, convey and deliver, and Buyer shall purchase, all of Sellers or the Seller Subsidiaries right, title and interest in, to and under the Purchased Assets free and clear of all Encumbrances (other than Permitted Encumbrances); provided, that the Purchased Assets that are Delayed Transfer Assets shall be delivered to Buyer on the Delayed Transfer Date pursuant to Section 6.15. Purchased Assets means only the following assets owned by Seller or the Seller Subsidiaries:
(a) all inventory, finished goods, raw materials, work in progress, customer returns, packaging, supplies, parts and other inventories related exclusively to the Joes Business that is physically located at or that is in transit to any Covered Real Property or that is physically located at any third party location held at the direction of Seller or the Seller Subsidiaries (Inventory);
(b) all accounts receivable held by Seller or the Seller Subsidiaries related exclusively to the Joes Business other than Excluded Accounts Receivable (Purchased Accounts Receivable);
(c) the Seller Leases, Acquired Purchase Orders, and the other Contracts set forth on Section 2.01(c) of the Seller Disclosure Letter (collectively, the Assigned Contracts);
(d) all Tangible Personal Property;
(e) all pre-paid expenses (other than in respect of Taxes) relating exclusively to the operation of the Joes Business, including pre-paid lease and rental payments (including any security deposits) and other current assets of Seller and Seller Subsidiaries related exclusively to the Joes Business;
(f) copies of all Books and Records (whether in paper or electronic format) relating to the assets described in Sections 2.01(a) through 2.01(e);
(g) to the extent transferrable, all express or implied warranties, indemnities and guarantees that are exclusively related to any of the assets described in Sections 2.01(a) through 2.01(e);
(h) all brochures, marketing and sales literature, advertising catalogues, photographs, display materials, media materials, packaging materials and other similar items which have been produced by or for Sellers specifically in connection with Joes Business;
(i) to the extent assignable, all of Sellers and the Seller Subsidiaries vendor identification numbers used exclusively in connection with Joes Business, and company prefixes issued by the Uniform Code Council, Inc., or GSI-US and any analogous foreign entity regarding international product codes (e.g. the EAN and JAN), to Sellers and any bar codes containing any such prefixes that identify Seller, the Seller Subsidiaries or the Inventory; and
(j) all goodwill exclusively related to any of the assets described in Sections 2.01(a) through 2.01(e) and, for the avoidance of doubt, excluding any goodwill associated with the assets that are being acquired by the IP Assets Purchaser pursuant to the IP Asset Purchase Agreement.
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Section 2.02 Excluded Assets. Buyer expressly understands and agrees that it is not purchasing or acquiring, and neither Seller nor any of the Seller Subsidiaries is selling or assigning, any properties, assets or rights other than the Purchased Assets (such properties, rights and assets that are not Purchased Assets, collectively, the Excluded Assets).
Section 2.03 Assumed Liabilities. On the terms and subject to the conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge when due only the following liabilities and obligations of Seller or any of the Seller Subsidiaries to the extent arising out of or relating to the Purchased Assets (collectively, the Assumed Liabilities); provided, that Buyer shall assume, and agree to pay, perform and discharge when due the Assumed Liabilities that are Delayed Transfer Liabilities from and after the Delayed Transfer Date pursuant to Section 6.15:
(a) all liabilities and obligations arising under or relating to the Assigned Contracts in respect of periods on and after the Closing Date (or, solely with respect to Assigned Contracts that are Delayed Transfer Assets, in respect of periods on and after the Delayed Transfer Date), provided, that Buyer shall not assume or agree to pay, discharge or perform any liabilities or obligations arising out of any breach by Seller or any of the Seller Subsidiaries on or prior to the Closing Date of any provision of any Assigned Contract (or, solely with respect to Assigned Contracts that are Delayed Transfer Assets, on or prior to the Delayed Transfer Date);
(b) all accounts payable (Assumed Accounts Payable) and other Current Liabilities of Seller and the Seller Subsidiaries (other than in respect of Taxes) relating exclusively to the operation of the Joes Business and reflected in Sellers Working Capital Statement;
(c) all liabilities and obligations in respect of periods on and after the Closing Date arising out of or relating to the employment or termination of employment of Continuing Joes Employees (or, solely with respect to Joes Employees that are located at Covered Real Property operated pursuant to a Seller Lease that is a Delayed Transfer Asset, in respect of periods on or after the Delayed Transfer Date), including any WARN Act or other liabilities relating to the termination of any Continuing Joes Employee on or after the Closing Date (or, solely with respect to Joes Employees that are located at Covered Real Property operated pursuant to a Seller Lease that is a Delayed Transfer Asset, on or after the Delayed Transfer Date), provided that Buyer shall not be liable to the extent of any incremental liability incurred by Buyer directly caused by actions taken by Buyer in reliance upon any inaccurate information contained in the lists provided by Seller in accordance with Section 4.15(d) and Section 6.10(h);
(d) any liabilities or obligations for Taxes for which Buyer is liable pursuant to Section 6.08 and Section 6.09;
(e) subject to Section 2.03(a), all liabilities and obligations arising out of or relating to the ownership or operation of the Purchased Assets in respect of periods on or after the Closing (or, solely in the case of Delayed Transfer Assets, in respect of periods on or after the Delayed Transfer Date); and
(f) any liabilities or obligations for which Buyer is liable pursuant to Section 6.10(b).
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Section 2.04 Excluded Liabilities. Notwithstanding anything contained herein to the contrary, Buyer shall not assume or cause to be assumed, or be deemed to have assumed and shall not be liable or responsible to pay, perform or discharge any liabilities or obligations (whether known or unknown, fixed, absolute, matured, unmatured, accrued or contingent, now existing or after the date hereof) of Seller or any of its Subsidiaries, other than Assumed Liabilities (such liabilities or obligations that are not Assumed Liabilities, collectively, the Excluded Liabilities) including by way of illustration and not limitation:
(a) any liability to the extent relating to or based on events or conditions occurring or existing or arising out of, the Joes Business operated prior to the Closing Date (or, in the case of the Delayed Transfer Liabilities, prior to the Delayed Transfer Date), or the ownership, possession, use, operation or sale or other disposition prior to the Closing Date of any Purchased Assets (or any other assets, properties, rights or interests associated, at any time prior to the Closing Date, with the Joes Business) (or, in the case of the Delayed Transfer Assets, prior to the Delayed Transfer Date);
(b) any liabilities or obligations for Taxes for which Seller is liable pursuant to Section 6.08 and Section 6.09;
(c) any amounts due to Affiliates of Seller (other than the Seller Subsidiaries);
(d) any indebtedness for borrowed money, bank loans or facilities or any other debt instruments;
(e) any obligations or liabilities related to any litigation involving Seller or any of the Seller Subsidiaries relating to the Joes Business to the extent related to periods prior to the Closing Date (or, in the case of Delayed Transfer Liabilities, to the extent related to periods prior to the Delayed Transfer Date);
(f) any liabilities or obligations of Seller or any of its Affiliates that relate to any indemnity, defense or hold harmless provision or agreement for occurrences prior to the Closing Date (or, in the case of Delayed Transfer Liabilities, to the extent related to periods prior to the Delayed Transfer Date);
(g) any liabilities of Seller to any current or former stockholder in respect of such stockholders equity interest in Seller;
(h) any liabilities or obligations arising under Excluded Assets;
(i) any liabilities or obligations arising out of (i) any Laws or claims respecting employment and employment practices, including those related to discrimination, wrongful discharge and harassment, equal opportunity, unfair labor practice, wages and hours, any claims for wages or other benefits including bonuses, commissions, accrued vacation, workers compensation, severance, retention, termination or other payments, and incorrect classification of any individual as an independent contractor or violation of any agreement; (ii) Seller Benefit Plans; (iii) employment, or termination of employment, of any Joes Employee prior to the Closing Date (or, solely with respect to Joes Employees that are located at Covered Real Property operated pursuant to a Seller Lease that is a Delayed Transfer Asset, prior to the
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Delayed Transfer Date); (iv) or workers compensation claims of any Joes Employee, in each instance to the extent related to events occurring prior to the Closing Date (or, solely with respect to Joes Employees that are located at Covered Real Property operated pursuant to a Seller Lease that is a Delayed Transfer Asset, prior to the Delayed Transfer Date), in each case under clauses (i) (iv) above; or
(j) any costs or expenses payable by Seller or any Affiliate of Seller in connection with the transactions contemplated by this Agreement, other than as specifically set forth herein.
Section 2.05 Purchase Price. The aggregate purchase price for the Purchased Assets shall be Thirteen Million Dollars ($13,000,000) (the Purchase Price). The Purchase Price shall be paid at Closing by wire transfer of immediately available funds to accounts designated in writing by Seller to Buyer at least two (2) Business Days prior to the Closing. In addition, Buyer shall make a payment in an amount equal to One Million Five Hundred Thousand Dollars ($1,500,000.00) (the Escrow Amount), by wire transfer of immediately available funds to an account designated in writing by the Escrow Agent, which Escrow Amount shall be governed by Section 6.16 of the IP Asset Purchase Agreement.
Section 2.06 Allocation of Purchase Price. Seller and Buyer agree to allocate the Purchase Price and, to the extent treated as consideration for federal income tax purposes any Assumed Liabilities and any other amounts, in accordance with Section 1060 of the Code. Seller and Buyer agree that Buyer shall prepare and provide to Seller a draft allocation of the purchase price among the Purchased Assets within ninety (90) days after the Closing Date. Seller shall notify Buyer within ninety (90) days of receipt of such draft allocation of any objection Seller may have thereto. Seller and Buyer agree to attempt to resolve any disagreement with respect to such allocation in good faith. In addition, Seller and Buyer hereby undertake and agree to file timely any information that may be required to be filed pursuant to Treasury Regulations promulgated under Section 1060(b) of the Code, and shall use the allocation determined pursuant to this Section 2.06 in connection with the preparation of Internal Revenue Service Form 8594 as such form relates to the transactions contemplated by this Agreement. Neither Seller nor Buyer shall file any Tax Return or other document or otherwise take any position which is inconsistent with the allocation determined pursuant to this Section 2.06 except as may be adjusted by subsequent agreement following an audit by the IRS or by court decision. If Seller and Buyer cannot agree on all or a portion of the allocation within sixty (60) days of Sellers objection to the allocation, each party shall use its own allocation of the unagreed portion as it deems appropriate.
Section 2.07 Sellers Working Capital Statement; Transfer of Purchased Assets and Assumed Liabilities.
(a) No later than three (3) days prior to the Closing Date and the Delayed Transfer Date, Seller shall deliver to Buyer a statement (the Sellers Working Capital Statement) of the estimated Business Working Capital as of the Closing Date, calculated in accordance with Exhibit A.
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(b) At the Closing, the Purchased Assets shall be sold, conveyed, transferred, assigned and delivered to Buyer (other than the Delayed Transfer Assets, which will be delivered to Buyer on the Delayed Transfer Date pursuant to Section 6.15), free and clear of all Encumbrances (other than Permitted Encumbrances), and the Assumed Liabilities shall be assumed by Buyer (other than the Delayed Transfer Liabilities, which will be assumed by Buyer on the Delayed Transfer Date pursuant to Section 6.15), pursuant to transfer and assumption Contracts, bills of sale, endorsements, assurances, conveyances, releases, discharges, assignments, certificates, drafts, checks or other instruments in such form as is necessary to effect a sale, conveyance, transfer and assignment of the Purchased Assets and an assumption of the Assumed Liabilities as Buyer and Seller shall reasonably deem necessary, or as required by Law in order to consummate the transaction and, to vest in Buyer valid title to the Purchased Assets free and clear of any Encumbrances (other than Permitted Encumbrances), which documents and instruments shall be executed, delivered and/or filed on the Closing Date or the Delayed Transfer Date, as applicable, by Seller (and, as applicable, its Subsidiaries), Buyer and/or any other third parties.
Section 2.08 Required Consents.
(a) Absence of Consents, Obtaining Consents. Notwithstanding anything to the contrary contained in this Agreement, to the extent that the sale, conveyance, transfer, assignment or delivery or attempted sale, conveyance, transfer, assignment or delivery to Buyer of any Assigned Contract or right is prohibited by any applicable Law or would require any third party or any Governmental Authoritys authorization, approval, consent, negative clearance or waiver and such authorization, approval, consent, negative clearance or waiver shall not have been obtained prior to the Closing, this Agreement shall not constitute a sale, conveyance, transfer, assignment or delivery, or an attempted sale, conveyance, transfer, assignment or delivery thereof. Following the Closing, the parties hereto shall have a continuing obligation to use their commercially reasonable best efforts to cooperate with each other to obtain promptly all such authorizations, approvals, consents, negative clearances or waivers; provided, that neither Seller nor any of its Affiliates shall be required to commence any litigation or offer or grant any accommodation (financial or otherwise) to any third party to obtain such authorizations, approvals, consents, negative clearances or waivers. Upon obtaining the requisite authorization, approval, consent, negative clearance or waiver, Seller or the applicable Seller Subsidiary shall promptly convey, transfer, assign and deliver, or cause to be conveyed, transferred, assigned and delivered, such Assigned Contract or right to Buyer hereunder.
(b) Benefit of Assigned Contracts. Pending, or in the absence of, such authorization, approval, consent, negative clearance or waiver, the parties hereto shall cooperate with each other in any reasonable and lawful arrangements designed to provide to Buyer the economic claims, rights and benefits and liabilities of use of such Assigned Contract or right and Seller or the applicable Seller Subsidiary shall continue to perform such Contracts upon the reasonable direction of Buyer; provided, that Seller shall bear the economic burden resulting from implementation of any such alternative arrangement pursuant to this Section 2.08(b) and Buyer shall be responsible for the Assumed Liabilities, if any, arising under such Assigned Contract.
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ARTICLE III
CLOSING
Section 3.01 Closing. On the terms and subject to the conditions of this Agreement and the satisfaction or waiver of all of the conditions set forth in Article III hereof, the closing of the transactions contemplated hereby (the Closing) shall take place on the date that is two (2) Business Days following the satisfaction or waiver of all of the conditions set forth in Article VIII hereof (other than those conditions to be satisfied on the Closing Date, but subject to the satisfaction or waiver, if permissible, of such conditions) at the offices of Akin Gump Strauss Hauer & Feld LLP, 1333 New Hampshire Avenue NW, Washington DC 20036, or at such other time, date or place as the parties hereto shall agree in writing. The date upon which the Closing occurs is herein referred to as the Closing Date. Upon consummation of the Closing, the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities hereunder, and the Closing, shall be deemed to have occurred as of 12:01 a.m. (New York time) on the Closing Date or the Delayed Transfer Date, as applicable; provided, that the Delayed Transfer Assets will not be delivered, and the Delayed Transfer Liabilities will not be assumed, until the Delayed Transfer Date.
Section 3.02 Closing Deliverables.
(a) At the Closing, Seller shall deliver (or cause to be delivered) to Buyer the following:
(i) a certificate signed by an authorized officer of Seller, dated as of the Closing Date, confirming the matters set forth in Sections 8.02(a) and (b);
(ii) a counterpart to the bill of sale, assignment and assumption agreement in substantially the form of Exhibit B hereto (the Bill of Sale), duly executed by Seller and the Seller Subsidiaries;
(iii) a counterpart to each assignment and assumption agreement with respect to each Sellers or the applicable Seller Subsidiaries interest in each Seller Lease that is an Assigned Contract in substantially the form of Exhibit C hereto (each, an Assignment of Lease), duly executed by Seller or the applicable Seller Subsidiary;
(iv) a duly executed Opinion of Sellers Counsel substantially in the form previously provided to Buyer (Sellers Counsel Opinion);
(v) the Required Consents;
(vi) A certificate of the corporate secretary (or equivalent officer) of Seller with respect to certain corporate matters and attaching thereto (A) a true, correct and complete copy of resolutions of the board of directors of Seller authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby; and (B) certification of the names and signatures of the officers of Seller authorized to sign this Agreement and the other Transaction Documents and the documents to be delivered hereunder and thereunder;
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(vii) A certificate of the corporate secretary (or equivalent officer) of each Seller Subsidiary with respect to certain corporate matters and attaching thereto a true, correct and complete copy of resolutions of the board of directors of such Seller Subsidiary authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby;
(viii) a non-foreign person affidavit from Seller and/or the Seller Subsidiaries dated as of the Closing Date as required by, and satisfying the requirements of, Section 1445 of the Code;
(ix) a counterpart to the transition services agreement, which agreement shall be in form and substance reasonably satisfactory to Buyer and Seller and contain the terms set forth on Exhibit D hereto (the Transition Services Agreement), duly executed by Seller; and
(x) such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer and Seller, as may be required in the reasonable opinion of Buyer and its counsel to vest in Buyer good and valid title to the Purchased Assets, free and clear of any Encumbrances (other than Permitted Encumbrances), and to put Buyer in actual possession or control of the Purchased Assets (other than the Delayed Transfer Assets, which will be delivered at the Delayed Transfer Date pursuant to Section 6.15), including, by way of illustration and not limitation, as set forth in Section 2.07(b).
(b) At the Closing, Buyer shall deliver (or cause to be delivered) to Seller or the applicable Seller Subsidiary the following:
(i) an amount in cash equal to the Purchase Price, payable by wire transfer of immediately available funds in accordance with Section 2.05;
(ii) a certificate signed by an authorized officer of Buyer, dated as of the Closing Date, confirming the matters set forth in Sections 8.03(a) and (b);
(iii) a counterpart to the Bill of Sale duly executed by Buyer;
(iv) a counterpart to each Assignment of Lease duly executed by Buyer;
(v) a counterpart to the Transition Services Agreement duly executed by Buyer; and
(vi) such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Seller, as may be required to give effect to this Agreement.
(c) At the Closing, Buyer shall deliver (or cause to be delivered) to the Escrow Agent an amount in cash equal to the Escrow Amount payable by wire transfer of immediately available funds in accordance with Section 2.05.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Seller Disclosure Letter, Seller represents and warrants to Buyer that the statements contained in this Article IV are true and correct.
Section 4.01 Organization and Qualification of Seller. Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Seller and each Seller Subsidiary have all necessary corporate or other power and authority to own the Purchased Assets and to carry on the Joes Business as currently conducted. Seller and the Seller Subsidiaries are duly licensed or qualified to do business and are in good standing in each jurisdiction in which the ownership of the Purchased Assets or the operation of the Joes Business as currently conducted makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 4.02 Authority of Seller. Seller has all necessary corporate or other power and authority to enter into this Agreement and the other Transaction Documents to which Seller is a party, to carry out its respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. Each Seller Subsidiary has all necessary corporate or other power and authority to enter into the Transaction Documents to which such Seller Subsidiary is a party, to carry out its respective obligations thereunder and to consummate the transactions contemplated thereby. The execution and delivery by Seller of this Agreement and any other Transaction Document to which Seller is a party, the performance by Seller of its obligations hereunder and thereunder and the consummation by Seller and the Seller Subsidiaries of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Seller. The execution and delivery by each Seller Subsidiary of any Transaction Document to which such Seller Subsidiary is a party, the performance by such Subsidiary of its obligations thereunder and the consummation by such Seller Subsidiary of the transactions contemplated thereby have been duly authorized by all requisite corporate or other action on the part of such Seller Subsidiary. This Agreement has been duly executed and delivered by Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity. At the Closing, each Transaction Document shall have been duly executed and delivered by Seller and/or the Seller Subsidiaries, as applicable, and (assuming due authorization, execution and delivery by Buyer) each such Transaction Document shall constitute a legal, valid and binding obligation of Seller and/or such Seller Subsidiary, enforceable against Seller and/or such Seller Subsidiary in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
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Section 4.03 No Conflicts; Consents. (a) The execution, delivery and performance by Seller of this Agreement and the Transaction Documents to which Seller is a party, and the consummation of the transactions contemplated hereby and thereby and (b) the execution, delivery and performance by each Seller Subsidiary of the Transaction Documents to which such Seller Subsidiary is a party, and the consummation of the transactions contemplated thereby do not and will not: (i) result in a violation or breach of or conflict with any provision of the certificate of incorporation or by-laws (or equivalent organizational documents) of Seller or the Seller Subsidiaries, as applicable, in each case, amended to the date of this Agreement; (ii) create any Encumbrance (other than Permitted Encumbrances) upon any Purchased Asset; (iii) result in a material violation or material breach of or material conflict with any provision of any Law or Governmental Order applicable to Seller, any of the Seller Subsidiaries, the Joes Business or the Purchased Assets; or (iv) except as set forth in Section 4.03 of the Seller Disclosure Letter, require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute (with or without due notice or lapse of time or both) a default under or result in the acceleration of any obligation under any Assigned Contract (collectively, the Consents). Except as set forth in Section 4.03 of the Seller Disclosure Letter, no consent, approval, Permit, or Governmental Order of, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Seller or any of the Seller Subsidiaries in connection with the execution and delivery of this Agreement or any of the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.
Section 4.04 Financial Statements. Attached hereto in Section 4.04 of the Seller Disclosure Letter are true and complete copies of the following financial statements (such financial statements, collectively, the Financial Statements):
(a) the unaudited consolidated balance sheet of Seller and the Seller Subsidiaries as of November 30, 2014 and the related unaudited consolidated statements of income, cash flows and stockholders equity for the respective periods then ended, and
(b) the unaudited consolidated balance sheet of Seller and the Seller Subsidiaries as of June 30, 2015 (the Latest Balance Sheet) and the related unaudited consolidated statements of income for the three-month period then ended.
(c) Except as set forth on Section 4.04(c) of the Seller Disclosure Letter, the Financial Statements (x) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and except for the absence of footnotes and subject to year-end adjustments (which, individually or in the aggregate, are not material), and (y) fairly present, in all material respects, the consolidated financial position of the Joes Business as of the dates thereof and their consolidated results of operations for the periods then ended (subject to the absence of footnotes and to normal year-end adjustments, which, individually or in the aggregate, are not material).
Section 4.05 Absence of Certain Changes, Events and Conditions. Except as set forth on Section 4.05 of the Seller Disclosure Letter or in the Company SEC Documents of the Seller, since November 30, 2014, (i) Seller and the Seller Subsidiaries have operated the Joes Business in the ordinary course of business in all material respects; (ii) there has not been any event, circumstance, development, state of facts, occurrence, change or effect which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and (iii) there has not occurred or arisen any:
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(a) destruction of, damage to or loss of any material asset of the Joes Business that would have been a Purchased Asset that has a value of $50,000 or more (whether or not covered by insurance);
(b) change in accounting methods or practices (including any change in depreciation or amortization policies or rates) by Seller of any Seller Subsidiary other than any change required by GAAP or applicable Law;
(c) the acceleration or delay of any sale of the products of Seller or any Seller Subsidiary, the collection of accounts receivable or payment and other current liabilities, except in the ordinary course of business consistent with past practice;
(d) revaluation by or Seller or any Seller Subsidiary of any of the Purchased Assets;
(e) termination of, or material amendment or supplement to, any Material Contract; or
(f) agreement by Seller or any Seller Subsidiary or any officer or Joes Employee thereof to do any of the things described in the preceding clauses (a) through (e) (other than as contemplated in this Agreement).
Section 4.06 Assigned Contracts. Except as set forth on Section 4.06 of the Seller Disclosure Letter, neither Seller nor any of its Subsidiaries, as applicable, is in material breach of, and there exists no material default or event of default, nor any event, occurrence, condition or act (including the transactions contemplated hereby) which, with the giving of notice, the lapse of time or the happening of any other event or condition, or both, would become a material default or event of default thereunder with respect to any material Assigned Contract. Each Assigned Contract that is material to the ownership and/or operation of the Joes Business, taken as a whole, is in full force and effect and is the legal, valid and binding obligation of Seller and the Seller Subsidiaries, as applicable, and, to the Knowledge of Seller, no other party to any such Assigned Contract is with the giving of notice, the lapse of time or the happening of any other event or condition, or both, in breach of default in any material respect thereunder. To the Knowledge of Seller, each of the other parties thereto, enforceable in accordance with the terms thereof, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and implied covenant of good faith and fair dealing. Neither Seller nor any Subsidiary has received any notice of termination of or intent to terminate any Assigned Contract. As of the date hereof, Seller has delivered or made available to Buyer true and complete copies, including all amendments and supplements thereto, of each Assigned Contract. For purposes of the foregoing, Seller acknowledges that each Seller Lease that is an Assigned Contract is material to the ownership and/or operation of the Joes Business, taken as a whole, and accordingly is deemed to be a material Assigned Contract.
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Section 4.07 Legal Proceedings; Governmental Orders.
(a) Except as set forth in Section 4.07(a) of the Seller Disclosure Letter, since January 1, 2014, there have been no actions, suits, claims, litigations, investigations, audits or other legal proceedings (including arbitration or administrative proceedings, interferences, cancellation proceedings, oppositions, seizure or other contested proceedings), at law or in equity, pending or, to the Knowledge of Seller, threatened against or by Seller or any of its Subsidiaries either (i) relating to the Joes Business, the Purchased Assets or the Assumed Liabilities or (ii) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
(b) Except as set forth in Section 4.07(b) of the Seller Disclosure Letter, there are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting the Joes Business, the Purchased Assets or the Assumed Liabilities. Neither Seller nor any Subsidiary is in default under any such Governmental Order.
(c) There has been no petition in bankruptcy or other insolvency proceeding filed by or against the Seller or any of its Subsidiaries, nor has the Seller or any of its Subsidiaries made any assignment for the benefit of creditors.
Section 4.08 Compliance with Laws.
(a) Except as set forth in Section 4.08(a) of the Seller Disclosure Letter, Seller and each of the Seller Subsidiaries are in compliance in all material respects with all Laws applicable to the conduct of the Joes Business and the ownership and use of the Purchased Assets. Since January 1, 2014, neither Seller nor any of its Subsidiaries has received any written communication from a Governmental Authority that alleges that Seller or any of its Subsidiaries is not in compliance with any applicable Law, in any material respects, in respect of the conduct of the Joes Business and which has not been resolved in all material respects, except as set forth in Section 4.08(a) of the Seller Disclosure Letter
(b) Seller and the Seller Subsidiaries hold all material Permits necessary for the lawful conduct of the Joes Business, and is in compliance in all material respects with the terms thereof.
(c) Since January 1, 2014, to Sellers Knowledge, Seller and its Subsidiaries have complied in all material respects with all applicable Laws relating to the importation of merchandise into the United States or any applicable jurisdiction in which Seller and/or its Subsidiaries conduct the Joes Business. Since January 1, 2014, neither Seller nor any of its Subsidiaries has received written communication from United States Customs and Border Protection, or its predecessor, the United States Customs Service, that (i) alleges that Seller or any of its Subsidiaries are not in compliance in any material respect with any applicable Law or (ii) asserts that Seller or any of its Subsidiaries owe material additional duties, liquidated damages, penalties, or fees.
(d) Except as disclosed in Section 4.08(d) of the Seller Disclosure Letter, to Sellers Knowledge, all products manufactured, distributed or sold by or on behalf of any of Seller or its Subsidiaries, since January 1, 2014, complied in all material respects with all applicable Laws, including, without limitation, the U.S. Consumer Product Safety Act, the Flammable Fabrics Act, the Hazardous Substances Act, all regulations and policies of the U.S. Consumer Product Safety Commission and other Governmental Entities, and all voluntary industry standards (all such Laws and standards being referred to collectively as Safety Requirements).
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Section 4.09 Taxes.
Except as set forth in Section 4.09 of the Seller Disclosure Letter,
(a) Seller and its Subsidiaries have timely filed, or will timely file (taking into account any valid extensions), all income and material Tax Returns with respect to the Joes Business or the Purchased Assets required to be filed prior to the Closing Date.
(b) All material Taxes due by or with respect to the income or operations of the Joes Business or the ownership of the Purchased Assets for all Pre-Closing Periods have been timely paid or will be timely paid in full, or have been adequately reserved and disclosed in the Financial Statements.
(c) (i) Neither Seller nor any of its Subsidiaries is currently the subject of an audit or other examination of Taxes by the tax authorities of any nation, state or locality with respect to the Joes Business or the Purchased Assets and (ii) no such audit is contemplated in writing or, to the Knowledge of Seller, pending.
(d) With respect to the Joes Business or the Purchased Assets, since November 30, 2009, neither Seller nor any of its Subsidiaries has engaged in a trade or business in any country outside the United States, has a permanent establishment in any country other than the United States, or has engaged in any transaction subject to Tax in a jurisdiction outside the United States.
(e) With respect to the Joes Business or the Purchased Assets, neither Seller nor its Subsidiaries has engaged in any listed transaction within the meaning of Treasury Regulations Section 1.6011-4(b).
Section 4.10 Inventory. All of the Inventory is reflected in the Financial Statements or, if acquired subsequent to the period covered by the Financial Statements, is reflected in the Books and Records or on the Sellers Working Capital Statement, and consists of a quality, quantity and price usable and/or saleable in the ordinary course of business, except in an amount in the aggregate which is equal to or less than the reserve thereof set forth in the Financial Statements, or for the period after the date of the Latest Balance Sheet, in the Books and Records or on the Sellers Working Capital Statement. The Inventory was acquired in the ordinary course of business consistent with past practice. Seller and Sellers Affiliates maintain reasonable policies, practices and procedures with respect to the adequate security and safeguard of inventory and other assets (including, with respect to Joes Employee and third-party theft and other loss), and neither Seller nor Sellers Affiliates has not made any material changes to such policies, practices and procedures during the current fiscal year.
Section 4.11 Accounts Receivable. All of the Purchased Accounts Receivable are reflected in the Financial Statements or for the period after the date of the Latest Balance Sheet, in the Books and Records, or on the Seller Working Capital Statement and were the result of bona fide transactions in the ordinary course of business consistent with past practice. The
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Purchased Accounts Receivable are not subject to any dispute, offset or Mark-Downs, except those Mark-Downs reflected in an amount in the aggregate which is equal to or less than the reserve thereof set forth in the Financial Statements, or for the period after the date of the Latest Balance Sheet, in the Books and Records or on the Sellers Working Capital Statement. Except as set forth on the Sellers Working Capital Statement, no discount or allowance has been granted with respect to any of the Purchased Accounts Receivable, and Seller has no obligation to accept any returns from, or make allowances to, any customer with respect to any existing transaction other than in the ordinary course of business consistent with past practice. As of the dates of each of the Latest Balance Sheet and the Seller Working Capital Statement, the Purchased Accounts Receivable set forth on the Latest Balance Sheet and the Sellers Working Capital Statement, as applicable (i) reflect all of the then accounts receivable related to the Joes Business other than the Excluded Accounts Receivable; and (ii) do not include any accounts receivable related to the Hudson Business. None of the accounts receivable for the Joes Business are accounted for in the books and records of the Hudson Business.
Section 4.12 Customer Purchase Orders. Each of the Acquired Purchase Orders arose in the ordinary course of business and constitutes a bona fide purchase order. To the Knowledge of Seller, none of the Acquired Purchase Orders is the subject of any dispute, offset or any demand of a customer for chargebacks, credits, discounts, deductions, allowances, or to make mark-down or similar payments (any such demand, a Mark-Down) in amounts which are inconsistent with past practice, except as set forth in Section 4.12 of the Seller Disclosure Letter. The Acquired Purchase Orders reflect all of the customer purchase orders related to the Joes Business; and (ii) do not include any customer purchase orders related to the Hudson Business. None of the customer purchase orders are accounted for in the books and records of the Hudson Business.
Section 4.13 Customer and Suppliers. Section 4.13(a) of the Seller Disclosure Letter lists (a) the ten (10) largest suppliers of Seller and the Seller Subsidiaries with respect to the Joes Business on a consolidated basis (with respect to consolidated net purchases) (collectively, the Material Suppliers) and (b) the twenty (20) largest customers of the Seller and the Seller Subsidiaries with respect to the Joes Business on a consolidated basis (with respect to consolidated net sales) (collectively, the Material Customers), in the case of each of clause (a) and (b) above, for the 12-month period ended June 30, 2015. Except as set forth on Section 4.13(b) of the Seller Disclosure Letter, since the date of the most recent Audited Financial Statement, (i) no Material Customer or Material Supplier has stopped or materially decreased the rate of, or materially changed the terms (whether related to payment, price or otherwise) with respect to purchasing of materials, products or services from, or supplying materials, products or services to, Seller or any of the Seller Subsidiaries and (ii) no Material Supplier or Material Customer has notified Seller or any of Sellers Affiliates in writing or, to the Sellers Knowledge, orally that it intends to stop or materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to purchasing materials, products or services from, or supplying materials, products or services to, Seller or any of the Seller Subsidiaries (whether as a result of the transactions contemplated by this Agreement or otherwise).
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Section 4.14 Tangible Personal Property. Except as disclosed on Section 4.14 of the Seller Disclosure Letter, Seller and its Subsidiaries have good and marketable title to, or a valid and binding leasehold or license interest in, all of the Tangible Personal Property, free and clear of all Encumbrances other than Permitted Encumbrances. All equipment and other items of Tangible Personal Property are in good operating condition and in working order, ordinary wear and tear excepted, are usable in the ordinary course of the Joes Business and Seller has no Knowledge of any material defects or problems with any of such equipment or other Tangible Personal Property.
Section 4.15 Employees and Related Matters; Employee Benefits.
(a) Section 4.15(a) of the Seller Disclosure Letter sets forth a true and correct list of all of the current full-time and part-time Joes Employees, and indicates the current total annual compensation (including without limitation, wages, salaries, bonuses and other monetary compensation) payable to each such Joes Employee and the date used by the applicable Seller or Seller Subsidiary as the commencement of employment of, and for the vesting of benefits for, each such Joes Employee.
(b) Section 4.15(b) of the Seller Disclosure Letter sets forth each material plan, program, arrangement or agreement that is a pension, profit-sharing, savings, retirement, employment, consulting, severance pay, termination, compensation, bonus, stock purchase, stock option, phantom stock or other equity-based compensation, change-in-control, retention, salary continuation, vacation, sick leave, disability, death benefit, group insurance, hospitalization, medical, dental, life (including all individual life insurance policies as to which Seller is the owner, the beneficiary, or both), Code Section 125 cafeteria or flexible benefit, employee loan, educational assistance or fringe benefit plan, program or arrangement, including, without limitation, any (i) employee benefit plan within the meaning of Section 3(3) of ERISA; or (ii) other employee benefit plans, agreements, programs, policies, arrangements or payroll practices, whether or not subject to ERISA, under which any Joes Employee has any present or future right to benefits (each such plan, program, arrangement or agreement set forth in such Section being individually, a Seller Benefits Plan and collectively the Seller Benefits Plans). Seller has made available to Buyer a true and complete copy of each material Seller Benefit Plan (including without limitation all amendments thereto), and a true and complete copy of each material document (including without limitation all material amendments thereto) prepared in connection with each such Seller Benefit Plan including without limitation (i) a copy of each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, and (iii) the most recently filed IRS Form 5500 for each Benefit Plan, if any. Neither Seller nor any Affiliate of Seller has any legally binding plan or commitment to create any additional Seller Benefit Plan or to modify or change any existing Seller Benefit Plan that could be reasonably expected to result in material liabilities to Buyer, except as may be required by Law.
(c) Except as set forth in Section 4.15(c) of the Seller Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereunder will (either alone or in combination with another event) result in (i) any material payment becoming due, or increase in any material respect the amount of any compensation due, to any current or former Joes Employee (including any bonus, retirement, or severance payment); or (ii) any current or former Joes Employee becoming entitled to any material benefit or enhanced benefit (including acceleration of vesting or exercise of an incentive award).
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(d) Section 4.15(d) of the Seller Disclosure Letter sets forth a list of all former Joes Employees whose employment with such Seller or any of Sellers Affiliates was terminated since January 1, 2015 (either voluntarily by the employee or by Sellers) and indicates whether any legal claims were made by such former employee in connection with such employees termination. Seller has provided Buyer with a copy of all written settlement agreements, releases or other agreements executed by any such former employees in connection with the termination of their employment. Seller has provided to Buyer a list of any former employee who is currently receiving continuing coverage under COBRA.
(e) Except as set forth in Section 4.15(e) to the Seller Disclosure Letter, none of the Seller Benefit Plans (i) is a plan that is or ever has been subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code, (ii) is a multiemployer plan as defined in Section 3(37) of ERISA, (iii) promises retiree medical or life insurance benefits to any current or former employee, officer or director of the Company other than the obligation pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (COBRA) or (iv) is subject to any Laws other than the Laws of the United States or a political subdivision thereof.
(f) Each of the Seller Benefit Plans has been operated and administered, in all material respects, in accordance with its terms and Law, including but not limited to, ERISA and the Code, including Section 409A of the Code. No legal action, suit or claim is pending or, to the Knowledge of Seller, threatened, with respect to any Seller Benefit Plan (other than claims for benefits in the ordinary course) and, to the Knowledge of Seller, no fact or event exists that could give rise to any such action, suit or claim.
(g) With respect to each Seller Benefit Plan which is intended to be qualified or exempt from taxation under Section 401(a), 401(k) or 501(a) of the Code, the Internal Revenue Service has issued a favorable determination letter and, to the Knowledge of Seller, no event, action or omission has occurred since the date of any such determination letter that would adversely affect such qualified status.
(h) There has been no non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Seller Benefit Plan which would reasonably be expected to give rise to a material liability imposed on any of Sellers. Neither Seller nor any Seller Subsidiary has incurred any material liability for any excise tax arising under Section 4971, 4972, 4975, 4980 or 4980B of the Code and, to the Knowledge of Seller, no fact or event exists which would reasonably be expected to give rise to such material liability on the part of any Seller. Neither Seller nor any Seller Subsidiary has incurred any liability relating to Title IV of ERISA (other than for the payment of premiums to the Pension Benefit Guaranty Corporation), and, to the Knowledge of Seller, no fact or event exists which would reasonably be expected to give rise to such liability on the part of Seller or any Seller Subsidiary.
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Section 4.16 Labor Matters; Employees.
(a) Neither Seller nor any of its Subsidiaries is party to a collective bargaining agreement. As of the date of this Agreement and except as would not reasonably be expected to have a Material Adverse Effect, with respect to the Joes Employees: (i) there are no labor related strikes, walkouts, stoppages, lockouts or similar disputes pending or, to the Knowledge of Seller, threatened, and (ii) to the Knowledge of Seller, there are no pending union organizing campaigns and no labor union has made a pending written demand for recognition or certification.
(b) Except as set forth in Section 4.16(b) of the Seller Disclosure Letter, (i) Seller and Sellers Affiliates have complied, in all material respects, with all Laws respecting employment and employment practices, including those pertaining to wages, hours, overtime, working conditions, collective bargaining, employment discrimination, immigration, occupational safety and health, workers compensation, unemployment insurance, or annual leave (ii) there is no unfair labor practice complaint against Seller or any of Sellers Affiliates pending or, to the Knowledge of Seller, threatened before the National Labor Relations Board or any other administrative body with respect to any Seller, and (iii) there are no discrimination charges (relating to sex, age, religion, race, national origin, ethnicity, handicap, disability, sexual orientation, genetic information or veteran status or any other legally protected category) pending before any Governmental Authority or court of competent jurisdiction against Seller or any of Sellers Affiliates.
Section 4.17 Seller Leases. All of the Seller Leases that are Assigned Contracts are listed on Section 2.01(c) of the Seller Disclosure Letter. Seller or one of the Seller Subsidiaries has a valid leasehold interest in each Seller Lease that is an Assigned Contract, free and clear of all Encumbrances (other than Permitted Encumbrances) and there are no pending or, to the Knowledge of Seller, threatened, condemnation or eminent domain proceedings or other Governmental Authority proceedings affecting any demised premises under a Seller Lease that is an Assigned Contract.
Section 4.18 Environmental Matters. Except for those matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) each of Seller and its Subsidiaries is in compliance with applicable Environmental Laws with respect to the operation of the Joes Business on Covered Real Property, which compliance includes compliance with Permits required under Environmental Laws for the operation of the Joes Business on Covered Real Property, (b) as of the date hereof there is no investigation, suit, claim, action or proceeding alleged under any Environmental Law that is pending against Seller or any of its Subsidiaries with respect to any Covered Real Property, (c) as of the date hereof neither Seller nor any of its Subsidiaries has received written notice of, or entered into any legally-binding Contract, Governmental Order or settlement involving, uncompleted, outstanding or unresolved requirements on the part of Seller or its Subsidiaries under Environmental Laws with respect to the operation of the Joes Business on Covered Real Property, and (d) to the knowledge of Seller, there are no Hazardous Materials present on any Covered Real Property in violation of applicable Environmental Law.
Section 4.19 Brokers. Except as set forth on Section 4.19 of the Disclosure Letters, no broker, finder, firm or investment banker or any other Person is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Seller.
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Section 4.20 Title to Purchased Assets. Except as set forth on Section 4.20(a) of the Seller Disclosure Letter, Seller and the Seller Subsidiaries have good and valid title to all property included in the Purchased Assets, free and clear of any Encumbrances, except for Permitted Encumbrances, whether in possession of Sellers, manufacturers, suppliers, or any other Person. Except as set forth on Section 4.20(b) of the Seller Disclosure Letter, the Purchased Assets set forth on the Latest Balance Sheet and the Sellers Working Capital Statement, as applicable do not include any assets related to the Hudson Business. No assets of the Joes Business are accounted for in the books and records of the Hudson Business.
Section 4.21 Products Liability. Except for product replacements that have been appropriately reflected on the Financial Statements, no Seller, any Affiliate of Seller nor any insurance company nor other third party acting on Seller or any of Sellers Affiliates behalf has, since January 1, 2014, paid any amount or damages to any third party for deaths of or injuries to persons or damage to property, or for breach of warranty in excess of One Hundred Thousand Dollars ($100,000) arising out of any alleged defect in quality, materials, workmanship or design of any of the products sold or services performed by the Joes Business. Except as set forth in Section 4.21 of the Seller Disclosure Letter, there are no presently pending, nor, to Sellers Knowledge, threatened in writing, civil, criminal or administrative actions, suits, demands, claims, hearings, notices of violation, inquiries, investigations, proceedings or demand letters relating to any alleged hazard or alleged defect in design, labeling, testing, manufacture, materials or workmanship, including, without limitation, any failure to warn or alleged breach of express or implied warranty or representation, relating to any product manufactured, distributed or sold by or on behalf of the Joes Business including, without limitation, the current Inventory. Since January 1, 2014, neither Seller nor any of Sellers Affiliates has issued a product recall, concerning any product of the Joes Business manufactured, shipped, sold or delivered by any Seller or Seller Affiliate, which has occurred or is pending.
Section 4.22 Anti-Bribery Laws. No Seller nor any of Sellers Affiliates (including, to Sellers Knowledge, any of their officers, directors, agents, distributors, employees or other Persons associated with or acting on their behalf) has, directly or indirectly, taken any action which would cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations thereunder or any similar anti-corruption or anti-bribery law applicable to Seller or any of Sellers Affiliates in any jurisdiction (in each case, as in effect at the time of such action), except for such violations as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 4.23 Insurance. Section 4.23 of the Seller Disclosure Letter sets forth a list of all insurance policies currently in effect that insure the property, assets of Seller and the Seller Subsidiaries and the Joes Business (the Insurance Policies), and true and complete copies of all Insurance Policies have been made available to Buyer. Each Insurance Policy is valid and binding and in full force and effect and neither Seller nor any of Sellers Affiliates has received any notice of cancellation, termination or default or denial of coverage in respect of any such Insurance Policy.
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Section 4.24 Transactions with Affiliates. Section 4.24 to the Seller Discloser Letter sets forth all contracts or arrangements between Seller or any Seller Subsidiary, on the one hand, and other Affiliates of Seller (other than any Seller Subsidiary or any employee of any Seller Subsidiary). Except as disclosed on Section 4.24 to the Seller Disclosure Letter, none of Seller or any Seller Subsidiary and their respective Affiliates, directors, officers, members, managers, partners or employees (i) possesses, directly or indirectly, any financial interest in, or is a director, officer, member, manager, partner or employee of, any Person (other than Seller or any Seller Subsidiary) which is a material client, supplier, customer, lessor, lessee, or competitor of Seller, (ii) owns any property right, tangible or intangible, which is used by Seller or any Seller Subsidiary in the conduct of the Joes Business or (iii) is a party to any contract or agreement with Seller or Seller Subsidiary (other than in such partys capacity as an employee). Ownership of five percent (5%) or less of any class of securities of a company whose securities are registered under the Securities and Exchange Act of 1934, as amended, shall not be deemed to be a financial interest for purposes of this Section 4.24.
Section 4.25 No Other Representations and Warranties. Except for the representations and warranties contained in this Article IV (as qualified by the Seller Disclosure Letter), neither Seller, nor any other Person on behalf of Seller, has made or makes any other express or implied representation or warranty, either written or oral, including any representation or warranty as to the accuracy or completeness of any information regarding the Joes Business and the Purchased Assets furnished or made available to Buyer and its Representatives, or as to the future revenue, profitability or success of the Joes Business, or any representation or warranty arising from statute or otherwise in law. Any and all statements made or information communicated by Seller, any of its Subsidiaries or any of their respective Representatives outside of this Agreement (including by way of documents provided in response to Buyers written diligence request(s) and any management presentation provided), whether verbally, in writing or otherwise, are deemed to have been superseded by this Agreement, it being intended that no such prior or contemporaneous statements or communications outside of this Agreement shall survive the execution and delivery of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Buyer Disclosure Letter, Buyer represents and warrants to Seller that the statements contained in this Article V are true and correct.
Section 5.01 Organization of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware and has all necessary corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as currently conducted.
Section 5.02 Authority of Buyer. Buyer has all necessary corporate power and authority to enter into this Agreement and the other Transaction Documents to which Buyer is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and any other Transaction Document to which Buyer is a party, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller) this Agreement constitutes a
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legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). At the Closing, each other Transaction Document shall have been duly executed and delivered by Buyer and (assuming due authorization, execution and delivery by Seller and/or its Subsidiaries, as applicable,) each such Transaction Document shall constitute a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 5.03 No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) result in a violation or breach of or conflict with any provision of the certificate of incorporation or by-laws of Buyer, in each case, amended as of the date of this Agreement; (b) result in a violation or breach of or conflict with any provision of any Law or Governmental Order applicable to Buyer; or (c) except as set forth in Section 5.03 of the Buyer Disclosure Letter, require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any agreement to which Buyer is a party, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not reasonably be expected to have a material adverse effect on Buyers ability to consummate the transactions contemplated hereby. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, except for such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which would not have a material adverse effect on Buyers ability to consummate the transactions contemplated hereby and thereby.
Section 5.04 Brokers. No broker, finder, firm or investment banker or any other Person is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer.
Section 5.05 Legal Proceedings. There are no actions, suits, claims, investigations or other legal proceedings pending or, to the Knowledge of Buyer, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
Section 5.06 Sufficiency of Funds. Buyer has, and will have as of the Closing, sufficient cash in immediately available funds to pay the Purchase Price and all costs, fees and expenses to be paid by Buyer that are necessary to consummate the transactions contemplated by this Agreement and to perform its obligations hereunder.
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Section 5.07 No Other Representations and Warranties. Except for the representations and warranties contained in this Article V, neither Buyer nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Buyer. Buyer hereby disclaims any other express or implied representations or warranties with respect to itself or such other Person.
ARTICLE VI
COVENANTS
Section 6.01 Access to Information Concerning Purchased Assets and Records.
(a) Seller shall, and shall cause its Subsidiaries to, upon reasonable prior notice and during regular business hours, afford Buyer and its Representatives reasonable access to the Representatives, properties, books and records of Seller and its Subsidiaries relating to the Joes Business, the Purchased Assets and the Assumed Liabilities so that Buyer may have a full opportunity to familiarize itself with such properties and other matters and, during such period, Seller shall furnish promptly to Buyer all financial and operating data and other information concerning the Joes Business as Buyer may reasonably request; provided, that such access shall not unreasonably disrupt the operations of Seller or any of its Subsidiaries. Notwithstanding the foregoing, neither Seller nor any of its Subsidiaries shall be required to afford such access if it would cause a violation of a Material Contract, would cause a loss of attorney/client privilege to Seller or any of its Subsidiaries, would violate the privacy rights of or confidentiality obligation to any Person or would constitute a violation under applicable Laws.
(b) No review by Buyer shall affect the representations and warranties made by Seller pursuant to this Agreement or the remedies of Buyer for breaches of those representations and warranties.
(c) Seller shall deliver or make available to Buyer complete, true and correct copies of all Assigned Contracts, including all amendments and supplements thereto.
(d) After the Closing Date, Buyer and Seller agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance (including access to books, records, work papers and Tax Returns for Pre-Closing Periods) relating solely to the Purchased Assets or the Joes Business for Pre-Closing Periods as is reasonably necessary for the preparation of any Tax Return, claim for refund or audit, and the prosecution or defense of any claim, suit or proceeding relating to any proposed Tax adjustment. Notwithstanding the foregoing or any other provision herein to the contrary, in no event shall Seller or its Affiliates be entitled to review or otherwise have access to any income Tax Return, or information related thereto, of Buyer or its Affiliates.
(e) Any request for information or documents pursuant to Section 6.01(d) shall be made by the requesting party in writing. The other party hereto shall, at the requesting partys expense, promptly (and in no event later than thirty (30) days after receipt of the request) provide the requested information. Any information obtained under Section 6.01(d) shall be kept confidential, except (i) as otherwise reasonably may be necessary in connection with the filing of Tax Returns or claims for refund or in conducting any Tax audit, dispute or contest, (ii) as required by applicable Law and (iii) in connection with the enforcement or defense of this Agreement.
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Section 6.02 Confidentiality.
(a) From and after the date of this Agreement until Closing, Buyer and Seller agree they will be bound by and comply with the obligations of the Confidentiality Agreement. After the Closing, the Confidentiality Agreement shall, solely with respect to Confidential Material, be deemed to have been terminated by the parties thereto and shall, solely with respect to Confidential Material, no longer be binding.
(b) Seller acknowledges that it is in possession of Confidential Material. For three (3) years following the Closing, Seller shall, and shall cause its Affiliates and Representatives to, treat confidentially and not disclose any portion of such Confidential Material and will use such Confidential Material solely for the purpose of consummating the transactions contemplated by this Agreement and for no other purpose; provided, that prior to Closing, Seller and its Subsidiaries may also use the Confidential Material for the purpose of operating their respective businesses in the ordinary course; provided, further, that Seller and its Subsidiaries may also disclose Confidential Material to in connection with (i) the negotiation of the IP Asset Purchase Agreement and the consummation of the transactions contemplated thereby, (ii) the performance of Sellers obligations thereunder and (iii) any disputes that may arise in connection therewith. Seller acknowledges and agrees that such Confidential Material is proprietary and confidential in nature and may be disclosed to its Representatives only to the extent necessary for Seller to consummate the transactions contemplated by this Agreement, for purposes of operating their respective businesses in the ordinary course or in connection with the enforcement or defense of this Agreement (it being understood that Seller shall be responsible for any disclosure by any such Representative not permitted by this Agreement). If Seller or any of its Affiliates or Representatives are requested or required to disclose (after, to the extent legally permitted, Seller has used its commercially reasonable efforts to avoid such disclosure and after, to the extent legally permitted, promptly advising and consulting with Buyer about Sellers intention to make, and the proposed contents of, such disclosure) any of the Confidential Material (whether by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process), Seller shall, or shall cause such Affiliate or Representative, to provide, to the extent legally permitted, Buyer with prompt written notice of such request so that Buyer may seek an appropriate protective order or other appropriate remedy. At any time that such protective order or remedy has not been obtained or Buyer waives Sellers obligations hereunder, Seller or such Affiliate or Representative may disclose only that portion of the Confidential Material which such Person is legally required to disclose or of which disclosure is required to avoid sanction for contempt or any similar sanction, and Seller shall exercise its commercially reasonable efforts to obtain assurance that confidential treatment will be accorded to such Confidential Material so disclosed.
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Section 6.03 Conduct of Seller and the Joes Business Pending the Closing Date.
(a) Seller agrees that, during the period commencing on the date hereof and ending on the Closing Date, except as otherwise set forth in Section 6.03(a) of the Seller Disclosure Letter, it shall, and shall cause the Seller Subsidiaries to, conduct the Joes Business only in the ordinary course of business consistent with past practice and to use their commercially reasonable efforts to preserve intact the Joes Business and the Purchased Assets, keep available the services of the Joes Employees and maintain satisfactory relationships with licensors, licensees, suppliers, distributors, clients and others having business relationships with the Joes Business.
(b) In furtherance and not in limitation of Section 6.03(a), Seller agrees that during the period commencing on the date hereof and ending on the Closing Date and except as otherwise set forth in Section 6.03(a) of the Seller Disclosure Letter, it shall not, and shall cause each of the Seller Subsidiaries not to, effect any of the following (as each pertains to or is related the Purchased Assets or the Assumed Liabilities) without the prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed):
(i) enter into, amend or supplement in any material respect, become subject to or terminate any Assigned Contract;
(ii) sell, transfer, lease, abandon, cancel, license or otherwise dispose of any Purchased Assets other than in the ordinary course of business consistent with past practices;
(iii) acquire, directly or indirectly (by merger, exchange, consolidation or acquisition of stock or assets or otherwise), any other Person or a material portion of the assets of any other Person, in each case, if such Person or such assets, as applicable, as of the Closing would constitute Purchased Assets, except for the acquisition of assets in the ordinary course of business consistent with past practice;
(iv) other than in the ordinary course of business, consistent with past practice, enter into any transaction that would constitute an Assumed Liability;
(v) subject any of the Purchased Assets to any Encumbrance (other than a Permitted Encumbrance);
(vi) other than in the ordinary course of business, consistent with past practice, accelerate the collection of Purchased Accounts Receivable or delay the payment of Assumed Accounts Payable;
(vii) other than in the ordinary course of business consistent with past practice for any Joes Employee, as required by applicable Law, or as permitted pursuant to the terms of any Seller Benefits Plan in effect on the date hereof: (A) increase in any manner the compensation of or benefits payable, (B) enter into, establish, amend or terminate any collective bargaining agreement or (C) to the extent such actions would reasonably be expected to result in a material liability to the Buyer, adopt, establish or amend any Seller Benefits Plan (or any plan, program, agreement or arrangement that would be a Seller Benefits Plan if in effect as of the date hereof);
(viii) hire an employee of Joes Business, retain a consultant or otherwise agree to pay for services rendered or to be rendered by any Person to Joes Business with annual compensation in excess of Seventy Five Thousand Dollars ($75,000) other than to replace a terminated or departed Joes Employee with such earnings;
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(ix) accelerate or delay the sale of the Products, the collection of accounts receivable or the payment of accounts payable and other Current Liabilities;
(x) waive or release any right or claim of Seller in excess of One Hundred Thousand Dollars ($100,000), including any write-off or other compromise of any account receivable of Joes Business other than in the ordinary course of business consistent with past practice;
(xi) knowingly violate any Law applicable to Seller; or
(xii) commit or agree (whether or not such Contract, commitment or agreement is legally binding) to do, or authorize, any of the foregoing.
(c) Seller shall keep, or cause its Subsidiaries to keep, all material insurance policies currently maintained with respect to the Joes Business, or suitable replacements or renewals, in full force and effect until the Closing.
Section 6.04 Commercially Reasonable Efforts; Consents. Subject to the terms and conditions contained in this Section 6.04, Seller and Buyer shall, and Seller shall cause each of its Subsidiaries to, cooperate and use their respective commercially reasonable efforts to take, or cause to be taken, all appropriate action, and to make, or cause to be made, all filings necessary, proper or advisable under applicable Laws and to consummate and make effective the transactions contemplated by this Agreement, including their respective commercially reasonable efforts to obtain, prior to the Closing Date, all Permits, consents, approvals, authorizations, qualifications and Governmental Orders as are necessary for consummation of the transactions contemplated by this Agreement and to fulfill the conditions to consummation of the transactions contemplated hereby set forth in Article VIII hereof; provided, that no indebtedness for borrowed money shall be repaid, except as otherwise required pursuant to the terms of the applicable loan agreement, and no Assigned Contract shall be amended to increase the amount payable thereunder or otherwise to be materially more burdensome to Seller or any of its Subsidiaries (or Buyer after the Closing), to obtain any such consent, approval or authorization, without first obtaining the written approval of Buyer; provided, further, that neither Seller nor any of its Affiliates shall be required to offer or grant any accommodation (financial or otherwise) to any third party to obtain any such Permit, consent, approval, authorization, qualifications or Governmental Order.
Section 6.05 Notification of Certain Matters. Seller shall promptly notify Buyer of (a) any material actions, suits, claims or proceedings in connection with the transactions contemplated by this Agreement commenced or, to the Knowledge of Seller, threatened, against Seller or any of its Subsidiaries relating to the Joes Business, the Purchased Assets or the Assumed Liabilities, or Buyer, as the case may be, (b) the occurrence or non-occurrence of any fact or event which would be reasonably likely to cause any condition set forth in Article VIII hereof not to be satisfied, (c) any notice of, or other communication relating to, a default or event that, with notice or lapse of time or both, would become a default under any Contract disclosed
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(or required to be disclosed) on Section 4.06 of the Seller Disclosure Letter, (d) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement, or (e) the occurrence of any event, circumstance, development, state of facts, occurrence, change or effect which has had a Material Adverse Effect or the occurrence or non-occurrence of any event, circumstance, development, state of facts, occurrence, change or effect which would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; provided, that no such notification, nor the obligation to make such notification, shall affect the representations, warranties or covenants, or the conditions to the obligations of, Seller.
Section 6.06 Public Announcements. After the Closing, at the request of either Seller or Buyer, Seller and Buyer shall send a jointly executed letter to those Persons as Buyer may request notifying such Persons of the consummation of the transactions contemplated by this Agreement. Seller and Buyer each shall (a) consult with each other before issuing any press release or otherwise making any public statement with respect to the transactions contemplated by this Agreement, (b) provide to the other party for review a copy of any such press release or public statement and (c) not issue any such press release or make any such public statement prior to such consultation and review and the receipt of the prior written consent of the other party to this Agreement, unless required by applicable Law or regulations of any applicable stock exchange.
Section 6.07 Bulk Sales Laws; Tax Clearance Certificates.
(a) The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer. If requested by Seller, Buyer agrees to provide applicable resale certificate(s) to Seller. In the event any claim is made by any creditor of Seller against Buyer or related to the transactions contemplated hereby which could have been asserted under any bulk sales, bulk transfer or similar Laws of any jurisdiction, Buyer shall notify Seller of such claim and Seller shall have thirty (30) days in which to satisfy or discharge such claim, or to take appropriate defensive action to dispute such claim in accordance with Article VII hereof. Seller shall indemnify Buyer for all Losses (including any Tax liabilities) resulting from non-compliance with any such Laws.
(b) Promptly following the full execution of this Agreement, Seller shall notify all of the taxing authorities in the jurisdictions that impose Taxes on Seller or any of Sellers Affiliates or where Seller or any of Sellers Affiliates has a duty to file Tax Returns of the transactions contemplated by this Agreement in the form and manner required by such taxing authorities, if the failure to make such notifications or receive any available tax clearance certificate (a Tax Clearance Certificate) could subject the Buyer to any Taxes of Seller or any of Sellers Affiliates. If any taxing authority asserts that Seller or any of Sellers Affiliates is liable for any Tax, Seller shall promptly pay any and all such amounts and shall provide evidence to the Buyer that such liabilities have been paid in full or otherwise satisfied. Seller shall provide all Tax Clearance Certificates to Buyer upon receipt thereof.
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Section 6.08 Transfer Taxes. All transfer, documentary, sales and use, value added, stamp, registration and similar Taxes and fees (including any penalties and interest) (collectively, Transfer Taxes) incurred in connection with this Agreement shall be split equally between Buyer and Seller. The parties shall cooperate in good faith in preparing and filing all Tax Returns or other applicable documents in connection with Transfer Taxes and to apply for and establish exemptions from or otherwise reduce Transfer Taxes.
Section 6.09 Tax Matters.
(a) All Taxes and Tax liabilities with respect to the income or operations of the Joes Business or the ownership of the Purchased Assets that relate to the Overlap Period shall be apportioned between Seller and Buyer as follows: (i) in the case of Taxes, other than income, sales and use, withholding, gross receipt and other similar Taxes, on a per diem basis; and (ii) in the case of income, sales and use, withholding, gross receipt and other similar Taxes, as determined as if there was a closing of the Books and Records at the end of the day on the Closing Date. Notwithstanding the foregoing, Taxes and Tax liabilities with respect to the income or operations or ownership of the Delayed Transfer Assets that relate to the taxable year or other taxable period beginning on or before and ending after the Delayed Transfer Date shall be apportioned between Seller and Buyer in the manner set forth in the preceding sentence, substituting Delayed Transfer Date for Closing Date. Seller shall be liable for any Taxes with respect to the income or operations of the Joes Business or the ownership of the Purchased Assets that are attributable to all Pre-Closing Periods (or in the case of the Delayed Transfer Assets, attributable to any taxable year or other taxable period, or portion thereof, that ends on or before the day before the Delayed Transfer Date). Buyer shall be liable for any Taxes with respect to the income or operations of the Joes Business or the ownership of the Purchased Assets that are attributable to all Post-Closing Periods (or in the case of the Delayed Transfer Assets, attributable to a taxable year or other taxable period, or portion thereof, that begins on or after the Delayed Transfer Date). Each Party shall be liable for its own income Taxes.
(b) To the extent Buyer receives any refund of Taxes (whether in the form of cash received, a credit, or offset against Taxes otherwise payable) which is attributable to any Pre-Closing Period, any such refund of Taxes shall belong to Seller and Buyer shall promptly pay any such refund to Seller within ten (10) days of receipt thereof.
(c) Pursuant to the Alternative Procedure provided in Section 5 of Revenue Procedure 2004-53, (i) Buyer and Seller shall report on a predecessor/successor basis as set forth therein, (ii) Seller will be relieved from filing an IRS Form W-2 with respect to the Continuing Joes Employees and (iii) Buyer will undertake to file (or cause to be filed) an IRS Form W-2 for each such Continuing Joes Employees for the year that includes the Closing Date (including the portion of such year that such Continuing Joes Employees was employed by Seller). Seller will provide Buyer on a timely basis with all payroll and employment-related information with respect to each such Continuing Joes Employees.
Section 6.10 Employee Benefits.
(a) Buyer shall, or shall cause one of its Affiliates to, offer employment to all active Joes Employees located at any Covered Real Property location (other than active Joes Employees located at any Covered Real Property Location that is operated pursuant to a Seller Lease that is a Delayed Transfer Asset, the procedure for offering employment to which is
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governed by Section 6.15), other than those listed in Section 6.10(a) to the Buyer Disclosure Letter (the Transition Employees), effective at Closing, such offers to be subject to such Joes Employees providing documentary evidence that they are currently legally authorized to work in the country such Joes Employee currently works in. Each such offer of employment shall be at not less than the same salary or hourly wage rate as in effect as of the day immediately prior to the Closing Date and shall permit such Joes Employee the opportunity to participate in Buyers employee benefit plans, subject to eligibility requirements. Employees who accept such offer of employment and become employees of Buyer or one of its Affiliates shall be referred to herein as Continuing Joes Employees. Except as set forth in Section 6.10(h), Seller shall bear any and all obligations and liability under the Workers Adjustment and Retraining Notification Act (the WARN Act), and any similar state or local Laws, resulting from employment losses for Joes Employees to whom Buyer is not obligated to offer employment under this Section 6.10.
(b) During the period between the Closing Date and September 30, 2015 or any earlier date agreed to by Seller and Buyer (such date, the Employee Transition Date), Seller shall, at Buyers expense, be responsible for all compensation, benefits, severance and employment-related obligations to all Transition Employees who remain employed by Seller or any Seller Subsidiary during such period; provided, however, that nothing herein is intended or shall be interpreted to require Seller or any Seller Subsidiary to retain any Transition Employee during such period or to prevent any Transition Employee from resigning during such period. Seventy-two (72) hours prior to when payroll becomes due for any payroll period from the Closing Date through and including the Employee Transition Date, Buyer shall pay Seller by wire transfer of immediately available funds for all amounts paid to Transition Employees and related costs and expenses incurred by Seller or any Seller Subsidiary with respect to all such Transition Employees, including, but not limited to, all compensation, benefits, severance, notice of pay and benefits, withholding taxes and all other employment-related obligations. However, Buyer shall not be obligated to reimburse Seller for any change of control payments or other similar payment obligations made by Seller or any Seller Subsidiary with respect to any of the Transition Employees in connection with the transactions contemplated by this Agreement (other than such payment made with Buyers prior written consent). Buyer shall indemnify, defend and hold the Seller Indemnitees harmless from and against any and all Losses suffered, paid or incurred by Seller as a result of or relating to (i) the employment or termination of employment of any Transition Employee on and after the Closing Date through the Employee Transition Date, (ii) any action or inaction by Transition Employees in connection with the operation of the Joes Business on or after the Closing Date, (iii) any law or regulation relating to workers compensation, wages and hours, workplace safety, discrimination, harassment, disability rights or any other law or regulation concerning the employment relationship or terms and conditions or employment of any Transition Employee arising on and after the Closing Date and (iv) the participation of Transition Employees in the Seller Benefit Plans or other benefit plans of the Seller on and after the Closing Date and through the Employee Transition Date. Seller shall have no responsibility for the quality or timeliness or any other aspect of the performance by the Transition Employees of any activities on behalf of or at the direction of Buyer, nor shall Seller be required or expected to provide direction to the Transition Employees as to the work they are to perform. The Transition Employees shall, for all purposes, be considered the employees of Buyer and are, as a matter of convenience to Buyer, being paid by Seller through its payroll system.
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(c) During the period between the Closing Date and September 30, 2015, without the prior consent of Buyer, Seller shall not and shall cause the Seller Subsidiaries to not (i) as required by the terms of employment contracts disclosed to Buyer, materially increase the rate of compensation for any Transition Employees or enter into or alter any employment agreement with any Transition Employee, or (ii) adopt or materially amend any Seller Benefit Plan, bonus plan or severance plan affecting Transition Employees, other than amendments (A) that are required by Law or that are not applicable to Transition Employees; provided, that Seller shall notify Buyer regarding any such amendments as soon as reasonably practicable), or (B) which do not materially increase the cost, in the aggregate, of all such Seller Benefit Plans to the employer.
(d) Except as set forth in Section 6.10(a), nothing shall limit the right of Buyer or any of its Affiliates to terminate the employment of any Continuing Joes Employee at any time.
(e) Seller intends that the transactions contemplated by this Agreement should not constitute a separation, termination or severance of employment of any Continuing Joes Employee who accepts an employment offer by Buyer for purposes of any Seller Benefits Plan that provides for separation, termination or severance benefits.
(f) Unless any Continuing Joes Employee is part of an excluded class of employees under Buyers 401(k) plan, Continuing Joes Employees shall be entitled to make rollover contributions into Buyers 401(k) plan at such time as Buyer determines it is legally permissible to do so and will not result in any liability to Buyer or any of its benefit plans. Buyers 401(k) plan shall not assume any outstanding 401(k) loans from any Continuing Joes Employees who rollover or otherwise participates in Buyers 401(k) plan. Accordingly, Continuing Joes Employees shall not be permitted to transfer outstanding 401(k) loan amounts to Buyers 401(k) plan and any rollover amounts from any Continuing Joes Employee shall be transferred to Buyers 401(k) plan free and clear of any outstanding 401(k) loan amounts.
(g) For purposes of the plans, programs and arrangements of Buyer relating to compensation and employee benefit plans, each Continuing Joes Employee will be credited with all years of service with a Seller (based on most recent hire date), as applicable, as set forth on Section 4.15(a) of the Seller Disclosure Letter, under any comparable benefit plan, program or arrangement for purposes of eligibility, vesting and benefit accrual (except with respect to the accrual of benefits under any defined benefit plan). In addition, Buyer shall, or shall cause its Affiliates to, waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to the Continuing Joes Employees under any medical, dental and vision plans in which such employees may become eligible to participate from and after the Closing Date.
(h) On or before the Closing Date and the Delayed Transfer Date, Seller shall provide a list of the name and employment site of any and all employees of Seller who have experienced, or will experience, an employment loss or layoff as defined by the WARN Act within ninety (90) days of the day immediately prior to the Closing Date or the Delayed Transfer Date, as applicable. Seller shall update this list up to the Closing Date and the Delayed Transfer Date, as applicable. For a period of ninety (90) days after the Closing Date and the Delayed Transfer Date, as applicable, Buyer shall not engage in any conduct which would result in an employment loss or layoff for a sufficient number of employees of Buyer which, if aggregated with any such
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conduct on the part of Seller prior to the Closing Date or the Delayed Transfer Date, as applicable, would trigger the WARN Act. Buyer shall be liable and hold Seller harmless for any liabilities or obligations arising out of or relating to Buyers violation of any of Buyers covenants in this Section 6.10(h) and Section 6.10(a) of this Agreement, including, without limitation, any liabilities or obligations arising under the WARN Act, provided that Buyer shall not be liable to the extent of any incremental liability incurred by Buyer directly caused by actions taken by Buyer in reliance upon any inaccurate information contained in the lists provided by Seller in accordance with Section 4.15(d) and Section 6.10(h).
(i) Nothing contained in this Section 6.10 shall confer any third-party beneficiary rights or other rights or remedies upon any Continuing Joes Employee or act as an amendment to any of the employee benefit plans of Buyer or its Affiliates.
(j) Seller and each of its Subsidiaries shall, after the date hereof and prior to the Closing, (i) provide any and all notices to, (ii) make any and all filings or registrations with, and (iii) obtain any and all consents or approvals of, any labor organization, works council or any similar entity, council or organization, required to be made or obtained in connection with this Agreement or the consummation of the transactions contemplated herein.
(k) Without limiting the generality of Section 10.06, nothing contained in this Section 6.10 shall confer upon any Person, other than the parties hereto, any rights or remedies or any right to employment or continued employment. Nothing in this Agreement shall be deemed to amend or modify any compensation or benefit plan, policy, agreement or arrangement sponsored or maintained by Seller or any of its Affiliates.
Section 6.11 Non-Solicitation. For a period from the Closing Date until the two (2) year anniversary thereof, no Seller nor any of its Affiliates shall, directly or indirectly, on its or his own behalf or on behalf of any other Person or through any other Person hire or solicit the employment of any Continuing Joes Employee or other employees of Joes Business (as owned by Buyer) and/or Buyers Affiliates or encourage any such employee to leave employment with the Joes Business (as owned by Buyer) or any of Buyers Affiliates or knowingly participate in any discussion with any employee of Joes Business (as owned by Buyer) or any of Buyers Affiliates regarding the possibility of his or her employment by any person or entity other than Buyer or its Affiliates or subsidiaries; provided, however, it is expressly understood and agreed that merely interviewing a Person who responds to a general advertisement or similar general notice with respect to employment shall in no event be deemed to be a violation of this Section 6.11; provided, further, however, that nothing in this Section 6.11 shall prevent Seller or any of its Affiliates from hiring (A) any employee whose employment has been terminated by Buyer or (B) after one hundred and eighty (180) days from the date of termination of employment, any employee whose employment has been terminated by the employee.
Section 6.12 Product Claims; Compliance. Prior to the Closing Date, Seller shall deliver to Buyer written notice of (a) any product liability claim made or suit filed with respect to any product sold by Seller or any of Sellers Affiliates in respect of Joes Business; (b) any investigations or directives regarding such products issued by any Governmental Authority; and (c) any notices sent by any Seller or Sellers Affiliates to, or received by Seller or Sellers Affiliates from, any Governmental Authority regarding such products. The notice required by
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the first sentence of this Section 6.12 shall be provided to Buyer within ten (10) calendar days of such Sellers written receipt or sending, as applicable, of the claim or notice contemplated in subparagraphs (a) or (c) above, or within ten (10) calendar days of Seller having Knowledge of any commencement of an investigation or directive contemplated in subparagraph (b) above. Prior to the Closing Date, Seller shall promptly notify Buyer if Seller has Knowledge that a product produced prior to the Closing Date may fail to materially comply with one or more Safety Requirements or may contain a defect that could create a substantial risk of injury to the public as described in 15 U.S.C. 2064, and thereafter shall provide Buyer with timely information regarding further developments with respect to such claim.
Section 6.13 Further Assurances. Following the Closing, without further consideration, each of the parties hereto shall, and shall cause their respective Subsidiaries to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.
Section 6.14 Sellers Disclosure Letter. Seller reserves the right to update the Sellers Disclosure Letter between the date hereof and the Closing to reflect changes in the information contained in such Sellers Disclosure Letter relating to any condition, event or circumstance arising after the date hereof that would cause, or reasonably be expected to cause, any representation or warranty made by Seller in this Agreement to fail to be true and correct as of the Closing as if made again at that time (except to the extent that any representation or warranty speaks as of an earlier date). Any such change or supplement to the Sellers Disclosure Letter shall not be deemed to have cured any inaccuracy in or breach of any representation or warranty contained in this Agreement, including for purposes of the indemnification or termination rights contained in this Agreement or of determining whether or not the conditions set forth in Section 8.02(b) have been satisfied.
Section 6.15 Certain Purchased Assets and Assumed Liabilities.
(a) On the Delayed Transfer Date, (i) Seller shall (and shall cause the Seller Subsidiaries to) deliver to Buyer the Purchased Assets set forth on Section 6.15(a) of the Seller Disclosure Letter (such Purchased Assets, the Delayed Transfer Assets) free and clear of all Encumbrances (other than Permitted Encumbrances) and (ii) Buyer shall assume and agree to pay, perform and discharge when due the Assumed Liabilities set forth on Section 6.15(b) of the Seller Disclosure Letter (such Assumed Liabilities, the Delayed Transfer Liabilities). In furtherance of the foregoing, on the Delayed Transfer Date, Seller shall deliver to Buyer a certificate signed by an authorized officer of Seller, dated as of the Delayed Transfer Date, confirming that the other than the Fundamental Representations directly relating to the Delayed Transfer Assets, the representations and warranties of Seller directly relating to the Delayed Transfer Assets contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the Delayed Transfer Date with the same effect as though made at and as of such date (except those representations and warranties that address
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matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Seller contained in the Fundamental Representations directly relating to the Delayed Transfer Assets shall be true and correct in all respects on and as of the Delayed Transfer Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).
(b) During the period commencing on the Closing Date and ending on the Delayed Transfer Date, Seller agrees to comply with the covenants and agreement set forth in Section 6.03 solely to the extent applicable to the Delayed Transfer Assets and the Delayed Transfer Liabilities.
(c) Prior to the Delayed Transfer Date, Seller shall update Section 4.15(a) to the Seller Disclosure Letter to providing for all active Joes Employees located at any Covered Real Property that is operated pursuant to a Seller Lease as of such date. Following receipt of such update and not later than three (3) Business Days prior to the Delayed Transfer Date, Buyer shall, or shall cause one of its Affiliates to, offer employment to all active Joes Employees located at any Covered Real Property that is operated pursuant to a Seller Lease that is a Delayed Transfer Asset (such offers shall (A) be for employment commencing as of immediately following the Delayed Transfer Date, (B) be subject to such Joes Employees providing documentary evidence that they are currently legally authorized to work in the country such Joes Employee currently works in and (C) shall be at not less than the same salary or hourly wage rate as in effect as of the day immediately prior to the Delayed Transfer Date and shall permit such Joes Employee the opportunity to participate in Buyers employee benefit plans, subject to eligibility requirements), those Joes Employees that accept such offers will be deemed Continuing Joes Employees from and after the Delayed Transfer Date. On the Delayed Transfer Date, Seller shall terminate the employment of each applicable Continuing Joes Employee, and Seller shall pay all accrued final wages and vacation pay related to such employees through the date of termination. Buyer shall comply with all covenants and agreements in Section 6.10 with respect to such Person from and after the Delayed Transfer Date (except that, solely with respect to such Persons, all references in such Section to Closing Date shall instead be deemed to refer to the Delayed Transfer Date).
(d) Notwithstanding anything herein to the contrary, and for the avoidance of doubt, all economic benefits and burdens related to the Delayed Transfer Assets and the Delayed Transfer Liabilities shall remain with Seller and the Seller Subsidiaries until the Delayed Transfer Date.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Survival. All representations and warranties made by Buyer and Seller in this Agreement and the Transaction Documents, as applicable, shall survive and remain in effect for a period of eighteen (18) months from the Closing Date (or, solely with respect to the Delayed Transfer Assets and Delayed Transfer Liabilities, for a period of eighteen (18) months from the Delayed Transfer Date), except that the Fundamental Representations shall survive and remain in effect for the period of the applicable statute of limitations. Each covenant and other
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agreement contained in this Agreement which by their terms contemplate actions or impose obligations following the Closing shall survive the Closing until the full performance of such covenant or agreement in accordance with its terms; provided, that each covenant and other agreement contained in this Agreement which by their terms contemplates actions or imposes obligations prior to or at the Closing shall terminate six (6) months after the Closing. Notwithstanding the foregoing, any claims asserted in accordance herewith in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of such survival period and such claims shall survive until finally resolved, whether or not the amount of the Losses resulting from such breach has been finally determined at the time the notice is given.
Section 7.02 Indemnification by Seller. On the other terms and subject to the other conditions of this Article VII, from and after the Closing, Seller agrees to indemnify Buyer, its Affiliates and its and their respective Representatives (the Buyer Indemnitees) against, and shall hold each of them harmless from and against, any and all Losses suffered, incurred, paid, sustained by, or imposed upon, any Buyer Indemnitee arising out of or resulting from:
(a) any failure of any representations or warranty made by Seller to be true and correct in all respects on and as of the Closing Date as if made at and as of such time (other than those made on a specified date, which shall be true and correct in all respects as of such specified date);
(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller or any of its Subsidiaries pursuant to this Agreement or any Transaction Document following the Closing;
(c) any Excluded Asset or any Excluded Liability;
(d) any failure by Seller or any of its Subsidiaries, or claim by a creditor of Seller or any of its Subsidiaries that any of them has failed, in each case, to comply with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction; or
(e) any Taxes imposed on Buyer due to Sellers failure to obtain any Tax Clearance Certificate.
Section 7.03 Indemnification by Buyer. On the other terms and subject to the other conditions of this Article VII, Buyer shall indemnify Seller, its Affiliates and its and their respective Representatives (the Seller Indemnitees), and shall hold each of them harmless from and against, any and all Losses suffered, incurred, paid, sustained by, or imposed upon, any Seller Indemnitee arising out of or resulting from:
(a) any failure of any representations or warranties made by Buyer to be true and correct in all respects on and as of the Closing Date as if made at and as of such time (other than those made on a specified date, which shall be true and correct in all respects as of such specified date);
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(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer or any of its Subsidiaries pursuant to this Agreement or any Transaction Document following the Closing; or
(c) any Assumed Liability.
Section 7.04 Certain Limitations. The party making a claim under this Article VII is referred to as the Indemnified Party, and the party against whom such claims are asserted under this Article VII is referred to as the Indemnifying Party. The indemnification provided for in Section 7.02 and Section 7.03 shall be subject to the following limitations:
(a) The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 7.02(a) or Section 7.03(a), as the case may be, until the aggregate amount of all Losses in respect of indemnification under Section 7.02(a) or Section 7.03(a) exceeds One Hundred Thousand Dollars ($100,000) (the Deductible), in which event the Indemnifying Party shall only be required to pay or be liable for Losses in excess of the Deductible. The parties agree that any claim for any individual Loss or group of related Losses indemnifiable pursuant to Section 7.02(a) or Section 7.03(a), as applicable, in an amount less than Five Thousand Dollars ($5,000) shall not count towards the applicable Deductible. Notwithstanding anything herein to the contrary, the limitations set forth in this Section 7.04(a) shall not apply to Losses described in Section 7.02(b)-(d) or Section 7.03(b)-(c), or to Losses incurred by (i) any Buyer Indemnitee in connection with or arising from any breach of any Fundamental Representation of Seller, (ii) any Seller Indemnitee in connection with or arising from any breach of any Fundamental Representation of Buyer, and (iii) any Losses in respect of indemnification under Section 7.02(a) or Section 7.03(a) arising from fraud or willful misconduct.
(b) The aggregate amount of all Losses for which an Indemnifying Party shall be liable pursuant to (x) Section 7.02(a) and Section 7.02(b) or (y) Section 7.03(a) and Section 7.03(b), as the case may be, shall not exceed Four Million Dollars ($4,000,000); provided, that the limitation set forth in the first clause of this Section 7.04(a) shall not apply to (i) Losses described in Section 7.02(b), or Section 7.03(b) as a result of any willful or intentional breach or non-fulfillment; or (ii) Losses incurred by (A) any Buyer Indemnitee in connection with or arising from any breach of any Fundamental Representation of Seller, or (B) any Seller Indemnitee in connection with or arising from any breach of any Fundamental Representation of Buyer; provided, further, that the maximum aggregate amount of all Losses for which an Indemnifying Party shall be liable pursuant to Section 7.02 or Section 7.03, as the case may be, shall not exceed the Purchase Price (the Cap). Notwithstanding the foregoing, the Cap shall not apply to Losses described in Section 7.02(c) incurred by any Buyer Indemnitee or Losses incurred by any Buyer Indemnitee or Seller Indemnitee arising from the fraud or willful misconduct of the Indemnifying Party.
(c) Payments by an Indemnifying Party pursuant to Section 7.02 or Section 7.03 in respect of any Loss shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds (net of any costs of investigation of the underlying claim and collection), the net present value of any Tax benefits actually recognized by the Indemnified Party, and any indemnity, contribution or other similar payment actually received by
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the Indemnified Party in respect of such Loss. If the Indemnified Party receives such insurance proceeds, Tax benefit, indemnity, contribution or similar payments after being indemnified and held harmless by an Indemnifying Party with respect to a Loss, the Indemnified Party shall promptly return such indemnification up to the amount of such insurance proceeds, Tax benefit, indemnity, contribution or similar payments.
(d) No Indemnifying Party shall be liable to any Indemnified Party for any punitive, incidental, consequential, special or indirect damages (collectively, Special Damages) or any lost profits, diminution in value or damages based on any type of multiple; provided, that Special Damages shall be indemnifiable pursuant to Section 7.02 or Section 7.03, as applicable, to the extent Special Damages are ordered, by a court of competent jurisdiction or other Government Authority, or the award of any arbitrator, or pursuant to a settlement consented to by the Indemnifying Party, to be paid by the Indemnified Party to a third party or are awarded in connection with fraud or willful misconduct.
(e) Each Indemnified Party shall take, and cause its Subsidiaries to take, commercially reasonable steps to mitigate any Loss as soon as reasonably practicable upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, such Loss.
Section 7.05 Indemnification Procedures.
(a) Third Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any action, suit, claim or other legal proceeding made or brought by any Person who is not a party to this Agreement (a Third Party Claim) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall deliver as promptly as practicable a written notice (a Claim Certificate), which Claim Certificate shall describe the Third Party Claim (or Direct Claim, if delivered pursuant to Section 7.05(c)) in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The failure to provide such Claim Certificate shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure or is materially prejudiced thereby. The Indemnifying Party shall have the right to participate in or, by giving written notice to the Indemnified Party within thirty (30) Business Days after its receipt of a Claim Certificate, to assume the defense of, the Third Party Claim described in such Claim Certificate at the Indemnifying Partys expense and by the Indemnifying Partys own counsel, and the Indemnified Party shall cooperate in good faith in such defense; provided, that in the event that the Indemnifying Party assumes the defense of any Third Party Claim, then (x) subject to Section 7.05(c), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claim in the name and on behalf of the Indemnified Party and (y) the Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any Third Party Claim with counsel selected by it. Notwithstanding anything to the contrary contained in this Agreement, the Indemnifying Party shall not be entitled to assume control of the defense of a Third Party Claim and shall pay, subject to the limitations of liability set forth in Section 7.04, the fees and expenses of counsel
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retained by the Indemnified Party if: (i) such Third Party Claim is reasonably likely to give rise to Losses which are more than one hundred percent (100%) of the amount indemnifiable by such Indemnifying Party pursuant to this Article VII; (ii) such Third Party Claim for indemnification relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation; (iii) such Third Party Claim seeks a material injunction or equitable relief against the Indemnified Party, (iv) the named parties to such Third Party Claim (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and such Indemnified Party has been advised in writing by such counsel that there is one (1) or more legal defenses available to the Indemnified Party which are not available to the Indemnifying Party, or are available to the Indemnifying Party but the assertion of which would be adverse to the interests of the Indemnified Party or (v) upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to prosecute or defend such Third Party Claim. Notwithstanding any other provision of this Agreement, with respect to any audit, assessment, inquiry, claim, adjustment or proposed adjustment with respect to Taxes (a Tax Contest), (A) Seller shall have the right to control such Tax Contest if, but only if, such Tax Contest relates to Taxes (1) attributable to the Purchased Assets or the Joes Business with respect to any Pre-Closing Period or (2) imposed on Seller and (B) if such Tax Contest could reasonably be expected to increase the Taxes for any Post-Closing Period for which Buyer is responsible, Buyer shall be entitled to participate in such Tax Contest, and Seller shall not consent to have any settlement or compromise of any such Tax Contest without the written consent of Buyer, which consent shall not be unreasonably withheld, delayed or conditioned. If the Indemnifying Party elects not to compromise or defend such Third Party Claim, the Indemnified Party may, subject to Section 7.05(c), pay, compromise, defend such Third Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. Seller and Buyer shall cooperate with each other in all commercially reasonable respects in connection with the defense of any Third Party Claim, including making available records relating to such Third Party Claim.
(b) Settlement of Third Party Claims.
(i) Any Indemnified Party shall have the right to employ separate counsel and to participate in the defense of any Third Party Claim (including Tax Contests), but the fees and expenses of such counsel shall not be at the expense of the Indemnifying Party unless (A) the Indemnifying Party shall have failed, or is not entitled, to assume the defense of such Third Party Claim in accordance with this Section 7.05(b), (B) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party or (C) the named parties to any such action (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party and such Indemnified Party shall have been advised in writing by such counsel that there is one (1) or more legal defenses available to the Indemnified Party which are not available to the Indemnifying Party, or are available to the Indemnifying Party but the assertion of which would be adverse to the interests of the Indemnified Party. So long as the Indemnifying Party is reasonably contesting any such Third Party Claim in good faith, the Indemnified Party shall not pay or settle any such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such Third Party Claim; provided that in such event it shall waive any right to indemnity therefor by the Indemnifying Party for such Third Party Claim unless the Indemnifying Party shall have consented to such payment or settlement or the Indemnifying Party is then in material breach of its indemnification obligations under this Article VII.
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(ii) If the Indemnifying Party does not notify the Indemnified Party within thirty (30) Business Days after the receipt of a Claim Certificate with respect to a Third Party Claim hereunder that it elects to undertake the defense thereof, or if the Indemnified Party assumes the defense of such Third Party Claim pursuant to this Section 7.05(b), the Indemnified Party shall have the right to contest, settle or compromise the Third Party Claim but shall not thereby waive any right to indemnity therefor pursuant to this Agreement; provided, that the Indemnified Party shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed).
(iii) Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not, without the prior written consent of the Indemnified Party, enter into any settlement of a Third Party Claim that is not entirely indemnifiable by the Indemnifying Party pursuant to this Article VII and does not include as an unconditional term thereof the giving by the Person or Persons asserting such Third Party Claim to all Indemnified Parties of an unconditional release from all liability with respect to such Third Party Claim or consent to entry of any judgment.
(c) Direct Claims. Any claim by an Indemnified Party on account of a Loss which does not result from a Third Party Claim (a Direct Claim) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written notice thereof in a Claim Certificate. The failure to provide such Claim Certificate shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure or is materially prejudiced thereby. In the event that the Indemnifying Party objects to the indemnification of an Indemnified Party in respect of any claim or claims specified in any Claim Certificate, the Indemnifying Party shall, within thirty (30) days after receipt by the Indemnifying Party of such Claim Certificate, deliver to the Indemnified Party a notice to such effect, specifying in reasonable detail the basis for such objection, and the Indemnifying Party and the Indemnified Party shall, within the sixty (60) day period beginning on the date of receipt by the Indemnified Party of such objection, attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims to which the Indemnifying Party shall have so objected. During such sixty (60) day period, the Indemnified Party shall allow the Indemnifying Party and its Representatives to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Partys investigation by giving such reasonable information and assistance (including a copy of any accounts, documents or records) as the Indemnifying Party or any of its Representatives may reasonably request. If the Indemnified Party and the Indemnifying Party shall succeed in reaching agreement on their respective rights with respect to any of such claims, the Indemnified Party and the Indemnifying Party shall promptly prepare and sign a memorandum setting forth such agreement. Should the Indemnified Party and the Indemnifying Party be unable to agree as to any particular item or items or amount or amounts within such time period, then the Indemnified Party shall be permitted to submit such dispute to the courts set forth in Section 10.08. Claims for Losses (i)
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specified in any Claim Certificate to which an Indemnifying Party claims for Losses covered by a memorandum of agreement of the nature described above and (ii) the validity and amount of which have been the subject of judicial determination as described above and in Section 10.08 or shall have been settled with the consent of the Indemnified Party, as described in this Section 7.05(c) are hereinafter referred to, collectively, as Agreed Claims. Within ten (10) Business Days of the final determination of the amount of any Agreed Claim, the Indemnifying Party shall pay to the Indemnified Party an amount equal to the Agreed Claim by wire transfer in immediately available funds to the bank account or accounts designated by the Indemnified Party in a notice to the Indemnifying Party not less than two (2) Business Days prior to such payment.
Section 7.06 Sellers Obligation to Cause Subsidiaries to Act. Seller acknowledges and agrees that, to the extent any provision of this Agreement requires any of Sellers Subsidiaries, or Seller agrees on behalf of its Subsidiaries, to perform, take or refrain from taking any action, (a) Seller shall have an obligation to cause such Affiliate to perform, take and/or refrain from taking such action, as applicable, and (b) the failure of such Affiliate to perform, take or refrain from taking such action shall constitute a breach by Seller of such provision (notwithstanding any lack of an express obligation on the part of Seller to cause such Affiliate to take such action).
Section 7.07 Tax Treatment of Indemnification Payments. Buyer and Seller agree to treat any amounts payable after the Closing by Seller to Buyer (or by Buyer to Seller) pursuant to this Agreement (including any indemnification payments made pursuant to this Article VII) as an adjustment to the Purchase Price, unless a final determination by the appropriate taxing authority or court causes any such payment not to be treated as an adjustment to the Purchase Price for Tax purposes.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.01 Conditions to the Obligations of Each Party. The respective obligations of Buyer and Seller to consummate and cause the consummation of the transactions contemplated herein at the Closing are subject to the satisfaction or waiver in writing by Seller and Buyer at or before the Closing Date of each of the following conditions:
(a) Injunctions; Illegality. No Governmental Authority shall have issued, enacted, entered, promulgated or enforced any Law or Governmental Order (that is final and non-appealable and that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement or any other Transaction Document.
(b) Consummation of the IP Asset Purchase Agreement. The transactions contemplated by the IP Asset Purchase Agreement shall have been consummated, or all conditions to the consummation thereof shall have been satisfied or waived (or shall be satisfied or waived contemporaneously with the Closing).
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Section 8.02 Conditions to the Obligations of Buyer. The obligations of Buyer to consummate and cause the consummation of the transactions contemplated herein are subject to the satisfaction or waiver by Buyer prior to the Closing Date of the following further conditions:
(a) Performance. All of the agreements and covenants of Seller to be performed prior to Closing pursuant to this Agreement and the other Transaction Documents shall have been duly performed in all material respects.
(b) Representations and Warranties. (i) The Fundamental Representations made by Seller shall be true and correct in all respects as of the Closing Date as if made at and as of such time (other than those representations and warranties made as of a specified date, which such representations and warranties shall be true and correct in all respects as of such specified date) and (ii) all other representations and warranties of Seller contained in Article IV hereof shall be true and correct (without giving effect to any material, materially, materiality, Material Adverse Effect, material adverse effect, material adverse change or similar qualifiers contained in any of such representations and warranties) as of the Closing Date as if made at and as of such time (other than those representations and warranties made as of a specified date, which such representations and warranties shall be true and correct in all respects as of such specified date), except for such failures to be true and correct that do not have and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(c) Required Consents. All of the Required Consents shall have been obtained without any amendments or supplements to any of the Assigned Contracts, other than any amendments or supplements consented to by Buyer in writing;
(d) Payoff Letters. Payoff letters from the lenders of Seller and the Seller Subsidiaries, in form and substance reasonably satisfactory to Buyer, indicating that, upon payment of the amount specified in such letters, all obligations of Seller and the Seller Subsidiaries to such Persons required to be satisfied on the Closing Date shall be satisfied, all Encumbrances on the Purchased Assets shall be released;
(e) Sellers Working Capital Statement. Seller shall have delivered to Buyer Sellers Working Capital Statement.
(f) Dahan Offer Letter. The Dahan Offer Letter has not been rescinded or terminated, whether voluntarily by Dahan or involuntarily on account of death or disability (in accordance with its terms), in each case prior to the Closing.
(g) Other Actions. All actions to be taken by Seller in connection with consummation of the transactions contemplated by this Agreement and the other Transaction Documents and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Buyer.
(h) Closing Deliverables. Seller shall have delivered or caused to be delivered to Buyer the items set forth in Section 3.02(a).
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(i) No Material Adverse Effect. Since the date hereof, there shall not have occurred any event, circumstance, development, state of facts, occurrence, change or effect that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 8.03 Conditions to the Obligations of Seller. The obligations of Seller to consummate and cause the consummation of the transactions contemplated herein are subject to the satisfaction or waiver by Seller, prior to the Closing Date, of the following further conditions:
(a) Performance. All of the agreements and covenants of Buyer to be performed prior to the Closing pursuant to this Agreement shall have been duly performed in all material respects.
(b) Representations and Warranties. (i) The Fundamental Representations made by Buyer shall be true and correct in all respects as of the Closing Date as if made at and as of such time (other than those representations and warranties made as of a specified date, which such representations and warranties shall be true and correct in all respects as of such specified date) and (ii) all other representations and warranties of Buyer contained in Article V hereof shall be true and correct (without giving effect to any material, materially, materiality, Material Adverse Effect, material adverse effect, material adverse change or similar qualifiers contained in any of such representations and warranties) as of the Closing Date as if made at and as of such time (other than those representations and warranties made as of a specified date, which such representations and warranties shall be true and correct in all respects as of such specified date), except for such failures to be true and correct that do not have and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Buyers ability to consummate the transactions contemplated hereby.
(c) Closing Deliverables. Buyer shall have delivered or caused to be delivered to Seller the items set forth in Section 3.02(b).
(d) Other Actions. All actions to be taken by Buyer in connection with consummation of the transactions contemplated by this Agreement and the other Transaction Documents and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Seller.
Section 8.04 Frustration of Closing Conditions. Neither Buyer nor Seller may rely on the failure of any condition set forth in this Article VIII to be satisfied if such failure were caused by such partys failure to act in good faith or such partys failure to use its commercially reasonable efforts to cause the Closing to occur, as required by Section 6.04.
ARTICLE IX
TERMINATION
Section 9.01 Termination Events. This Agreement may be terminated and the transactions contemplated herein may be abandoned, at any time prior to the Closing:
(a) by mutual written consent of Seller and Buyer;
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(b) by either Seller or Buyer, if: (i) the Closing Date shall not have occurred prior to September 30, 2015 (the End Date); provided, that neither party may terminate this Agreement pursuant to this Section 9.01 if such party is in material breach of this Agreement or (ii) any court or other Governmental Authority shall have issued, enacted, entered, promulgated or enforced any Law or Order (that is final and non-appealable and that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement; provided, that the party seeking to terminate pursuant to this Section 9.01(b) shall have complied with its obligations, if any, under Section 6.04;
(c) by Seller, if: (i) any of the representations and warranties of Buyer contained in Article V hereof shall fail to be true and correct or (ii) there shall be a breach by Buyer of any covenant or agreement of Buyer in this Agreement that, in either case, (A) would result in the failure of a condition set forth in Section 8.03(a) or Section 8.03(b) and (B) which is not curable or, if curable, is not cured upon the occurrence of the earlier of (1) the thirtieth (30th) day after written notice thereof is given by Seller to Buyer and (2) the day that is five (5) Business Days prior to the End Date; provided that Seller may not terminate this Agreement pursuant to this Section 9.01(c) if Seller is in material breach of this Agreement; or
(d) by Buyer, if: (i) any of the representations and warranties of Seller contained in Article IV hereof shall fail to be true and correct or (ii) there shall be a breach by Seller of any covenant or agreement of Seller in this Agreement that, in either case, (A) would result in the failure of a condition set forth in Section 8.02(a) or Section 8.02(b) and (B) which is not curable or, if curable, is not cured upon the occurrence of the earlier of (1) the tenth (10th) day after written notice thereof is given by Buyer to Seller and (2) the day that is five (5) Business Days prior to the End Date; provided that Buyer may not terminate this Agreement pursuant to this Section 9.01(d) if Buyer is in material breach of this Agreement.
Section 9.02 Effect of Termination. In the event of a termination of this Agreement pursuant to Section 9.01 by Buyer, on the one hand, or Seller, on the other hand, written notice thereof shall forthwith be given to the other party specifying the provision hereof pursuant to which such termination is made, and this Agreement shall be terminated and become void and have no effect and there shall be no liability hereunder on the part of Seller or Buyer, except that this Section 9.02, and Article X hereof shall survive any termination of this Agreement. Nothing in this Section 9.02 shall relieve any party of liability for any Willful Breach of this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.
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Section 10.02 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when received by the addressee if delivered by hand or sent by a nationally recognized overnight courier (receipt requested); (b) on the date sent by facsimile or e-mail of a PDF document if sent between 9:00 A.M, and 6:00 P.M. New York City time on any Business Day, and on the next Business Day if sent outside of such hours or (c) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. In the case of facsimile or e-mail of a PDF document, such copies shall also be sent by overnight courier service or by registered mail. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02):
If to Seller to:
Joes Jeans Inc.
2340 S. Eastern Avenue
Commerce, CA 90040
Attention: Interim Chief Executive Officer
Facsimile: (323) 837-3791
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Jeffrey H. Cohen
Andrew D. Garelick
Facsimile: (213) 687-5600
Email: Jeffrey.Cohen@skadden.com
Andrew.Garelick@skadden.com
Akin Gump Strauss Hauer & Feld LLP
1333 New Hampshire Avenue NW
Washington DC 20036
Attention: Russell W. Parks, Jr.
Erica D. McGrady
Facsimile: (202) 887-4288
Email: RParks@akingump.com
EMcgrady@akingump.com
or to such other person or address as Seller shall furnish to Buyer in writing.
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If to Buyer to:
GBG USA Inc.
350 Fifth Ave., 9th Floor
New York, NY 10118
Attn: Robert K. Smits, EVP & General Counsel
Fax No.: (646) 786-6943
Email: RobertSmits@globalbrandsgroup.com
with a copy (which shall not constitute notice) to:
Crowell & Moring LLP
590 Madison Ave.
New York, NY 10022
Attn: Paul Pollock
Ilana Lubin
Fax No.: (212) 223-4134
Email: PPollock@crowell.com
ILubin@crowell.com
or to such other person or address as Buyer shall furnish to Seller in writing.
Notices sent by multiple means, each of which is in compliance with the provisions of this Agreement will be deemed to have been received at the earliest time provided for by this Agreement.
Section 10.03 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
Section 10.04 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
Section 10.05 Entire Agreement. This Agreement, together with the Confidentiality Agreement, Exhibits hereto, the Disclosure Letters and the other Transaction Documents, constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous representations, warranties, understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the Exhibits and Disclosure Letters (other than an exception expressly set forth as such in the Disclosure Letters), the statements in the body of this Agreement will control.
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Section 10.06 Binding Effect; Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to Article VII hereof, which shall inure to the benefit of each Buyer Indemnitee and Seller Indemnitee, all of whom are intended as express third-party beneficiaries thereof, no other Person not party to this Agreement shall be entitled to the benefits of this Agreement. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, that (i) Seller shall be entitled to assign its rights, interests and obligations hereunder in connection with a merger, exchange, consolidation or sale of all or substantially of its stock or assets or other similar transaction; and (ii) Buyer may, in its sole discretion and without the consent of Seller, designate one or more of its Affiliates (each, a Buyer Designee) to purchase certain of the Purchased Assets and assume certain of the Assumed Liabilities, and Buyers Designee shall be entitled to the benefit of the representations, warranties, covenants and agreements, to the extent applicable, made by Seller in Transaction Document; provided, however that Buyer shall remain liable under this Agreement. Each party shall provide written notice to the other party of any such assignment. Any attempted assignment in violation of this Section 10.06 will be void. Notwithstanding any assignment by any party pursuant to this Section 10.06, such party shall be responsible for full performance of such partys covenants, agreements and obligations hereunder.
Section 10.07 Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
Section 10.08 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to its rules of conflict of laws.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN ANY STATE OF FEDERAL COURT IN NEW YORK COUNTY, NEW YORK. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
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(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 10.09 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that an award of money damages would be inadequate in such event. Accordingly, it is acknowledged that Seller and Buyer shall be entitled to equitable relief without proof of actual damages, including an injunction or injunctions or Orders for specific performance to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with its terms, in addition to any other remedy to which they are entitled at law or in equity as a remedy for any such breach. Each party further agrees that no other party hereto or any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 10.09, and each party hereto irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument
Section 10.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
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JOES JEANS, INC. |
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GBG USA INC. |
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By: |
/s/ Hamish Sandhu |
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By: |
/s/ Dow Famulak |
Name: Hamish Sandhu |
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Name: Dow Famulak |
Title: CFO |
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Title: President and COO |
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Exhibit 4.1
FORM OF CERTIFICATE OF DESIGNATION
OF
10.0% SERIES A CONVERTIBLE PREFERRED STOCK
OF
JOES JEANS INC.
(Pursuant to Section 151 of the General Corporation Law of the State of Delaware)
Joes Jeans Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter, the Corporation), hereby certifies that the following resolution was duly adopted by the Board of Directors of the Corporation (or a duly authorized committee thereof) as required by Section 151 of the General Corporation Law of the State of Delaware:
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation in accordance with the provisions of the certificate of incorporation of the Corporation, there is hereby created and provided out of the authorized but unissued preferred stock, par value $0.10 per share, of the Corporation (Preferred Stock), a new series of Preferred Stock, and there is hereby stated and fixed the number of shares constituting such series and the designation of such series and the powers (including voting powers), if any, of such series and the preferences and relative, participating, optional, special or other rights, if any, and the qualifications, limitations or restrictions, if any, of such series as follows:
Series A Convertible Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be designated as shares of 10.0% Series A Convertible Preferred Stock, par value $0.10 per share, of the Corporation (the Series A Preferred Stock), and the number of shares constituting such series shall be fifty thousand (50,000).
Section 2. Definitions. The following terms shall have the following meanings for purposes of this Certificate of Designation (as the same may be amended or amended and restated from time to time, this Certificate of Designation):
(a) Additional Shares of Common Stock shall mean all shares of Common Stock issued (or deemed to be issued upon issue of any Options or Convertible Securities) by the Corporation after the Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities:
(i) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series A Preferred Stock;
(ii) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split or other distribution on shares of Common Stock that is covered by Section 6(f), Section 6(g) or Section 6(h);
(iii) shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation; and
(iv) shares of Common Stock, Options or Convertible Securities issued (x) to the equityholders of a Person pursuant to the acquisition of such Person by the Corporation by consolidation, merger or other reorganization in which the Corporation acquires fifty percent (50%) or more of the voting power of such Person or fifty percent (50%) or more of the equity ownership of such Person or (y) to a Person pursuant to the acquisition of all or substantially all of the assets of such Person by the Corporation.
(b) Annual Dividend Amount shall have the meaning set forth in Section 3(a).
(c) Board of Directors shall mean the Board of Directors of the Corporation.
(d) Certificate of Designation shall have the meaning set forth in Section 2.
(e) Common Stock shall mean the common stock, par value $0.10 per share, of the Corporation.
(f) Conversion Date shall have the meaning set forth in Section 6(b).
(g) Conversion Notice shall have the meaning set forth in Section 6(b).
(h) Conversion Price shall mean $11.10, as such amount may be adjusted pursuant to the terms herein.
(i) Convertible Securities shall mean any shares of capital stock or other securities of the Corporation convertible into or exchangeable or exercisable for shares of Common Stock, but excluding Options.
(j) Corporation shall have the meaning set forth in the preamble.
(k) Dividend Rate shall mean 10.0% per annum.
(l) Dividend Reference Date shall have the meaning set forth in Section 3(a).
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(m) Liquidation Event shall mean (a) any termination, liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, (b) the consolidation or merger of the Corporation into or with another Person or Persons (other than any such transactions in which the holders of a majority of the Voting Stock in the Corporation (measured by voting power rather than the number of shares and without distinction as to any series or class of Voting Stock) immediately before such transaction hold a majority of the Voting Stock in the surviving Person (measured by voting power rather than the number of shares and without distinction as to any series or class of Voting Stock) immediately after such transaction), or (c) the sale, lease, exchange, exclusive license or other disposition of all or substantially all of the assets (including capital stock of Subsidiaries) or capital stock of the Corporation (determined on a consolidated basis) shall each be deemed a Liquidation Event.
(n) Liquidation Preference with respect to each share of Series A Preferred Stock shall mean, on any date, an amount equal to the Original Issue Price, plus accumulated and accrued dividends thereon through such date.
(o) Liquidation Proceeds shall mean the assets of the Corporation legally available for distribution to its stockholders upon the occurrence of a Liquidation Event.
(p) Options shall mean options, warrants or rights to purchase shares of Common Stock or Convertible Securities.
(q) Original Issue Date shall mean the first date on which one or more shares of Series A Preferred Stock is/are issued by the Corporation.
(r) Original Issue Price shall mean $1,000 per share of Series A Preferred Stock.
(s) Person shall mean an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity.
(t) Preferred Stock shall have the meaning set forth in the preamble.
(u) Series A Directors shall have the meaning set forth in Section 4(b).
(v) Series A Dividends shall have the meaning set forth in Section 3.
(w) Series A Preferred Stock shall have the meaning set forth in Section 1.
(x) Subsidiary shall mean, with respect to the Corporation, any corporation, limited liability company, partnership, association, trust or other entity the accounts of which would be consolidated in the Corporations consolidated financial statements if such financial statements were prepared in accordance with GAAP, as well as any other corporation, limited liability company, partnership, association, trust or other entity of which securities or other ownership interests representing more than 50% of the equity (or, in the case of a partnership, more than 50% of the general partnership interests) or more than 50% of the Voting Stock (measured by voting power rather than the number of shares and without distinction as to any series or class of Voting Stock) are, as of such date, owned or controlled by the Corporation or one or more Subsidiaries of the Corporation or by the Corporation and one or more Subsidiaries of the Corporation.
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(y) Voting Stock means, with respect to any Person, capital stock of such Person that ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person.
Section 3. Dividends.
(a) Each holder of the Series A Preferred Stock shall be entitled to receive dividends when, as and if declared by the Board of Directors or a duly authorized committee thereof out of funds of the Corporation legally available therefor, at an annual rate equal to the Dividend Rate on the Liquidation Preference (including all accumulated dividends thereon, but not accrued dividends that have not accumulated) of each share of the Series A Preferred Stock (the Annual Dividend Amount). Such dividends shall be payable solely in cash (to the extent actually paid), shall be cumulative and shall accrue (whether or not earned or declared, whether or not there are funds legally available for the payment thereof and whether or not restricted by the terms of any of the Corporations indebtedness outstanding at any time) from and including the date each share is issued to and including the first to occur of (i) the date on which the Liquidation Preference (including all accumulated dividends thereon) of such share (plus all accrued and unpaid dividends thereon) is paid to the holder thereof in connection with the liquidation of the Corporation or (ii) the date on which such share is otherwise acquired by the Corporation, including upon conversion in accordance with Section 6 hereof. To the extent not paid in cash on March 31, June 30, September 30 and December 31 of each year (each, a Dividend Reference Date), all dividends which have accrued on each share outstanding during the calendar quarter preceding the applicable Dividend Reference Date shall be accumulated and shall remain accumulated dividends with respect to such share until paid to the holder thereof.
(b) The dividend payment period for any dividend payable or accumulating on a Dividend Reference Date shall be the period beginning on the immediately preceding Dividend Reference Date (or on the issue date if the applicable share is first issued at some time after the immediately preceding Dividend Reference Date) and ending on the day preceding such applicable Dividend Reference Date. If any date on which a cash dividend is declared in respect of the Series A Preferred Stock is not a Business Day, such payment shall be made on the next day that is a Business Day.
(c) Any dividends paid in cash shall be payable to the holders of record of the Series A Preferred Stock as they appear on the stock transfer books of the Corporation at the close of business on the day the dividend is declared, or such other date that the Board of Directors designates that is not more than thirty (30) nor less than ten (10) days prior to such date. Dividends paid on the shares of the Series A Preferred Stock in an amount less than accumulated and unpaid dividends payable thereon shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.
(d) In addition to the dividends specified in Section 3(a) and subject to compliance with Section 3(e), if the Board of Directors declares or pays a dividend on the Common Stock, then the Board of Directors shall declare and pay to the record holders of the Series A Preferred Stock a cash dividend in an amount per share of Series A Preferred
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Stock equal to the product of (i) the per share dividend declared and paid in respect of each share of Common Stock and (ii) the number of whole shares of Common Stock into which such share of Series A Preferred Stock would then be convertible in accordance with Section 6 hereof.
(e) So long as any shares of Series A Preferred Stock shall be outstanding, unless all accumulated, accrued and unpaid dividends on the Series A Preferred Stock have been declared and paid or set apart for payment, the Corporation shall not (i) declare or pay, or set aside any amounts for payment of, any dividend or distribution on any other class or series of capital stock of the Corporation, whether in cash, property or otherwise (other than dividends or distributions in respect of outstanding shares of Common Stock for which an adjustment is made pursuant to Section 6(g) or 6(h) hereof) or (ii) purchase or redeem, or permit any Subsidiary to purchase or redeem, any shares of any other class or series of capital stock of the Corporation (except by conversion into or exchange solely for shares of Common Stock), or pay or make available any monies for a sinking fund for the purchase or redemption of shares of any other class or series of capital stock of the Corporation.
Section 4. Voting Rights.
(a) General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), in addition to any voting rights provided by applicable law, each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the certificate of incorporation of the Corporation, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.
(b) Election of Directors. For so long as at least [ ]% of the shares of Series A Preferred Stock issued on the Original Issue Date remain outstanding, the holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect three (3) members of the Board of Directors (the Series A Directors). Any Series A Director may be removed without cause by, and only by, the affirmative vote of the holders of a majority of the shares of the Series A Preferred Stock, given either at a special meeting of such holders duly called for that purpose or pursuant to a written consent of such holders. If the holders of shares of the Series A Preferred Stock fail to elect three (3) Series A Directors, then any directorship not so filled shall remain vacant until such time as the holders of the Series A Preferred Stock elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the holders of the Series A Preferred Stock. At any meeting held for the purpose of electing a Series A Director, the presence in person or by proxy of the holders of a majority of the
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outstanding shares of the Series A Preferred Stock shall constitute a quorum for the purpose of electing such Series A Director. The initial Series A Directors shall be those Persons who are designated by the record holder of the Series A Preferred Stock on the Issue Date to serve until their successors are duly elected.
The Secretary of the Corporation may, and, upon the written request of the holders of record of 10% or more of the number of shares of Series A Preferred Stock then outstanding addressed to such Secretary at the principal office of the Corporation, shall, call a special meeting of the holders of record of the Series A Preferred Stock for the election of the directors to be elected by them as hereinabove provided, to be held in the case of such written request within twenty (20) days after delivery of such request, and in either case to be held at the place and upon the notice provided by law and in the Corporations by-laws for the holding of meetings of stockholders.
(c) Series A Preferred Stock Protective Provisions. For so long as at least 50% of the shares of Series A Preferred Stock issued on the Original Issue Date remain outstanding, the Corporation shall not, at any time or from time to time following the Original Issue Date, without the prior vote or written consent of the holders of at least a majority of the shares of Series A Preferred Stock then outstanding, voting separately as a single class:
(i) change, amend, alter or repeal any provision of the certificate of incorporation or bylaws of the Corporation, whether by merger, consolidation or otherwise, if such change, amendment, alteration or repeal would adversely affect the powers, obligations, preferences or relative, participating, optional, special or other rights of the holders of the Series A Preferred Stock or the qualifications, limitations or restrictions of the holders of the Series A Preferred Stock;
(ii) (x) authorize, issue, create or designate any series of capital stock of the Corporation pursuant to the provisions of the certificate of incorporation of the Corporation ranking senior or pari passu to the Series A Preferred Stock (1) as to dividends or other distributions or (2) upon a liquidation, dissolution or winding up of the Corporation; or (y) permit any Subsidiary of the Corporation to authorize, issue, create or designate any class or series of capital stock of such Subsidiary other than an issuance of capital stock to the Corporation or any other wholly-owned Subsidiary of the Corporation;
(iii) take any action to liquidate, dissolve or wind-up the business and affairs of the Corporation or consent to any of the foregoing; or
(iv) increase the authorized number of members of the Board of Directors.
Any action required or permitted to be taken at any meeting of the holders of Series A Preferred Stock may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding shares of Series A Preferred Stock having not less than the
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minimum number of votes that would be necessary to authorize or take such action at a meeting at which all outstanding shares of Series A Preferred Stock were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporations registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking of corporate action without a meeting by less than unanimous written consent of the holders of Series A Preferred Stock shall, to the extent required by law, be given to those holders of Series A Preferred Stock who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders of Series A Preferred Stock to take the action were delivered to the Corporation.
Section 5. Liquidation. Upon any Liquidation Event, the holders of any outstanding shares of Series A Preferred Stock shall be entitled to receive out of the Liquidation Proceeds, prior and in preference to the holders of any other class or series of capital stock of the Corporation, an amount per share of Series A Preferred Stock equal to the greater of (a) the Liquidation Preference on the date of determination and (b) the amount that would be payable to the holders of Series A Preferred Stock if such holders had converted all outstanding shares of Series A Preferred Stock into shares of Common Stock pursuant to Section 6 hereof immediately prior to such Liquidation Event. If, upon the occurrence of any Liquidation Event, the Liquidation Proceeds thus distributed among the holders of any outstanding shares of Series A Preferred Stock shall be insufficient to permit the payment in full to the holders of the outstanding shares of Series A Preferred Stock of the preferential amounts to which they are entitled, then the entire Liquidation Proceeds shall be distributed ratably among the holders of the outstanding shares of Series A Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive.
Section 6. Conversion.
(a) Right to Convert; Conversion Ratio. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Original Issue Price (plus, at the option of the holder as set forth in Section 6(d), the amount of accrued and unpaid dividends thereon, as of the Conversion Date) by the Conversion Price in effect at the time of conversion. Such initial Conversion Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below; provided, however, that no adjustment will be made for any event in which an adjustment has already been provided under this Section 6; provided, further, that if any event occurs that would result in an adjustment under more than one subsection of this Section 6, the subsection that results in the most favorable adjustment to the holders of Series A Preferred Stock shall control.
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(b) Mechanics of Conversion. Before any holder of shares of Series A Preferred Stock shall be entitled to receive stock certificate(s) representing the shares of Common Stock into which such shares of Series A Preferred Stock shall have been converted pursuant to this Section 6, such holder shall have surrendered the stock certificate(s) representing such shares of Series A Preferred Stock to the Corporation, duly indorsed for transfer to the Corporation and accompanied by written notice substantially in the form set forth in Annex A attached hereto (the Conversion Notice). The Corporation shall, on a date as soon as practicable, and in no event later than three (3) trading days after the delivery of said stock certificate(s) and Conversion Notice to the Corporation (such date, the Conversion Date), issue and deliver to such holder, or the nominee or nominees of such holder, stock certificate(s) or evidence of book entry credits, if requested by the holder converting such shares, representing the number of shares of Common Stock to which such holder shall be entitled under this Section 6, and the stock certificate(s) representing the share(s) of Series A Preferred Stock so surrendered shall be cancelled. In the event that there shall have been surrendered stock certificate(s) representing shares of Series A Preferred Stock, only a portion of which shall have been converted pursuant to this Section 6, then the Corporation shall also issue and deliver to such holder, or the nominee or nominees of such holder, stock certificate(s) representing the number of share(s) of Series A Preferred Stock that shall not have been converted pursuant to this Section 6. The person(s) entitled to receive share(s) of Common Stock issuable upon conversion of share(s) of Series A Preferred Stock pursuant to this Section 6 shall be treated for all purposes as the record holder(s) of such shares of Common Stock as of the Conversion Date.
(c) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
(d) Effect of Conversion. All shares of Series A Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate upon conversion, except only the right of the holders thereof to receive (i) shares of Common Stock in exchange therefor, (ii) payment of cash in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 6(c) and (iii) payment in cash or additional shares of Common Stock, at the option of the holder and specified in the Conversion Notice, of any accrued but unpaid dividends thereon. Any shares of Series A Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.
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(e) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date issue Additional Shares of Common Stock without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such issue, then the Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:
CP2 = CP1 * (A + B) ÷ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
(i) CP2 shall mean the Conversion Price in effect immediately after such issue of Additional Shares of Common Stock;
(ii) CP1 shall mean the Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;
(iii) A shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion, exercise or exchange of Convertible Securities (including the Series A Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
(iv) B shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and
(v) C shall mean the number of such Additional Shares of Common Stock issued in such transaction.
(f) Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.
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(g) Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction:
(i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing, (A) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions, and (B) no such adjustment shall be made if the holders of Series A Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event.
(h) Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in rights, then and in each such event the holders of Series A Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or rights in an amount equal to the amount of such securities or rights as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock in accordance with Section 6 hereof on the date of such event.
(i) Consolidation, Merger, Sale or Reclassification. In case of any consolidation with or merger of the Corporation with or into another corporation, or in case of any sale, lease, exchange, exclusive license or other disposition to another corporation of the assets of the Corporation as an entirety or substantially as an entirety (where there is a change in or distribution with respect to the Common Stock), or any reclassification of the capital stock of the Corporation, each share of Series A Preferred
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Stock shall after the date of such consolidation, merger, sale, lease, exchange, exclusive license or other disposition or reclassification be convertible into the number of shares of stock or other securities or property (including cash) to which the Common Stock issuable (at the time of such consolidation, merger, sale, lease, exchange, exclusive license or other disposition or reclassification) upon conversion of such share of Series A Preferred Stock would have been entitled upon such consolidation, merger, sale, lease, lease, exchange, exclusive license or other disposition or reclassification; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the holders of Series A Preferred Stock shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or property thereafter deliverable on the conversion of the shares of Series A Preferred Stock. If the Corporation shall propose to take any action of the type described in this clause (i), the Corporation shall give notice to each record holder of Series A Preferred Stock, which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place. Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known on the date of such notice) on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon conversion of shares of Series A Preferred Stock. In the case of any action that would require the fixing of a record date, such notice shall be given at least ten (10) days prior to the date so fixed, and in case of all other action, such notice shall be given at least fifteen (15) days prior to taking such proposed action.
(j) Statement Regarding Adjustments. Whenever a Conversion Price shall be adjusted, the Corporation shall forthwith file, at the office of any transfer agent for the Series A Preferred Stock and at the principal office of the Corporation, a statement showing in reasonable detail the facts requiring such adjustment and the Conversion Price that shall be in effect after such adjustment, and the Corporation shall also cause a copy of such statement to be sent to each record holder of Series A Preferred Stock. Each such statement shall be signed by the chief financial officer of the Corporation.
(k) Notice to Holders. All notices permitted or required to be sent by the Corporation to the Holders pursuant to this Certificate of Designation shall be sent by overnight courier or first class certified mail, postage prepaid, to the holders of Series A Preferred Stock at the addresses appearing on the Corporations records.
(l) Treasury Stock. The sale or other disposition of any Common Stock theretofore held in the Corporations treasury shall be deemed to be an issuance thereof.
(m) Costs. The Corporation shall pay all documentary, stamp, transfer or other transactional taxes attributable to the issuance or delivery of shares of Common Stock upon conversion of any shares of Series A Preferred Stock; provided that the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer and involved in the issuance or delivery of any certificate for such shares in a name other than that of the holder of record of the shares of Series A Preferred Stock in respect of which such shares are being issued, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Corporation the amount of any such tax, or has established to the reasonable satisfaction of the Corporation that such tax has been or will be paid.
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Section 7. Reservation of Shares.
(a) The Corporation shall at all times keep reserved, free from preemptive rights, out of its authorized but unissued shares of Common Stock, or shares held in treasury, sufficient shares of Common Stock to provide for the conversion of Series A Preferred Stock as required by this Certificate of Designation from time to time as shares of Series A Preferred Stock are presented for conversion.
(b) All Common Stock delivered upon conversion of the Series A Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances.
Section 8. Maturity. The Series A Preferred Stock shall be perpetual unless converted or liquidated in accordance with this Certificate of Designation.
Section 9. Redemption. The Series A Preferred Stock shall not be redeemable either at the Corporations option or at the option of holders of the Series A Preferred Stock at any time.
Section 10. Amendment. No provision of this Certificate of Designation may be amended, except in a written instrument signed by the Corporation and record holders of a majority of the shares of Series A Preferred Stock then outstanding. Any of the rights of the holders of Series A Preferred Stock set forth herein may be waived by the affirmative vote of such holders holding a majority of the shares of Series A Preferred Stock then outstanding. No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designation shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation of the 10% Series A Convertible Preferred Stock of Joes Jeans Inc. on this day of , 2015.
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[Signature Page to Certificate of Designation]
NOTICE TO EXERCISE CONVERSION RIGHT
The undersigned, being a holder of the 10.0% Series A Convertible Preferred Stock of Joes Jeans Inc. (the Series A Preferred Stock) exercises the right to convert outstanding shares of Series A Preferred Stock on , , into shares of Common Stock of Joes Jeans Inc., [upon the occurrence of [name consolidation or merger of the Corporation or sale of all or substantially all of the assets of the Corporation or recapitalization of the Corporation] on or prior to [insert date]] in accordance with the terms of the shares of Series A Preferred Stock, and directs that the shares issuable and deliverable upon the conversion be issued and delivered in the denominations indicated below to the registered holder hereof unless a different name has been indicated below.
By checking this box o the undersigned holder hereby elects to receive cash in lieu of additional shares of Common Stock in respect of any accrued and unpaid dividends on each share of Series A Preferred Stock being converted pursuant to this notice.
Dated: [At least one Business Day prior to the date fixed for conversion]
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Exhibit 4.2
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE COMMON STOCK INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION EVIDENCED BY (IF REQUESTED BY THE COMPANY) AN OPINION OF COUNSEL TO THE HOLDER, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
THE PRINCIPAL AMOUNT OF THIS NOTE, AND INTEREST IN RESPECT THEREOF, ARE SUBORDINATED IN RIGHT OF PAYMENT TO SENIOR DEBT.
THIS NOTE IS SUBJECT TO CERTAIN SET OFF PROVISIONS SET FORTH IN A STOCK PURCHASE AGREEMENT DATED AS OF JULY 15, 2013 AMONG THE COMPANY, THE PERSON TO WHOM THIS NOTE WAS ORIGINALLY ISSUED, AND CERTAIN OTHER PERSONS. THE COMPANY WILL FURNISH A COPY OF THESE SET OFF PROVISIONS TO THE HOLDER HEREOF, WITHOUT CHARGE, UPON WRITTEN REQUEST.
FORM OF SUBORDINATED CONVERTIBLE NOTE
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated July 15, 2013, by and among the Parties (as defined below) and certain other persons (the Stock Purchase Agreement), the Company (as defined below) executed that certain Subordinated Convertible Note, dated September 30, 2013, in favor of the Holder (as defined below) in the original principal amount of [ ] Dollars ($[ ]) (the Original Note);
WHEREAS, pursuant to that certain Rollover Agreement, dated September [ ], 2015, by and among the Parties and certain other persons (the Rollover Agreement), a portion of the Original Note has been repaid in cash, a portion has been repaid in Common Stock (as defined below) and the balance is to be repaid through issuance of this Subordinated Convertible Note (this Note); and
WHEREAS, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Original Note is hereby amended and restated in all respects by this Note.
FOR VALUE RECEIVED, the undersigned, Joes Jeans, Inc., a Delaware corporation (the Company and, together with Holder, the Parties), hereby unconditionally promises to pay to [ ] (Holder), in lawful money of the United States of America, the principal sum of [ ] Dollars ($[ ])(1), together with interest on the unpaid principal balance thereon from the date set out above (the Issuance Date) until the earlier to occur of the Conversion Date or the date such principal amount is paid in full as provided herein.
This Note is one of an issue of Subordinated Convertible Notes issued on the date hereof and has been executed and delivered pursuant to the terms of the Rollover Agreement (including any PIK Notes issued thereon, collectively, the Notes, and such other Subordinated Convertible Notes, the Other Notes). Undefined capitalized terms herein are defined in the Stock Purchase Agreement. The Company and the Holder acknowledge and agree that the payment of all or any portion of the outstanding principal balance of this Note and all accrued interest hereon, including but not limited to in connection with any Event of Default but excluding any payment in connection with any elective conversion of this Note pursuant to Section 2, shall be pari passu in right of payment and in all other respects to the Other Notes. In furtherance of the foregoing, the Company agrees that it shall not make any payment of interest under this Note (whether at maturity or otherwise, but excluding any payment pursuant to Section 2) unless it shall concurrently make a payment of interest, as applicable, under each of the Other Notes in the same proportionate amount as the accrued but unpaid interest is paid under this Note.
1. Payments
1.1 Principal and Interest.
(a) Interest shall accrue on the unpaid principal balance of this Note at a rate of 6.50%(2) per annum (the Interest Rate), which shall be payable 50% in cash and 50% in PIK Notes (PIK Interest); provided, however, that the Company may, in its sole discretion, elect to pay 100% of such interest in cash.
(b) When the Company issues additional Notes (PIK Notes) to the Holder as payment of PIK Interest, such PIK Notes shall be equal to the amount of PIK Interest that has accrued in respect of the Notes since the last interest payment date up to the relevant interest payment date. The Notes issued on the Issuance Date and any such PIK Notes shall be treated as a single class for all purposes under this Note, including with respect to the accrual of interest. In the event that PIK Interest due to the Holder is less than $1.00, any PIK Interest less than $1.00 shall be rounded up to the nearest $1.00.
(c) Interest shall accrue at the Interest Rate computed on the basis of a 365/366 day year on the unpaid principal amount of this Note outstanding from time to time from the Issuance Date until the earlier to occur of the Conversion Date or the date such principal amount is paid in full as provided in Section 1.1(a). The Company shall
(1) Note to Draft: To be the amount equal to the percentage of principal and unpaid interest set forth on Schedule A to the Rollover Agreement.
(2) Note to Draft: Interest rate for all Noteholders other than Fireman to be 6.5%. Interest rate for FCP Note to initially be 6.5% with a step up to 7% as of October 1, 2016.
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pay to the Holder all accrued and unpaid interest in arrears for each calendar quarter on the first day of each April, July, October and January, beginning [ ], 2016 and ending [October 1], 20[20](3). Thereafter, the Company shall pay to the Holder all accrued and unpaid interest on the Maturity Date (as defined below). Notwithstanding the foregoing, if the parties professional tax advisors agree that quarterly payments may be made subsequent to [ ], 20[ ], without causing this Note to be an applicable high yield debt obligation, as defined in section 163(i) of the Internal Revenue Code of 1986, as amended, then such interest payments shall be on a quarterly basis. Any accrued interest which for any reason has not theretofore been paid shall be paid in full on the date on which the final principal payment on this Note is made. Notwithstanding the first paragraph of this Note or the first sentence of this Section 1.1(c), during any period in which an Event of Default has occurred and is continuing, the Company shall pay interest on the unpaid principal amount of this Note at a rate per annum equal to [·]%(4) (the Default Rate).
1.2 Payment of Principal on Note.
(a) The Company shall pay the principal amount then outstanding of this Note to the Holder on [ ], 20[ ](5) (the Maturity Date), together with all accrued and unpaid interest in the manner set forth below, unless such amounts are paid or payable sooner pursuant to the provisions of this Note. On the Maturity Date, the Company shall pay to the Holder cash in an amount equal to the entire then outstanding principal balance of this Note plus all accrued but unpaid interest on the Note.
For the avoidance of doubt, notwithstanding anything to the contrary herein, this Note shall remain outstanding so long as either (1) any principal amount of this Note (together with any accrued and unpaid interest thereon) remains outstanding or (2) the Holder has the right to convert any Conversion Amount pursuant to this Note.
(b) The Company shall provide notice of the Maturity Date to the Holder no later than 30 days prior to the Maturity Date, which notice shall be deemed to have been received (i) on the date of delivery if delivered personally, or if by facsimile, upon written confirmation of receipt by facsimile, e mail or otherwise, (ii) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (iii) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. Prior to delivering such notice, the Company shall be required to confirm the notice information of the Holder.
(c) Except as provided in (i) the final paragraph of Section 3.3 and (ii) Section 5, the Company shall have the right to prepay this Note at any time.
(3) Note to Draft: Bracketed date to be updated based on the date the Note is issued.
(4) Note to Draft: To be 2% above the applicable interest rate.
(5) Note to Draft: To be the date that is five and a half years following the date of the Note.
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1.3 Manner of Payment. Principal, interest, and all other amounts due under this Note will be payable in cash, except as provided in Section 1.1, in U.S. dollars, to Holder by wire transfer in immediately available funds to an account designated by Holder in writing. If any applicable law (as determined by the Company) requires the deduction of withholding of any tax from any payment or in connection with a conversion of the Note, then the Company shall be entitled to make such deduction and timely pay the full amount deducted to the relevant governmental authority and any amount so deducted and paid to the relevant governmental authority shall be treated as a payment to the Holder. If any payment of principal or interest on this Note is due on a day that is not a Business Day, such payment will be due on the next succeeding Business Day, and such extension of time will be taken into account in calculating the amount of interest payable under this Note. Business Day means any day other than a Saturday, Sunday or legal holiday in the State of California. The Company may, to the extent permissible under Section 1.2(h)(i) and Section 9.7 of the Stock Purchase Agreement, set off against the principal amount outstanding under this Note any amounts that Holder is determined to be liable to the Company in connection with the Transactions under the Stock Purchase Agreement which have been determined: (i) by the written agreement between the Holder and the Company; or (ii) by any other means to which the Holder and the Company shall agree which shall include the final judgment or decree of a court when the time for appeal, if any, shall have expired and no appeal shall have been taken or when all appeals taken shall have been finally determined; provided, that such set off shall be treated as a payment of principal under this Note and shall be subject to Article 4. In the event of such setoff, the outstanding principal amount of this Note shall be set-off until the aggregate amount of the set-off equals the amounts for which setoff is available from the Holder pursuant to the Stock Purchase Agreement; provided that in all cases the foregoing shall be subject as to indemnification claims under Section 9.7 to the limitations in Article 9 of the Stock Purchase Agreement, including those set forth in Section 9.1 of the Stock Purchase Agreement. Any accrued but unpaid interest on the principal amount so offset will be cancelled, and, in the event any such interest on such principal amount so offset has been previously paid to Holder, such interest shall be deducted by the Company from the next interest payments otherwise due Holder. This Right of Setoff is without prejudice and in addition to any other right to which Holder is at any time otherwise entitled under this Note (whether by operation of Law, Contract, or otherwise). Within 10 days after the final determination of any amounts hereunder available for set off, the Holder shall surrender this Note to the Company for cancellation in exchange for a replacement Note reflecting the correct principal amount after taking into account the set off.
1.4 Payment of Certain Taxes. The Company shall promptly reimburse the Holder for any interest payable by the Holder pursuant to Section 453A of the Internal Revenue Code of 1986, as amended (the Code) (and any corresponding state and local taxes) on the deferred tax liability (as defined in Section 453A(c)(3) of the Code) attributable to the transactions contemplated by the Stock Purchase Agreement (the Section 453A Interest Charges). The amounts owed by the Company to the Holder pursuant to the preceding sentence shall be treated as additional sales proceeds and shall be payable at such time as the Section 453A Interest Charges are actually payable by the Holder to the Internal Revenue Service or other taxing authority (the Section 453A Payment Date) and shall be increased by the taxes payable by the Holder with respect to the receipt of the Section 453A Interest Charges from the Company (such
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aggregate amount shall be referred to as the Section 453A Payment Amount). Such calculations shall be based on the assumptions that the Holder (x) has received no other installment notes in the taxable year including the Closing Date, and (y) is subject to income tax at the highest marginal federal, state and local capital gains tax rates applicable to the Holder (including, to the extent applicable to the Holder, the tax imposed under Section 1411 of the Code on net investment income), absent the Holder providing the Company with documentation that the Holder is subject to the federal alternative minimum tax. An example of such calculations, solely for illustrative purposes, is attached hereto as Exhibit II. The Holder shall provide the Company with Holders tax basis and gain percentage recognized on the transaction in order to calculate the Section 453A Payment Amount. Within ten (10) days after the Company receives written notice from the Holder of the Section 453A Payment Date and the Section 453A Payment Amount, the Company shall pay such Section 453A Payment Amount to the Holder in cash.
2. Conversion of Notes. This Note shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined below) or cash or a combination thereof at the option of the Company, on the terms and conditions set forth in this Section 2.
2.1 Conversion Right. At any time on or after the date hereof, the Holder shall be entitled to convert all but not less than all of the Conversion Amount into the Settlement Amount determined in accordance with Section 2.3. Subject to Section 4, all accrued but unpaid interest on the Note shall be paid in cash at the time of conversion. In the event that the Company is prohibited from paying such interest in cash pursuant to the provisions of its Senior Debt, it shall pay such interest in Common Stock based upon the then Market Price. The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of the Conversion Amount.
2.2 Mechanics of Conversion. To convert any Conversion Amount into the Settlement Amount as provided in this Note, the Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., Los Angeles time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the Conversion Notice) to the Company (such date, the Conversion Date). Interest on the Note shall cease to accrue on the Conversion Date. Within three (3) Trading Days following a conversion of this Note as aforesaid, the Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by Section 6.3). In the event of a Physical Settlement or Combination Settlement, on or before the second Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a Settlement Notice as described in Section 2.3(b), of receipt of such Conversion Notice to the Holder and the Companys transfer agent (the Transfer Agent), if applicable. On or before the third Trading Day following the date of receipt of a Conversion Notice, the Company shall, to the extent any such Settlement Amount is to be paid in shares of Common Stock, either (a) credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holders or its designees balance account with The Depository Trust Company through its Deposit/Withdrawal at Custodian system or (b) if required, issue and deliver (via reputable overnight courier) to the address as specified in the Company instructions, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled.
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2.3 Settlement Upon Conversion. If a Holder converts this Note, the Company shall pay or deliver to such Holder, as the case may be, in respect of the Conversion Amount of Notes being converted, solely cash, solely shares of Common Stock (other than the payment of accrued interest, which shall be paid in cash except as contemplated by Section 2.1) or a combination of cash and Common Stock (the Settlement Amount), at the Companys election, as set forth in this Section 2.3.
(a) The Company shall pay or deliver, as the case may be, the Settlement Amount on the third Trading Day immediately following the date of the Conversion Notice; provided, that;
(i) if the Company elects to fulfill its conversion obligation, in whole or in part, in shares of Common Stock, the Company shall deliver such Common Stock on the third Trading Day immediately following the Conversion Date in accordance with Section 2.2;
(ii) if the Company elects to fulfill its conversion obligation, in whole or in part, in cash, the Company shall pay such cash as soon as possible but no later than the twentieth Trading Day immediately following the Conversion Date; and
(iii) the Company shall use its commercially reasonable effort to pay in cash all accrued but unpaid interest as soon as possible but no later than the twentieth Trading Day immediately following the Conversion Date.
For the avoidance of doubt, notwithstanding anything to the contrary herein, in the event that for any reason (including due to the provisions of Section 4 hereof that restrict making of cash payments in certain circumstances) the Company is not able to pay all or any portion of the Notes in cash, then the Company shall be required to fulfill its conversion obligations in shares of Common Stock for any portion that the Company cannot pay in cash.
(b) The Company shall deliver a notice (each, a Settlement Notice) of the relevant Settlement Amount not later than the Close of Business on the second Trading Day following the related Conversion Date. Each such Settlement Notice shall specify whether the Company shall satisfy its conversion obligation by (i) delivering shares of Common Stock (Physical Settlement), (ii) paying solely cash (Cash Settlement) or (iii) paying and delivering, as the case may be, a combination of cash and shares of Common Stock (Combination Settlement). In the case of an election that provides for Combination Settlement, the relevant Settlement Notice shall indicate the Specified Dollar Amount.
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(c) The Settlement Amount in respect of any conversion shall be computed as follows:
(i) if the Company elects to satisfy its conversion obligation in respect of such conversion through Physical Settlement, the Company will deliver to the converting Holder a number of shares of Common Stock equal to (A) the entire Conversion Amount, divided by (B) the Market Price;
(ii) if the Company elects to satisfy its conversion obligation in respect of such conversion through Cash Settlement, the Company shall pay to the converting Holder cash in an amount equal to the entire Conversion Amount; and
(iii) subject to Section 2.1, if the Company elects to satisfy its conversion obligation in respect of such conversion through Combination Settlement, the Company shall pay and deliver to the converting Holder, as the case may be, a Settlement Amount equal to: (A) a number of shares of Common Stock as calculated pursuant to Section 2.3(c)(i) above assuming that a portion of the Conversion Amount designated by the Company is the Conversion Amount being settled by Physical Settlement and (B) cash equal to the amount of cash to be paid pursuant to Section 2.3(c)(ii) above assuming that the remaining portion of the Conversion Amount is the Conversion Amount being settled by Cash Settlement.
(d) Notwithstanding the foregoing, the Company will not issue fractional shares of Common Stock as part of the Settlement Amount due with respect to any converted Note in respect of which shares of Common Stock are deliverable. Instead, if any such Settlement Amount includes a fraction of a share of Common Stock, the Company will, in lieu of delivering such fraction of a share of Common Stock, pay an amount of cash equal to the product of (i) such fraction of a share and (ii) the Market Price of the Common Stock, subject in each case to the following paragraph.
(e) If a Holder surrenders more than one Note for conversion on a single Conversion Date, the Company will calculate the amount of cash and the number of shares of Common Stock due with respect to such Notes as if such Holder had surrendered for conversion one Note having an aggregate principal amount equal to the sum of the principal amounts of each of the Notes surrendered for conversion by such Holder on such Conversion Date.
2.4 Rights Upon Issuance Of Purchase Rights And Other Corporate Events.
(a) Purchase Rights. In addition to any adjustments pursuant to Section 2.5 below, if at any time the Company grants, issues or sells any Options, Convertible Notes or rights to purchase stock, warrants, securities or other property pro rata to all of the record holders of any class of Common Stock (the Purchase Rights), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held
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the number of shares of Common Stock acquirable upon complete conversion of this Note (without taking into account any limitations or restrictions on the convertibility of this Note) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, (i) prior to the consummation of any Corporate Event pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets in exchange for shares of Common Stock, the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion price for such consideration commensurate with the Conversion Price or (ii) prior to the consummation of any Corporate Event pursuant to which holders of shares of Common Stock are entitled to receive a distribution with respect to securities or other assets and, immediately following such distribution, such shares of Common Stock remain outstanding, the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note). The provisions of this Section 2.4(b) shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion of this Note. Upon any Corporate Event, this Note shall continue in full force and effect and the terms hereof shall be applicable to the securities and assets receivable on the exercise of this Note after the consummation of such Corporate Event and shall be binding upon the Company, or upon a successor entity resulting from such Corporate Event regardless of whether or not such successor entity shall have expressly assumed the terms of this Note.
2.5 Rights Upon Issuance of Other Securities.
(a) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 2.4, if the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 2.5, if the Company at any time on or after the Issuance Date (other than pursuant
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to the Reverse Stock Split) combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 2.5 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 2.5 occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.
(b) Other Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of Sections 2.4 or 2.5 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Companys board of directors shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the Holder.
2.6 Notices.
(a) Immediately upon any adjustment of the Conversion Price, the Company shall send written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such adjustment.
(b) The Company shall send written notice to the Holder at least 10 Business Days prior to the date on which the Company closes its books or takes a record (i) with respect to any dividend or distribution upon the Common Stock, (ii) with respect to any pro rata subscription offer to holders of Common Stock or (iii) for determining rights to vote with respect to any Corporate Event, dissolution or liquidation.
(c) The Company shall also give at least ten (10) Business Days prior written notice of the date on which any Corporate Event, dissolution or liquidation shall take place.
3. Defaults
3.1 Events of Default. The occurrence of any one or more of the following events with respect to the Company will constitute an event of default hereunder (Event of Default):
(a) If the Company fails to pay when due any payment of principal or interest on this Note or any Other Note and such failure continues for ten (10) days after the original due date for such payment;
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(b) If the Company, under the laws of any jurisdiction: (i) is dissolved, liquidated or wound up, or otherwise ceases doing business; (ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (iii) consents to the appointment of a trustee, receiver, assignee, liquidator or similar official; (iv) makes a general assignment for the benefit of its creditors; (v) institutes a proceeding, or has an involuntary proceeding instituted or filed against it (or has any writ, judgment, warrant of attachment, execution or similar process issued or levied against a substantial part of the Companys properties) that is not dismissed, released or fully bonded within 45 days thereafter, relating to insolvency, bankruptcy, reorganization, liquidation, receivership, dissolution, winding-up, relief of debtors or any other similar relief under any bankruptcy, insolvency, or other similar Law affecting creditors rights; or (vi) takes any action to effectuate or authorize any of the foregoing;
(c) the failure to make any payment when due (giving effect to any applicable grace periods and any extensions thereof) on the principal amount of any Indebtedness of the Company and its subsidiaries, or any interest thereon, if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness, whether such Indebtedness now exists, or is created after the date of this Note, in default for failure to pay principal at final maturity or which has been accelerated, aggregates $10.0 million or more at any time; or
(d) the Company breaches any covenant or other term or condition in this Note or any Other Note, and such breach is not cured within 30 days after the Holder notifies the Company in writing of such breach.
3.2 Notice by the Company. The Company will notify Holder in writing within five days after the occurrence of any Event of Default of which the Company acquires knowledge.
3.3 Remedies. Upon the occurrence of an Event of Default (a) pursuant to Section 3.1(a) hereunder (unless cured by the Company or waived in writing by Holder), Holder may, at its option, (i) by written notice to the Company, declare the entire unpaid principal balance of this Note, together with all accrued and unpaid interest on the Note, immediately due and payable and/or (ii) exercise any and all rights and remedies available to it under this Note and applicable Law, including the right to collect from the Company all sums due under this Note or (b) pursuant to Sections 3.1(b), 3.1(c) or 3.1(d) hereunder (unless cured by the Company or waived in writing by the holders of a majority of the outstanding principal amount of the Notes), the holders of a majority of the outstanding principal amount of the Notes may, at their option, (i) by written notice to the Company, declare the entire unpaid principal balance of the Notes, together with all accrued and unpaid interest on the Notes, immediately due and payable and/or (ii) exercise any and all rights and remedies available to the holders of the Notes and applicable Law, including the right to collect from the Company all sums due under this Note. The rights and remedies of the Holder under this Note are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to the Holder. No failure, delay or omission on the part of the Holder in exercising any right, power or privilege under this Note shall operate as a waiver of such right, power or privilege or any other right, power or privilege hereunder or otherwise preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The Company will pay all costs and expenses incurred by or on behalf of Holder in connection with Holders exercise of any or all of its rights and remedies under this Note, including reasonable attorneys fees.
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Without limitation any other provision herein set forth, upon any Event of Default prior to the Maturity Date in which the entire unpaid principal balance of this Note is paid or required to be paid pursuant to a demand made pursuant to the preceding paragraph (without regard to the provisions of Section 4), the Company shall, subject to Section 4, prepay such amount pursuant to Section 5.
4. Subordination. Notwithstanding anything to the contrary set forth in this Note, this Note, including, without limitation, the Subordinated Debt, the rights of contribution under Section 8.9 and the Guaranteed Obligations (collectively, the Subordinated Obligations), are subordinated to the Senior Debt to the extent and in the manner set forth in this Section 4. In the event of any conflict between this Section 4 and any other provision of this Note, this Section 4 shall control and govern. For the avoidance of doubt, this Note is not subordinated to, or pari passu with, any Indebtedness other than the Senior Debt, as to which Senior Debt this Note shall be subordinated as provided herein. The Loan Parties shall not be permitted to issue any unsecured Indebtedness that is senior to this Note and the Other Notes. For purposes of this Section, any reference to a holder or the holders of the Senior Debt shall be deemed to include any agent for such holder or holders.
4.1 No payment or distribution of any kind, whether direct or indirect (by set-off, recoupment or otherwise) and whether in cash or other property (other than in shares of Common Stock), shall be made on account of any Subordinated Obligation, or in respect of any redemption, retirement, purchase or other acquisition of any Subordinated Obligation, by or for the account of any of the Loan Parties, at any time during which the Senior Debt shall be outstanding or any commitment to extend the Senior Debt exists, other than (a) to the extent no Senior Default has occurred and is continuing, regularly scheduled payments of interest (at the non-default rate of interest and on a non-accelerated basis), payments of interest and fractional shares upon conversion of this Note, or payments of taxes pursuant to Sections 1.4 and 2.1, (b) payment of principal (other than payments of principal due upon the conversion of this Note) on this Note at its stated maturity date, so long as no Senior Default has occurred and is continuing and (c) issuance of shares of Common Stock upon conversion of this Note, or as otherwise contemplated hereunder and the accrual and capitalization of any PIK Interest.
4.2 Except as permitted by Section 4.11, in the event of any payment or distribution of assets of any of the Loan Parties of any kind or character, whether in cash or other property, upon the dissolution, winding up, or total or partial liquidation or reorganization, readjustment, arrangement, or similar proceeding relating to such Loan Party or its property, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership, arrangement or similar proceedings or upon an assignment for the benefit of creditors, or upon any other marshaling or composition of the assets and liabilities of such Loan Party (each, a Proceeding), or event described in Section 4.4 or Section 4.5 of this Note or otherwise: (a) all amounts owing on account of the Senior Debt shall first be Paid in Full before any payment of the Subordinated Obligations is made and (b) any cash payment to which the Holder would be entitled (but for the provisions hereof) shall be paid or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of creditors,
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or other liquidating agent making such payment or distribution to the Senior Debt holders directly, for application to the payment of the Senior Debt until all the Senior Debt shall have been Paid in Full; provided that in no event shall the foregoing limit the issuance of shares of Common Stock upon conversion of this Note.
4.3 In the event that notwithstanding the foregoing any payment or distribution of assets of any Loan Party of any kind or character, whether direct or indirect (by set-off, recoupment or otherwise) and whether in cash or other property, shall be received by the Holder on account of any Subordinated Obligation in violation of the provisions of this Note and before all the Senior Debt is Paid in Full, subject to, if no Proceeding is pending, Section 4.13, such payment or distribution shall be received and held in trust by the Holder for the benefit of the holders of the Senior Debt, or their designated representative, ratably according to the respective amounts of the Senior Debt held or represented by each, to the extent necessary to cause the Senior Debt to be Paid in Full and upon demand by any such holder, shall be delivered to such holders; provided that in no event shall the foregoing be deemed to include any shares of Common Stock issued upon conversion of this Note.
4.4 Until the 91st day following the date all Senior Debt is Paid in Full, the Holder shall not be entitled to (x) accelerate the maturity of any Subordinated Obligation (provided that if the Company fails to pay any payment that is due and payable under this Note at a time when the Company is otherwise permitted under this Section 4 to make such payment, then, on or after the 180th day following an Event of Default that is continuing under this Note due to such failure and as to which written notice thereof has been delivered to the Company and the holders of the Senior Debt, the Holder may by written notice to the Company and such holders elect to accelerate the maturity of any Subordinated Obligation, but may not take any other action with respect to the Subordinated Obligations) or commence any other action or proceeding to recover any amounts due or to become due with respect to any Subordinated Obligation or (y) join in, solicit any other Person to, or act to cause the commencement of, any Proceeding. If at any time the Holder obtains any judgment or Lien against any Loan Party or any of its subsidiaries or their respective properties in respect of any Subordinated Obligation, such judgment or Lien, or both, shall automatically (and without any further action) be subordinate and junior to any Lien, whether now existing or hereafter acquired, securing, or purporting to secure, any of the Senior Debt and shall further be subject to the subordination provisions of this Note and the rights of the holders of the Senior Debt to the same extent as such rights apply to Subordinated Obligations under this Note. Upon any release of any such Lien securing any Senior Debt, any Lien securing any of the Subordinated Obligations shall automatically be released to the same extent as such Lien securing such Senior Debt.
4.5 The provisions of this Section 4 shall continue to be effective or be reinstated, as the case may be, if at any time any payment in respect of the Senior Debt is rescinded or must otherwise be returned by any holders of the Senior Debt (including, without limitation, in the event of a Proceeding), all as though such payment had not been made. Without limitation to the foregoing, in the event that the Senior Debt is avoided, disallowed or subordinated pursuant to Section 548 of the Bankruptcy Code or any applicable state fraudulent conveyance laws, whether asserted directly or under Section 544 of the Bankruptcy Code, the provisions of this Section 4 shall continue to be effective or be reinstated, as the case may be.
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4.6 All rights and interests of the holders of the Senior Debt hereunder, and all agreements and obligations of the Holder, or any Loan Party hereunder, shall remain in full force and effect irrespective of:
(a) any lack of validity or enforceability of the Senior Debt;
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Debt, or any other amendment or waiver of or any consent to any departure from the Senior Debt, including, without limitation, any increase in the Senior Debt resulting from the extension of additional credit to Company or otherwise;
(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any part of the Senior Debt;
(d) any manner of application of collateral, or proceeds thereof, to all or any of the Senior Debt, or any manner of sale or other disposition of any collateral for all or any of the Senior Debt or any other assets of any Loan Party;
(e) the grant of any adjustment, indulgence or forbearance, or compromise with, any Loan Party with respect to the Senior Debt;
(f) any change, restructuring or termination of the structure or existence of any Loan Party; or
(g) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Loan Party or any Holder.
4.7 Each of the Loan Parties and Holder hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Senior Debt and this Section 4 and any requirement that the Senior Debt holder protect, secure, perfect or insure any security interest or lien on the any property subject thereto or exhaust any right to take or first take any action against any Loan Party or any other Person or any collateral.
4.8 This Note and all other instruments (and all replacements thereof) evidencing the Subordinated Obligations or any part thereof shall be inscribed with a legend conspicuously indicating that the payment thereof is subordinated to the payment of the Senior Debt pursuant to the provisions of this Section 4.
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4.9 This Section 4 shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt; and such holders are made third party beneficiaries of this Section 4 hereunder and any one or more of them, or their designated representative, may enforce such provisions, and all such holders shall be deemed to have relied thereon. The subordination effected by this Section 4 is a continuing subordination, and the Holder unconditionally waives notice of the incurring of any Senior Debt or any part thereof and reliance by any holders of Senior Debt upon the subordination contained herein. The Holder acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement to and a consideration of the holders of Senior Debt, whether such Senior Debt was created or acquired before or after the incurrence or creation of any Subordinated Obligation and whether such holders of Senior Debt are now known or hereafter become known, and each holder of Senior Debt shall be deemed conclusively to have relied upon such subordination provisions in acquiring and holding, or in continuing to hold, such Senior Debt and shall be entitled to enforce the provisions of this Section 4 directly as if it were a party to this Note. No right of any present or future holders of Senior Debt to enforce subordination provisions contained in this Section 4 shall at any time be prejudiced or impaired by any act or failure to act on the part of the Loan Parties or by any noncompliance by the Loan Parties with the terms of this Note.
4.10 The provisions of this Section 4 are for the purpose of defining the relative rights of the holders of the Senior Debt on the one hand and the holders of Subordinated Obligations on the other hand, and nothing herein shall impair (as between the Loan Parties and the holders of the Subordinated Obligations) the Loan Parties obligation to the holders of the Subordinated Obligations to pay to such holders the full amount of the Subordinated Obligations in accordance with the terms of the Notes. Except as provided in Section 4.4 above, no provision of this Section 4 shall be construed to prevent the holders of the Subordinated Obligations from exercising all rights and remedies available under this Note or under applicable law upon the occurrence of an Event of Default or otherwise, subject to the rights of the holders of the Senior Debt as set forth above to receive payments otherwise payable to the holders of the Subordinated Obligations, and no provision of this Section 4 shall be deemed to subordinate, to any extent, any claim or right of any holder of the Subordinated Obligations to any claim against any Loan Party by any creditor or any other Person except to the extent expressly provided herein. The subordination provisions of this Section 4 are solely for the benefit of the holders of the Senior Debt and may not be rescinded, canceled, amended or modified in any way that adversely affects the rights under this Section 4 of any holder of Senior Debt then outstanding without the prior written consent of the Working Capital Agent, the Term Loan Agent and the holders of a majority of the other Senior Debt then outstanding.
4.11 Notwithstanding anything herein to the contrary, nothing in this Section 4 shall affect or limit the right of the Holder to at any time convert all or any portion of this Note, or interest thereon as contemplated hereunder, into Common Stock in accordance herewith (or the obligation of the Company to effect such conversion), it being expressly acknowledged and agreed that such conversion may be consummated regardless of the occurrence and continuance of a Senior Default, the commencement and pendency of a Proceeding with respect to the Company, or any other circumstance.
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4.12 Upon the Senior Debt having been Paid in Full (but not before), Holder shall be subrogated to the rights of the holders of such Senior Debt to receive payments or distributions of assets of any Loan Party applicable to the Senior Debt until the obligations under this Note shall have been satisfied. For purposes of such subrogation, no payments or distributions to the holders of Senior Debt of assets, whether in cash, property or securities, distributable to the holders of Senior Debt under the provisions hereof to which Holder would be entitled except for the provisions of this Section 4, and no payment pursuant to the provisions of this Section 4 to the holders of Senior Debt by Holder, shall, as among the Loan Parties, its creditors other than the holders of Senior Debt, and Holder, be deemed to be a payment by the Loan Parties to or on account of Senior Debt, it being understood that the provisions of this Section 4 are, and are intended, solely for the purpose of defining the relative rights of Holder, on the one hand, and the holders of Senior Debt, on the other hand.
4.13 The Company shall give prompt written notice to Holder of any fact known to the Company which would prohibit the making of any payment to Holder in respect of this Note pursuant to this Section 4. Notwithstanding the provisions of this Section 4, Holder shall not at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment or distribution to Holder of the type that could be made under Section 4.1, unless and until Holder shall have received written notice thereof from the Company or from the holder or holders of any Senior Debt or shall have received notice of any Proceeding; and, prior to the receipt of any such written notice, Holder shall be entitled to assume conclusively that such facts do not exist and to receive and retain such payments or distributions on this Note; provided, the Holder shall not be entitled to retain any such payments or distributions received by Holder within the 30 day period prior to the date Holder receives such written notice. Holder shall be entitled to rely on the delivery to it of a written notice by a person representing himself or herself to be a holder of Senior Debt to establish that such notice has been given by a holder of Senior Debt. In the event that Holder determines in good faith that further evidence is required with respect to the right pursuant to this Section 4 of any person as a holder of Senior Debt to participate in any payment or distribution of amounts otherwise payable to Holder, Holder may request such person to furnish evidence to the reasonable satisfaction of Holder as to the amount of Senior Debt held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of each person under this Section 4, and, if such evidence is not furnished, Holder may defer any payment to such person pending judicial determination as to the right of such person to receive such payment.
5. Company Optional Prepayment.
5.1 Subject to Section 4, the Company shall have the right to prepay all or any portion of the then outstanding principal balance under this Note so long at it makes pro rata prepayment and all or any portion of the then outstanding principal balance (as defined in the Other Notes) then outstanding under the Other Notes on the Company Optional Prepayment Date (as defined below) (a Company Optional Prepayment). On the Company Optional Prepayment Date, an amount equal to 103%(6) of the principal amount of the portion of this Note subject to prepayment pursuant to this Section 5.1 shall be prepaid by the Company in cash (the Company Optional Prepayment Amount).
(6) Note to Draft: In the FCP Notes, this shall be 100% of the principal amount.
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5.2 The Company may exercise its prepayment right under this Section 5 by delivering an irrevocable written notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes and Other Notes, excluding for purposes hereof the [FCP Notes](7) (the Company Optional Prepayment Notice and the date all of the holders of Notes and Other Notes received such notice is referred to as the Company Optional Prepayment Notice Date). The Company Optional Prepayment Notice shall (x) state the date on which the Company Optional Prepayment shall occur (the Company Optional Prepayment Date) which date shall not be less than sixty (60) calendar days nor more than ninety (90) calendar days following the Company Optional Prepayment Notice Date, and (y) state the aggregate Company Optional Prepayment Amount of the Notes and Other Notes which is being prepaid in such Company Optional Prepayment from the Holder and all of the other holders of the Notes and Other Notes pursuant to this Section 5 (and analogous provisions under the Other Notes) on the Company Optional Prepayment Date. All principal balances under this Note converted by the Holder after the Company Optional Prepayment Notice Date shall reduce the Company Optional Prepayment Amount of this Note required to be prepaid on the Company Optional Prepayment Date. Prepayments made pursuant to this Section 5 shall be made in accordance with Section 5.3.
5.3 The Company shall deliver the applicable Company Optional Prepayment Amount to the Holder on the applicable Company Optional Prepayment Date. In the event that the Company does not pay the applicable Company Optional Prepayment Amount to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Company Optional Prepayment Amount in full, the Holder shall have the option, in lieu of prepayment, to require the Company to promptly return to the Holder all or any portion of this Note representing the principal balance of this Note that was submitted for prepayment and for which the applicable Company Optional Prepayment Amount has not been paid, which remedy shall be in addition to the other remedies available to the Holder (including under Section 3).
5.4 Notwithstanding anything to the contrary in this Note, the Conversion Amount (a) shall remain outstanding (for purposes of conversion, but not as a principal obligation or indebtedness of any kind) after the consummation of any Company Optional Prepayment until the Maturity Date and (b) during such period may be converted by the Holder in accordance with Section 2.
6. Certain Definitions. For purposes of this Note, the following terms shall have the following meanings:
6.1 Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, et seq.) as now and hereafter in effect, or any applicable successor statute.
(7) Note to Draft: The term Management Notes to replace the term FCP Notes in the FCP Notes.
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6.2 Capitalized Lease Obligations means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.
6.3 Closing Bid Price and Closing Sale Price means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the pink sheets by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.
6.4 Common Stock means the Common Stock, par value $0.10 per share, of the Company.
6.5 Conversion Amount means, as of any date of determination, the amount equal to (a) the product of (i) the Market Price, multiplied by (ii) the quotient of (A) the Principal Amount, divided by (B) the Conversion Price, minus (b) the aggregate Company Optional Prepayment Amounts paid to the Holder as of such date of determination pursuant to Section 5.
6.6 Conversion Price means, as of the Conversion Date or other date of determination, $[ ](8), subject to adjustment as provided herein.
6.7 Convertible Securities means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(8) Note to Draft: To be the amount equal to the deal price ($0.37) with a 25% premium (adjusted for the Reverse Stock Split).
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6.8 Corporate Event means any consolidation with or merger of the Company with or into another Person, or any sale, lease, exchange, exclusive license or other disposition to another Person of the assets of the Company as an entirety or substantially as an entirety (where there is an exchange of or distribution with respect to the Common Stock), or any reclassification of the capital of the Company.
6.9 FCP Notes means the Other Notes issued on date hereof to Fireman Capital CPF Hudson Co-Invest LP.(9)
6.10 Indebtedness means with respect to any Person without duplication: (a) all Obligations of such Person for borrowed money; (b) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all Capitalized Lease Obligations of such Person; (d) all Obligations of such Person issued or assumed as the deferred and unpaid purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business); (e) all Obligations for the reimbursement of any obligor on any letter of credit, bankers acceptance or similar credit transaction (including reimbursement obligations with respect thereto except to the extent such reimbursement obligation relates to a trade payable and such obligation is satisfied within 30 days of incurrence); (f) guarantees and other contingent obligations in respect of Indebtedness of other Persons referred to in clauses (a) through (e) above; (g) all Obligations of any other Person of the type referred to in clauses (a) through (f) which are secured by any Lien on any property or asset of such Person whether or not such Indebtedness is assumed by such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset at such date of determination and the amount of the Obligation so secured; (h) all Obligations of such Person in respect of any interest rate swaps or hedge agreements; or (i) all Obligations of such Person under any sale and leaseback transaction, synthetic lease or other off-balance sheet loan or financing.
6.11 Lien means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).
6.12 Loan Parties means, collectively, the Company and the Subsidiary Guarantors.
6.13 Market Disruption Event means (a) a failure by the primary exchange or quotation system on which the Common Stock trades or is quoted to open for trading during its regular trading session or (b) the occurrence or existence, prior to 1:00 p.m., New York City time, on any Trading Day for the Common Stock, of an aggregate one half-hour period of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in the Common Stock or in any options, contracts or future contracts relating to the Common Stock.
(9) Note to Draft: This term will be removed in the FCP Notes and will be replaced with the term Management Notes (Other Notes, issued on date hereof, other than notes issued to Fireman Capital CPF Hudson Co-Invest LP).
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6.14 Market Price means (a) the sum of the Closing Sales Price of the Common Stock on each of the twenty (20) consecutive Trading Days ending and including the Trading Day immediately preceding the Conversion Date, the Company Optional Prepayment Date or the Maturity Date, as the case may be, divided by (b) twenty (20). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction during such the applicable measurement periods and prior to the actual conversion hereunder.
6.15 Obligations means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.
6.16 Options means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
6.17 Paid in Full means, with respect to any issuance of the Senior Debt, the full payment in cash, in immediately available funds, of such Senior Debt (other than unasserted contingent indemnification obligations) and the termination of all commitments of the holders of such Senior Debt to make loans and other extensions of credit to or for the benefit of the Company pursuant to the terms of the documents evidencing such Senior Debt. The expressions prior payment in full, payment in full, paid or satisfied in full and paid in full (whether or not such expressions are capitalized) and other similar phrases shall have correlative meanings.
6.18 Person means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
6.19 Principal Market means the principal securities exchange or securities market on which the Common Stock is then traded.
6.20 Principal Amount means the original principal amount of this Note to be converted less any amounts set off against the Note pursuant to Section 9.7 of the Stock Purchase Agreement less any amount of principal previously converted and fulfilled by the Company pursuant to Section 2.
6.21 Reverse Stock Split means the 1 for 30 reverse stock split contemplated by the Merger Agreement.
6.22 Senior Debt means the principal of (and premium, if any), unpaid interest and any other amount, in each case whether or not such premium, interest or other amount is allowed in connection with any Proceeding, constituting (X) (a) Indebtedness of the Company (including Indebtedness of others guaranteed by the Company) other than the Notes and Other Notes, whether outstanding on the date of this Note or thereafter created, incurred, assumed or guaranteed and (b) amendments, renewals, extensions, modifications and refundings of any such Indebtedness, unless in any case in the instrument creating or evidencing any such Indebtedness
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or pursuant to which the same is outstanding it is provided that such Indebtedness is not superior or is subordinated in right of payment to or is on parity in right of payment with the Notes and Other Notes, provided, however, that, notwithstanding anything to the contrary in the preceding, Senior Debt shall not include (i) any liability for federal, state, local or other taxes owed or owing by the Loan Parties, (ii) any Indebtedness of the Loan Parties to any of their respective Affiliates, (iii) any trade payables of the Company or any Subsidiary Guarantor or (iv) any unsecured Obligations for borrowed money incurred by the Company or any Subsidiary Guarantor after the date of this Note; (Y) Working Capital Indebtedness and all other Indebtedness under factoring facilities and revolving credit facilities, the proceeds of which other Indebtedness are used for working capital of the Company and its subsidiaries and (Z) Term Loan Indebtedness.
6.23 Senior Default means any event of default under any of the Senior Debt.
6.24 Specified Dollar Amount means the dollar amount to be received upon conversion as specified by the Company in the Settlement Notice.
6.25 Subordinated Debt means all Obligations arising with respect to this Note.
6.26 Subsidiary Guarantor means [Joes Jeans Subsidiary, Inc., Joes Jeans Retail Subsidiary, Inc., Innovo West Sales, Inc., Hudson Clothing Holdings, Inc., HC Acquisition Holdings, Inc., and Hudson Clothing LLC](10).
6.27 [Term Loan Agent means Garrison Loan Agency Services LLC, in its capacity as administrative agent and collateral agent for the Term Loan Lenders, its successors and assigns (including any agent appointed to replace such initial agent).](11)
6.28 Term Loan Credit Agreement has the meaning set forth in the definition of Term Loan Documents.
6.29 [Term Loan Indebtedness means all Obligations of any kind owed by the Company and its subsidiaries (or any of them) to the Term Loan Agent and the other Term Loan Lenders (or any of them) from time to time under or pursuant to any of the Term Loan Documents and all Ledger Debt (as defined in the Term Loan Credit Agreement) owing to The CIT Group/Commercial Services, Inc., as factor, including, without limitation, all principal, interest accruing thereon, charges, expenses, fees and other sums (including all interest, charges, expenses, fees and other sums accruing after commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company or any of its subsidiaries) chargeable to the Company or any of its subsidiaries by the Term Loan Agent or the Term Loan Lenders, and reimbursement, indemnity or other obligations due and payable to such Term Loan Agent and Term Loan Lenders. Term Loan Indebtedness shall continue to constitute
(10) Note to Draft: To be confirmed and to include any subsidiaries providing a guarantee with respect to the Senior Debt.
(11) Note to Draft: To be updated to conform to new financing arrangement.
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Senior Debt, notwithstanding the fact that such Term Loan Indebtedness or any claim for such Term Loan Indebtedness is subordinated, avoided or disallowed under the federal Bankruptcy Code or other applicable law. Term Loan Indebtedness shall also include any indebtedness of the Company and its subsidiaries incurred in connection with a refinancing of the Term Loan Indebtedness under the Term Loan Documents.](12)
6.30 Term Loan Lenders has the meaning set forth in the definition of Term Loan Documents.
6.31 [Term Loan Documents means (x) that certain Term Loan Credit Agreement dated as of September 30, 2013 (as amended, restated, modified, supplemented, extended, replaced or refinanced from time to time, the Term Loan Credit Agreement), by and among the Company, certain of its subsidiaries as co-borrowers and guarantors, the financial institutions from time to time party thereto (the Term Loan Lenders), and Term Loan Agent and (y) all other agreements, documents and instruments at any time executed and/or delivered by the Company or any other obligor with respect to the Term Loan Indebtedness with, to or in favor of Term Loan Agent or the Term Loan Lenders in connection with the Term Loan Credit Agreement or related thereto (including, without limitation, all Loan Documents as defined in the Term Loan Credit Agreement), as all of the foregoing now exist or may hereafter be amended, restated, modified, supplemented, extended, replaced or refinanced.](13)
6.32 Trading Day means a day during which (i) trading in the Common Stock generally occurs on the primary exchange or quotation system on which the Common Stock then trades or is quoted and (ii) there is no Market Disruption Event.
6.33 [Working Capital Agent means The CIT Group/Commercial Services, Inc., in its capacity as administrative agent and collateral agent for the Working Capital Lenders, its successors and assigns (including any agent appointed to replace such initial agent).](14)
6.34 Working Capital Credit Agreement has the meaning set forth in the definition of Working Capital Loan Documents.
6.35 [Working Capital Indebtedness means all Obligations of any kind owed by the Company and its subsidiaries (or any of them) to the Working Capital Agent and the other Working Capital Lenders (or any of them) from time to time under or pursuant to any of the Working Capital Loan Documents and all Ledger Debt (as defined in the Working Capital Credit Agreement) owing to The CIT Group/Commercial Services, Inc., as factor, including, without limitation, all principal, interest accruing thereon, charges, expenses, fees and other sums (including all interest, charges, expenses, fees and other sums accruing after commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company or any of its subsidiaries) chargeable to the Company or any of its subsidiaries by
(12) Note to Draft: To be updated to conform to new financing arrangement.
(13) Note to Draft: To be updated to conform to new financing arrangement.
(14) Note to Draft: To be updated to conform to new financing arrangement.
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the Working Capital Agent or the Working Capital Lenders, and reimbursement, indemnity or other obligations due and payable to such Working Capital Agent and Working Capital Lenders. Working Capital Indebtedness shall continue to constitute Senior Debt, notwithstanding the fact that such Working Capital Indebtedness or any claim for such Working Capital Indebtedness is subordinated, avoided or disallowed under the federal Bankruptcy Code or other applicable law. Working Capital Indebtedness shall also include any indebtedness of the Company and its subsidiaries incurred in connection with a refinancing of the Working Capital Indebtedness under the Working Capital Loan Documents.](15)
6.36 Working Capital Lenders has the meaning set forth in the definition of Working Capital Loan Documents.
6.37 [Working Capital Loan Documents means (x) that certain Revolving Credit Agreement dated as of September 30, 2013 (as amended, restated, modified, supplemented, extended, replaced or refinanced from time to time, the Working Capital Credit Agreement), by and among the Company, certain of its subsidiaries as co-borrowers and guarantors, the financial institutions from time to time party thereto (the Working Capital Lenders), and Working Capital Agent and (y) all other agreements, documents and instruments at any time executed and/or delivered by the Company or any other obligor with respect to the Working Capital Indebtedness with, to or in favor of Working Capital Agent or the Working Capital Lenders in connection with the Working Capital Credit Agreement or related thereto (including, without limitation, all Loan Documents as defined in the Working Capital Credit Agreement), as all of the foregoing now exist or may hereafter be amended, restated, modified, supplemented, extended, replaced or refinanced.](16)
7. Miscellaneous
7.1 Waiver. The Company hereby waives presentment, demand, protest, and notice of dishonor and protest, waives any rights which it may have to require the Holder to proceed against any other Person or property, and agrees that without notice to any Person and without affecting any Persons liability under this Note, the Holder, at any time or times, may grant extensions of the time for payment or other indulgences to any Person or permit the renewal, amendment or modification of this Note. No act or inaction of the Holder under this Note shall be deemed to constitute or establish a course of performance or dealing that would require the Holder to so act or refrain from acting in any particular manner at a later time under similar or dissimilar circumstances.
7.2 Non-Negotiability. This Note is fully transferable. If this Note is assigned or transferred to any Person, then with respect to the portion of the Note so assigned or transferred (a) the assignor or transferor (as the case may be) will no longer be deemed to be a Holder for purposes of this Note and (b) the assignee or transferee (as the case may be) will be deemed to be a Holder for purposes of this Note, subject to the provision of notice to the Company in
(15) Note to Draft: To be updated to conform to new financing arrangement.
(16) Note to Draft: To be updated to conform to new financing arrangement.
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Section 7.7. Notwithstanding the foregoing, unless permitted under Section 4, this Note may not be transferred (whether directly, by way of a participation or otherwise) to the Company or any subsidiary of the Company, without the prior written consent of the Working Capital Agent and the Term Loan Agent, and any such transfer made in violation of this provision shall be null and void.
7.3 Replacement. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction of this Note, upon receipt of an indemnity reasonably satisfactory to the Company (provided that, if the holder of this Note is a financial institution, its own unsecured agreement shall be satisfactory) or, in the case of any such mutilation, upon the surrender and cancellation of this Note, the Company, at its expense, shall execute and deliver, in lieu thereof, a new Note of like tenor and dated the date of such lost, stolen, destroyed or mutilated Note. Any Note in lieu of which any such new Note has been so executed and delivered by the Company shall not be deemed to be an outstanding Note.
7.4 Reservation of Authorized Shares. The Company covenants that, so long as any Notes remain outstanding, the Company will at all times reserve and keep available, from its authorized and unissued Common Stock solely for issuance and delivery upon the conversion of the outstanding Notes and free of preemptive rights, such number of shares of Common Stock as from time to time shall be issuable upon the conversion in full of all outstanding Notes. The Company covenants that all shares of Common Stock issuable upon conversion of the Notes will, upon issuance, be freely tradable, listed, duly and validly issued, fully paid and nonassessable and will be free from all taxes, Liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein).
7.5 Stock Certificates. Each stock certificate delivered by the Company to Holder will be imprinted with legends substantially in the following form:
THE SHARES OF COMMON STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SHARES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION EVIDENCED BY (IF REQUESTED BY THE COMPANY) AN OPINION OF COUNSEL TO THE HOLDER, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT.
7.6 No Stockholder Rights. Nothing contained in this Note shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company and,
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except as otherwise expressly provided herein, no dividends or other distributions shall be payable or accrued in respect of this Note or the interest represented hereby or the shares of Common Stock to be obtained upon conversion hereunder until, and only to the extent that, this Note shall have been converted.
7.7 Registration; Book-Entry. The Company shall maintain a register (the Register) for the recordation of the names and addresses of the holders of each Note and the principal amount of the Other Notes held by such holders (the Registered Notes). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of Principal and Interest hereunder, notwithstanding notice to the contrary.
7.8 Successors. All of the terms, agreements, covenants, representations, warranties, and conditions of this Note are binding upon, and inure to the benefit of and are enforceable by, the Parties and their respective successors. If Holder is an entity and if the principal business, operations or a majority or substantial portion of the assets of Holder are assigned, conveyed, allocated, or otherwise transferred, including by sale, merger, consolidation, amalgamation, conversion, or similar transactions, such receiving Person or Persons will automatically become bound by and subject to the provisions of this Note, and Holder will cause the receiving Person or Persons to expressly assume its obligations hereunder.
7.9 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.
7.10 Assignment by the Company. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company, without the prior written consent of the Holder; provided, that, without limiting the Companys obligations under Section 2.4, the Company shall be entitled to assign its rights, interests and obligations hereunder in connection with a Corporate Event, provided, further, that the resulting, surviving or transferee Person in such Corporate Event expressly assumes all of the Companys obligations under this Note and, solely in connection with a Corporate Event not involving an unaffiliated third party, so long as the Company or any of its affiliated entities remains an entity whose common equity interests are listed on a national securities exchange, such listed entity shall be the primary obligor under this Note.
7.11 Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder will be deemed duly given if (and then three business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
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If to the Company:
Joes Jeans, Inc.
2340 South Eastern Avenue
Commerce, CA 90040
Attn: [ ]
Fax: [ ]
Copy to (which will not constitute notice):
Joes Jeans, Inc.
2340 South Eastern Avenue
Commerce, CA 90040
Attn: Lori Nembirkow
Fax: 323-837-3791
If to the Holder:
Attn: [ ]
[ ]
[ ]
Either Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Either Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other notice in the manner herein set forth, provided that no change in a Holders notice address shall be effective unless such change is received and acknowledged by the Working Capital Agent and the Term Loan Agent.
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7.12 Submission to Jurisdiction; No Jury Trial.
(a) Submission to Jurisdiction. Each Party submits to the jurisdiction of any state or federal court sitting in Wilmington, Delaware in any Action arising out of or relating to this Note and agrees that all claims in respect of the Action may be heard and determined in any such court. Each Party also agrees not to bring any Action arising out of or relating to this Note in any other court. Each Party agrees that a final judgment in any Action so brought will be conclusive and may be enforced by an Action on the judgment or in any other manner provided at Law or in equity. Each Party waives any defense of inconvenient forum to the maintenance of any Action so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto.
(b) Waiver of Jury Trial. THE PARTIES EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS NOTE OR ANY OTHER AGREEMENTS RELATING THERETO OR ANY DEALINGS BETWEEN THEM RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY. The scope of this waiver is intended to be all encompassing of any and all Actions that may be filed in any court and that relate to the subject matter of the transactions contemplated hereby, including Contract claims, tort claims, breach of duty claims and all other common Law and statutory claims. Each Party acknowledges that this waiver is a material inducement to enter into a business relationship and that they will continue to rely on the waiver in their related future dealings. Each Party further represents and warrants that it has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND THE WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS NOTE OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. IN THE EVENT OF AN ACTION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY A COURT.
7.13 Time. Time is of the essence in the performance of this Note.
7.14 Headings. The article and section headings contained in this Note are inserted for convenience only and will not affect in any way the meaning or interpretation of this Note.
7.15 Governing Law. This Note and the performance of the obligations of the Parties hereunder will be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of Law principles.
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7.16 Amendments and Waivers. No amendment, modification, replacement, termination, cancellation, waiver of or consent to any provision of this Note will be valid, unless (i) the same will be in writing and signed by holders of a majority in principal amount of Notes excluding any [FCP Notes](17) and (ii) Working Capital Agent and Term Loan Agent if such amendment, modification, replacement, termination, or cancellation of any provision of this Note affects Section 4, affects any other right of Working Capital Agent, Term Loan Agent or a holder of the Senior Debt or changes the obligations under this Note regarding the date of payment or amount of principal or interest payable under this Note (other than rate reductions and payment extensions). No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation, or Breach of warranty or covenant hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence.
7.17 Severability. The provisions of this Note will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Note, as applied to any Party or to any circumstance, is adjudged by a Governmental Authority, arbitrator, or mediator not to be enforceable in accordance with its terms, the Parties agree that the Governmental Authority, arbitrator, or mediator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced.
7.18 Expenses. Except as otherwise expressly provided in this Note or in Section 2.7 of the Rollover Agreement, each Party will bear its own costs and expenses incurred in connection with the preparation, execution and performance of this Note, including all fees and expenses of agents, representatives, financial advisors, legal counsel, and accountants; provided, however, that the Company shall pay all reasonable and documented costs and expenses of collection and enforcement of this Note when incurred, including the Holders reasonable and documented attorneys fees and legal and court costs in connection therewith, including any incurred on appeal or in connection with bankruptcy or insolvency, whether or not any lawsuit or proceeding is ever filed with respect hereto.
7.19 Construction. The Parties have participated jointly in the negotiation and drafting of this Note. If an ambiguity or question of intent or interpretation arises, this Note will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party because of the authorship of any provision of this Note. Any reference to any federal, state, local, or foreign Law will be deemed also to refer to Law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise. The words include, includes, and including will be deemed to be followed by without limitation. Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words this Note, herein, hereof, hereby, hereunder, and words of similar import refer to this Note as a whole and not to any particular subdivision unless expressly so limited. The Parties intend that each representation, warranty, and covenant contained herein will have independent significance. If any Party has
(17) Note to Draft: To be replace with the term Management Notes in the FCP Notes.
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breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached will not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant.
7.20 Remedies. Except as expressly provided herein, the rights, obligations and remedies created by this Note are cumulative and in addition to any other rights, obligations or remedies otherwise available at Law or in equity. Except as expressly provided herein, nothing herein will be considered an election of remedies.
7.21 No Inconsistent Agreements. The Company has not entered into, and in no event shall the Company enter into, any agreements, which are inconsistent with this Note.
8. Guaranty.
8.1 The Subsidiary Guarantee. The Subsidiary Guarantors hereby jointly and severally guarantee (the Subsidiary Guarantee), as a primary obligor and not as a surety to each Holder and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest on the Notes, and all other Obligations from time to time owing to the Holder by the Company or any Subsidiary Guarantor (the Note Parties) under the Notes, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the Guaranteed Obligations). The Subsidiary Guarantors hereby jointly and severally agree that if the Company or other Subsidiary Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.
8.2 Obligations Unconditional. The obligations of the Subsidiary Guarantors under Section 8.1 shall constitute a guaranty of payment and to the fullest extent permitted by law, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of the Company under the Notes or any other agreement or instrument referred to herein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Subsidiary Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Subsidiary Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above:
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(a) at any time or from time to time, without notice to any Subsidiary Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of the Notes or any other agreement or instrument referred to herein shall be done or omitted;
(c) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Notes or any other agreement or instrument referred to herein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or
(d) the release of any other Subsidiary Guarantor pursuant to Section 8.8.
The Subsidiary Guarantors hereby, to the fullest extent permitted by applicable Legal Requirement, expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Holder exhaust any right, power or remedy or proceed against the Company under the Notes or any other agreement or instrument referred to herein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Subsidiary Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Holder upon this Subsidiary Guarantee or acceptance of this Subsidiary Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Subsidiary Guarantee, and all dealings between the Company and the Holder shall likewise be conclusively presumed to have been had or consummated in reliance upon this Subsidiary Guarantee. This Subsidiary Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by the Holder, and the obligations and liabilities of the Subsidiary Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Holder or any other person at any time of any right or remedy against the Company or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This Subsidiary Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Subsidiary Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Holders, and their respective successors and assigns.
8.3 Reinstatement. The obligations of the Subsidiary Guarantors under this Section 8 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Company or other Note Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.
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8.4 Subrogation. Each Subsidiary Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all Guaranteed Obligations it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in Section 8.1, whether by subrogation or otherwise, against the Company or any other Subsidiary Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations.
8.5 Remedies. The Subsidiary Guarantors jointly and severally agree that, as between the Subsidiary Guarantors and the Holders, the obligations of the Company under the Notes may be declared to be forthwith due and payable as provided in Section 3.3 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 3.3) for purposes of Section 8.1, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Company and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Company) shall forthwith become due and payable by the Subsidiary Guarantors for purposes of Section 8.1.
8.6 Continuing Guarantee. The guarantee in this Section 8 is a continuing guarantee of payment, and shall apply to all Guaranteed Obligations whenever arising.
8.7 General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Subsidiary Guarantor under Section 8.1 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 8.1, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Subsidiary Guarantor, any Note Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the right of contribution established in Section 8.9) that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.
8.8 Release of Subsidiary Guarantors. If all or substantially all of the equity interests of any Subsidiary that is a Subsidiary Guarantor are sold or otherwise transferred (a Transferred Subsidiary Guarantor) to a person or persons, none of which is the Company or a Subsidiary Guarantor, such Transferred Subsidiary Guarantor shall, upon the consummation of such sale or transfer, be automatically released from its obligations under this Agreement.
8.9 Right of Contribution. Each Subsidiary Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any other Subsidiary Guarantor hereunder which has not paid its proportionate share of such payment. Each Subsidiary Guarantors right of contribution shall be subject to the terms and conditions of Section 8.4. The provisions of this Section 8.9 shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Holders, and each Subsidiary Guarantor shall remain liable to the Holders for the full amount guaranteed by such Subsidiary Guarantor hereunder.
[SIGNATURE ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the date first above written.
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JOES JEANS INC. |
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By: |
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Name: [ ] |
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Title: [ ] |
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JOES JEANS SUBSIDIARY, INC. |
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By: |
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Title: [ ] |
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JOES JEANS RETAIL SUBSIDIARY, INC. |
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INNOVO WEST SALES, INC. |
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By: |
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[Signature Page to Buyer Note]
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HUDSON CLOTHING LLC |
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By: |
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Name: [ ] |
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HUDSON CLOTHING HOLDINGS, INC. |
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By: |
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HC ACQUISITION HOLDINGS, INC. |
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By: |
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Name: [ ] |
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Title: [ ] |
[Signature Page to Buyer Note]
EXHIBIT I
JOES JEANS, INC.
CONVERSION NOTICE
To: Joes Jeans, Inc.
The undersigned Holder of this Note hereby irrevocably exercises the option to convert this Note, into an amount of cash, shares of Common Stock or combination of cash and shares of Common Stock, as the case may be, in accordance with the terms of the Note, and directs that any cash payable and any shares of Common Stock issuable and deliverable upon conversion, be paid and/or issued and/or delivered, as the case may be, to the registered Holder hereof unless a different name is indicated below.
If any shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect to such issuance and transfer as set forth in the Note.
Principal amount to be converted:
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Signature(s) |
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Signature(s) must be guaranteed by an institution which is a member of one of the following recognized signature Guarantee Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MNSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) another guarantee program acceptable to the Trustee. |
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Signature(s) |
Fill in for registration of any shares of Common Stock and Securities if to be issued otherwise than to the registered Holder.
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(Name) |
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(Address) |
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Please print Name and Address |
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(including zip code number) |
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Social Security or other Taxpayer |
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Identifying Number |
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EXHIBIT II
The example provided below is an illustrative example only and the principal amount, amount of gain, tax rate imposed on gain, and other figures are hypothetical figures only and the actual figures may differ.
Assumptions
· Holders Principal Amount of Note at Issuance: $7,100,000
· Deferred Gain: Equal to the outstanding principal amount of the Holders Note at year end
· Section 6621(a)(2) Underpayment Rate: 3%
· Maximum Rate of Tax in effect under Section 1(h) for net capital gain: 20%
· Assumed tax rate imposed on gain from installment sale: 37.1% (based on a maximum federal capital gains tax rate of 20%, a 3.8% Medicare tax rate on net investment income and a 13.3% California tax rate)
· 2015 Payments: None
· 2016 Payments: Aggregate payments in an amount sufficient to reduce the principal amount of the Holders Note to $5,000,000 at year end
2015
At the close of 2015, the outstanding principal amount of the Holders Note remains $7,100,000. Pursuant to Section 453A, the taxpayer must pay an interest charge on an applicable percentage of the deferred tax liability. The applicable percentage would be 29.58%, which is determined by dividing (i) $2,100,000 (the excess of the amount of the Note outstanding at the end of the year over $5,000,000), by (ii) $7,100,000 (the amount of the Note outstanding at the end of the year). The deferred tax liability would be $1,420,000, which is equal to the product of (i) $7,100,000 (the amount of gain from the installment sale that is unrecognized at the end of the year), and (ii) 20% (the maximum tax rate on net capital gain under Section 1(h)). The portion of the deferred tax liability that would be subject to the interest charge would be $420,000, which is determined by multiplying $1,420,000 by 29.58%. The interest charge imposed by Section 453A will therefore equal $12,600, which is determined by multiplying $420,000 by 3% (the underpayment rate under Section 6621(a)(2)).
The amount paid to holder would equal $20,031.80, which reflects a gross up for the tax imposed on the Section 453A interest charge determined by dividing (i) $12,600 by (ii) 62.9% (1 minus an assumed tax rate of 37.1%).
2016
At the close of 2016, the outstanding principal amount of the Holders Note would be $5,000,000. As a result the applicable percentage would be 0%. Accordingly, no payment would be due under Section 1.4 of this Agreement.
Exhibit 10.1
STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 8, 2015
by and between
TCP DENIM, LLC
and
JOES JEANS INC.
TABLE OF CONTENTS
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Page |
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ARTICLE I PURCHASE AND SALE OF THE SHARES |
1 |
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Section 1.1. |
Agreement to Purchase and Sell |
1 |
Section 1.2. |
Closing |
2 |
Section 1.3. |
Delivery and Payment |
2 |
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ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
3 |
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Section 2.1. |
Organization, Standing and Corporate Power |
3 |
Section 2.2. |
Capitalization |
4 |
Section 2.3. |
Authority; Noncontravention; Voting Requirements |
5 |
Section 2.4. |
Governmental Approvals |
6 |
Section 2.5. |
Company SEC Documents; Undisclosed Liabilities |
6 |
Section 2.6. |
Absence of Certain Changes or Events |
7 |
Section 2.7. |
Legal Proceedings |
8 |
Section 2.8. |
Compliance with Laws; Permits |
8 |
Section 2.9. |
Issuance and Delivery of Purchased Shares |
8 |
Section 2.10. |
No General Solicitation |
8 |
Section 2.11. |
Preemptive Rights; Rights to First Offer |
8 |
Section 2.12. |
Private Placement |
8 |
Section 2.13. |
Registration Rights |
9 |
Section 2.14. |
No Restriction on the Ability to Pay Cash Dividends |
9 |
Section 2.15. |
Rights Agreement; Anti-Takeover Provisions |
9 |
Section 2.16. |
Additional Representations and Warranties |
9 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER |
9 |
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Section 3.1. |
Authority |
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Section 3.2. |
Consents and Approvals |
10 |
Section 3.3. |
No Conflict |
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Section 3.4. |
No Proceedings |
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Section 3.5. |
Investment Representations |
10 |
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ARTICLE IV ADDITIONAL COVENANTS AND AGREEMENTS |
11 |
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Section 4.1. |
Certain Covenants from the Merger Agreement |
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Section 4.2. |
Certain Tax Matters |
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Section 4.3. |
Reservation and Listing of Securities |
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Section 4.4. |
Use of Proceeds |
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Section 4.5. |
Notification of Certain Matters |
12 |
Section 4.6. |
Fees and Expenses |
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Section 4.7. |
Company Board of Directors |
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Section 4.8. |
No Waivers under the Merger Agreement |
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ARTICLE V CONDITIONS TO CLOSING |
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Section 5.1. |
Conditions to Each Partys Obligations |
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Section 5.2. |
Conditions to Obligations of the Purchaser |
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Section 5.3. |
Conditions to the Companys Obligations |
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ARTICLE VI TERMINATION |
15 |
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Section 6.1. |
Termination by the Purchaser or the Company |
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Section 6.2. |
Effect of Termination |
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ARTICLE VII MISCELLANEOUS |
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Section 7.1. |
Survival of Representations and Warranties |
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Section 7.2. |
Notices |
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Section 7.3. |
Amendments and Waivers |
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Section 7.4. |
Descriptive Headings, Etc. |
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Section 7.5. |
Further Assurances |
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Section 7.6. |
No Third-Party Beneficiaries |
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Section 7.7. |
Successors and Assigns |
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Section 7.8. |
Entire Agreement |
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Section 7.9. |
Severability |
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Section 7.10. |
Governing Law; Jurisdiction; Waiver of Jury Trial |
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Section 7.11. |
Specific Enforcement; Limit on Liability |
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Section 7.12. |
Definitions |
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Section 7.13. |
Counterparts; Scanned Signatures |
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this Agreement) dated as of September 8, 2015 by and between JOES JEANS INC., a Delaware corporation (the Company), and TCP Denim, LLC, a Delaware limited liability company (the Purchaser).
WHEREAS, concurrently with the execution of this Agreement, the Company is entering into an Agreement and Plan of Merger, dated as of September 8, 2015 (the Merger Agreement), with JJ Merger Sub LLC, a Delaware limited liability company (Merger Sub), and RG Parent, LLC, a Delaware limited liability company (RG), pursuant to which, among other things, Merger Sub will merge with and into RG with RG surviving the merger as a wholly owned subsidiary of the Company (the Merger);
WHEREAS, as part of the financing for the Merger, the Company proposes to issue and sell to the Purchaser certain shares of the Companys preferred stock, par value $.10 per share, designated as Series A Convertible Preferred Stock (the Company Preferred Stock), having the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions as specified in the certificate of designation establishing the Company Preferred Stock, in substantially the form attached hereto as Exhibit A (the Certificate of Designation), to be adopted pursuant to a restated certificate of incorporation of the Company (the Restated Charter) on or before the Closing Date, on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Company Preferred Stock is being offered and sold to the Purchaser, on the terms and subject to the conditions set forth in this Agreement, without registration under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the Securities Act), in reliance on an exemption from the registration requirements under the Securities Act; and
WHEREAS, prior to, or concurrently with, the execution of this Agreement, and as a condition and inducement to the Companys and RGs willingness to enter into the Merger Agreement, Tengram Capital Partners Fund II, L.P., a Delaware limited partnership (Guarantor) is entering into a guaranty in favor of the Company (the Guaranty) with respect to the obligations of the Purchaser under this Agreement to pay the Purchase Price.
NOW, THEREFORE, in consideration of the premises and of the mutual agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
Section 1.1. Agreement to Purchase and Sell. On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Company agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Company, an aggregate of fifty thousand (50,000) shares of Company Preferred Stock (the Purchased Shares), for an aggregate purchase price in cash equal to $50,000,000 (the Purchase Price and, the issuance of the Purchased Shares by the Company and the payment of the Purchase Price by the Purchaser as described in this Section 1.1, the Sale).
Section 1.2. Closing. Subject to the satisfaction or waiver of the applicable conditions set forth in Article V hereof, including that the Merger shall have been consummated in accordance with the terms of the Merger Agreement, the closing of the Sale (the Closing) shall occur immediately following the consummation of the Merger (the Closing Date), at the offices of Akin Gump Strauss Hauer & Feld LLP, 1333 New Hampshire Avenue NW, Washington DC 20036, unless another time, date or place is agreed to in writing by the parties hereto. By agreement of the parties, the Closing may take place by delivery of the documents to be delivered at the Closing by facsimile or other electronic transmission. All deliveries by one party to any other party at the Closing shall be deemed to have occurred simultaneously and none shall be effective until and unless all have occurred, unless the parties agree otherwise in writing.
Section 1.3. Delivery and Payment.
(a) At the Closing, the Company shall deliver or cause to be delivered to the Purchaser:
(i) the Purchased Shares, validly issued and free and clear of Encumbrances, evidenced by certificates registered in the Purchasers name and duly authorized, executed and delivered on behalf of the Company, bearing the legend set forth in Section 3.5(a) hereof;
(ii) evidence that the Restated Charter and Certificate of Designation have been filed with and accepted by the Secretary of State of the State of Delaware;
(iii) a certificate, dated as of the Closing Date, signed by an authorized officer of the Company, in the form attached hereto as Exhibit B, among other things, certifying that the conditions set forth in Section 5.2 have been satisfied;
(iv) a certificate, dated as of the Closing Date, signed by the secretary of the Company, in the form attached hereto as Exhibit C, certifying as to certain matters; and
(v) the Registration Rights Agreement, duly executed by the Company.
(b) At or prior to the Closing, the Purchaser shall deliver or cause to be delivered to the Company:
(i) the Purchase Price, by wire transfer of immediately available funds to such accounts as the Company shall specify in writing not later than three (3) Business Days prior to the Closing Date; and
(ii) the Registration Rights Agreement, duly executed by the Purchaser.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as disclosed in the Company SEC Documents or (ii) as set forth in the disclosure schedule delivered by the Company to the Purchaser simultaneously with the execution of this Agreement (the Company Disclosure Schedule), the Company represents and warrants to the Purchaser as follows (such representations and warranties are given with the assumption that the Asset Sale Transactions have been consummated):
Section 2.1. Organization, Standing and Corporate Power.
(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated. Each of the Companys Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated or formed. Each of the Company and its Subsidiaries has all requisite corporate or other power, as the case may be, and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and its Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(b) The copies of the Company Charter Documents that are incorporated by reference into the SEC Documents are complete and correct copies thereof as in effect on the date hereof. The Company is not in violation of or default under any of the provisions of the Company Charter Documents. No Subsidiary of the Company is in violation of or default under any of the provisions of its articles of incorporation, bylaws or similar organizational documents.
(c) Section 2.1(c) of the Company Disclosure Schedule lists, as of the date hereof, all Subsidiaries of the Company together with the jurisdiction of organization of each such Subsidiary. (i) The Company is the direct or indirect owner of all outstanding shares of capital stock of, or other equity interests in, each Subsidiary of the Company, (ii) all such shares or other equity interests have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights and are owned directly or indirectly by the Company and (iii) all such shares or other equity interests are free and clear of all liens, pledges, proxies, charges, mortgages, deeds of trust, hypothecations, encumbrances, adverse rights, title defects, restrictions or claims and security interests of any kind or nature whatsoever (including any restriction on the right to vote or transfer the same, except for such transfer restrictions of general applicability as may be provided under the Securities Act and the blue sky laws of the various States of the United States) (collectively, Liens). Other than money market accounts, the Company does not own, directly or indirectly, any capital stock of, or voting securities or equity interests in, any Person, other than its Subsidiaries.
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Section 2.2. Capitalization.
(a) The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.10 per share (Company Common Stock), and 5,000,000 shares of Company Preferred Stock. At the close of business on the date of this Agreement, (i) 70,075,429 shares of Company Common Stock were issued and outstanding, (ii) 727,137 shares of Company Common Stock were held by the Company in its treasury and (iii) no shares of Company Preferred Stock were issued and outstanding. All of the shares of Company Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. None of the Subsidiaries of the Company beneficially owns any shares of Company Common Stock or any other equity securities of the Company.
(b) Since January 1, 2014, the Company has not issued any shares of its capital stock, voting securities or equity interests, or any securities convertible into or exchangeable or exercisable for any shares of its capital stock, voting securities or equity interests, other than pursuant to the outstanding awards under the Company Incentive Plan as disclosed in the Company SEC Documents or as otherwise expressly permitted by this Agreement.
(c) Except (i) as set forth in Section 2.2(a), (ii) for the Convertible Notes, (iii) for outstanding awards under the Company Incentive Plan as disclosed in the Company SEC Documents or (iv) as otherwise expressly permitted by Section 4.1 of the Merger Agreement as incorporated by reference under Section 4.1 of this Agreement, as of the date of this Agreement there are not, and as of the Closing there will not be, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) the Company issued and outstanding or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance of, or obligating the Company or any of its Subsidiaries to transfer or sell, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) the Company, including any representing the right to purchase or otherwise receive any Company Common Stock. Except as provided for by the Company Incentive Plan and the Convertible Notes, none of the Company or any of its Subsidiaries has issued or is bound by any outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance or disposition of any shares of capital stock, voting securities or equity interests of any Subsidiary of the Company. Except as set forth in the Company Incentive Plan, there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock, voting securities or equity interests (or any options, warrants or other rights to acquire any shares of capital stock, voting securities or equity interests) of the Company or any of its Subsidiaries. Except as set forth in Section 2.2(c) of the Company Disclosure Schedule, none of the Company or any Subsidiary of the Company is a party to any stockholders agreement, voting trust agreement, registration rights agreement or other similar agreement or understanding relating to capital stock, voting securities or equity interests of the Company or any of its Subsidiaries or any other agreement relating to the disposition, voting or dividends with respect to any such stock, securities or interests.
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Section 2.3. Authority; Noncontravention; Voting Requirements.
(a) The Company has all necessary corporate or other power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to obtaining the Company Stockholder Approval, to consummate the Sale. The execution, delivery and performance by the Company of this Agreement and the consummation of the Sale have been duly authorized and approved by the Company Board and, except for obtaining the Company Stockholder Approval with respect to consummation of the Sale and related matters, no other corporate or other action on the part of the Company is necessary to authorize the execution, delivery and performance by the Company of this Agreement and the consummation of the Sale. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Purchaser, constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Laws of general application affecting or relating to the enforcement of creditors rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity (the Bankruptcy and Equity Exception).
(b) The Company Board, at a meeting duly called and held, has (i) determined that it is fair to, and in the best interest of, the Company and the Company Stockholders to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and (iii) resolved to recommend the authorization or approval, as applicable, by the Company Stockholders of such actions that require the authorization or approval of the Company Stockholders in order to consummate the Merger, the Sale and certain related matters (the Company Recommendation), which resolutions, as of the date hereof, have not been subsequently withdrawn or modified in a manner adverse to the Purchaser.
(c) Except as set forth in Section 2.3(c) of the Company Disclosure Schedule, none of the execution and delivery of this Agreement by the Company, the consummation by the Company of the Sale or compliance by the Company with any of the terms or provisions hereof will (i) assuming that the Company Stockholder Approval is obtained, conflict with or violate any provision of the Company Charter Documents or (ii) assuming that the authorizations, consents and approvals referred to in Section 2.4 and the Company Stockholder Approval are obtained and the filings referred to in Section 2.4 are made, (A) violate any material Law, judgment, writ or injunction of any Governmental Authority applicable to the Company, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of, the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any loan or
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credit agreement, debenture, note, bond, mortgage, indenture, deed of trust, license, lease, contract or other agreement, instrument or obligation (each, a Contract) or Permit, to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except, in the case of clause (ii)(B), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(d) (i) The affirmative vote (in person or by proxy) of the holders of a majority of the shares of Company Common Stock for the adoption of an amendment to the Companys certificate of incorporation to effect a 1 for 30 reverse stock split of the Company Common Stock (the Reverse Stock Split) and (ii) the affirmative vote (in person or by proxy) of the holders of a majority of the shares present at the stockholders meeting for the approval of the issuance of Company Common Stock in connection with the Merger and the issuance of the Underlying Purchased Shares in connection with the consummation of the transactions contemplated by this Agreement, is the only vote or approval of the holders of any class or series of capital stock of the Company or any of its Subsidiaries which is necessary to approve the Merger, the Sale and certain related matters (the Company Stockholder Approval).
Section 2.4. Governmental Approvals. Except for (a) the filing with the SEC of a Proxy Statement in definitive form relating to the Stockholders Meeting (as defined below), the Form S-4 Registration Statement and any other filings required under, and compliance with other applicable requirements of, the Securities Exchange Act of 1934, as amended (the Exchange Act), the Securities Act, state securities laws or blue sky laws of the various States of the United States and the rules of NASDAQ, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DLLCA and the terms of the Merger Agreement, (c) filings required under, and compliance with other applicable requirements of, the HSR Act and any other applicable Antitrust Laws pursuant to the terms of the Merger Agreement and (d) the filing with the Secretary of State of Delaware of the Amended and Restated Charter and the Certificate of Designation, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Sale, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 2.5. Company SEC Documents; Undisclosed Liabilities.
(a) The Company has filed with and furnished to the SEC all Company SEC Documents required to be filed or furnished by it since January 1, 2014 (collectively, the Company Reports), and the Company will file with and furnish to the SEC all Company SEC Documents required to be filed or furnished after the date of this Agreement. As of their respective effective dates (in the case of Company Reports that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all other Company Reports), and, if amended, as of the date of the last such amendment, the Company Reports complied as to
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form in all material respects with the requirements of the Exchange Act, the Securities Act and the Sarbanes-Oxley Act, as the case may be, applicable to such Company Reports, and none of the Company Reports as of such respective dates and, if amended, as of the date of the last such amendment, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Companys Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act. As of the date of this Agreement, there are no outstanding or unresolved comments received from the SEC or its staff with respect to the Company Reports.
(b) The consolidated financial statements of the Company included or incorporated by reference in the Company Reports comply as to form, as of their respective dates and, if amended, as of the date of the last such amendment, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except as indicated in the notes thereto) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments, the absence of notes and other adjustments described therein).
(c) Except as set forth in Section 2.5(c) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has any Liabilities of the type required to be disclosed in the liabilities column of a balance sheet prepared in accordance with GAAP, except Liabilities (i) reflected or reserved against on the unaudited balance sheet of the Company and its Subsidiaries as of May 31, 2015 (the Balance Sheet Date) (including the notes thereto), (ii) incurred after the Balance Sheet Date in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would not be material to the Company and its Subsidiaries, taken as a whole, or to the Hudsons Business, (iii) permitted by Section 4.1 of the Merger Agreement as incorporated by reference under Section 4.1 of this Agreement or (iv) which have been discharged or paid in full in the ordinary course of business consistent with past practice, as of the date of this Agreement.
Section 2.6. Absence of Certain Changes or Events. Except as set forth in Section 2.6 of the Company Disclosure Schedule, since November 30, 2014, (a) there have not been any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate, have had or would reasonably be expected to have a Company Material Adverse Effect and (b) the Company and its Subsidiaries have carried on and operated their respective businesses in all material respects in the ordinary course of business consistent with past practice.
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Section 2.7. Legal Proceedings. As of the date of this Agreement, except as set forth in Section 2.7 of the Company Disclosure Schedule, there is no pending or, to the Knowledge of the Company, threatened, legal, administrative, arbitral or other proceeding, claim, suit or action against, or, to the Knowledge of the Company, governmental or regulatory audit or investigation of, the Company, any of its Subsidiaries, any of its or their respective properties or assets, or any officer, director or employee of the Company or any of its Subsidiaries in such capacity, that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect. There is no Order imposed (or, to the Knowledge of the Company, threatened to be imposed) upon the Company, any of its Subsidiaries or any of its or their respective properties or assets, by or before any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.
Section 2.8. Compliance with Laws; Permits. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries are (and since January 1, 2014 have been) in compliance with all laws (including common law), statutes, ordinances, codes, rules, regulations, decrees and Orders of Governmental Authorities (collectively, Laws) applicable to the Company or any of its Subsidiaries, any of their properties or other assets or any of their businesses or operations or their employees. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and each of its Subsidiaries hold (and since January 1, 2014 have held) all licenses, franchises, permits, certificates, registrations, approvals and authorizations from Governmental Authorities, or required by Governmental Authorities to be obtained, in each case necessary for the lawful conduct of their respective businesses (collectively, Permits). Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries are (and since January 1, 2014 have been) in compliance with the terms of all such Permits.
Section 2.9. Issuance and Delivery of Purchased Shares. The Purchased Shares have been duly authorized and, when issued by the Company in the Sale and the Purchase Price is paid by the Purchaser in the Sale, in each case in compliance with the provisions of this Agreement, (a) shall be free and clear of any and all Liens, except for such Liens as are expressly set forth in this Agreement or in the Certificate of Designation or otherwise imposed by applicable federal or state securities laws or by the Purchaser, (b) shall have been duly authorized and validly issued and (c) shall be fully paid and nonassessable.
Section 2.10. No General Solicitation. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Section 4(a)(2) under the Securities Act) in connection with the offer or issuance of the Securities.
Section 2.11. Preemptive Rights; Rights to First Offer. None of the sale and issuance of the Purchased Shares pursuant to this Agreement and the issuance of Underlying Purchased Shares upon conversion of the Purchased Shares in accordance with their terms are or will be subject to any preemptive rights, rights of first offer or similar rights of any Person.
Section 2.12. Private Placement. Assuming the accuracy of the representations and warranties of the Purchaser set forth in Article III of this Agreement, the offer, sale, and issuance of the Purchased Shares and the issuance of the Underlying Purchased Shares upon conversion of the Purchased Shares, in each case in conformity with the terms of this Agreement, are exempt from the registration requirements of Section 5 of the Securities Act.
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Section 2.13. Registration Rights. Other than the Registration Rights Agreement and except as set forth in Section 2.13 of the Company Disclosure Schedule, the Company has not granted or agreed to grant, and is not under any obligation to provide, any rights (including piggy-back registration rights) to register under the Securities Act any of its presently outstanding securities or any of its securities that may be issued subsequently.
Section 2.14. No Restriction on the Ability to Pay Cash Dividends. Except as set forth in the Amended and Restated Charter, the Certificate of Designation and in Section 2.14 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is, or will be, immediately following the Closing, a party to any Contract, and is not, and will not be, immediately following the Closing, subject to any provisions in its Charter or Bylaws or other governing documents or resolutions of the Company Board or other governing body, that restricts, limits, prohibits or prevents the payment of cash dividends with respect to any of its equity securities.
Section 2.15. Rights Agreement; Anti-Takeover Provisions.
(a) The Company is not party to a stockholder rights agreement, poison pill or similar agreement or plan.
(b) The Company Board has taken all necessary action so that any takeover, anti-takeover, moratorium, fair price, control share or other similar Law enacted under any Law applicable to the Company, including Section 203 of the DGCL, does not, and will not, apply to this Agreement, the Sale or the other transactions contemplated by the Merger Agreement.
Section 2.16. Additional Representations and Warranties. The representations and warranties contained in Sections 2.9 (Tax Matters), 2.10 (Employee Benefits), 2.11 (Contracts), 2.12 (Intellectual Property), 2.13 (Brokers and Other Advisors), 2.14 (Related Party Transactions), 2.15 (Insurance), 2.16 (Property), 2.17 (Environmental Matters), 2.19 (Labor Matters; Employees) and 2.20 (Asset Purchase Agreements) of the Merger Agreement are hereby incorporated by reference into this Agreement mutatis mutandis.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Except as set forth in the disclosure schedule delivered by the Purchaser to the Company simultaneously with the execution of this Agreement (the Purchaser Disclosure Schedule), the Purchaser represents and warrants to the Company as follows:
Section 3.1. Authority. The Purchaser has all requisite power and authority to execute and deliver this Agreement and to consummate the Sale. The Purchaser has taken all requisite action to, and no other action or proceeding on the part of the Purchaser is necessary for, the execution and delivery by the Purchaser of this Agreement or the consummation by the Purchaser of the Sale. This Agreement has been duly executed and delivered by the Purchaser
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and, assuming due authorization, execution and delivery of this Agreement by the Company, is a valid and binding obligation of the Purchaser and is enforceable by the Company against the Purchaser in accordance with its terms, subject, as to enforcement, to (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereinafter in effect affecting creditors rights generally and (ii) general principles of equity.
Section 3.2. Consents and Approvals. No filing with, or authorization, approval, consent, license, Order, registration, qualification or decree of, any Governmental Authority or third party is necessary or required by or with respect to the Purchaser for the execution by the Purchaser of this Agreement or the consummation by the Purchaser of the Sale.
Section 3.3. No Conflict. None of the execution, delivery or performance by the Purchaser of this Agreement nor the consummation by the Purchaser of the Sale will conflict with, violate, constitute a breach of or a default under (i) the Purchasers organizational documents, (ii) any contracts to which the Purchaser is a party or by which it is bound or (iii) any Law binding upon the Purchaser.
Section 3.4. No Proceedings. There is no action, claim, suit, demand, hearing, notice of violation or deficiency, or proceeding pending or, to the Purchasers knowledge, threatened against the Purchaser by Governmental Authorities or any third party that would reasonably be expected, individually or in the aggregate, to enjoin, prevent or materially delay the consummation by the Purchaser of the Sale.
Section 3.5. Investment Representations.
(a) The Purchaser (i) is acquiring the Purchased Shares solely for investment with no present intention to distribute them in violation of the Securities Act and the rules and regulations thereunder or any applicable U.S. state securities laws, (ii) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of making an informed investment decision to purchase the Purchased Shares, (iii) is an accredited investor (as that term is defined by Rule 501 promulgated under the Securities Act) and (iv) acknowledges and understands that the Purchased Shares have not been registered under the Securities Act, or any state securities laws, and agrees that it will not offer, sell, assign, transfer, pledge, encumber or otherwise dispose of such Purchased Shares absent registration under the Securities Act or unless such transaction is exempt from, or not subject to, registration under the Securities Act, and in each case, in accordance with all applicable state securities laws. The Purchaser understands that the Purchased Shares will be characterized as restricted securities under the United States federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Purchased Shares or the fairness or suitability of the Purchased Shares. The Purchaser understands that until such time as the resale thereof has been registered under the Securities Act, certificates evidencing the Purchased Shares shall bear a legend substantially to the following effect (in addition to any legends required under applicable securities laws):
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR ANY STATE SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES OR UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL THAT AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS
Section 4.1. Certain Covenants from the Merger Agreement. The covenants contained in Sections 4.1(a), 4.5, 4.6 and 4.7 of the Merger Agreement are hereby incorporated by reference into this Agreement mutatis mutandis and all references to RG thereto will be references to the Purchaser hereunder. For avoidance of doubt, any of the provisions incorporated by reference under this Section 4.1 requiring the consent of RG shall require the consent of the Purchaser.
Section 4.2. Certain Tax Matters. The Company and the Purchaser acknowledge and agree that the Purchased Shares are being issued solely in consideration of the Purchase Price and neither the Company nor the Purchaser shall take any position for financial accounting, Tax or other purposes inconsistent with such agreement. Without limiting the foregoing, the Company shall not record an expense or apply any withholding (other than any withholding that may be required by law pursuant to Section 1441, 1442, 1445 or other applicable provision of the Code and comparable state or local laws) in connection with the issuance or any exercise or redemption of, any adjustment to, or any payments made in respect of any of the Purchased Shares.
Section 4.3. Reservation and Listing of Securities. The Company shall (a) maintain a reserve from its duly authorized Company Common Stock for issuance of the Underlying Purchased Shares to fulfill its obligations in full under the Sale Documents, (b) prepare and timely file with NASDAQ a subsequent listing application covering all of the Underlying Purchased Shares, (c) use reasonable best efforts to cause the Underlying Purchased Shares to be approved for listing on NASDAQ as soon as reasonable practicable following the date hereof and in any event prior to the Closing Date and (d) use reasonable best efforts to maintain the listing of the Underlying Purchased Shares on NASDAQ.
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Section 4.4. Use of Proceeds. The Company shall use the net proceeds from the Sale for the purpose of consummating the Merger and the transactions contemplated by the Merger Agreement.
Section 4.5. Notification of Certain Matters. The Company shall give prompt notice to the Purchaser, and the Purchaser shall give prompt notice to the Company, of (i) any notice or other communication received by such party from any Governmental Authority in connection with the Sale, any of the transactions contemplated by the Sale Documents or from any Person alleging that the consent of such Person is or may be required in connection with the Sale or any of the transactions contemplated by the Sale Documents, (ii) any actions, suits, claims, investigations or proceedings commenced or, to such partys knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its Subsidiaries which relate to the Sale or any of the transactions contemplated by the Sale Documents, (iii) the discovery of any fact or circumstance that, or the occurrence or nonoccurrence of any event the occurrence or non-occurrence of which, is reasonably likely to (A) in the case of the Company, cause the conditions set forth in Section 5.2(a) or Section 5.2(b) not to be satisfied and (B) in the case of the Purchaser, cause the conditions set forth in Section 5.3(a) or Section 5.3(b) not to be satisfied; provided, however, that the delivery of any notice pursuant to this Section 4.5 shall not (x) cure any breach of, or non-compliance with, any provision of this Agreement or (y) limit the remedies available to the party receiving such notice.
Section 4.6. Fees and Expenses; Taxes.
(a) Except as otherwise provided herein, all fees and expenses incurred in connection with the Sale shall be paid or reimbursed by the Company upon consummation of the Sale. If the Sale is not consummated, all fees and expenses incurred in connection with the Sale shall be paid by the party incurring such fees or expenses.
(b) The Company shall pay all Taxes incident to preparing for, entering into and carrying out this Agreement and the consummation of the Sale.
Section 4.7. Company Board of Directors. At the Closing, the applicable number of directors on the Company Board shall resign such that only two directors on the Company Board immediately prior to the Closing shall remain on the Company Board immediately following the Closing and, as of the Closing, the Company Board shall appoint the three (3) persons designated by Purchaser in writing at least five (5) Business Days prior to the anticipated Closing Date to fill three of such vacancies as a director of the Company. A remaining vacancy will be filled by the Companys Chief Executive Officer following the Effective Time.
Section 4.8. No Waivers under the Merger Agreement. The Company and its Subsidiaries will not amend or waive any material term or condition of the Merger Agreement without the prior written consent of the Purchaser, which, for the avoidance of doubt shall include, without limitation, any extension of the Outside Date (as such term is defined in the Merger Agreement).
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ARTICLE V
CONDITIONS TO CLOSING
Section 5.1. Conditions to Each Partys Obligations. The respective obligations of each party hereto to effect the Sale shall be subject to the satisfaction (or waiver, if permissible under applicable Law, by the Purchaser and the Company) on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval; Filing of Restated Charter and Certificate of Designation. The Company Stockholder Approval shall have been obtained on or before the Closing Date, and the Restated Charter and Certificate of Designation shall have been properly filed with and accepted by the office of the Secretary of State of the State of Delaware.
(b) No Injunctions or Restraints. No Law or Order enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining, preventing or prohibiting consummation of the Sale or making the consummation of the Sale illegal.
(c) Consummation of the Merger Agreement. The Merger shall have been consummated in accordance with the terms of the Merger Agreement.
Section 5.2. Conditions to Obligations of the Purchaser The obligations of the Purchaser to consummate the Sale shall be subject to the satisfaction, or waiver by the Purchaser, of each of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of the Company set forth in Sections 2.1(a), 2.2, 2.3(a), 2.3(d) 2.9, 2.10, 2.11, 2.12, 2.13 and 2.15, shall be true and correct (other than in de minimis respects with regard to Section 2.2) as of the date of this Agreement and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date) and (ii) all other representations and warranties of the Company set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to not be so true and correct (without giving effect to any limitation as to materiality or Company Material Adverse Effect set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Purchaser shall have received a certificate signed on behalf of the Company by the Interim Chief Executive Officer and Chief Financial Officer thereof to such effect.
(b) Performance of Obligations of the Company. The Company shall have performed or complied in all material respects with its obligations, agreements and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing Date and the Purchaser shall have received a certificate signed on behalf of the Company by the Interim Chief Executive Officer and Chief Financial Officer thereof to such effect.
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(c) Listing. The Underlying Purchased Shares shall have been authorized for listing on the NASDAQ, subject to official notice of issuance.
(d) No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred a Company Material Adverse Effect and there shall not have been any changes, events, effects, developments, occurrences or state of facts that, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.
(e) Closing Deliveries. The Company shall have made, or caused to be made, delivery to the Purchaser of the items required to be delivered to the Purchaser pursuant to Section 1.3(a).
Section 5.3. Conditions to the Companys Obligations. The obligations of the Company to consummate the Sale shall be subject to the satisfaction, or waiver by the Company, of each of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of the Purchaser set forth in Sections 3.1 and 3.5 shall be true and correct other than in de minimis respects as of the date of this Agreement and as of the Closing Date, as if made at and as of such time and (ii) all other representations and warranties of the Purchaser set forth in this Agreement shall be true and correct (disregarding all qualifications or limitations as to materiality and words of similar import set forth therein) as of the date of this Agreement and as of the Closing Date as though made on the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a material effect on Purchasers ability to, in a timely manner, perform its obligations under this Agreement or consummate the Sale. The Company shall have received a certificate signed on behalf of the Purchaser by an executive officer thereof to such effect.
(b) Performance of Obligations of the Purchaser. The Purchaser shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date and the Company shall have received a certificate signed on behalf of the Purchaser by an executive officer of the Purchaser to such effect.
(c) Closing Deliveries. The Purchaser shall have made, or caused to be made, delivery to the Company of the items required to be delivered to the Company pursuant to Section 1.3(b).
(d) Validity of the Guaranty. The Guaranty shall be in full force and effect and the valid, binding obligation of the Guarantor.
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ARTICLE VI
TERMINATION
Section 6.1. Termination by the Purchaser or the Company. This Agreement shall terminate automatically and without any action from either the Company or the Purchaser if the Merger Agreement is terminated in accordance with its terms.
Section 6.2. Effect of Termination. In the event of the termination of this Agreement as provided in Section 6.1, this Agreement shall forthwith become null and void (other than Section 4.6, Section 6.2, Article VII and the expense reimbursement provisions contained in Section 4.6(a), all of which shall survive termination of this Agreement), and there shall be no liability on the part of the Purchaser or the Company or their Affiliates or Representatives, except (a) no such termination shall relieve the Purchaser or the Company for any liabilities or damages incurred or suffered by the Company or the Purchaser, as the case may be, to the extent such liabilities or damages were the result of the breach by the Purchaser or the Company, as the case may be, of any of its representations, warranties, covenants or other agreements set forth in this Agreement and (b) nothing shall relieve any party to this Agreement from liability for any damages for a knowing and intentional breach of a representation or warranty or a knowing and intentional breach of any obligation hereunder made or allowed to occur or actual (not constructive) fraud.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Survival of Representations and Warranties. The representations and warranties of the Company set forth in Sections 2.1, 2.2, 2.3(a), 2.3(a) 2.9, 2.10, 2.11, 2.12 and 2.15 will terminate upon ninety (90) days after the expiration of the statutes of limitations applicable to each such representation and warranty. All other representations and warranties will not survive the Closing.
Section 7.2. Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
if to Company:
Joes Jeans Inc.
2340 S. Eastern Avenue
Commerce, CA 90040
Attention: Interim Chief Executive Officer
Facsimile: (323) 837-3791
with a copy (which shall not constitute notice) to:
Akin Gump Strauss Hauer & Feld LLP
1333 New Hampshire Avenue NW
Washington DC 20036
Attention: Russell W. Parks, Jr.
Erica D. McGrady
Facsimile: (202) 887-4288
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if to the Purchaser:
TCP Denim, LLC
c/o Tengram Capital Partners
15 Riverside Avenue, First Floor
Westport, CT 06880
Attention: Andrew R. Tarshis
Facsimile: (203) 454-6998
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Attention: Jeffrey H. Cohen
Andrew D. Garelick
Facsimile: (213) 687-5600
or such other address or facsimile number as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
Section 7.3. Amendments and Waivers. The provisions of this Agreement may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of the Company and the Purchaser.
Section 7.4. Descriptive Headings, Etc. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires: (1) words of any gender shall be deemed to include each other gender; (2) words using the singular or plural number shall also include the plural or singular number, respectively; (3) the words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and paragraph references are to the Sections and paragraphs of this Agreement unless otherwise specified; (4) the word including and words of similar import when used in this Agreement mean including, without limitation, unless otherwise specified; (5) or is not exclusive; and (6) provisions apply to successive events and transactions.
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Section 7.5. Further Assurances. Each party to this Agreement shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such agreements, certificates, instruments and documents as the other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
Section 7.6. No Third-Party Beneficiaries. No person or entity not a party to this Agreement shall be deemed to be a third-party beneficiary hereunder or entitled to any rights hereunder.
Section 7.7. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the written consent of the Purchaser. The Purchaser may assign its rights hereunder in whole or in part to any Person to whom the Purchaser assigns or transfers any Securities in compliance with the Sale Documents and applicable law, provided such transferee shall agree in writing to be bound, with respect to the transferred Securities, by the terms and conditions of this Agreement that apply to the Purchaser.
Section 7.8. Entire Agreement. This Agreement (together with the other Sale Documents) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior documents, agreements and understandings, both written and verbal, among the parties with respect to the subject matter hereof and the transactions contemplated hereby.
Section 7.9. Severability. In the event that any one or more of the provisions, paragraphs, words, clauses, phrases or sentences contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision, paragraph, word, clause, phrase or sentence in every other respect and of the other remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law.
Section 7.10. Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware, without regard to its rules of conflict of laws. To the fullest extent permitted by Law, any action against any party to this Agreement arising out of or in any way relating to this Agreement shall be brought in the Court of Chancery of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), and each of the parties submits to the exclusive jurisdiction of such courts for the purpose of any such action. To the fullest extent permitted by Law, each party irrevocably and unconditionally agrees not to assert (i) any objection which it may ever have to the laying of venue of any such action in the Court of Chancery of the State of
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Delaware and any state appellate court therefrom within the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), (ii) any claim that any such action brought in any such court has been brought in an inconvenient forum, and (iii) any claim that such court does not have jurisdiction with respect to such action.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE DEBT COMMITMENT LETTERS OR THE DOCUMENTS RELATED THERETO. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 7.10.
Section 7.11. Specific Enforcement; Limit on Liability. The parties agree that irreparable damage would occur and the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, except as provided in the following sentence. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement from the Chancery Court of the State of Delaware and any state appellate court therefrom within the State of Delaware (or, if the Chancery Court of the State of Delaware declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware), without proof of actual damages, without bond or other security being required, this being in addition to any other remedy to which they are entitled at law or in equity. The parties hereto further agree that (i) by seeking the remedies provided for in this Section 7.11, a party shall not in any respect waive its right to seek any other form of relief that may be available to a party under this Agreement (including monetary damages) in the event that the remedies provided for in this Section 7.11 are not available or otherwise are not granted, and (ii) nothing set forth in this Section 7.11 shall require any party hereto to institute any proceeding for (or limit any partys right to institute any proceeding for) specific performance under this Section 7.11 prior or as a condition to exercising any termination right under Article VI (and pursuing damages after such termination), nor shall the commencement of any legal proceeding pursuant to this Section 7.11 or anything set forth in this Section 7.11 restrict or limit any partys right to terminate this Agreement in accordance with the terms of Article VI or pursue any other remedies under this Agreement that may be available then or thereafter.
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Section 7.12. Definitions.
(a) As used in this Agreement, the following terms have the meanings ascribed thereto below:
Affiliate means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For this purpose, control (including, with its correlative meanings, controlled by and under common control with) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.
Agreement has the meaning set forth in the preamble hereto.
Amended and Restated Charter has the meaning set forth in the recitals hereto.
Antitrust Laws means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other applicable Laws issued by a Governmental Authority that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.
Balance Sheet Date has the meaning set forth in Section 2.5(c).
Bankruptcy and Equity Exception has the meaning set forth in Section 2.3(a).
Business Day means a day except a Saturday, a Sunday or other day on which the SEC or banks in New York, New York are authorized or required by Law to be closed.
Certificate of Designation has the meaning set forth in the recitals hereto.
Certificate of Merger means the certificate of merger with respect to the Merger, containing the provisions required by, and executed in accordance with, the DLLCA.
Closing has the meaning set forth in Section 1.2.
Closing Date has the meaning set forth in Section 1.2.
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Code means the Internal Revenue Code of 1986, as amended.
Company has the meaning set forth in the preamble hereto.
Company 10-K means the Companys Annual Report on Form 10-K for the fiscal year ended November 30, 2014, as amended.
Company Board has the meaning set forth in the recitals.
Company Charter Documents means the Certificate of Incorporation and Bylaws of the Company, each as amended.
Company Common Stock has the meaning set forth in Section 2.2(a).
Company Incentive Plan means the Amended and Restated 2004 Stock Incentive Plan, as amended, of the Company.
Company Material Adverse Effect means any change, event, circumstance, effect, development, occurrence or state of facts that, individually or in the aggregate: (i) has or would be reasonably likely to have a material adverse effect on the business, condition, properties, assets, liabilities (contingent or otherwise), results of operations or financial condition of (x) the Company and its Subsidiaries, taken as a whole, or on the Hudsons Business; provided, however, that none of the following shall be deemed in itself to constitute, and that none of the following shall be taken into account in determining whether there has been or would reasonably be expected to be, a Company Material Adverse Effect: (a) any change generally affecting the economy, financial markets or political, economic or regulatory conditions in the United States or any other geographic region in which the Company and its Subsidiaries conduct business (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (b) general financial, credit or capital market conditions, including interest rates or exchange rates, or any changes therein (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (c) conditions (or changes therein) in any industries in which the Company and its Subsidiaries operate (excluding seasonal fluctuations) (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), (d) the taking of any action required by this Agreement or the announcement of the transactions contemplated hereby, (e) changes in applicable Law or GAAP (or, in each case, any interpretations thereof) (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to
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other participants in the industries in which the Company and its Subsidiaries participate), (f) a decline in the price of the Company Common Stock on NASDAQ or any other market in which such securities are quoted for purchase and sale (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Company Material Adverse Effect), (g) any acts of terrorism or war or any escalation thereof or any weather related event, fire or natural disaster (except, in each case, to the extent that the Company and its Subsidiaries, taken as a whole, or the Hudsons Business are disproportionately adversely affected relative to other participants in the industries in which the Company and its Subsidiaries participate), or (h) any failure by the Company and its Subsidiaries to meet internal or published projections, forecasts, performance measures, operating statistics or revenue or earnings predictions for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be taken into account in determining whether there has been, or will be, a Company Material Adverse Effect); or (ii) has a material adverse effect on the Companys ability to, in a timely manner, perform its obligations under this Agreement, consummate the transactions contemplated by this Agreement or consummate the Sale.
Company Preferred Stock has the meaning set forth in the recitals.
Company Recommendation has the meaning set forth in Section 2.3(b).
Company Reports has the meaning set forth in Section 2.5(a).
Company SEC Documents means all reports, schedules, forms, certifications, prospectuses, and registration, proxy and other statements required to be filed with or furnished to the SEC, together with all documents filed on a voluntary basis on Form 8-K, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein.
Company Stockholder Approval has the meaning set forth in Section 2.3(d).
Company Stockholders has the meaning set forth in the recitals.
Contract has the meaning set forth in Section 2.3(c).
Convertible Notes means those certain subordinated convertible notes issued on September 30, 2013, and all payment in kind notes issued as interest thereon, to the former stockholders and optionholders of Hudson Clothing Holdings, Inc.
Copyrights has the meaning set forth in the definition of Intellectual Property Rights.
DGCL means the Delaware General Corporation Law.
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DLLCA means the Delaware Limited Liability Company Act.
Encumbrance means any lien, encumbrance, security interest, pledge, mortgage, hypothecation, charge, restriction on transfer of title, adverse claim, title retention agreement of any nature or kind, or similar claim or right. The term Encumbrance shall not include any restrictions on transfer applicable to the Purchased Shares under applicable securities laws.
Exchange Act has the meaning set forth in Section 2.4.
Form S-4 Registration Statement means the registration statement on Form S-4 to be filed with the SEC by the Company in connection with issuance of Company Common Stock in the Merger, as such registration statement may be amended prior to the time it is declared effective by the SEC.
Governmental Authority means any supranational, foreign, domestic, state, municipal or local government, political subdivision or any department, court, arbitrator, commission, board, bureau, regulatory or administrative agency, instrumentality or other authority thereof, or any other governmental or quasi-governmental authority (including any government-sponsored enterprise such as Fannie Mae or Freddie Mac).
Guarantor has the meaning set forth in the recitals.
Guaranty has the meaning set forth in the recitals.
Hudsons Business means the business of the Company operated as of the date hereof under the brand names Hudsons and Hudson Jeans.
Intellectual Property Rights means all of the rights arising from or in respect of the following, whether protected, created or arising under the Laws of the United States or any foreign jurisdiction: (i) patents, patent applications, any reissues, reexaminations, divisionals, continuations, continuations-in-part and extensions thereof (collectively, Patents); (ii) trademarks, service marks, trade names (whether registered or unregistered), fictitious names, industrial designs, brand names, domain names, social media handles and accounts, trade dress rights, identifying symbols, logos, emblems, signs or insignia, and including all goodwill associated with the foregoing; (iii) copyrights, whether registered or unregistered (including copyrights in computer software programs), mask work rights and registrations and applications therefore (collectively, Copyrights); (iv) confidential, proprietary or other nonpublic information, or non-public processes, designs, specifications, technology, know-how, techniques, formulas, inventions (whether or not patentable and whether or not reduced to practice), concepts, trade secrets, discoveries, ideas and technical data and information, in each case which derive economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other Persons who can obtain economic value from its disclosure or use, and which is the subject of commercially reasonable efforts to maintain its secrecy, excluding
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any rights in respect of any of the foregoing that comprise or are protected by Copyrights or Patents; (v) rights of publicity and moral rights; (vi) any other intellectual property rights and (vi) all applications and registrations related to any of the foregoing clauses (i) through (iv).
Joes Business means the business of the Company operated as of the date hereof under the brand names Joes Jeans, Joes, Joes JD and else.
Knowledge of the Company means the actual knowledge, after reasonable inquiry under the circumstances (but only to the extent of each such individuals area of responsibility), of the Samuel Furrow, Hamish Sandhu, Lori Nembirkow, Peter Kim and Robert Otto.
Laws has the meaning set forth in Section 2.8.
Liens has the meaning set forth in Section 2.1(c).
Merger has the meaning set forth in the recitals hereto.
Merger Agreement has the meaning set forth in the recitals hereto.
Merger Sub has the meaning set forth in the recitals hereto.
NASDAQ means the Nasdaq Capital Market.
Order means any writ, judgment, injunction, consent, order, decree, stipulation, award or executive order of or by any Governmental Authority.
Patents has the meaning set forth in the definition of Intellectual Property Rights.
Permits has the meaning set forth in Section 2.8.
Person means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity, including a Governmental Authority.
Proxy Statement means a proxy statement/prospectus to be sent to the Companys stockholders in connection with the Stockholders Meeting.
Purchase Price has the meaning set forth in Section 1.1.
Purchased Shares has the meaning set forth in Section 1.1.
Purchaser has the meaning set forth in the preamble hereto.
Representatives means a companys Subsidiaries and Affiliates and each of the companys and the companys Subsidiaries and Affiliates respective directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, agents and other representatives.
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Registration Rights Agreement means the Registration Rights Agreement, in substantially the form attached to this Agreement as Exhibit D, dated as of the Closing Date, by and among the Company, the Purchaser and the other parties specified therein.
Reverse Stock Split has the meaning set forth in Section 2.3(d).
RG has the meaning set forth in the recitals hereto.
Rollover Letter has the meaning set forth in the recitals.
Sale has the meaning set forth in Section 1.1.
Sale Documents means this Agreement, the Registration Rights Agreement, the Certificate of Designation and any other document, instrument or agreement entered into in connection with the Sale.
SEC means the Securities and Exchange Commission.
Securities means the Purchased Shares and Underlying Purchased Shares.
Securities Act has the meaning set forth in the recitals hereto.
Stockholders Meeting has the meaning set forth in Section 4.5(e) of the Merger Agreement as incorporated by referenced under Section 4.1 hereto.
Subsidiary when used with respect to any party, means any corporation, limited liability company, partnership, association, trust or other entity the accounts of which would be consolidated with those of such party in such partys consolidated financial statements if such financial statements were prepared in accordance with GAAP, as well as any other corporation, limited liability company, partnership, association, trust or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership interests) are, as of such date, owned or controlled by such party or one or more Subsidiaries of such party or by such party and one or more Subsidiaries of such party.
Tax or Taxes means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes (in the case of all such taxes, whether the tax base is modified or
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not), customs duties, fees, assessments and charges of any kind whatsoever, (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Authority in connection with any item described in clause (i), and (iii) any liability in respect of any items described in clauses (i) or (ii) payable by reason of contract, assumption, transferee or successor liability, operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof or any analogous or similar provision under Law) or otherwise.
Underlying Purchased Shares means the shares of the Companys Common Stock issuable upon conversion of the Purchased Shares in accordance with the terms and provisions thereof.
(b) Any capitalized term used herein but not defined shall have the meaning ascribed to such term in the Merger Agreement.
Section 7.13. Counterparts; Scanned Signatures. This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile or other electronically scanned and transmitted signatures shall be deemed originals for all purposes of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.
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JOES JEANS, INC. |
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/s/ Hamish Sandhu |
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Name: Hamish Sandhu |
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Title: CFO |
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TCP DENIM, LLC |
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By: |
/s/ Andrew Tarshis |
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Name: Andrew Tarshis |
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Title: |
[Signature Page to Stock Purchase Agreement]
Exhibit 10.2
ROLLOVER AGREEMENT
This ROLLOVER AGREEMENT (this Agreement) is made as of September 8, 2015 among Joes Jeans Inc., a Delaware corporation (the Company), and each of the undersigned Persons set forth on Schedule A hereto (individually, a Noteholder, and collectively, the Noteholders). All capitalized terms not defined herein have the meanings in the Agreement and Plan of Merger, dated as of September 8, 2015 (the Merger Agreement) among the Company, JJ Merger Sub LLC, a Delaware limited liability company and a wholly-owned Subsidiary of the Company (Merger Sub), and RG Parent, LLC, a Delaware limited liability company (RG).
RECITALS
WHEREAS, pursuant to the Merger Agreement, Merger Sub will be merged with and into RG, with RG surviving the Merger, on the terms and subject to the conditions set forth in the Merger Agreement at the Effective Time.
WHEREAS, as an inducement for the Company and Merger Sub to enter into the Merger Agreement and as a condition precedent to the consummation of the Merger at the Effective Time, each Noteholder has agreed, on the terms and subject to the conditions of this Agreement, to contribute to the Company the Convertible Notes set forth on Schedule A in exchange for:
(a) issuance by the Company of a number of shares of the Company Common Stock (with respect to each Noteholder, the Stock Payment) with a value (at the agreed upon value per share of $11.10 per share of Company Common Stock (the Implied Per Share Price)) equal to the sum of (i) the percentage specified for such Noteholder in the column entitled Stock Payment Percentage on Schedule A of the principal amount of Convertible Notes as of the Rollover Time (as defined below) held by such Noteholder, which amount as of July 1, 2015, is specified for such Noteholder in the column entitled Principal Amount on Schedule A and which will be increased by any PIK interest payable in accordance with the terms of the Convertible Notes until the Rollover Time, plus (without duplication) (ii) all accrued interest, including default interest as applicable, owing on 50% of the principal amount of such Convertible Notes in accordance with the terms of the Convertible Notes as of the Rollover Time, which amount as of July 1, 2015, is specified for such Noteholder in the column entitled Accrued Interest on Schedule A and which will continue to accrue interest in accordance with the terms of the Convertible Notes until the Rollover Time;
(b) a cash payment by the Company (with respect to each Noteholder, the Cash Payment) equal to the percentage specified for such Noteholder in the column entitled Cash Payment Percentage on Schedule A of the principal amount of Convertible Notes as of the Rollover Time held by such Noteholder, which amount as of July 1, 2015, is specified for such Noteholder in the column entitled Principal Amount on Schedule A and which will be increased by any PIK
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interest payable in accordance with the terms of the Convertible Notes until the Rollover Time; provided, that for the purposes of this Agreement, the Cash Payment shall be deemed to have been made first in respect of all accrued interest, including default interest as applicable, owing on 100% of the principal amount of such Convertible Notes in accordance with the terms of the Convertible Notes as of the Rollover Time and thereafter, any remaining portion of the Cash Payment shall be made in respect of the principal amount of Convertible Notes held by such Noteholder; and
(c) a modified convertible note (with respect to each Noteholder, the Modified Note Payment) in the form attached as Exhibit B (each a Modified Convertible Note, and collectively, the Modified Convertible Notes) with a principal amount equal to the sum of (i) the percentage specified for such Noteholder in the column entitled Modified Note Payment Percentage on Schedule A of the principal amount of Convertible Notes as of the Rollover Time held by such Noteholder, which amount as of July 1, 2015, is specified for such Noteholder in the column entitled Principal Amount on Schedule A and which will be increased by any PIK interest payable in accordance with the terms of the Convertible Notes until the Rollover Time, plus (without duplication) (ii) all accrued interest, including default interest as applicable, owing on 50% of the principal amount of such Convertible Notes in accordance with the terms of the Convertible Notes as of the Rollover Time, which amount as of July 1, 2015, is specified for such Noteholder in the column entitled Accrued Interest on Schedule A and which will continue to accrue interest in accordance with the terms of the Convertible Notes until the Rollover Time, each as more fully described below.
NOW, THEREFORE, in consideration of the representations and warranties herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
ROLLOVER
1.1 Convertible Notes. On the terms and subject to the conditions of this Agreement, effective as of the Rollover Time: (i) each Noteholder agrees that all of such Noteholders right, title and interest in and to Convertible Notes identified on Schedule A with respect to such Noteholder shall be contributed, transferred and assigned to the Company; and (ii) the Company shall (A) issue to such Noteholder the Stock Payment due to such Noteholder; (B) pay such Noteholder the Cash Payment due to such Noteholder; (C) issue to such Noteholder the Modified Note Payment due to such Noteholder, in each case, as promptly as practicable following the Rollover Time (but in any case, on the same day as the Rollover Time and as part of the Closing, and in the case of the Cash Payment, by wire transfer of immediately available funds), and such Noteholder shall accept the consideration set forth in clauses (A) through (C) as consideration for the contribution of Convertible Notes identified on Schedule A; and (D) cancel the Convertible Notes.
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1.2 Timing. On the terms and subject to the conditions of this Agreement, the Noteholders and the Company agree that the contribution, issuances, payments and cancellations contemplated by Section 1.1 shall be deemed to occur immediately prior to the Effective Time (the Rollover Time) and shall be effective at the Rollover Time without any further consent, approval or action by either the Company or any of the Noteholders, with such payments and issuances occurring promptly following the Effective Time; provided that, if for any reason the Merger is not consummated, then the Convertible Notes shall remain outstanding in accordance with the terms of the Convertible Notes.
1.3 Acknowledgements. In connection with the issuance of the Stock Payment and the Modified Note Payment, each Noteholder understands and acknowledges to the Company that:
(a) the offering and issuance of the Stock Payment and the Modified Note Payment are intended to be exempt from registration under the Securities Act of 1933, as amended (the Securities Act), by virtue of the provisions of Section 4(a)(2) of the Securities Act;
(b) the issuance of the Company Common Stock and the Modified Convertible Notes pursuant hereto may involve tax consequences, the Company has not provided the Noteholder with tax advice or information, and the Noteholder must retain its own professional advisors to evaluate the tax and other consequences of an investment in the Company Common Stock and the Modified Convertible Notes; and
(c) the Company Common Stock and the Modified Convertible Notes have not been registered under the Securities Act and must be held indefinitely unless transferred or sold in a transaction covered by an effective registration statement under the Securities Act or such transfer or sale is permitted pursuant to an available exemption from such registration requirement.
1.4 Deliveries.
(a) Within five (5) Business Days of the execution and delivery of this Agreement, each Noteholder shall deliver to the Company or to counsel for one or more of the Noteholders:
(i) the Convertible Notes held by such Noteholder and identified on Schedule A, free and clear of all Liens (other than any restrictions under the Securities Act and state securities laws, and those arising under the terms of the Convertible Notes or this Agreement), together with assignments in favor of the Company in form reasonably acceptable to the Company;
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(ii) a signature page to the registration rights agreement in the form attached as Exhibit C (the Registration Rights Agreement), duly executed by such Noteholder; and
(iii) if applicable, a Spousal Consent.
The Convertible Notes, assignments and Spousal Consents, if any, shall be held in escrow until the earlier of (i) the Effective Time and (ii) the termination of this Agreement in accordance with Section 4.13.
(b) At the Effective Time, the Company shall deliver to, or cause the Paying Agent to deliver to, each of the Noteholders the applicable Stock Payment, the applicable Cash Payment, the applicable Modified Convertible Notes, duly executed by the Company, and the Registration Rights Agreement, duly executed by the parties thereto (other than the Noteholders).
(c) On the date hereof, the Company shall deliver to each of the Noteholders a true and correct copy of the Merger Agreement, the Stock Purchase Agreement, the Asset Purchase Agreements, in each case, executed by each of the parties thereto, any other exhibits, schedules and ancillary documents thereto or reasonably requested by the Noteholders (collectively, the Transaction Documents), and thereafter, any amendments, modifications or waivers to any of the foregoing.
1.5 Adjustments. In the event that the Company changes the number of shares of Company Common Stock or securities convertible or exchangeable into or exercisable for shares of Company Common Stock issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, issuer tender or exchange offer, or other similar transaction, the Implied Per Share Price shall be equitably adjusted. For the avoidance of doubt, this Section 1.5 shall not require any adjustment as a result of the 1 for 30 reverse stock split contemplated by the Merger Agreement unless such ratio is modified and then the Implied Per Share Price shall be adjusted accordingly.
1.6 Noteholder Representation and Warranties. Each Noteholder a party hereto represents and warrants to the Company (on behalf of such Noteholder only and for no other Noteholder) that the following statements are true and correct:
(a) Organization. If such Noteholder is an entity, such Noteholder is duly formed, validly existing, and in good standing under the laws of the jurisdiction of its creation, formation or organization and there is no pending or, to the knowledge of such Noteholder, threatened action for the dissolution, liquidation, insolvency, or rehabilitation of such Noteholder.
(b) Authority; Enforceability. Such Noteholder has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery, and performance by such Noteholder of this Agreement has been duly authorized by all necessary action of such Noteholder; and this Agreement has been duly executed and delivered by such Noteholder and is the legal, valid and binding obligation of such Noteholder enforceable against such Noteholder in accordance with its terms, subject to the Bankruptcy and Equity Exception.
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(c) No Consents; No Violations.
(i) No authorization, approval or other action by, and no notice to or filing with, any governmental authority is required on the part of such Noteholder for the due execution, delivery, and performance by such Noteholder of this Agreement.
(ii) The execution and delivery of this Agreement by such Noteholder and the performance by such Noteholder of its obligations hereunder do not and will not result in any breach, violation or contravention of (A) if such Noteholder is an entity, such Noteholders organizational documents, (B) any Law or Order applicable to such Noteholder, or (C) any Contract to which such Noteholder is a party or by which any of its properties is bound.
(d) Ownership. Such Noteholder holds of record and beneficially owns those Convertible Notes as are set forth on Schedule A, free and clear of any Liens (other than any restrictions under the Securities Act and state securities laws, and those arising under the terms of the Convertible Notes and this Agreement). Such Noteholder is not a party to any (i) Contract that could require such Noteholder to sell, transfer, or otherwise dispose of any Convertible Notes held by the Noteholder or any beneficial interest therein (other than this Agreement) or (ii) other Contract (including any pledge) with respect to the Convertible Notes other than any Contracts entered into between the Company and any Noteholder in connection with the 2013 acquisition of Hudson Clothing Holdings, Inc. by the Company. Upon the consummation of the transactions contemplated hereby, such Noteholder will have transferred its entire right, title and interest in, to and under such Convertible Notes to the Company, and the Company will have good, valid and marketable title to such Convertible Notes, free and clear of any Lien (other than any restrictions under the Securities Act and state securities laws, and those arising under the terms of the Convertible Notes and this Agreement).
(e) Investment Representations.
(i) The Company Common Stock and the Modified Convertible Notes to be acquired by such Noteholder are being acquired for its own account, not as a nominee or agent for any other person, and without a view to the distribution of the Company Common Stock or the Modified Convertible Notes or any interest therein in violation of the Securities Act, and the Company Common Stock and the Modified Convertible Notes will not be disposed of in contravention of the Securities Act or any applicable state securities laws.
(ii) Such Noteholder (A) is an Accredited Investor as such term is defined in Regulation D under the Securities Act, or (B) has, or with a purchaser representative (as defined in Rule 501 of the Securities Act as presently in effect) has such knowledge and experience in financial or business matters that the Noteholder is capable of evaluating the merits and risks of the investment in the Company Common Stock and the Modified Convertible Notes.
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(iii) Such Noteholder has business or financial experience or the business or financial experience of its professional adviser, who is unaffiliated with and who is not compensated by the Company or any affiliate of the Company, directly or indirectly, from which it could be reasonably assumed that the Noteholder has the capacity to protect its own interest in connection with the transaction.
(iv) Such Noteholder has been provided, to its satisfaction, the opportunity to ask questions concerning the terms and conditions of the offering and issuance of the Company Common Stock and the Modified Convertible Notes, has had all such questions answered to its satisfaction and has been supplied all additional information requested by it to verify the accuracy of the information furnished to it.
1.7 Company Representation and Warranties. Except (i) as disclosed in the Company SEC Documents or (ii) as set forth in the Company Disclosure Schedule to the Merger Agreement (which has been provided to the Noteholders prior to the date hereof), the Company represents and warrants to each of the Noteholders as follows (such representations and warranties are given with the assumption that the Asset Sale Transactions have been consummated):
(a) Organization, Standing and Corporate Power of the Company. The Company is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated. Each of the Companys Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated or formed. Each of the Company and its Subsidiaries has all requisite corporate or other power, as the case may be, and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and its Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(b) Capitalization.
(i) The authorized capital stock of the Company consists of 100,000,000 shares of common stock, par value $0.10 per share, and 5,000,000 shares of Company Preferred Stock. At the close of business on the date of this Agreement, (i) 70,075,429 shares of Company Common Stock were issued and outstanding, (ii) 727,137 shares of Company Common Stock were held by the Company in its treasury and (iii) no shares of Company Preferred Stock were issued and outstanding. All of the shares of Company Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. None of the Subsidiaries of the Company beneficially owns any shares of Company Common Stock or any other equity securities of the Company.
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(ii) Since January 1, 2014, the Company has not issued any shares of its capital stock, voting securities or equity interests, or any securities convertible into or exchangeable or exercisable for any shares of its capital stock, voting securities or equity interests, other than pursuant to the outstanding awards under the Company Incentive Plan or as otherwise expressly permitted by the Merger Agreement.
(iii) Except (i) as set forth in Section 1.7(b)(i) or in the Company Disclosure Schedule or (ii) for the Convertible Notes, as of the date of this Agreement there are not, and as of the Closing there will not be, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) the Company issued and outstanding or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance of, or obligating the Company or any of its Subsidiaries to transfer or sell, any shares of capital stock, voting securities or equity interests of (or any securities convertible into, exercisable or exchangeable for equity interests of) the Company, including any representing the right to purchase or otherwise receive any Company Common Stock. Except as provided for by the Company Incentive Plan and the Convertible Notes, none of the Company or any of its Subsidiaries has issued or is bound by any outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any character providing for the issuance or disposition of any shares of capital stock, voting securities or equity interests of any Subsidiary of the Company. There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock, voting securities or equity interests (or any options, warrants or other rights to acquire any shares of capital stock, voting securities or equity interests) of the Company or any of its Subsidiaries. Except as set forth in Section 2.2(c) of the Company Disclosure Schedule, none of the Company or any Subsidiary of the Company is a party to any stockholders agreement, voting trust agreement, registration rights agreement or other similar agreement or understanding relating to capital stock, voting securities or equity interests of the Company or any of its Subsidiaries or any other agreement relating to the disposition, voting or dividends with respect to any such stock, securities or interests.
(c) Authority; Noncontravention.
(i) The Company has all necessary corporate or other power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance by the Company of this Agreement have been duly authorized and approved by the Company Board and no other corporate or other action on the part of the Company is necessary to authorize the execution, delivery and performance by the Company of this Agreement. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Noteholders, constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to the Bankruptcy and Equity Exception.
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(ii) Except as set forth in Section 2.3(c) of the Company Disclosure Schedule, none of the execution and delivery of this Agreement by the Company or compliance by the Company with any of the terms or provisions hereof will, (i) conflict with or violate any provision of the Company Charter Documents, (ii) violate any material Law applicable to the Company, any of its Subsidiaries or any of their respective properties or assets or (iii) violate, conflict with, result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of, the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any Contract or Permit, to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except, in the case of clause (iii), for such violations, conflicts, losses, defaults, terminations, cancellations, accelerations or Liens as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(d) Governmental Approvals. Except as provided in Section 2.4 of the Merger Agreement, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement by the Company.
(e) Issuance and Delivery of Purchased Shares. The Company Common Stock comprising the Stock Payment and the Modified Convertible Notes comprising the Modified Note Payment and the issuance of the Company Common Stock upon conversion of the Modified Convertible Notes have been duly authorized and, when issued by the Company in each case in compliance with the provisions of this Agreement and the Modified Notes, (a) shall be free and clear of any and all Liens, except for such Liens as are expressly set forth in this Agreement or otherwise imposed by applicable federal or state securities laws or by the Noteholder, (b) shall have been duly authorized and validly issued and (c) shall be fully paid and nonassessable.
(f) No General Solicitation. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Section 4(a)(2) under the Securities Act) in connection with the offer or issuance of the Company Common Stock comprising the Stock Payment and the Modified Convertible Notes comprising the Modified Note Payment.
(g) Preemptive Rights; Rights of First Offer. None of the issuance of the Company Common Stock and the Modified Convertible Notes pursuant to this Agreement and the issuance of Company Common Stock upon conversion of the Modified Convertible Notes in accordance with their terms are or will be subject to any preemptive rights, rights of first offer or similar rights of any Person.
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(h) Private Placement. Assuming the accuracy of the representations and warranties of the Noteholders set forth in Section 1.5(e) of this Agreement, the issuance of the Company Common Stock comprising the Stock Payment and the Modified Convertible Notes comprising the Modified Note Payment and the issuance of the Company Common Stock upon conversion of the Modified Convertible Notes, in each case in conformity with the terms of this Agreement and the Modified Convertible Notes, are exempt from the registration requirements of Section 5 of the Securities Act.
(i) Registration Rights. Other than the Registration Rights Agreement and except as set forth in Section 2.13 of the Company Disclosure Schedule, the Company has not granted or agreed to grant, and is not under any obligation to provide, any rights (including piggy-back registration rights) to register under the Securities Act any of its presently outstanding securities or any of its securities that may be issued subsequently.
ARTICLE 2
COVENANTS AND RELEASES
2.1 Further Assurances. If at any time before or after the Effective Time, any of the parties hereto reasonably believes or is advised that any further instruments, deeds, assignments or assurances are reasonably necessary to consummate the contribution of Convertible Notes, the payment of the Cash Payment, issuance of the Stock Payment and the issuance of the Modified Note Payment, as contemplated herein, or to carry out the purposes and intent of this Agreement at or after the Rollover Time, then the parties hereto, and their respective officers and directors, as applicable, shall execute and deliver all such proper deeds, assignments, instruments and assurances and do all other things reasonably necessary to consummate the contribution of the Convertible Notes, the payment of the Cash Payment, issuance of the Stock Payment and the issuance of the Modified Note Payment and to carry out the purposes and intent of this Agreement, including the amendment of the Convertible Notes by the requisite number of Noteholders to facilitate and consummate the transactions contemplated by the parties.
2.2 Releases.
(a) Effective as of the Effective Time, each of the Noteholders, on their own behalf and on behalf of their respective Affiliates, including, without limitation, derivatively, to the fullest extent legally possible, hereby completely and forever releases, waives and discharges, and shall be forever precluded from asserting, any and all claims, obligations, suits, judgments, damages, debts, rights, causes of action and liabilities of any kind or nature, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, whether or not hidden or concealed, then existing in law, equity or otherwise, that directly or derivatively, to the fullest extent legally possible, it has, had or may have against the Company or its Subsidiaries, or any of their or their Affiliates present or former directors, officers, employees, management, predecessors, members, attorneys, accountants, underwriters, investment bankers, financial advisors, appraisers, representatives or agents acting
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in such capacity, that are based in whole or in part on any act, omission, transaction or other occurrence (i) prior to the date hereof arising out of or related to such Noteholders status as a director, officer or employee of the Company or any of its subsidiaries, or (ii) prior to the Effective Time arising out of or related to any and all matters related to the Convertible Notes, including, but not limited to, such Noteholders status as an owner or holder of such Convertible Notes and the payment of any premium or penalty upon the occurrence of the Merger or the other transactions contemplated by the Merger Agreement pursuant to the terms of the Convertible Notes or otherwise; provided, however, that the foregoing release shall not cover (A) claims under the Stock Purchase Agreement, dated July 15, 2013, by and among the Company, Hudson Clothing Holdings, Inc., and such other parties set forth on the signature pages thereto, (B) if such Noteholder (or any employee, officer or designee thereof) is or was a director or officer of the Company or any Subsidiary of the Company, claims for indemnification under applicable Law, the Companys or such Subsidiarys certificate of incorporation or bylaws or other organizational documents or any indemnification agreement with the Company or its Affiliates, (C) if such Noteholder is or was an employee of the Company, claims for wages, accrued vacation and other employee benefits under offer letters, employment agreements or policies of the Company or its Affiliates and (D) claims to enforce this Agreement or any agreement or instrument entered into pursuant hereto.
(b) Effective as of the Effective Time, the Company on its own behalf and on behalf of its Affiliates, including, without limitation, derivatively, to the fullest extent legally possible, hereby completely and forever releases, waives and discharges, and shall be forever precluded from asserting, any and all claims, obligations, suits, judgments, damages, debts, rights, causes of action and liabilities of any kind or nature, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, whether or not hidden or concealed, then existing in law, equity or otherwise, that directly or derivatively, to the fullest extent legally possible, it has, had or may have against each of the Noteholders or any of their respective Subsidiaries, or any of their or their Affiliates present or former directors, officers, employees, management, predecessors, members, attorneys, accountants, underwriters, investment bankers, financial advisors, appraisers, representatives or agents acting in such capacity, that are based in whole or in part on any act, omission, transaction or other occurrence (i) prior to the date hereof arising out of or related to such Noteholders status as a director, officer or employee of the Company or any of its subsidiaries, or (ii) prior to the Effective Time arising out of or related to any and all matters related to the Convertible Notes, including, but not limited to, such Noteholders status as an owner or holder of such Convertible Notes or otherwise; provided, however, that the foregoing release shall not cover claims under this Agreement or any agreement or instrument entered into pursuant hereto or the Stock Purchase Agreement, dated July 15, 2013, by and among the Company, Hudson Clothing Holdings, Inc., and such other parties set forth on the signature pages thereto.
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(c) Each releasing party acknowledges that such releasing party is familiar with and understands the provision of Section 1542 of the California Civil Code, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HER OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HER OR HER MUST HAVE MATERIALLY AFFECTED HER OR HER SETTLEMENT WITH THE DEBTOR.
Being aware of that code section, such releasing party expressly waives and relinquishes any rights or benefits such releasing party may have thereunder, as well as any other state or federal statutes or common law principles of similar effect. Each releasing party intends and agrees that the waiver and release provided for in this Agreement shall be effective as a full and final accord and satisfaction and release of any and all claims of every nature and kind whatsoever, whether known or unknown, suspected or unsuspected.
2.3 Confidentiality. Each Noteholder expressly agrees (as if such Noteholder was expressly a party to the Confidentiality Agreements (as defined below)) to, and to cause such Noteholders Affiliates, directors, officers, employees, agents, accountants, attorneys, bankers, partners, advisors and representatives (collectively, Representatives) to treat as Confidential Information as such term is defined under the terms of the Confidentiality and Nondisclosure Agreements dated July 15, 2015, between the Company and Mr. Peter Kim (Mr. Kim) and between the Company and Fireman Capital CPF Hudson Co-Invest LP (Fireman), respectively (the Confidentiality Agreements), any and all information or data (written, electronic or oral) provided at any time to such Noteholder or its Representatives in connection with the transactions contemplated by the Transaction Documents, subject to the limitations and exceptions and other terms and conditions of the Confidentiality Agreements or as may be required under applicable securities Laws; provided, however, that the Confidentiality Agreements shall be deemed to be amended hereby such that the obligations thereunder (and therefore hereunder) shall not terminate upon the consummation of the Transaction (as defined in the Confidentiality Agreements) and the Term (as defined in the Confidentiality Agreements) shall be extended to the date that is eighteen (18) months following the date hereof.
2.4 Transfer of Convertible Notes. Between the date of this Agreement and the earlier of: (i) the termination of this Agreement and (ii) the Effective Time, each Noteholder agrees that it shall not, directly or indirectly, by operation of Law or otherwise, sell, contract to sell, give, assign, grant a Lien on, offer, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any economic, voting or other rights in or to (collectively, Transfer), all or any portion of its Convertible Notes or any interest therein, other than to the Company, unless the transferee thereof (a) executes a Joinder Agreement, in form and substance reasonably acceptable to the Company, whereby such transferee agrees (1) to become a party to this Agreement and (2) to be fully bound by the terms, and subject to all of the conditions, of this Agreement as though an original party (the Joinder Agreement) and (b) delivers the Joinder Agreement to an officer of the Company, which delivery is acknowledged in writing by such officer. Any Transfer by a Noteholder in violation of this Section 2.4 shall be deemed void ab initio.
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2.5 Reservation and Listing. The Company shall (a) from and after the Effective Time maintain a reserve from its duly authorized Company Common Stock for issuance of the shares of Company Common Stock to be issued upon conversion of the Modified Convertible Notes, (b) prepare and timely file with NASDAQ a subsequent listing application covering all of shares of Company Common Stock comprising the Stock Payment and the Company Common Stock to be issued upon conversion of the Modified Convertible Notes, (c) use reasonable best efforts to cause the shares of Company Common Stock comprising the Stock Payment and the Company Common Stock to be issued upon conversion of the Modified Convertible Notes to be approved for listing on NASDAQ as soon as reasonably practicable following the date hereof and in any event prior to the Closing Date and (d) use reasonable best efforts to maintain the listing of the Company Common Stock comprising the Stock Payment and the shares of Company Common Stock to be issued upon conversion of the Modified Convertible Notes on NASDAQ.
2.6 Notification of Certain Matters. The Company shall give prompt notice to the Noteholders, and Mr. Kim and Fireman shall give prompt notice to the Company, of (i) any notice or other communication received by such party from any Governmental Authority in connection with any of the transactions contemplated by this Agreement or from any Person alleging that the consent of such Person is or may be required in connection with this Agreement or any of the transactions contemplated by this Agreement, (ii) any actions, suits, claims, investigations or proceedings commenced or, to such partys knowledge, threatened against, relating to or involving or otherwise affecting such party or any of its Subsidiaries which relate to this Agreement or any of the transactions contemplated by this Agreement, (iii) the termination of the Merger Agreement in accordance with its terms prior to the Rollover Time, or (iv) the discovery of any fact or circumstance that, or the occurrence or non-occurrence of any event the occurrence or non-occurrence of which, is reasonably likely to (A) in the case of the Company, cause the conditions set forth in Section 3.2(a) or Section 3.2(b) not to be satisfied and (B) in the case of the Noteholders, cause the conditions set forth in Section 3.3(a) or Section 3.3(b) not to be satisfied; provided, however, that the delivery of any notice pursuant to this Section 2.6 shall not (x) cure any breach of, or non-compliance with, any provision of this Agreement or (y) limit the remedies available to the party receiving such notice.
2.7 Fees and Expenses. At the Effective Time, the Company will reimburse Mr. Kim and Fireman in an amount equal to $250,000 in the aggregate for certain fees and expenses of B. Riley & Co., LLC incurred in connection with this Agreement, the Modified Convertible Notes and the Employment Agreement by and among the Company, Hudson Clothing Holdings, Inc., HC Acquisition Holdings, Inc. and Mr. Kim. Such reimbursement shall be made on the Closing Date by wire transfer of immediately available funds to the account or accounts specified by Mr. Kim and Fireman on no less than two days prior notice. Except as otherwise provided herein, all fees and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses.
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2.8 Amendments, Modifications and Waivers of the Transaction Documents. Without the prior written consent of Mr. Kim and Fireman, which consent shall not be unreasonably withheld, conditioned or delayed, the Company and its Subsidiaries shall not amend, modify or waive any provisions of the Transaction Documents so as to materially alter the form of consideration to be paid to holders of RG Units under the Merger Agreement or to TCP Denim, LLC, a Delaware limited liability company, under the Stock Purchase Agreement or the amount of consideration payable by or to the Company or any of its Subsidiaries in connection with the transactions contemplated by the Transaction Documents or materially alter the aggregate amount of the indebtedness or any preferred stock of the Company or any of its Subsidiaries contemplated in connection therewith, in each case in a manner that would reasonably be likely to be adverse to the economic benefits to the Noteholders of the Stock Payment or Modified Note Payment contemplated hereby.
2.9 Section 16 Matters. The Company Board shall, prior to the Effective Time, take all such actions as may be necessary or appropriate to cause the transactions contemplated by this Agreement, including the contribution of the Convertible Notes to the Company and the issuance by the Company of the Company Common Stock and the Modified Convertible Notes pursuant to this Agreement to be exempt under Rule 16b-3 promulgated under the Exchange Act.
ARTICLE 3
CONDITIONS
3.1 Conditions to Each Partys Obligations. The respective obligations of each party hereto to consummate the transactions contemplated hereby shall be subject to the satisfaction (or waiver, if permissible under applicable Law, by Mr. Kim and Fireman, the Company and RG) on or prior to the Closing Date of the following conditions:
(a) No Injunctions or Restraints. No Law or Order enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining, preventing or prohibiting consummation of the transactions contemplated hereby or making the consummation of the transactions contemplated hereby illegal.
(b) Consummation of the Merger Agreement. The Merger shall have been consummated in accordance with the terms of the Merger Agreement, as may be amended or modified after the date hereof in compliance with Section 2.8.
3.2 Conditions to the Obligations of the Noteholders. The obligations of the Noteholders to consummate the transactions contemplated hereby shall be subject to the satisfaction, or waiver by Mr. Kim and Fireman, of each of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of the Company set forth in Section 1.7(a), Section 1.7(b), Section 1.7(c)(i), Section 1.7(e), Section 1.7(f), Section 1.7(g), Section 1.7(h) and Section 1.7(i) shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date and immediately prior to the Merger, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), (ii) all other representations and warranties of the Company set forth in this Agreement and the representations and warranties of the Company set forth in Section 2.5, Section 2.6, Section 2.7 and Section 2.8 of the Merger Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, as if made at and as of such time (except
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to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to not be so true and correct (without giving effect to any limitation as to materiality or Company Material Adverse Effect set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect and (iii) the representations and warranties of RG set forth in Section 3.1, Section 3.2(a) and Section 3.3 of the Merger Agreement shall be true and correct in all respects (other than, in the case of Section 3.3, for such failures to be true and correct as are de minimis in effect) as of the date of this Agreement and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date). The Noteholders shall have received a certificate signed on behalf of the Company by the Interim Chief Executive Officer and Chief Financial Officer thereof to such effect, and the Company shall have received the certificate required to be delivered by RG pursuant to Section 5.3(a) of the Merger Agreement, a copy of which will have been provided to the Noteholders but, for the avoidance of doubt, the delivery of such copy shall not, and shall not be deemed to, give the Noteholders a right to make claims against RG or the Company.
(b) Performance of Obligations of Company. The Company shall have performed or complied in all material respects with their respective obligations, agreements and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing Date and the Noteholders shall have received a certificate signed on behalf of the Company by the Interim Chief Executive Officer and Chief Financial Officer thereof to such effect.
(c) Closing Deliveries. The Company shall have made, or caused to be made, delivery to the Noteholders of the items required to be delivered to the Noteholders pursuant to Section 1.4(b).
3.3 Conditions to the Obligations of the Company. The obligations of the Company to consummate the transactions contemplated hereby shall be subject to the satisfaction, or waiver by the Company, of each of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of the Noteholders set forth in Section 1.6(a), Section 1.6(b), Section 1.6(d) and Section 1.6(e) shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date, as if made at and as of such time and (ii) all other representations and warranties of the Noteholders set forth in this Agreement shall be true and correct (disregarding all qualifications or limitations as to materiality and words of similar import set forth therein) as of the date of this Agreement and as of the Closing Date as though made on the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a material effect on the Noteholders ability to, in a timely manner, perform its obligations under this Agreement or consummate the transactions contemplated hereby.
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(b) Performance of Obligations of the Noteholders. The Noteholders shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date.
(c) Closing Deliveries. The Noteholders shall have made, or caused to be made, delivery to the Purchaser of the items required to be delivered to the Purchaser pursuant to Section 1.4(a).
ARTICLE 4
MISCELLANEOUS
4.1 Survival of Representations and Warranties. The representations and warranties will not survive the Closing.
4.2 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
(i) if to the Company, to:
Joes Jeans Inc.
2340 S. Eastern Avenue
Commerce, CA 90040
Attention: Interim Chief Executive Officer
Facsimile: (323) 837-3791
with a copy (which shall not constitute notice) to:
Akin Gump Strauss Hauer & Feld LLP
1333 New Hampshire Avenue NW
Washington DC 20036
Attention: Russell W. Parks, Jr.
Erica D. McGrady
Facsimile: (202) 887-4288
(ii) if to any Noteholder, to the address identified for such Noteholder on the signature page for such Noteholder attached hereto.
or such other address or facsimile number as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
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4.3 Interpretation. When a reference is made in this Agreement to a Section, Article or Exhibit such reference shall be to a Section, Article or Exhibit of this Agreement unless otherwise indicated. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word including and words of similar import when used in this Agreement will mean including, without limitation, unless otherwise specified. References to the Company Disclosure Schedule refer to the applicable sections of such schedules delivered pursuant to the Merger Agreement and any disclosure made on any other section of such schedules that is applicable (if such applicability is reasonably apparent on its face).
4.4 Entire Agreement. This Agreement (including the Exhibits and Schedules hereto), and the Confidentiality Agreements constitute the entire agreement, and supersedes all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings, among the parties hereto with respect to the subject matter hereof.
4.5 Governing Law. The internal laws of the State of Delaware, irrespective of its conflicts of law principles, shall govern the validity of this Agreement, the construction of its terms, and the interpretation and enforcement of the rights and duties of the parties hereto. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of Delaware and the Federal courts of the United States of America located within the State of Delaware (the Chosen Courts) solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby and thereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or thereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a Delaware State or Federal court. With respect to any particular action, suit or proceeding, venue shall lie solely in Delaware.
4.6 Assignment; Successors. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any party without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and permitted assigns.
4.7 Enforcement. The parties to this Agreement agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties to this Agreement shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions of this
16
Agreement in the Chosen Courts, this being in addition to any other remedy at law or in equity, and the parties to this Agreement hereby waive any requirement for the posting of any bond or similar collateral in connection therewith. The parties acknowledge and agree that each party hereto shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity. Each party hereto agrees that it will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that (1) the other party has an adequate remedy at law or (2) an award of specific performance is not an appropriate remedy for any reason at law or equity.
4.8 Currency. All references to dollars or $ or US$ in this Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement.
4.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
4.10 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
4.11 Counterparts; Facsimile Signature. This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile or other electronically scanned and transmitted signatures shall be deemed originals for all purposes of this Agreement.
4.12 No Presumption Against Drafting Party. Each party to this Agreement acknowledges that such party has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.
4.13 Termination. This Agreement shall automatically be terminated and of no effect upon the termination of the Merger Agreement in accordance with its terms prior to the Rollover Time. This Agreement shall also be terminated upon written notice by the Company, on the one hand, or by Mr. Kim and Fireman on the other hand, if the Rollover Time has not occurred prior
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to April 8, 2016. In the event of the termination of this Agreement as provided in this Section 4.13, written notice thereof shall be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void (other than this Article 4, which shall survive termination of this Agreement), and there shall be no liability on the part of the Noteholders, the Company, or any of their Affiliates or Representatives and all Convertible Notes, if previously delivered to the Company, shall be returned to the Noteholders and the Stock Payment and the Modified Notes Payment to be issued hereunder shall be deemed not to have been issued or outstanding.
4.14 Amendment; Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed by the Company, Mr. Kim and Fireman. No course of dealing or any delay or failure to exercise any right, power or remedy hereunder on the part of any party hereto shall operate as a waiver of or otherwise prejudice such partys rights, powers or remedies.
4.15 Spousal Consent. Each Noteholder who is an individual and who is married on the date of this Agreement and resides in California shall cause such Noteholders spouse to execute and deliver to the Company a consent of Spouse in the form of Exhibit A attached hereto (a Spousal Consent), dated as of the date hereof. If any Noteholder who is an individual should marry following the date of this Agreement and resides in California, such Noteholder shall cause his or her spouse to execute and deliver to the Company a Spousal Consent within thirty (30) days thereafter.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Rollover Agreement as of the date first written above.
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JOES JEANS INC. |
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By: |
/s/ Hamish Sandhu |
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Name: |
Hamish Sandhu |
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Title: |
CFO |
[Signature Page to Rollover Agreement]
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NOTEHOLDER |
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/s/ Paul Cardenas |
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Paul Cardenas |
[Signature Page to Rollover Agreement]
CONSENT OF SPOUSE
I, Mabel Cardenas, spouse of Paul Cardenas, acknowledge that I have read the Rollover Agreement, dated as of September 8, 2015, to which this Consent is attached as Exhibit A (the Agreement), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the voting and transfer of Convertible Notes that my spouse may own, including any interest I might have therein.
I hereby agree that my interest, if any, in any Convertible Notes subject to the Agreement shall be irrevocably bound by the Agreement and further understand and agree that any community property interest I may have in such Convertible Notes shall be similarly bound by the Agreement.
I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.
Dated: |
August 21, 2015 |
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/s/ Mabel Cardenas |
[Signature Page to Rollover Agreement]
CONSENT OF SPOUSE
I, Meelim Kim, spouse of Tony Chu, acknowledge that I have read the Rollover Agreement, dated as of September 8, 2015, to which this Consent is attached as Exhibit A (the Agreement), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the voting and transfer of Convertible Notes that my spouse may own, including any interest I might have therein.
I hereby agree that my interest, if any, in any Convertible Notes subject to the Agreement shall be irrevocably bound by the Agreement and further understand and agree that any community property interest I may have in such Convertible Notes shall be similarly bound by the Agreement.
I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.
Dated: |
August 22, 2015 |
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/s/ Meelim Kim |
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NOTEHOLDER |
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/s/ Barbara Cook |
[Signature Page to Rollover Agreement]
CONSENT OF SPOUSE
I, Alex Daneman, spouse of Barbara Cook, acknowledge that I have read the Rollover Agreement, dated as of September 8, 2015, to which this Consent is attached as Exhibit A (the Agreement), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the voting and transfer of Convertible Notes that my spouse may own, including any interest I might have therein.
I hereby agree that my interest, if any, in any Convertible Notes subject to the Agreement shall be irrevocably bound by the Agreement and further understand and agree that any community property interest I may have in such Convertible Notes shall be similarly bound by the Agreement.
I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.
Dated: |
August 21, 2015 |
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/s/ Alex Daneman |
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NOTEHOLDER |
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FIREMAN CAPITAL CPF HUDSON CO-INVEST LP |
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By: Fireman Partners CPF GP I LLC, its General Partner |
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By: Fireman Capital Partners LLC, its Managing Member |
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/s/ Dan Fireman |
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Name: Dan Fireman |
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Its: Managing Partner |
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c/o Fireman Capital Partners LLC |
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Watermill Center |
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800 South Street, Suite 600 |
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Waltham, MA 02453 |
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Attention: Dan Fireman |
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E-Mail: dan.fireman@firemancapital.com |
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Telephone: 617-671-0555 |
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Facsimile: 617-236-8111 |
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with a copy to: |
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McDermott Will & Emery LLP |
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340 Madison Avenue |
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New York, New York 10173 |
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Attention: Todd Finger |
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E-Mail: tfinger@mwe.com |
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Telephone: 212-547-5400 |
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Facsimile: 212-547-5444 |
[Signature Page to Rollover Agreement]
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NOTEHOLDER |
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/s/ Chris Lynch |
[Signature Page to Rollover Agreement]
CONSENT OF SPOUSE
I, Dionne Lynch, spouse of Christopher M. Lynch, acknowledge that I have read the Rollover Agreement, dated as of September 8, 2015, to which this Consent is attached as Exhibit A (the Agreement), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the voting and transfer of Convertible Notes that my spouse may own, including any interest I might have therein.
I hereby agree that my interest, if any, in any Convertible Notes subject to the Agreement shall be irrevocably bound by the Agreement and further understand and agree that any community property interest I may have in such Convertible Notes shall be similarly bound by the Agreement.
I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.
Dated: |
August 20, 2015 |
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/s/ Dionne L. Lynch |
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NOTEHOLDER |
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/s/ Peter Kim |
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Name: Peter Kim |
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with a copy to: |
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Sullivan & Cromwell LLP |
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1888 Century Park East, Suite 2100 |
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Los Angeles, California 90067 |
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Attention: Patrick S. Brown |
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E-Mail: brownp@sullcrom.com |
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Telephone: 310-712-6603 |
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Facsimile: 310-712-8800 |
[Signature Page to Rollover Agreement]
CONSENT OF SPOUSE
I, Seimie Kim, spouse of Peter Kim, acknowledge that I have read the Rollover Agreement, dated as of September 8, 2015, to which this Consent is attached as Exhibit A (the Agreement), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the voting and transfer of Convertible Notes that my spouse may own, including any interest I might have therein.
I hereby agree that my interest, if any, in any Convertible Notes subject to the Agreement shall be irrevocably bound by the Agreement and further understand and agree that any community property interest I may have in such Convertible Notes shall be similarly bound by the Agreement.
I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.
Dated: |
August 21, 2015 |
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/s/ Seimie Kim |
[Signature Page to Rollover Agreement]
Schedule A
Company Capital Stock
Name |
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Principal Amount as of 7/1/2015 |
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Accrued Interest as of 7/1/2015 |
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Stock Payment Percentage |
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Cash Payment Percentage |
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Modified Note Payment Percentage |
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Peter Kim |
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14,812,425 |
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987,124 |
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25.0 |
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25.0 |
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50.0 |
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Paul Cardenas |
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5,697,090 |
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379,663 |
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25.0 |
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25.0 |
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50.0 |
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Tony Chu |
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2,278,839 |
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151,865 |
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25.0 |
|
25.0 |
|
50.0 |
|
Chris Lynch |
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7,697 |
|
513 |
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25.0 |
|
25.0 |
|
50.0 |
|
Ben Taverniti |
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177,879 |
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11,854 |
|
25.0 |
|
25.0 |
|
50.0 |
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Barbara Cook |
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855,954 |
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57,042 |
|
25.0 |
|
25.0 |
|
50.0 |
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Fireman Capital CPF Hudson Co-Invest LP |
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10,160,654 |
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348,556 |
|
50.0 |
|
25.0 |
|
25.0 |
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Exhibit 10.3
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the Agreement) is made as of [ ], 2015, by and among Joes Jeans, Inc., a Delaware corporation (the Company), each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an Investor and each of the Persons listed on Schedule B hereto, each of which is referred to in this Agreement as a Management Holder.
RECITALS
WHEREAS, the Investors and the Management Holders hold Registrable Securities (as defined herein).
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows:
1. Definitions. For purposes of this Agreement:
1.1 Affiliate means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including any general partner, managing member, officer or director of such Person or any private equity fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. The term control (including the terms controlling and controlled by) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
1.2 Agreement has the meaning specified in the Preamble.
1.3 Common Stock means the common stock, par value $.10 per share, of the Company and any and all securities of any kind whatsoever which may be issued after the date hereof in respect of, in exchange for, or in substitution of, such common stock of the Company pursuant to a merger, consolidation, stock split (forward or reverse), stock dividend, conversion, combination, or recapitalization of the Company or otherwise.
1.4 Company has the meaning specified in the Preamble and includes any successor thereto (by merger, consolidation, sale of all or substantially all assets, operation of law or otherwise).
1.5 Convertible Notes means, collectively, each Subordinated Convertible Note issued by the Company on [ ], 2015 in favor of a Management Holder.
1.6 Damages means any loss, claim, damage, expense (including expenses incurred in investigating, preparing or defending any litigation or proceeding, whether commenced or threatened, and the reasonable fees, disbursements and other charges of legal counsel) or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, claim,
damage, expense or liability (or any action in respect thereof) arises out of, is incurred in connection with, is caused by or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any other prospectus or documents or information filed with or furnished to the SEC related thereto or any amendments or supplements thereto; (ii) an omission or alleged omission to state in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any other prospectus or documents or information filed with or furnished to the SEC related thereto or any amendments or supplements thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under any state securities law.
1.7 Demand Notice has the meaning specified in Subsection 2.1(a).
1.8 Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
1.9 Excluded Registration means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary of the Company pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; or (iii) a registration on Form S-4 or otherwise in connection with an exchange offer.
1.10 FINRA means the Financial Industry Regulatory Authority, Inc.
1.12 Form S-1 means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
1.13 Form S-3 means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.
1.14 Form S-4 means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
1.15 Form S-8 means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
1.16 Fund Indemnitees has the meaning specified in Subsection 2.11(e).
1.17 Fund Indemnitors has the meaning specified in Subsection 2.11(e).
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1.18 Holder means any holder of Registrable Securities who is a party to this Agreement.
1.19 Immediate Family Member means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.
1.20 Initiating Holders means, collectively, Holders who properly initiate a registration under this Agreement.
1.21 Investor has the meaning specified in the Preamble.
1.22 Management Holders has the meaning specified in the Preamble.
1.23 Person means any individual, corporation, partnership, trust, limited liability company, association or other entity.
1.24 Registrable Securities means (i) any shares of Common Stock held by an Investor, or any Management Holder, at any time; (ii) any shares of Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of the Series A Preferred Stock, a Convertible Note or any other securities of the Company or an Affiliate of the Company held by the Holders at any time; or (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, in exchange for, or in substitution for or replacement of, the shares referenced in clauses (i) and (ii) above. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) such securities shall have been sold (other than in a privately negotiated sale where the transferor has assigned its rights under this Agreement and the transferee agrees in writing to be bound by the terms hereof) in compliance with the requirements of SEC Rule 144, as such SEC Rule 144 may be amended (or any successor provision thereto) and any legend thereon relating to restrictions on transferability thereof under the Securities Act or otherwise has been removed by the Company or (iii) such securities have ceased to be outstanding.
1.25 Registration Expenses means any and all fees and expenses incident to performance of or compliance with this Agreement by the Company, including, without limitation (i) all SEC, stock exchange, FINRA and other registration, listing and filing fees (including, if applicable, the fees and expenses of any qualified independent underwriter and its counsel as may be required by the rules and regulations of FINRA), (ii) all fees and expenses incurred (including by the underwriters, if any) in connection with compliance with state securities or blue sky laws and compliance with the rules of any stock exchange (including reasonable fees and disbursements of counsel in connection with such compliance and the preparation of a blue sky memorandum and legal investment survey), (iii) all fees and expenses of any Persons in preparing or assisting in preparing, word processing, printing, distributing,
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mailing and delivering any registration statement, any prospectus, securities certificates and other documents relating to the performance of or compliance with this Agreement, (iv) the fees and disbursements of counsel for the Company, (v) the reasonable fees and disbursements of one counsel (and any applicable local counsel) for the selling Holders (as selected by the Investors holding a majority of the Registrable Securities held by the Investors), (vi) the fees and disbursements of all independent public accountants (including the expenses of any audit and/or cold comfort letters) and the fees and expenses of other Persons, including experts, retained by the Company, and (vii) all fees and disbursements of underwriters customarily paid by the issuers or sellers of securities (subject to the proviso below); provided, however, Registration Expenses shall not include discounts and commissions payable to underwriters, selling brokers, dealer managers or other similar Persons engaged in the distribution of any of the Registrable Securities and applicable transfer and documentary stamp taxes, if any.
1.26 SEC means the Securities and Exchange Commission.
1.27 SEC Rule 144 means Rule 144 promulgated by the SEC under the Securities Act.
1.28 SEC Rule 145 means Rule 145 promulgated by the SEC under the Securities Act.
1.29 Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.30 Series A Preferred Stock means the Series A Preferred Stock, par value $.10 per share, of the Company.
1.31 All references to (a) registration statement shall be deemed to mean the registration statement and all amendments and supplements thereto, including any post-effective amendment, in each case including the prospectus contained therein, all exhibits thereto and all information incorporated (or deemed to be incorporated) by reference therein, and (b) prospectus shall be deemed to mean the prospectus included in a registration statement (including any preliminary or final prospectus and any prospectus that includes any information previously omitted from a prospectus in reliance upon Rule 430A, 430B or 430C under the Securities Act), and any preliminary or final prospectus supplement, free-writing prospectus or any amendments or supplements thereto, including in each case all information incorporated (or deemed to be incorporated) by reference therein.
2. Registration Rights. The Company covenants and agrees as follows:
2.1 Demand Registration.
(a) Form S-1 Demand. If at any time after the date hereof the Company receives a request that the Company file a Form S-1 registration statement from Investors holding a majority of the Registrable Securities then held by Investors proposing to sell (together with any Affiliates of such Investors that are also Holders) at least twenty percent (20%) of the Registrable Securities then held by all Investors (or a lesser percent if the
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anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $20 million) requesting to sell Registrable Securities with an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $20 million, then the Company shall (x) within ten (10) days after the date such request is given, give notice thereof specifying to all Holders other than the Initiating Holders (i) the Initiating Holders request, (ii) the aggregate number of Registrable Securities requested by the Initiating Holders to be registered and (iii) the intended method or methods of distribution in connection with such request to the extent then known (the Demand Notice); and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, in each case, in accordance with the intended method or methods of distribution specified by such Holders, as specified by notice given by each such Holder to the Company within twenty (20) days after the date the Demand Notice is given, and in each case, subject to the limitations of Subsection 2.5.
(b) Form S-3 Demand. If, at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders proposing to sell (together with any Affiliates of such Holders that are also Holders) outstanding Registrable Securities having an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $10 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within thirty (30) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, in each case, in accordance with the intended method or methods of distribution specified by such Holders, as specified by notice given by each such Holder to the Company within twenty (20) days after the date the Demand Notice is given, and in each case, subject to the limitations of Subsection 2.5.
(c) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(a) (i) during the period that is sixty (60) days before the Companys good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith reasonable best efforts to cause such registration statement to become effective; (ii) if the Company has effected four (4) registrations pursuant to Subsection 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 (including in accordance with the intended method or methods of distribution specified by the Holders) pursuant to a request made pursuant to Subsection 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(b) during the period that is thirty (30) days before the Companys good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith reasonable best efforts to cause such registration statement to become effective.
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(d) A registration shall not be counted as effected for purposes of Subsection 2.1 until such time as the applicable registration statement has been declared effective by the SEC; provided, however, that if any Initiating Holder withdraws its request for such registration and does not reimburse the Company for its reasonable out-of-pocket Registration Expenses relating to the preparation and filing of such registration statement, such withdrawn registration statement shall be counted as effected for purposes of Subsection 2.1 with respect to such withdrawing Initiating Holder but not any other Holders, except as provided in Subsection 2.4. Notwithstanding the foregoing, a registration statement shall not be counted as effected in the circumstances set forth in Subsection 2.5(d).
2.2 Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any shares of its capital stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration) and the registration form to be used may be used for the registration of Registrable Securities, the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Subsection 2.5, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration, in each case, in accordance with the intended method or methods of distribution specified by such Holders.
2.3 Withdrawal by the Company. The Company shall have the right to terminate or withdraw any registration initiated by it under Subsection 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The Registration Expenses (excluding, in the case of an underwritten offering, any underwriting discounts and commissions with respect to any Registrable Securities that a Holder has requested to be included in such registration) of such withdrawn registration shall be borne by the Company in accordance with Subsection 2.8.
2.4 Withdrawal Rights. Any Holder that has notified or directed the Company to include any Registrable Securities in a registration statement pursuant to Subsections 2.1 or 2.2 shall have the right to withdraw any such notice or direction with respect to any or all of such Registrable Securities by giving written notice to such effect to the Company at least two days prior to the effective date of such registration statement. In the event of any such withdrawal, the Company shall not include such Registrable Securities in the applicable registration, and such Registrable Securities shall continue to be Registrable Securities hereunder. No such withdrawal shall affect the obligations of the Company with respect to the Registrable Securities not so withdrawn; provided that, in the case of a registration pursuant to Subsections 2.1(a) or (b), if such withdrawal shall reduce the anticipated aggregate offering price of the Registrable Securities below $10 million as of such date, the Company shall as promptly as practicable give each Holder of Registrable Securities sought to be registered notice to such effect, referring to this Agreement and summarizing this Subsection 2.4, and within five (5) business days after such notice either the Company or the Holders of a majority of the Registrable Securities sought to be registered may, by written notice made to each Holder of Registrable Securities sought to be registered and the Company, as applicable, elect that such registration statement not be filed or, if theretofore filed, be withdrawn. During such period of five (5) business days, the Company
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shall not file such registration statement if not theretofore filed, or, if such registration statement has been theretofore filed, the Company shall not seek, and shall use its best efforts to prevent, the effectiveness thereof. Any request for registration that is withdrawn by an Initiating Holder prior to the effectiveness of the applicable registration statement shall be counted as a registration pursuant to a Demand Notice by such Initiating Holder for the purposes of Subsection 2.1 unless such Initiating Holder reimburses the Company for its reasonable out-of-pocket Registration Expenses relating to the preparation and filing of such registration statement (in which event such registration statement shall not be counted as effected for purposes of Subsection 2.1). Notwithstanding the foregoing, if a withdrawal of a request for registration is made (A) because of a material adverse change in the business, operations, financial condition or prospects of the Company, or (B) because of a postponement of such registration pursuant to Subsection 2.1(c), or (C) because the Company shall fail to file the registration statement within the time period specified by this Agreement other than as a result of a postponement pursuant to Subsection 2.1(c), then such withdrawal shall not be counted as a registration pursuant to a Demand Notice by such Initiating Holder for the purposes of Subsection 2.1, and the Company shall pay all Registration Expenses in connection therewith.
2.5 Underwriting Requirements.
(a) If, pursuant to Subsection 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Subsection 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Holders of a majority of the Registrable Securities sought to be registered by the Initiating Holders and shall be reasonably acceptable to the Company. In such event, the right of any Holder to include such Holders Registrable Securities in such registration shall be conditioned upon such Holders participation in such underwriting and the inclusion of such Holders Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Subsection 2.6(h)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting, and each such Holder may, at such Holders option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriter(s) shall also be made to and for the benefit of such Holders and that any or all of the conditions precedent to the obligations of such underwriter(s) under such underwriting agreement be conditions precedent to the obligations of such Holders; provided, however, that the Company shall not be required to make any representations or warranties with respect to written information provided by such Holders for inclusion in the registration statement pursuant to Subsection 2.7. No such Holder shall be required to make any representations or warranties to, or agreements with, the Company or the underwriter(s) other than representations, warranties or agreements regarding such Holder, such Holders Registrable Securities and such Holders intended method of disposition. Notwithstanding any other provision of this Subsection 2.5, if the total number of Registrable Securities requested by stockholders to be included in such offering exceeds the number of securities that the managing underwriter(s) in its reasonable discretion determines in good faith can reasonably be expected to be sold without adversely affecting the success of the offering, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise
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would be underwritten pursuant hereto and the Company shall be required to include in the offering only that number of such Registrable Securities which the managing underwriter(s) and the Company in their reasonable discretion determine in good faith can reasonably be expected to be sold without adversely affecting the success of the offering. If the managing underwriter(s) so determines that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders of Registrable Securities in proportion (as nearly as practicable) to the number of Registrable Securities sought to be registered by each such Holder. To facilitate the allocation of shares in accordance with the above provisions, the Company or the managing underwriter(s) may round the number of shares allocated to any Holder to the nearest 100 shares.
(b) In connection with any offering involving an underwriting of shares of the Companys capital stock pursuant to Subsection 2.2, the Company shall not be required to include any of the Holders Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as set forth below. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities that the managing underwriter(s) in its reasonable discretion determines in good faith can reasonably be expected to be sold (in addition to the securities to be sold by the Company) without adversely affecting the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the managing underwriter(s) and the Company in their reasonable discretion determine in good faith can reasonably be expected to be sold without adversely affecting the success of the offering. If the managing underwriter(s) so determines that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable) to the number of Registrable Securities sought to be registered by each such Holder. To facilitate the allocation of shares in accordance with the above provisions, the Company or the managing underwriter(s) may round the number of shares allocated to any Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering or (ii) the number of Registrable Securities included in the offering be reduced below twenty five percent (25%) of the total number of securities included in such offering, in which case the selling Holders may be excluded further if the managing underwriter(s) makes the determination described above and no other securities other than securities to be sold by the Company are included in such offering.
(c) For purposes of the provisions in Subsection 2.5 concerning apportionment, for any selling Holder that is a partnership, limited liability company or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single selling Holder, and any proportionate reduction with respect to such selling Holder shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such selling Holder, as defined in this sentence.
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(d) For purposes of Subsection 2.1, a registration shall not be counted as effected if, as a result of an exercise of the managing underwriter(s) cutback provisions in Subsection 2.5(a), fewer than fifty percent (50%) of the total number of Registrable Securities that the Initiating Holders have requested to be included in such registration statement are actually included.
2.6 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities in accordance with the intended method or methods of distribution specified by the selling Holders, which registration statement shall comply as to form in all material respects with the requirements of the applicable form and the Securities Act, and use its reasonable best efforts to cause such registration statement to become effective and, upon the request of the Initiating Holders, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period (x) the Holder refrains, pursuant to Subsection 2.13 or otherwise at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration and (y) during which any of the events set forth in Subsection 2.6(e) or 2.6(l)(ii)-(iv) shall have occurred and be continuing, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended so as to keep the registration statement effective until all such Registrable Securities are sold; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, or comparable filings under securities or blue sky laws of any jurisdiction, the Company shall (i) provide to the selling Holders counsel (as selected by the Investors holding a majority of the Registrable Securities held by the Investors), the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or by the selling Holders, in each case with a reasonable opportunity to review such registration statement and each prospectus included therein (and each amendment or supplement thereto or comparable filing but excluding any exhibits thereto and any filing made under the Exchange Act that is incorporated by reference therein) to be filed with the SEC, and (ii) not file any such registration statement or prospectus (or amendment or supplement thereto or comparable filing) with the SEC to which such aforementioned parties shall have reasonably objected on the grounds that such filing does not comply in all material respects with the requirements of the Securities Act, the Exchange Act or the intended method or methods of distribution specified by the selling Holders;
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(b) if the Company receives written notice from a selling Holder after the date on which the registration statement has become effective that such selling Holder desires to include additional Registrable Securities in such registration statement, use its reasonable best efforts to so include such additional Registrable Securities as promptly as possible by filing an additional registration statement pursuant to Rule 462(b) under the Securities Act or any similar rule then in effect, which registration shall not be counted as effected for purposes of Subsection 2.1;
(c) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary (i) to keep such registration statement effective for the time periods set forth in Section 2.6(a) and (ii) to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement in accordance with the intended method or methods of disposition specified by the selling Holders as set forth in such registration statement;
(d) furnish, without charge, to the selling Holders such number of copies of the applicable registration statement, each related prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as such selling Holders may reasonably request in order to facilitate their disposition of their Registrable Securities (the Company hereby consenting to the use in accordance with applicable law of each such registration statement and each such prospectus by such selling Holders in connection with the offering and sale of the Registrable Securities covered by such registration statement or prospectus);
(e) notify the selling Holders, at any time when a prospectus furnished pursuant to Subsection 2.6(d) is required to be delivered under the Securities Act, upon the discovery that, or of the happening of any event as a result of which, the registration statement covering such Registrable Securities as then in effect, or any related prospectus, or in each case any amendment or supplement thereto, (i) contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or any fact necessary to make the statements therein (in the case of a prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading or (ii) fails to comply with all applicable requirements of the Securities Act, the Exchange Act and any other applicable securities laws of any state or other jurisdiction;
(f) upon the occurrence of any event described in Subsection 2.6(e), 2.6(l)(ii), 2.6(l)(iii) or 2.6(l)(iv), prepare a supplement or post-effective amendment to the registration statement or applicable prospectus or any document incorporated therein by reference or file any other required document so that such registration statement shall not, and such prospectus as thereafter delivered to the purchasers of such Registrable Securities shall not, contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or any fact necessary to make the statements therein (in the case of a prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, and in the event of a post-effective amendment subject to SEC review, use its reasonable best efforts to cause such post-effective amendment to be declared effective as soon as practicable;
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(g) use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders and do any and all other acts and things that may be reasonably necessary or advisable to enable the selling Holders to consummate the disposition in such jurisdictions of the securities owned by such Holders and keep such registration or qualification in effect for so long as the registration statement remains effective under the Securities Act; provided that the Company shall not be required to (i) qualify generally to do business in any jurisdiction in which it would not otherwise be required to qualify but for this paragraph, (ii) subject itself to taxation in any such jurisdiction in which it would not otherwise be subject to taxation but for this paragraph, or (iii) consent to the general service of process in any jurisdiction in which it would not otherwise be subject to general service of process but for this paragraph, in each case, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(h) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(i) use its reasonable best efforts to cause all such Registrable Securities covered by such registration statement to be listed (i) on each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed, or (ii) if so requested by any selling Holder, if securities of the Company are not at the time listed on any securities exchange and trading system (or if the listing of Registrable Securities is not permitted under the rules of each securities exchange or trading system on which the Companys securities are then listed), on a securities exchange or trading system designated by the Holders of a majority of such Registrable Securities held by the selling Holders;
(j) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
(k) make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Companys officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith, in each case subject to reasonable and customary confidentiality arrangements;
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(l) notify each selling Holder and the selling Holders counsel (as selected by the Investors holding a majority of the Registrable Securities held by the Investors), promptly after the Company receives notice thereof, of each of (i) the filing of the registration statement, any pre-effective amendment, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement and, with respect to the registration statement or any post-effective amendment, when the same has become effective, (ii) the receipt of any comments or requests from the SEC or any state securities or blue sky authorities, any securities exchange or any other governmental authorities with respect to any such registration statement or prospectus, any amendments or supplements thereto or for additional information, (iii) the issuance by the SEC or any state securities or blue sky authorities of any oral or written stop order with respect to such registration statement, any suspension of the registration or qualification (or exemption from qualification) of the sale of such Registrable Securities in any jurisdiction, or any initiation or threatening of any proceedings with respect to any of the foregoing, and (iv) the Companys reasonable determination that a post-effective amendment to a registration statement or a supplement to a prospectus would be appropriate or that there exists circumstances not yet disclosed to the public which make further sales under such registration statement inadvisable pending such disclosure and such amendment or supplement;
(m) use its reasonable best efforts to prevent the issuance of any stop order described in Subsection 2.6(l)(iii) and, in the event of the issuance of any such stop order use its reasonable best efforts promptly to obtain the withdrawal or lifting of such order at the earliest possible time and, in the event of the receipt of comments or requests described in Subsection 2.6(l)(ii), use reasonable best efforts to promptly respond to and address all such comments and requests;
(n) use reasonable best efforts to comply with all applicable laws related to such registration statement and offering and sale of securities and all applicable rules and regulations of governmental authorities in connection therewith (including the Securities Act and the Exchange Act) and make generally available to its security holders as soon as reasonably practicable (but in any event not later than fifteen (15) months after the effectiveness of such registration statement) an earnings statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act;
(o) in the case of an underwritten offering, use reasonable best efforts to cause to be furnished to each seller of Registrable Securities a signed counterpart of (i) an opinion of counsel for the Company and (ii) a comfort letter signed by the independent public accountants who have certified the Companys financial statements included or incorporated by reference in such registration statement, covering such matters with respect to such registration statement and, in the case of the accountants comfort letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuers counsel and in accountants comfort letters delivered to the underwriters in underwritten public offerings of securities for the account of, or on behalf of, an issuer of common stock, such opinion and comfort letters to be dated the date such opinions and comfort letters are customarily dated in such transactions, and covering in the case of such legal opinion, such other legal matters and, in the case of such comfort letter, such other financial matters, as the Holders of a majority of the Registrable Securities being sold may reasonably request; and
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(p) use its reasonable best efforts to take all other steps necessary to expedite or facilitate the registration and disposition of the Registrable Securities contemplated hereby.
2.7 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holders Registrable Securities. The Company agrees to include in any registration statement filed pursuant to this Section 2 all information about a selling Holder which such selling Holder, upon advice of counsel, shall reasonably request, and which is provided to the Company a reasonable period of time prior to the time the Company has informed the Holder that it intends to file such registration statement. Any such information provided by the selling Holders pursuant to this Subsection 2.7 shall be used only in connection with the applicable registration statement.
2.8 Expenses of Registration. All Registration Expenses incurred in connection with registrations, filings, or qualifications pursuant to Section 2 shall be borne and paid by the Company. All underwriting discounts and commissions relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.
2.9 Effective Registration Statement; Suspension. A registration statement shall not be deemed to have become effective (i) unless it has been declared effective by the SEC and remains effective in compliance with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement, in accordance with the method or methods of distribution specified by the Holders, for the time periods specified herein, or (ii) if the offering of any Registrable Securities pursuant to such registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court.
2.10 Indemnification. If any Registrable Securities are included in a registration statement whether or not pursuant to this Section 2:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, stockholders, employees, advisors, agents and Affiliates of each such Holder, including legal counsel and accountants for each such Holder and any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are
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incurred; provided, however, that the Company shall not be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.
(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that in no event shall a Holders liability pursuant to this Subsection 2.11(b), when combined with the amounts contributed, paid or payable by such Holder pursuant to Subsection 2.11(d), exceed the proceeds from the offering received by such Holder (net of any underwriting discounts and commissions paid by such Holder).
(c) Promptly after receipt by an indemnified party under this Subsection 2.11 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Subsection 2.11, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain separate counsel, and to participate in the defense of such claim, at the expense of such indemnified party except that in each of the following circumstances the indemnifying party shall pay the fees and expenses of one firm of separate counsel retained by the indemnified party (and any other indemnified parties that may be represented without conflict by one counsel) and applicable local counsel: (A) the indemnifying party has agreed in writing to pay such fees and expenses, (B) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such indemnified party within thirty (30) days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so, or (C) in the reasonable judgment of any such indemnified party, representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such claim (in which case, if the indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying
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party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such indemnified party). The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Subsection 2.10, only to the extent that such failure materially prejudices the indemnifying partys ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Subsection 2.11.
Without the written consent of the indemnified party (which consent shall not be unreasonably withheld, delayed or conditioned), no indemnifying party shall be permitted to consent to entry of any judgment with respect to, or to effect the settlement or compromise of any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim), unless such settlement, compromise or judgment (1) includes an unconditional release of the indemnified party from all liability arising out of such action or claim, (2) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party, and (3) does not provide for any action on the part of any party other than the payment of Damages which is to be paid in full by the indemnifying party.
(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Subsection 2.11 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Subsection 2.11 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Subsection 2.11, then, and in each such case, such parties will contribute to the aggregate Damages to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such Damages, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Subsection 2.11(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above. Notwithstanding the provisions of this Subsection 2.11(d), (x) in no event shall a Holder be required to contribute an amount that, nor shall a Holders liability pursuant to this Subsection 2.11(d), in each case when combined with the amounts paid or payable by such Holder pursuant to Subsection 2.11(b), exceed the proceeds from the offering received by such Holder (net of any underwriting discounts and commissions
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paid by such Holder), and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Subject to Subsection 2.11(c), no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any such claim or proceeding if such settlement is effected without such Persons written consent, which consent shall not be unreasonably withheld, delayed or conditioned.
(e) The Company hereby acknowledges that certain members of its Board of Directors (the Fund Indemnitees) may have rights to indemnification, advancement of expenses and/or insurance with respect to their service on the Board of Directors or otherwise in connection with their involvement with the Company that is provided by other Persons (collectively, the Fund Indemnitors). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to the Fund Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by the Fund Indemnitees are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by the Fund Indemnitees and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the certificate of incorporation or bylaws of the Company (or any other agreement between the Company and the Fund Indemnitees), without regard to any rights the Fund Indemnitees may have against the Fund Indemnitors, and (iii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of the Fund Indemnitees with respect to any claim for which the Fund Indemnitees have sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Fund Indemnitees against the Company. The Company and the Fund Indemnitors agree that the Fund Indemnitees are express third party beneficiaries of the terms of this Subsection 2.11(d).
(f) The obligations of the Company and Holders under this Subsection 2.11 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.
2.11 Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall at all times:
(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144;
(b) use reasonable best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
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(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act, and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
2.12 Limitations on Subsequent Registration Rights; No Inconsistent Agreement.
(a) From and after the date of this Agreement, the Company shall not, without the prior written consent of the Investors holding a majority of the Registrable Securities held by all Investors, enter into any agreement (including any amendment to this Agreement or the acceptance of any joinder to this Agreement) with any holder or prospective holder of any securities of the Company that (i) would provide to such holder the right to include securities in any registration on other than with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder.
(b) The Company hereby represents that, as of the date hereof, the rights granted to the Holders of Registrable Securities hereunder do not in any way conflict with and are not inconsistent with any other agreements to which the Company is a party or by which it is bound.
2.13 Market Stand-off Agreement. Each Holder hereby agrees, if requested by the Company and a managing underwriter, if any, of Common Stock in connection with any underwritten public offering of the Company and only upon confirmation reasonably satisfactory to such Holder that all officers and directors of the Company have entered into similar agreements, that it will not, directly or indirectly lend, pledge, offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any equity securities of the Company held by it for (a) the seven (7) days prior to and the ninety (90) days following the effective date of the relevant registration statement, or (b) such other period as such managing underwriter shall specify, in each case, reasonably and in good faith. The Company will use its reasonable best efforts to cause each holder of 5% or greater of the outstanding Common Stock of the Company to enter into an agreement substantially to the one specified in the preceding sentence. Notwithstanding the foregoing, to the extent required by the Securities Act or the Exchange Act, if (x) during the last 17 days of the foregoing 90-day period, the Company issues an earnings release or material news or a material event relating to the Company occurs or (y) prior to the expiration of the 90-day period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the period, then the restrictions described above shall continue to apply until the expiration of an 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. The foregoing
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provisions of this Subsection 2.14 shall not apply to (i) the sale of any shares to an underwriter pursuant to an underwriting agreement, (ii) the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value or (iii) other customary exclusions or other exclusions that may be agreed upon between such Holder and the underwriters. The underwriters in connection with such registration are intended third-party beneficiaries of this Subsection 2.14 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such customary letter agreements as may be reasonably requested by the Company and the managing underwriter in connection with such registration that are consistent with this Subsection 2.14 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the managing underwriter shall apply pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.
3. Miscellaneous.
3.1 Nominees for Beneficial Owners. If Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its option, be treated as the Holder of such Registrable Securities for purposes of any request or other action by any Holder or Holders of Registrable Securities pursuant to this Agreement, provided that the Company shall have received assurances reasonably satisfactory to it of such beneficial ownership, written confirmation from such nominee, and the beneficial owner agrees to be bound by the terms of this Agreement.
3.2 Amendments and Waivers. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or any Holder unless such modification, amendment or waiver is approved in writing by the Company and the Investors holding a majority of the Registrable Securities held by all Investors; provided, that, no modification, amendment or waiver of any provision of this Agreement which disproportionately adversely affects the Management Holders shall be effective against any Management Holder unless such modification, amendment or waiver is approved in writing by the Management Holders holding a majority of the Registrable Securities held by all Management Holders. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar). No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof or of any other or future exercise of any such right, power or privilege.
3.3 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipients normal business hours, and if not sent during normal business hours, then on the recipients next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1)
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business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the Investors at their addresses as set forth on Schedule A hereto, to any other Holder at the address as set forth on the signature page hereto for such Holder, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Subsection 3.3. If notice is given to the Company or to the Investors, a copy shall be sent to such party at the addresses set forth below:
if to the Company, to: |
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Joes Jeans Inc. |
2340 South Eastern Avenue |
Commerce, CA 90040 |
Telephone: 323-837-3712 |
Facsimile: 323-837-3791 |
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with a copy to: |
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Russell W. Parks and Erica D. McGrady |
Akin Gump Strauss Hauer & Feld LLP |
1333 New Hampshire Ave NW |
Washington, DC 20036 |
Telephone: 202-887-4000 |
Facsimile: 202-887-4288 |
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if to the Investors, to the addresses set forth on Schedule A hereto: |
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with a copy to: |
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Skadden, Arps, Slate, Meagher & Flom LLP |
Jeffrey H. Cohen and Andrew D. Garelick |
300 South Grand Avenue, Suite 3400 |
Los Angeles, CA 90071 |
Telephone: |
213-687-5288 |
Facsimile: |
213-621-5288 |
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if to the Management Holders, to the addresses set forth on Schedule B hereto: |
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with a copy to: |
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Sullivan & Cromwell LLP |
Patrick S. Brown |
1888 Century Park East, Suite 2100 |
Los Angeles, California 90067 |
Telephone: (310) 712-6603 |
Facsimile: (310) 712-8800 |
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3.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned by the Company to any Person without the prior written consent of the Holders of a majority of the Registrable Securities. Any Holder may, at its election, at any time or from time to time, assign its rights under this Agreement, in whole or in part, to any person who acquires Registrable Securities from such Holder not in violation of any contract, agreement or organizational document of the Company, in which case such permitted assignee or successor shall become an Holder under this Agreement. If any Holder shall acquire additional Registrable Securities, such Registrable Securities shall be subject to all of the terms, and entitled to all the benefits, of this Agreement.
3.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and performed in such state, without giving effect to its choice of law or conflict of law rules.
3.6 Heading; Interpretations. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. All Section and Subsection references are to this Agreement unless otherwise expressly provided. When used in this Agreement, the words include, includes and including are to be read as if they were followed by the phrase without limitation.
3.7 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.
3.8 Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to injunctive relief, including specific performance, to enforce such obligations without the posting of any bond, and, if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.
3.9 Further Assurances. Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
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3.10 Entire Agreement. This Agreement (including Schedule A) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
3.11 Submission to Jurisdiction; Consent to Service of Process(a)
(a) The parties hereto hereby irrevocably submit to the exclusive jurisdiction of any federal or state court located within the State of Delaware over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action or proceeding related thereto may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Subsection 3.3.
3.12 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
3.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. For purposes of this Agreement, a document (or signature page thereto) signed and transmitted by facsimile machine or other electronic means is to be treated as an original document. The signature of any party on any such document, for purposes hereof, is to be considered as an original signature, and the document transmitted is to be considered to have the same binding effect as an original signature on an original document. At the request of any party, any facsimile or other electronic signature is to be re-executed in original form by the party which executed the facsimile or other electronic signature. No party may raise the use of a facsimile machine or other electronic means, or the fact that any signature was transmitted through the use of a facsimile machine or other electronic means, as a defense to the enforcement of this Agreement.
Remainder of Page Intentionally Left Blank
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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COMPANY: |
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JOES JEANS, INC. |
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By: |
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Name: Hamish Sandhu |
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Title: CFO |
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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INVESTORS: |
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TCP Denim, LLC |
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By: |
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Name: |
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Title: |
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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MANAGEMENT HOLDERS: |
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Peter Kim |
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Paul Cardenas |
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Tony Chu |
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Chris Lynch |
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Ben Taverniti |
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Barbara Cook |
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Fireman Capital CPF Hudson Co-Invest, L.P. |
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By: |
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Name: |
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Title: |
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Schedule A
Investors
Investor |
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Address |
TCP Denim, LLC |
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Schedule B
Management Holders
Management Holder |
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Address |
Peter Kim |
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Paul Cardenas |
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Tony Chu |
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Christopher Lynch |
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Ben Taverniti |
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Barbara Cook |
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Fireman Capital CPF Hundson Co-Invest L.P. |
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Exhibit 10.4
EXECUTION COPY
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (Agreement) is entered into as of September 8, 2015 by and between Joes Jeans Inc., a Delaware corporation (Parent), Hudson Clothing Holdings, Inc. (HCH), a Delaware corporation, HC Acquisition Holdings, Inc. (HCAH), a Delaware corporation, Hudson Clothing, LLC (the Company), a California limited liability company, and Peter Kim (Executive) but (other than as expressly set forth in Section 5.15) is not effective until the Closing (as defined in the Agreement and Plan of Merger, dated as of September 8, 2015 among RG Parent, LLC (RG), JJ Merger Sub LLC and Parent (the Transaction Agreement)) under the Transaction Agreement (the date of such Closing, the Effective Date).
RECITALS
In connection with the transactions contemplated (the Acquisition Transaction) by the Transaction Agreement, including, and as a necessary condition to the consummation of the transactions contemplated by, the Rollover Agreement, dated as of September 8, 2015 among Parent, Executive and the other parties thereto (the Rollover Agreement), Parent and the Company desire that Executive continue to serve as the Chief Executive Officer of the Company, in order to assure continuity of management of the Company, and Executive desires to be so employed, on the terms and conditions as hereinafter set forth.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
Section 1. EMPLOYMENT
Section 1.1 Term of Employment. The Company agrees to employ Executive, and Executive agrees to remain an employee of the Company, for three years from the Effective Date of this Agreement. The period during which Executive is employed by the Company pursuant to this Agreement is herein referred to as the Term.
Section 1.2 Title and Duties. During the Term, Executive shall be employed as the Chief Executive Officer of the Company, reporting directly and only to the Chief Executive Officer of Parent. Executive will have all of the authorities, duties and responsibilities as is customary for a chief executive officer of a company, including the authority to identify and recommend Company employees to Parent and the Board for equity awards, with a grant date fair market value not to exceed an aggregate annual amount as mutually agreed between Executive and the Chief Executive Officer of RG Parent, LLC (RG Parent CEO) as soon as practicable following the date hereof, which awards will be granted by Parent pursuant to its then applicable equity plan. During the Term, Executive shall diligently devote his business skill, time and effort to his employment hereunder but may engage in outside activities that are not directly competitive to the Company Group (as defined below) (Outside Activities); provided that Executive devotes no less than 95% of his business time to the responsibilities of his employment with the Company; and provided further that Outside Activities shall include, and Executive shall be permitted to engage in, any activities that Executive initiated prior to the time any member of the Company Group became such or initiated such members engagement in such
activity. In the event Executive determines to issue or sell a controlling interest (the Transferred Interests) in any such Outside Activities (or any related entities), Executive shall provide Parent with advance written notice of any such sale and the proposed purchase price. Parent shall have a period of 30 days from such notice to elect by written notice to Executive to purchase the Transferred Interests at such price. If Parent does not so elect within such 30-day period, Executive shall be permitted, for a period of 120 days from the earlier of (i) Parents notice that it will not elect to purchase such Transferred Interests and (ii) the end of such 30-day period, to sell or enter into agreement to sell the Transferred Interests for consideration no less than such price.
During the Term, Executive shall further serve (i) as a director of HCAH and HCH, and a manager of the Company in each case, to the extent then existing, and (ii) as Chief Executive Officer of HCAH and HCH, without additional compensation. In the event that Executive is not an employee of the Company, then Section 3.3 shall apply.
Section 1.3 Location. Executive shall be based in Commerce, California, subject to travel as required in the performance of duties hereunder.
Section 1.4 Vacation. Executive shall be allowed four weeks of vacation with pay and leaves of absence with pay on the same basis as other senior executive employees of the Company.
Section 1.5 Board of Directors. So long as Executive is Chief Executive Officer of the Company, Executive shall have the right to attend all regular and special meetings of the Board of Directors of Parent (the Board). Executive shall receive the same notice of any such meeting and, except to the extent the Board reasonably determines is necessary in order to avoid the waiver of any privilege that may be asserted under applicable law, all other information and materials (including copies of any action proposed to be taken by written consent of the Board without a meeting) as and at the same time received by the directors of the Board, and shall have the right to participate therein, but shall not have the right to vote on any matter or to be counted for purposes of determining whether a quorum is present. Executive shall be excused from (i) any discussion if the Board reasonably determines that such excusal is necessary in order to avoid the waiver of any privilege that may be asserted under applicable law and (ii) all executive sessions of the Board if so directed by the Board. Any action taken by the Board at any meeting will not be invalidated by the absence of Executive at such meeting.
Section 2. COMPENSATION
Section 2.1 Salary; Other Payments. The Company shall pay Executive during the Term an annual base salary of $600,000 payable in accordance with the Companys normal payroll practices, and Executive and Parent agree that such salary shall be reviewed by the Compensation Committee of the Board at least annually, beginning with a review on or around the first anniversary of the Effective Date; provided, however, that Executives Base Salary shall not be decreased at any time during the Term. (Executives annual salary, as set forth above or as it may be increased from time to time as set forth herein, shall be referred to hereinafter as Base Salary.)
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Section 2.2 Benefits. During the Term, Executive shall be entitled to participate in any life, health and long-term disability insurance programs, pension and retirement programs, and other fringe benefit programs made available to senior executive employees of the Company and Parent from time to time (subject to the terms thereof and, in the case of life, health and long-term disability insurance programs, to his qualifying under the terms of the insurance coverage), at a level commensurate with his position, and Executive shall be entitled to receive such other fringe benefits as may be granted to him from time to time by the Board.
Section 2.3 Annual Bonus Opportunity. In respect of each calendar year ending during the Term, Executive shall be eligible to receive an annual discretionary bonus (Bonus), targeted at 50% of Executives Base Salary, the achievement of such Bonus to be based on the satisfaction of criteria and performance standards as established in advance by the Board or the Compensation Committee of the Board after consultation with Executive. The Bonus, if any, should be paid no later than March 15th after the end of the year to which it relates.
Section 2.4 Initial Stock Awards.
2.4.1 The Proxy Statement required to be prepared by Parent for the first annual meeting following the Closing will include a proposal to approve an equity incentive plan (the Stock Incentive Plan) with a share reserve sufficient to permit the grant, on the Effective Date, of the Restricted Stock Award and Performance Shares set forth below in this Section 2.4.
2.4.2 On the Effective Date (after giving effect to the one for 30 reverse stock split), Parent shall grant Executive restricted stock units in respect of 166,667 shares of Parents common stock (the Restricted Stock Award) that will be settled in shares of Parents common stock or, if approval of the Stock Incentive Plan is not received, cash. The Restricted Stock Award will vest and become transferable in three equal, annual installments beginning on the first anniversary of the Closing subject to Executives continuous employment through such date (except as set forth in Section 3 below) and the terms of an award agreement substantially in the form of the Restricted Stock Award agreement provided to Executive prior to the signing of the Rollover Agreement.
2.4.3 On the Effective Date (after giving effect to the one for 30 reverse stock split), Parent shall grant Executive performance share units in respect of 166,667 shares of Parents common stock (the Performance Shares) that will be earned over a three-year performance period beginning on the later to occur of the Closing and January 1, 2016. One-third of the Performance Shares will be eligible to vest each year based on annual performance metrics for the Company and subject to Executives continued employment (except as set forth in Section 3 below) through year-end and the terms of an award agreement substantially in the form of the Performance Shares award agreement provided to Executive prior to the signing of the Rollover Agreement. The Compensation Committee of the Board will establish the performance metrics (which will be consistent with metrics used for Parents other operational divisions) at the beginning of the applicable year in consultation with Executive as part of the normal budgeting process. Vested Performance Shares will be settled in shares of Parents common stock or, if approval of the Stock Incentive Plan is not received, cash, within 30 days following the applicable vesting date.
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Section 2.5 Ongoing Long-Term Incentives. Executive will be entitled to participate in all regular long-term incentive programs maintained by Parent or the Company on the same basis as similarly-situated employees of Parent and/or the Company.
Section 2.6 Expenses. Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by him in the performance of his duties for the Company, including, but not limited to, reasonable entertainment expenses, travel and lodging expenses, in accordance with the policies and procedures adopted by the Company from time to time for executive officers of the Company. Executive shall furnish appropriate documentation of such expenses, including documentation required by the Internal Revenue Service.
Section 3. TERMINATION OF EMPLOYMENT
Section 3.1 Termination. The Company shall have the right to terminate Executives employment hereunder upon at least 30 days prior written notice to Executive (other than as provided in Section 3.2) and Executive shall have the right to terminate his employment with the Company upon at least 30 days prior written notice of his intention to terminate his employment hereunder. Nothing herein prevents the Company from removing Executive from service, during the period, if any, between notice and effectiveness of such termination.
Section 3.2 Rights of Executive Upon Termination. In the event that Executives employment is terminated for any reason or no reason, the Company shall have no further obligation to Executive under this Agreement except for payment to Executive of (A) his accrued, but unpaid Base Salary (as of termination) through the date of termination, (B) any accrued but unused vacation (if and to the extent consistent with the Companys policies), (C) any unreimbursed expenses, and (D) if it has not previously been paid to Executive, Executive shall be paid any Bonus that has been earned by Executive for any fiscal year ending prior to the effective date of such termination but not yet paid; any Bonus for the period in which termination occurred, prorated for the partial period with the amount, if any, based on actual performance and paid when bonuses for the applicable period are paid to other senior executives of Parent or the Company; any rights under any benefit or equity or long-term incentive plan, program or practice; and his rights to indemnification and directors and officers liability insurance (collectively, the Required Payments).
3.2.1 In the event that Executives employment is terminated by the Company without Cause, in addition to the obligations of the Company pursuant to Section 3.2 above, (A) the Company shall also make a severance payment to Executive equal to 12 months Base Salary (as of termination) (payable in 12 monthly, equal installments after termination and beginning on 55th day after which termination occurs), (B) any unvested portion of the Restricted Stock Award shall immediately vest and become transferable and (C) any unvested Performance Shares will continue to vest without regard to Executives continued employment. For purposes of the foregoing, Cause shall mean: (i) substantial and willful failure to perform specific and lawful written directives of the Board; (ii) willful and knowing violation of any rules or regulations of any governmental or regulatory body (a Governmental Body) that is materially injurious to the financial condition of the Company; (iii) conviction of or plea of guilty or nolo contendere to a
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felony; or (iv) material breach of the terms of this Agreement by Executive; provided, however, that Executive may not be terminated for Cause unless and until the Chief Executive Officer of Parent has given him reasonable written notice of their intended actions and specifically describing the alleged events, activities or omissions giving rise thereto and with respect to those events, activities or omissions for which a cure is possible, 30 days to cure such breach; and provided further, however, that for purposes of determining whether any such Cause is present, no act or failure to act by Executive shall be considered willful if done or omitted to be done by Executive in good faith and in the reasonable belief that such act or omission was in the best interest of the Company and/or required by applicable law.
The Chief Executive Officer of Parent shall provide Executive with at least 30 days advance written notice detailing the basis for the termination of employment for Cause. If the Chief Executive Officer of Parent does not provide such notice within 90 days after the Board of Parent has actual knowledge that an event constituting Cause has occurred, the event will no longer constitute Cause. During the 30 day period after Executive has received such notice, Executive shall have an opportunity to cure or remedy such alleged Cause events and to present his case to the Chief Executive Officer of Parent (with the assistance of his own counsel, at his expense) before any termination for Cause is finalized. Executive shall continue to receive the compensation and benefits provided by this Agreement until his employment is actually terminated.
3.2.2 In the event that Executive voluntarily terminates his employment for Good Reason, in addition to the obligations of the Company set forth in Section 3.2 above, the Company shall also make a severance payment to Executive equal to 12 months Base Salary (as of termination) (payable in 12 monthly, equal installments after termination and beginning on the 55th day after which termination occurs), (B) any unvested portion of the Restricted Stock Award shall immediately vest and become transferable and (C) any unvested Performance Shares will continue to vest without regard to Executives continued employment. For purposes of the foregoing, Good Reason shall mean: the occurrence of any of the following events, provided that the Executive gives written notice of his intent to resign pursuant to such event within 90 days following the initial occurrence and provided that such event is not fully corrected within 30 days following written notification by Executive to the Company that he intends to terminate his employment hereunder for one of the reasons set forth below: (i) a material adverse alteration in the nature or status of Executives responsibilities; (ii) a requirement that he relocate his primary place of employment by more than 50 miles from his place of employment as of the date hereof (or such later place of employment as to which he agrees in writing to relocate); (iii) requiring Executive to report to any person other than the Chief Executive Officer of Parent, (iv) a material breach by the Company of any provision of this Agreement including, but not limited to, the assignment to Executive of any duties inconsistent with Executives position as Chief Executive Officer of the Company, or (v) a material reduction in Executives then current Base Salary.
Executive must actually terminate his employment within 30 days following the Companys failure to cure the applicable event to be treated as resigning for Good Reason.
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3.2.3 In the event Executives employment is terminated (whether by the Company or by Executive) without Cause or with Good Reason or by death or disability, the Executive and his spouse and dependents shall be entitled to continue to be covered by the Companys group medical plan hereof as provided under COBRA continuation requirements (if applicable) and the Company will pay the premiums (but only to the extent such premiums exceed the applicable active employee rates) for such coverage for the shorter of the first 12 months of such coverage or his period of COBRA eligibility (whichever is shorter), subject to Executive timely electing continuation coverage under COBRA. If the payment or reimbursement of COBRA premiums provided hereunder could result in excise taxes to the Company or its affiliates under Section 4980D of the Code and/or adverse consequences under the Employee Retirement Income Security Act of 1974, as amended, or applicable law, then Executive agrees to negotiate in good faith an alternative arrangement in lieu of payment or reimbursement hereunder that would avoid such consequences.
Section 3.3 If Executives employment ends for any reason, Executive agrees that he will cease immediately to hold any and all officer or director positions he then has with Parent or any subsidiary, absent a contrary direction from the Board (which may include either a request to continue such service or a direction to cease serving upon notice without regard to whether his employment has ended). Executive hereby irrevocably appoints Parent to be his attorney to execute any documents and do anything in his name to effect his ceasing to serve as a director and officer of Parent and any subsidiary, should he fail to resign following any such request from Parent to do so. A written notification signed by a director or duly authorized officer of Parent that any instrument, document or act falls within the authority conferred by this clause will be conclusive evidence that it does so.
Section 3.4 Upon the occurrence of an event described in Section 3.2.1, 3.2.2 or 3.2.3 above, Executive will be eligible for severance benefits (which shall not include the payment of any Required Payments, which shall not be conditioned upon execution of a Settlement Agreement and Release of the Company Group (as defined below hereunder)) only if Executive executes and delivers to the Company a Settlement Agreement and Release of the Company Group (as defined below) in a form prepared by the Company and delivered to Executive within three days following his termination, which will include a general release of known and unknown claims, a return of Company Property and a requirement to cooperate regarding any future litigation, as set forth in Exhibit 1 attached hereto (which may be updated to conform to current legal requirements, in the Companys reasonable judgment), and such Settlement Agreement and Release becomes effective and irrevocable no later than 55 days following Executives termination.
Section 4. COVENANTS.
Section 4.1 Restrictive Covenants. Executive agrees to comply with the covenants contained in this Section 4.
4.1.1 Exclusive Dealings. Executive absolutely and unconditionally covenants and agrees that for the period commencing on the Effective Date of this Agreement, and continuing during his employment with the Company (the Restrictive Period), Executive shall not, either directly or indirectly, solely or jointly with any other person or persons, as an employee, consultant or advisor, or as an individual proprietor, partner, stockholder, director, officer, joint venturer, investor, lender or in any other capacity (whether or not engaged in
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business for profit), engage or participate in (i) the business of developing, manufacturing, selling, marketing, distributing and/or licensing apparel, and (ii) any other business being conducted by Parent and its subsidiaries (the Company Group) during the Term, other than through the Company Group or the Outside Activities (Restricted Business).
4.1.2 Non-Competition During the Term, Executive shall not, directly or indirectly, alone or as a an officer, director, employee, owner, partner, joint venturer, member, manager, consultant, agent, independent contractor, or Equity Interest (as defined in the 2015 Non-Competition Agreement) holder of, or lender to, any Person or business, engage in, compete with, or permit his name to be used by or in connection with the Restricted Business. Executive shall be permitted to, directly or indirectly, own an interest in and, when not employed by the Company, take part in and/or manage or operate the Historical Family Businesses. Historical Family Businesses means the business of manufacturing, selling, distributing, transporting, delivering and marketing junior and missy moderate sportswear and such additional apparel business as conducted by Executives family from time to time which is not competitive with the Company Group.
4.1.3 Non-Solicitation. Executive absolutely and unconditionally covenants and agrees that during the Restrictive Period and for a period of 12 months thereafter, Executive will not (i) solicit any of the Company Groups employees to join a business competitive with the Company Group, or (ii) induce or attempt to induce any Company Group employee (other than Nicole Cross or any other executive assistant of Executive) to terminate his or her employment for the purpose of becoming employed by Executive or a third party.
4.1.4 Use and Treatment of Confidential Information. Executive agrees not to disclose, divulge, publish, communicate, publicize, disseminate or otherwise reveal, either directly or indirectly, any Confidential Information to any person, natural or legal. The term Confidential Information means all information in any form relating to the past, present or future business affairs, including without limitation, research, development or business plans, operations or systems, of the Company Group or a person not a party to this Agreement whose information any member of the Company Group has in its possession under obligations of confidentiality, which is disclosed by any member of the Company Group to Executive or which is produced or developed while Executive is an owner of, employee or director of any member of the Company Group. The term Confidential Information shall not include any information of the Company Group which (i) becomes publicly known through no wrongful act of Executive, (ii) is received from a person not a party to this Agreement who is free to disclose it to Executive, (iii) is lawfully required to be disclosed to any governmental agency or is otherwise required to be disclosed by law, subpoena or court order but only to the extent of such requirement, provided that before making such disclosure Executive shall give the Company Group an adequate opportunity to interpose an objection or take action to assure confidential handling of such information or (iv) is independently developed by Executive without reference to Confidential Information.
4.1.5 Ownership and Return of Confidential Information. All Confidential Information disclosed to or obtained by Executive in tangible form (including, without limitation, information incorporated in computer software or held in electronic storage media) shall be and remain the property of the Company Group. All Confidential Information possessed by Executive at the time he ceases employment with the Company Group shall be returned to the Company at such time. Upon the return of Confidential Information, it shall not thereafter be retained in any form, in whole or in part, by Executive.
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4.1.6 Work Product Assignment. Executive agrees that any work product, intellectual property, developments, processes, inventions, ideas and discoveries, and works of authorship developed, designed, discovered, improved, authored, derived, invented or acquired by Executive during the period of and in the course of his employment by the Company made, conceived or completed by Executive during the term of Executives service, solely or jointly with others, which (i) are made with the Company Groups equipment, supplies, facilities or Confidential Information, (ii) are related at the time of conception or reduction to practice of the invention to the business of any member of the Company Group or the Company Groups actual or demonstrably anticipated research and development (other than, in the case of this clause (ii), for work related to the Outside Activities), or (iii) result from any work performed by Executive for the Company Group, shall be the sole and exclusive property of the Company Group, and all trade secrets, Confidential Information, copyrightable works, works of authorship, and all patents, registrations or applications related thereto, all other intellectual property or proprietary information and all similar or related information (whether or not patentable and copyrightable and whether or not reduced to tangible form or practice) which are related to the business, research and development, or existing or future products or services of the Company Group and which are conceived, developed or made by Executive during and in the course of the Executives employment with the Company (collectively, Work Product, but excluding each of the preceding relating to the Outside Activities) shall be deemed to be work made for hire (as defined in the Copyright Act, 17 U.S.C. §101 et seq., as amended) and owned exclusively by the Company Group. To the extent that any Work Product is not deemed to be a work made for hire under applicable law, and all right, title and interest in and to such Work Product have not automatically vested in the Company Group, Executive hereby (a) irrevocably assigns, transfers and conveys, and shall assign transfer and convey, to the fullest extent permitted by applicable law, all right, title and interest in and to the Work Product on a worldwide basis to the Company Group (or such other person or entity as the Company Group shall designate), without further consideration, and (b) waives all moral rights in or to all Work Product, and to the extent such rights may not be waived, agrees not to assert such rights against the Company or its respective licensees, successors, or assigns. For the avoidance of doubt, including without limitation pursuant to California Labor Code sections 2870 and 2872, Work Product does not include matters developed entirely on Executives own time without using any equipment, supplies, facilities, or Confidential Information of the Company or any of its affiliates; provided, however, Work Product does include, without exception, all Work Product that either (i) relates, at the time of conception or reduction to practice of such Work Product, to the business of any member of the Company Group, or actual or demonstrably anticipated research or development of any member of the Company Group, or (ii) result from any service or work performed by Executive to or for the benefit of any member of the Company Group. In order to permit the Company Group to claim rights to which it may be entitled, Executive agrees to promptly disclose to the Company Group in confidence all Work Product which the Executive makes arising out of the Executives employment with the Company Group. Executive shall assist the Company Group, at no cost to Executive, in obtaining patents on all Work Product patentable by the Company Group in the United States and in all foreign countries, and shall execute all documents and do all things reasonably necessary, at no cost to Executive and at the Company Groups exclusive cost and expense, to obtain letters patent, to vest the Company Group with full and extensive title thereto, and to protect the same against infringement by others.
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4.1.7 Remedies upon Breach. The parties acknowledge that Confidential Information and the other protections afforded to the Company Group by this Agreement are valuable and unique and that any breach of any of the covenants contained in this Section 4.1 will result in irreparable and substantial injury to the Company Group for which it will not have an adequate remedy at law. In the event of a breach or threatened breach of any of the covenants contained in this Section 4.1, any member of the Company Group shall be entitled to obtain from any court having jurisdiction, with respect to the Employee, temporary, preliminary and permanent injunctive relief prohibiting any such breach, as well reimbursement for all reasonable costs, including attorneys fees, incurred in enjoining any such breach. Any such relief shall be in addition to and not in lieu of any appropriate relief in the way of monetary damages and equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. Executive does hereby waive any requirement for the Company Group to post a bond for any injunction. If, however, a court nevertheless requires a bond to be posted, Executive agrees that such bond shall be in a nominal amount.
4.1.8 Remedies upon Breach. Nothing in this Section 4.1 shall limit Executives right, after the Restrictive Period, to own, manage, operate, control, participate in, or otherwise carry on, directly or indirectly (whether as owner, lender, director, officer, employee, principal, agent, independent contractor or otherwise) a business that competes with the Company Groups business. Nothing in this Section 4.1 shall limit Executives right to engage in general (a) solicitations in newspapers, trade journals or similar media or (b) solicitations through the use of search firms, in each case that are not directed at the Company Groups employees or customers. Executive further agrees that, during the Restrictive Period, he will not, directly or indirectly, knowingly assist or encourage any other person in carrying out, directly or indirectly, any activity that would be prohibited by the above provisions of this Section 4 if such activity were carried out by Executive, either directly or indirectly, and Executive agrees that he will not, directly or indirectly, knowingly induce any employee of the Company Group to carry out, directly or indirectly, any such activity.
Section 4.2 Non-Disparagement. During the Restrictive Period, each party to this Agreement agrees not to defame, disparage or criticize any other party, its reputation, its business plan, procedures, products, services, development, finances, financial condition, capabilities or other aspect of its business, or any of its shareholders in any medium (whether oral, written, electronic or otherwise, whether currently existing or hereafter created), to any person or entity or in any public forum whether directly or indirectly and regardless of intent. Notwithstanding the foregoing sentence, Parent and the Board may engage in good faith communications with one another regarding the performance of Executives obligations and duties hereunder or under any contract between the parties, and the Executive may confer in confidence with his advisors and make truthful statements as required by law, and may criticize the Company in his capacity as the Chief Executive Officer, and may enforce his rights hereunder and under the Settlement Agreement and Release of the Company Group (including in respect of his right to the Required Payments and any severance benefits).
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Section 4.3 No Other Severance Benefits. Except as specifically set forth in this Agreement, Executive covenants and agrees that he shall not be entitled to any other form of severance benefits from the Company, including, without limitation, benefits otherwise payable under any of the Companys regular severance policies, in the event his employment hereunder ends for any reason and, except with respect to obligations of the Company expressly provided for herein, Executive unconditionally releases Parent and its subsidiaries and affiliates, and their respective directors, officers, employees and stockholders, or any of them, from any and all claims, liabilities or obligations under any severance or termination arrangements of Parent or any of its subsidiaries or affiliates.
Section 4.4 Parachute Treatment. The Company will make the payments under or referenced by this Agreement without regard to whether the deductibility of such payments (or any other payments or benefits) would be limited or precluded by Section 280G of the Code and without regard to whether such payments would subject Executive to the federal excise tax levied on certain excess parachute payments under Section 4999 of the Internal Revenue Code of 1986, as amended (the Code); provided, however, that if the Total After-Tax Payments (as defined below) would be increased by the reduction or elimination of any payment and/or other benefit (including any vesting of equity compensation) under this Agreement or otherwise in connection with a covered change in control, then the amounts payable will be reduced or eliminated as follows: (i) first, by reducing or eliminating any cash payments or other benefits (other than the vesting of the options) and (ii) second, by reducing or eliminating the vesting of the equity that occurs as a result of an event covered by Section 280G of the Code, to the extent necessary to maximize the Total After-Tax Payments. The Companys independent, certified public accounting firm will determine whether and to what extent payments or vesting under this Agreement are required to be reduced in accordance with the preceding sentence. If there is an underpayment or overpayment under this Agreement (as determined after the application of this paragraph), the amount of such underpayment or overpayment will be immediately paid to Executive or refunded by Executive, as the case may be, with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. For purposes of this Agreement, Total After-Tax Payments means the total of all parachute payments (as that term is defined in Section 280G(b)(2) of the Code) made to or for the benefit of Executive (whether made under the Agreement or otherwise), after reduction for all applicable federal taxes (including, without limitation, the tax described in Section 4999 of the Code).
Section 5. GENERAL PROVISIONS
Section 5.1 Entire Agreement. This Agreement and the certificates, documents, instruments and writings that are delivered pursuant hereto, constitutes the entire agreement and understanding of the parties in respect of its subject matters and supersedes all prior understandings, agreements, or representations by or among the parties, written or oral, to the extent they relate in any way to Executives employment. The parties agree that, on the Effective Date, each of (i) the Employment Agreement between Executive and Parent, HCH, HCAH and the Company dated as of July 15, 2013, and (ii) the Non-Competition Agreement between Executive and Parent and HCH dated July 15, 2013, is hereby terminated and of no further effect. Notwithstanding the provisions of this Section 5.1, the parties acknowledge that they have entered into a separate Non-Competition Agreement (the 2015 Non-Competition Agreement) in connection with the transactions contemplated by the Rollover Agreement and nothing stated herein affects the enforceability of such Non-Competition Agreement.
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Section 5.2 Notice. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon the earliest of (i) personal delivery, (ii) actual receipt or (iii) the third full day following deposit in the United States mail with postage prepaid, addressed to the Company Group, 2340 S. Eastern Avenue, Commerce, CA 90040, to the attention of the Chief Executive Officer with a copy to the Secretary, or, if to Executive, to such home or other address as Executive has most recently provided in writing to the Company.
Section 5.3 Assignment; Binding Effect. Neither Executive nor the Company may assign this Agreement without the prior written consent of the other party, except that the Company may assign this Agreement to any affiliate thereof, or to any subsequent purchaser of the Company or all or substantially all of the assets of the Company, or by operation of law and who expressly agrees to fully assume all of the Companys obligations hereunder. This Agreement shall be binding upon the heirs, executors, and administrators of Executive and on any successors or assigns of the Company.
Section 5.4 Choice of Law: Consent to Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH AND ENFORCED UNDER THE LAWS OF THE STATE OF CALIFORNIA. ALL SUITS, ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, SHALL BE BROUGHT IN A STATE OR FEDERAL COURT LOCATED IN THE CITY OF LOS ANGELES, STATE OF CALIFORNIA, WHICH COURTS SHALL BE THE EXCLUSIVE FORUM FOR ALL SUCH SUITS, ACTIONS OR PROCEEDINGS. EXECUTIVE AND THE COMPANY HEREBY WAIVE ANY OBJECTION WHICH HE OR IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH COURT OR ANY SUCH SUIT, ACTION OR PROCEEDING. EXECUTIVE AND THE COMPANY HEREBY IRREVOCABLY CONSENT AND SUBMIT THEMSELVES TO THE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.
Section 5.5 Amendment; Waiver. No modification, amendment or termination of this Agreement shall be valid unless made in writing and signed by the parties hereto, and approved by the Board (but not including Executive if a member of the Board). Any waiver by any party of any violation of, breach of or default under any provision of this Agreement, by the other party shall not be construed as, or constitute, a continuing waiver of such provision, or waiver of any other violation of breach of or default under any other provision of this Agreement.
Section 5.6 Withholding of Taxes. The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as shall be required to be withheld pursuant to any law or government regulation or ruling.
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Section 5.7 Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party hereto or to any circumstance, is adjudged by a Governmental Body, arbitrator or mediator not to be enforceable in accordance with its terms, the parties hereto agree that the Governmental Body, arbitrator, or mediator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced.
Section 5.8 Survival of Certain Obligations. The obligations of the Company and Executive set forth in this Agreement which by their terms extend beyond or survive the termination of the Term shall not be affected or diminished in any way by the termination of the Term.
Section 5.9 Headings. The headings in this Agreement are intended solely for convenience and shall be disregarded in interpreting it.
Section 5.10 Third Parties. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person or entity other than the Company and Executive any rights or remedies under, or by reason of, this Agreement.
Section 5.11 Counterparts. This Agreement may be executed in counterparts, and all of such counterparts (including facsimile or PDF), when separate counterparts have been executed by the parties hereto, shall be deemed to be one and the same agreement. This Agreement shall only become effective as of the Effective Date.
Section 5.12 409A. The parties intend that the payments and benefits provided for in this Agreement to either be exempt from Section 409A of the Internal Revenue Code, as amended (the Code) or be provided in a manner that complies with Section 409A of the Code. Notwithstanding anything contained herein to the contrary, all payments and benefits which are payable upon a termination of employment hereunder shall be paid or provided only upon those terminations of employment that constitute a separation from service from the Company within the meaning of Section 409A of the Code (determined after applying the presumptions set forth in Treas. Reg. Section 1.409A-1(h)(1)). Each payment or series of payments under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement or otherwise which constitutes a deferral of compensation within the meaning of Section 409A of the Code. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code. To the extent that any reimbursements pursuant to this Agreement or otherwise are taxable to Executive, any reimbursement payment due to Executive shall be paid to Executive on or before the last day of Executives taxable year following the taxable year in which the related expense was incurred; provided that, Executive has provided the Company written documentation of such expenses in a timely fashion and such expenses otherwise satisfy the Company expense reimbursement policies. Reimbursements pursuant to this Agreement or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year.
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Notwithstanding any provision in this Agreement to the contrary, if on the date of his termination from employment with the Company Executive is deemed to be a specified employee within the meaning of Code Section 409A and the Final Treasury Regulations using the identification methodology selected by the Company from time to time, or if none, the default methodology under Code Section 409A, any payments or benefits due upon a termination of Executives employment under any arrangement that constitutes a deferral of compensation within the meaning of Code Section 409A shall be delayed and paid or provided (or commence, in the case of installments) on the first payroll date on or following the earlier of (i) the date which is six (6) months and one (1) day after Executives termination of employment for any reason other than death, and (ii) the date of Executives death, and any remaining payments and benefits shall be paid or provided in accordance with the normal payment dates specified for such payment or benefit. Notwithstanding any of the foregoing to the contrary, the Company and its respective officers, directors, employees, or agents make no guarantee that the terms of this Agreement as written comply with, or are exempt from, the provisions of Code Section 409A, and none of the foregoing shall have any liability for the failure of the terms of this Agreement as written to comply with, or be exempt from, the provisions of Code Section 409A.
Section 5.13 Cooperation. Without limitation to any other provision herein set forth herein, during and after Executives employment, Executive shall reasonably cooperate with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while Executive was employed by the Company; provided, however, that such cooperation shall not materially and adversely affect Executive or expose Executive to an increased probability of civil or criminal litigation. Executives cooperation in connection with such claims or actions shall include, but not be limited to, being reasonably available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after Executives employment, Executive also shall reasonably cooperate with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by the Company. The Company shall reimburse Executive for all costs and expenses incurred in connection with his performance under this Section 5.14, including, but not limited to, reasonable attorneys fees and costs, provided that Executive shall not incur costs and expenses in excess of $1,000 in the aggregate without the prior written consent of the Company.
Section 5.14 Indemnification. Executive shall be indemnified to the fullest extent permitted by law with regard to actions or inactions taken as an officer, director, employee or agent of the Company or Parent or any affiliate or as a fiduciary of any benefit plan. Executive shall be covered by directors and officers liability insurance with regard to the foregoing to the highest extent of any other officer or director both during his service to the Company and thereafter while any liability may exist.
Section 5.15 Effectiveness. For the avoidance of doubt, this Agreement other than Section 2.4.1 shall only become effective as of the Closing; Section 2.4.1 shall be effective as of the date of this Agreement. In the event that the Transaction Agreement is terminated in accordance with its terms, this Agreement shall automatically and immediately terminate.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company and Executive have executed this Employment Agreement as of the date first written above.
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JOES JEANS INC. |
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By: |
/s/ Hamish Sandhu |
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Name: |
Hamish Sandhu |
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Title: |
CFO |
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HUDSON CLOTHING HOLDINGS, INC. |
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By: |
/s/ Hamish Sandhu |
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Name: |
Hamish Sandhu |
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Title: |
CFO |
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HC ACQUISITION HOLDINGS, INC. |
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By: |
/s/ Hamish Sandhu |
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Name: |
Hamish Sandhu |
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Title: |
CFO |
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HUDSON CLOTHING, LLC |
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By: |
/s/ Hamish Sandhu |
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Name: |
Hamish Sandhu |
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Title: |
CFO |
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EXECUTIVE |
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/s/ Peter Kim |
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Peter Kim |
Signature Page to Employment Agreement
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Exhibit 1
GENERAL RELEASE
THIS GENERAL RELEASE (this Release) is entered into effective as of , 201 , (the Effective Date) by and among Joes Jeans Inc. (Parent), Hudson Clothing Holdings, Inc., HC Acquisition Holdings, Inc., Hudson Clothing, LLC (the Company), and Peter Kim (Executive), with reference to the following facts:
RECITALS
A. The parties entered into an Employment Agreement, dated with an effective date as of September 8, 2015 (the Employment Agreement), pursuant to which the parties agreed that upon the occurrence of certain conditions, Executive would become eligible for certain termination payments (as provided for in Section 3.2 of the Employment Agreement) in exchange for Executives release of the Company from all claims which Executive may have against the Company as of the termination date. Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Employment Agreement. Executive acknowledges that the consideration recited in this Release is in addition to anything to which Executive may otherwise be entitled.
B. The parties desire to dispose of, fully and completely, all claims, which Executive may have against the Company, in the manner set forth in this Release.
AGREEMENT
1. Executive waives and releases Parent and its affiliates, subsidiaries, partners, officers, directors, shareholders, agents, employees, attorneys, successors, assigns, affiliates, related organizations and related employee benefit plans (collectively referred to herein as Releasees) with respect to any and all claims, rights, and causes of action, known or unknown, that Executive may have or claim to have had against any of them, based on any act, occurrence, or omission from the beginning of time to and including the date this Release was executed, including, but not limited to, any and all claims, rights, and causes of action arising out of or in any way connected with Executives employment with, or termination of employment from the Company, and arising under federal, state and/or local laws such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the California Fair Employment and Housing Act, the California Labor Code, the California Constitution, and ERISA, and the common law (hereinafter referred to as the Released Claims). Notwithstanding the foregoing, this Release shall not apply to (none of which shall be Released Claims): (a) any claims for any amounts which shall to be paid to Executive following the execution hereof pursuant to the terms of Section 3.2 of the Employment Agreement; (b) any claims for indemnification under Section 5.14 of the Employment Agreement, or otherwise pursuant to the governance documents of any member of the Company Group, or under any separate indemnification agreement Executive may enter into from time to time; (c) claims of Executive under the Rollover Agreement, or any other agreements entered into in connection therewith, other than the Employment Agreement, (c) claims of Executive as a shareholder, note holder or option holder of Parent or otherwise relating to or arising out of any agreements
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relating thereto or to the acquisition of any securities, notes, options or other equity interests in Parent; (d) the payment of any Required Payments; and (d) claims under any employee benefit plan (other than for wages and bonuses to the extent they may be considered an employee benefit plan) of the Company (collectively, the Surviving Claims).
2. Executive promises not to file any law suits in any court or any demand for arbitration against any of the Releasees with respect to the Released Claims. Executive affirms that, except for the Surviving Claims, Executive has been paid and/or has received all leave (paid or unpaid), compensation, wages, commissions, vacation pay, severance pay, bonuses, commissions, reimbursements, benefits, and other monies to which Executive may have been entitled and that, except for the termination payments, no other leave (paid or unpaid), compensation, wages, commissions, vacation pay, severance pay, bonuses, commissions, reimbursements, benefits, and/or other monies are due Executive. Executive also acknowledges that the termination payment is in excess of any payment to which Executive otherwise was entitled.
3. Executive acknowledges that Executive is familiar with and understands the provision of Section 1542 of the California Civil Code, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
Being aware of that Code Section, Executive expressly waives and relinquishes any rights or benefits Executive may have thereunder, as well as any other state or federal statutes or common law principles of similar effect.
4. A. Executive warrants that neither Executive, nor anyone acting on Executives behalf, has filed any claim, charge or action against any of the Releasees with respect to any of the Released Claims, except as disclosed to the Company in writing on the date hereof.
B. Nothing in this Release shall affect (i) Executives rights, if any, to indemnification under California Labor Code section 2802, (ii) Executives rights to file claims for workers compensation or unemployment insurance benefits, or (iii) Executives rights to file charges of discrimination with any state or federal administrative agency alleging violations of state or federal anti-discrimination laws, with the understanding and agreement that Executive may not accept any money, anything of economic value or other individual relief (e.g., reinstatement) as a result of having filed such charges. Finally, Executive agrees that, if any of the Released Claims are brought on Executives behalf or for Executives benefit in a court or administrative agency, Executive waives and agrees not to accept any award of money, other damages or other individual relief (e.g., reinstatement) as a result of such claim.
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5. This Release is executed voluntarily and without any duress or undue influence. Executive acknowledges he has read this Release and executed it with his full and free consent. No provision of this Release shall be construed against any party by virtue of the fact that such party or its counsel drafted such provision or the entirety of this Release.
6. This Release is made and entered into in the State of California and accordingly the rights and obligations of the parties hereunder shall in all respects be construed, interpreted, enforced and governed in accordance with the laws of the State of California as applied to contracts entered into by and between residents of California to be wholly performed within California, without regard to conflicts of law principles.
7. Executive is hereby advised to consult with an attorney prior to executing this Release. Executive is hereby advised that Executive has 21 calendar days to consider whether to sign this Release before signing it and that Executive has 7 calendar days to revoke the Release subsequent to the time Executive signed it. Accordingly, unless Executive has timely revoked acceptance of this Release, this Release shall become effective the eighth day after the date of Executives signature.
8. If any part, term or provision of this Release is found to be illegal or invalid, such illegality or invalidity shall not affect the validity of the remainder of the Release. This Release constitutes the entire agreement and understanding concerning the matters addressed herein and replaces all prior discussions and agreements, and may only be modified by a writing signed by all of the parties.
9. Any party who asserts that there exists any dispute, controversy or claim arising out of or relating to this Agreement or the employment relationship (including claims of discrimination, wrongful termination, tort claims and claims based on any statutory or constitutional provision), may only do so by final and binding arbitration in accordance with the then current employment dispute rules of the American Arbitration Association. The arbitration will be conducted in Los Angeles County, California, before and subject to the administrative procedures of JAMS Endispute. The arbitrator will be a neutral, experienced arbitrator who is a retired judge and licensed to practice law in California. The arbitrator will be jointly selected by the parties or, if necessary, designated by JAMS Endispute in accordance with its procedures. Executive and each member of the Company Group each knowingly waives the right to a jury trial in a court of law with respect to claims subject to arbitration. All fees of the arbitrator will be paid by the Company. All other costs and expenses associated with the arbitration, such as attorneys fees and witness fees, will be paid by the party that incurs those costs and expenses, except to the extent that a party is entitled to recover those costs or expenses under applicable law. The arbitrator will have the power to summarily adjudicate claims and/or enter summary judgment in appropriate cases and to apply any applicable statutes of limitation, and the decision of the arbitrator will be final and binding and may be confirmed in court. The arbitrators decision will be in writing. A petition to compel arbitration or to confirm, modify or vacate an arbitration award may be brought pursuant to applicable federal or California state arbitration statutes, or both. Subject to the provisional remedies, if any, provided for under applicable state or federal law, which either party may pursue in court, arbitration will be the exclusive remedy for resolving any such arbitrable disputes, and the decision of the arbitrator will be final and binding on all parties, subject to review only in accordance with applicable state or federal law.
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The decision of the arbitrator may be reduced to an enforceable court judgment by the prevailing party in the arbitration, and the Federal Arbitration Act (FAA) will govern this paragraph.
Dated: , 201 |
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PETER KIM |
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JOES JEANS INC. |
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Dated: , 201 |
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Name: |
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Title: |
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HUDSON CLOTHING HOLDINGS, INC. |
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Dated: , 201 |
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Name: |
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Title: |
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HC ACQUISITION HOLDINGS, INC. |
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Dated: , 201 |
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Name: |
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Title: |
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HUDSON CLOTHING, LLC |
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Dated: , 201 |
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Name: |
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Title: |
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Exhibit 10.5
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this Agreement) is made as of September 8, 2015 by and among Joes Jeans Inc. (Parent), Hudson Clothing Holdings, Inc. (Company) and Peter Kim (Kim) but is not effective until the Closing (as defined in the Agreement and Plan of Merger, dated as of September 8, 2015 among RG Parent, LLC (RG), JJ Merger Sub LLC (Merger Sub) and Parent (the Transaction Agreement)) under the Transaction Agreement (the date of such Closing, the Closing Date).
BACKGROUND:
A. Pursuant to Transaction Agreement, Merger Sub will be merged with and into RG (the Merger), with RG surviving the merger as a wholly-owned subsidiary of Parent.
B. In connection with the Merger, the holders of Parents convertible notes have agreed to exchange their notes (the Exchange) for cash, common stock and modified convertible notes (the new note to be received by Kim, the Modified Note) pursuant to the Rollover Agreement, dated as of September 8, 2015 among Parent, Kim and the other parties thereto (the Rollover Agreement).
C. Kim is the holder of convertible notes. Kim acknowledges that he is entering into this Agreement in consideration for the Exchange.
D. Pursuant to the Rollover Agreement, Kim is required to execute and deliver this Agreement in connection with the Closing.
E. RG would not have entered into the Transaction Agreement if Kim did not enter into this Agreement, and Kim is receiving substantial benefits under the Rollover Agreement and pursuant to the Exchange.
F. Undefined capitalized terms herein are defined in the Transaction Agreement.
NOW THEREFORE, Parent, Company and Kim, intending to be legally bound, hereby agree as follows:
1. Restrictive Covenants. To assure that Parent and Company will realize the benefits of the transactions contemplated the Transaction Agreement (the Transactions) and in consideration of the substantial benefits that Kim is receiving under the Transaction Agreement, Kim hereby agrees with Parent and Company that:
1.1 Kim shall not, from the Closing Date until the earliest of (i) the third (3rd) anniversary after the Closing Date, (ii) six months after a Corporate Event (as defined in the Modified Note) of Parent or the Company, (iii) 60 days after the occurrence of any Event of Default (as defined in the Modified Note; for purposes of this Agreement, the term Company as used in the definition of Event of Default shall be deemed to also apply to Company) of the Modified Note, which Event of Default has not been previously cured by
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Parent or waived by Kim, provided that if Kim remains employed by the Company and the Event of Default is cured by Parent or waived by Kim within 60 days after the occurrence, such Event of Default shall be deemed not to have occurred, and (iv) the termination of Kims employment without Cause or for Good Reason (as such terms are defined in the Employment Agreement) (the earlier of (i)-(iv), the Termination Date), directly or indirectly, alone or as an officer, director, employee, owner, partner, joint venturer, member, manager, consultant, agent, independent contractor, or Equity Interest holder of, or lender to, any Person or business, engage in, compete with, or permit his name to be used by or in connection with the business of developing, manufacturing, selling, marketing, distributing and/or licensing of premium denim apparel wear of the type sold by Company or Parent and each of their respective subsidiaries (the Company Group) as of the Closing (Restricted Business); provided that nothing herein shall in any way restrict any involvement by Kim in any manner in the Outside Activities (as defined in the Employment Agreement). In addition, at any time, Kim shall be permitted to, directly or indirectly, own an interest in and, when not employed by Hudson Clothing LLC, take part in and/or manage or operate the Historical Family Businesses (as defined below). Historical Family Businesses means the business of manufacturing, selling, distributing, transporting, delivering and marketing junior and missy moderate sportswear and such additional apparel business as conducted by Kims family from time to time which is not competitive the Company Group.
1.2 Kim, Company and Parent agree and acknowledge that the restrictions in this Section 1 are reasonable in scope and duration and are necessary to protect Company, Parent and their respective Affiliates after the Closing. If any provision of this Section 1, as applied to any party hereto or to any circumstance, is adjudged by a Governmental Authority, arbitrator, or mediator to be unenforceable, illegal or invalid in accordance with its terms, the same will in no way affect any other circumstance or the enforceability of the remainder of this Agreement. If any such provision, or any part thereof, is held not to be enforceable in accordance with its terms because of the duration of such provision, the area covered thereby, or the scope of the activities covered, Parent, Company and Kim agree that the Governmental Authority, arbitrator, or mediator making such determination will have the power (and is hereby instructed by the parties) to reduce the duration, area, and/or scope of activities of such provision, and/or to delete or modify specific words or phrases (it being the intent of the parties that any such reduction or modification be limited to the minimum extent necessary to render such provision enforceable) and in its reduced or modified form such provision will then be legal, valid and enforceable in accordance with its terms and will be enforced.
2. Conflicts of Interest. Kim represents to Parent and Company that there are no restrictions, agreements or understandings, oral or written, to which Kim is a party or by which Kim is bound that prevents or makes unlawful Kims execution or performance of the terms and conditions of this Agreement.
3. Miscellaneous.
3.1 Entire Agreement. This Agreement and the Rollover Agreement and the certificates, documents, instruments and writings that are delivered pursuant hereto and thereto, constitute the entire agreement and understanding of the parties hereto in respect of the subject hereof and supersede all prior understandings, agreements, or representations by or
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among the parties, written or oral, to the extent they relate in any way to the subject matter hereof. Except as expressly contemplated hereby and except for Parents Affiliates, each of which will be deemed a third party beneficiary of all obligations of Kim under this Agreement, there are no third party beneficiaries having rights under or with respect to this Agreement. Notwithstanding the provisions of this Section 3.1, the Parties acknowledge that Kim, Company, Parent and certain of their Affiliates have entered into a separate employment agreement dated as of September 8, 2015 (the Employment Agreement), and nothing stated herein affects the enforceability of the Employment Agreement.
3.2 Successors. All of the terms, agreements, covenants, representations, warranties, and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the parties hereto and their respective successors.
3.3 Assignment. No party hereto may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties hereto; provided, however, that Parent may (a) assign any or all of its rights and interests hereunder to one or more of its Affiliates, (b) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases Parent nonetheless will remain responsible for the performance of all of its obligations hereunder), and (c) assign its rights and delegate its duties to any successor entity resulting from any liquidation, merger, consolidation, reorganization, or transfer of all or substantially all of the assets or stock of Parent or Company.
3.4 Notices. All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder will be deemed duly given if (and then three (3) Business Days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
If to Parent or Company:
Joes Jeans
2340 S. Eastern Avenue
Commerce, California 90040
Attn Chief Executive Officer
Fax: (323) 837-3791
Copy to (which will not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attn Jeffrey H. Cohen
Andrew D. Garelick
Fax: (213) 687-5600
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If to Kim:
Peter Kim
4411 Dundee Dr
Los Angeles, CA 90027
Any party hereto may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party hereto may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other parties hereto notice in the manner herein set forth.
3.5 Definitions.
(a) Commitment means (i) options, warrants, convertible securities, exchangeable securities, subscription rights, conversion rights, or other Contracts that could require a Person to issue any of its Equity Interests or sell any Equity Interests it owns in another person; (ii) any other securities convertible into, exchangeable or exercisable for, or representing the right to subscribe for any Equity Interest of a Person or owned by a Person; (iii) statutory pre-emptive rights or pre-emptive right granted under a Persons Organizational Documents; and (iv) stock appreciation rights, phantom stock, profit participation, or other similar rights with respect to a Person.
(b) Equity Interest means (i) with respect to a corporation, any and all Equity Interests and any Commitments with respect thereto, (ii) with respect to a partnership, limited liability company, trust or similar Person, any and all units, interests or other partnership/limited liability company interests, and any Commitments with respect thereto, and (iii) any other direct or indirect ownership or participation in a Person.
(c) Losses means any and all actual losses, claims, damages, liabilities, expenses (including reasonable attorneys and accountants fees), assessments and Taxes.
(d) Organizational Documents means the articles of incorporation, certificate of incorporation, charter, bylaws, articles of formation, operating agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments or certificates executed, adopted, or filed in connection with the creation, formation, or organization of a Person, including any amendments thereto.
3.6 Specific Performance. Each party hereto acknowledges and agrees that the other parties hereto would be damaged irreparably if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, and that money damages alone would be an inadequate remedy to compensate the non-breaching party and its Affiliates for any such breach. Accordingly, each party hereto agrees that the other parties will be entitled to an injunction or injunctions to prevent breaches of the provisions of this
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Agreement and to enforce specifically this Agreement and its terms and provisions in any Action instituted in any court of the United States or any state thereof having jurisdiction over the parties hereto and the matter, in addition to any other remedy to which they may be entitled at Law or in equity, which other remedies, including Losses, will in no way be limited by the foregoing.
3.7 Submission to Jurisdiction; No Jury Trial.
(a) Submission to Jurisdiction. Each party hereto submits to the jurisdiction of any state or federal court sitting in Los Angeles, California, in any Action arising out of or relating to this Agreement and agrees that all claims in respect of the Action may be heard and determined in any such court. Each party hereto also agrees not to bring any Action arising out of or relating to this Agreement in any other court. Each party hereto agrees that a final judgment in any Action so brought will be conclusive and may be enforced by Action on the judgment or in any other manner provided at Law or in equity, with all rights to appeal. Each party hereto waives any defense of inconvenient forum to the maintenance of any Action so brought and waives any bond, surety, or other security that might be required of any other party hereto with respect thereto.
(b) Waiver of Jury Trial. THE PARTIES HERETO EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM RELATING TO THE TRANSACTIONS. The scope of this waiver is intended to be all encompassing of any and all Actions that may be filed in any court and that relate to the subject matter hereof and of the Transactions, including, contract claims, tort claims, breach of duty claims and all other common Law and statutory claims. The parties hereto each acknowledge that this waiver is a material inducement to enter into a business relationship and that they will continue to rely on the waiver in their related future dealings. Each party hereto further represents and warrants that it has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND THE WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING HERETO. In the event of an Action, this Agreement may be filed as a written consent to trial by a court.
3.8 Time. Time is of the essence in the performance of this Agreement.
3.9 Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument.
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3.10 Headings. The article and section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.
3.11 Governing Law. This Agreement and the performance of the parties obligations hereunder will be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of Law principles that would apply any other Law.
3.12 Effectiveness. For the avoidance of doubt, this Agreement shall only become effective as of the Closing as defined in the Transaction Agreement. In the event that the Transaction Agreement is terminated in accordance with its terms, this Agreement shall automatically and immediately terminate.
3.13 Amendments and Waivers. No amendment, modification, replacement, termination, or cancellation of any provision of this Agreement will be valid, unless the same will be in writing and signed by the Parent, Company and Kim (and, if prior to the Closing, RG). Neither any failure nor any delay by any party hereto in exercising any right, power or privilege under this Agreement or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be discharged by one party hereto, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other parties hereto; (b) no waiver that may be given by a party hereto will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party hereto will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement.
3.14 Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party hereto or to any circumstance, is adjudged by a Governmental Authority, arbitrator or mediator not to be enforceable in accordance with its terms, the parties hereto agree that the Governmental Authority, arbitrator, or mediator making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced.
3.15 Expenses. Except as otherwise expressly provided in this Agreement or the Rollover Agreement, each party hereto will bear its own costs and expenses incurred in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby and thereby including all fees and expenses of agents, representatives, financial advisors, legal counsel and accountants.
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3.16 Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise favoring or disfavoring any party hereto because of the authorship of any provision of this Agreement. Any reference to any federal, state, local, or foreign Law will be deemed also to refer to Law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise. The words include, includes, and including will be deemed to be followed by without limitation. Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. The words this Agreement, herein, hereof, hereby, hereunder, and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty, and covenant contained herein will have independent significance. If any party hereto has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached will not detract from or mitigate the fact that such party is in breach of the first representation, warranty, or covenant.
3.17 Remedies. Except as expressly provided herein, the rights, obligations and remedies created by this Agreement are cumulative and in addition to any other rights, obligations, or remedies otherwise available at Law or in equity. Except as expressly provided herein, nothing herein will be considered an election of remedies.
3.18 Electronic Signatures.
(a) Notwithstanding the Electronic Signatures in Global and National Commerce Act (15 U.S.C. Sec. 7001 et.seq.), the Uniform Electronic Transactions Act, or any other Law relating to or enabling the creation, execution, delivery, or recordation of any Contract or signature by electronic means, and notwithstanding any course of conduct engaged in by the parties hereto, no party hereto will be deemed to have executed this Agreement or other document contemplated thereby (including any amendment or other change thereto) unless and until such party shall have executed this Agreement or other document on paper by a handwritten original signature or any other symbol executed or adopted by a party with current intention to authenticate this Agreement or such other document contemplated.
(b) Delivery of a copy of this Agreement or such other document bearing an original signature by facsimile transmission (whether directly from one facsimile device to another by means of a dial-up connection or whether mediated by the worldwide web), by electronic mail in portable document format (.pdf) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature. Originally signed or original signature means or refers to a signature that has not been mechanically or electronically reproduced.
[Signature page follows]
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IN WITNESS WHEREOF, Parent, Company and Kim have executed and delivered this Non-competition Agreement as of the date first above written.
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JOES JEANS INC. |
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By: |
/s/ Hamish Sandhu |
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Name: Hamish Sandhu |
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Title: CFO |
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HUDSON CLOTHING HOLDINGS, INC. |
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By: |
/s/ Hamish Sandhu |
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Name: Hamish Sandhu |
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Title: CFO |
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/s/ Peter Kim |
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PETER KIM |
Signature Page to Non-Competition Agreement
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Exhibit 10.6
VOTING AGREEMENT
This Voting Agreement (this Agreement) is made and entered into as of September 8, 2015, by and among RG Parent, LLC, a Delaware limited liability company (the Company), Joes Jeans, Inc., a Delaware corporation (Parent, and, together with the Company, the Merger Parties), and Joseph M. Dahan (the Stockholder).
RECITALS
A. Concurrently with the execution of this Agreement, the Merger Parties and JJ Merger Sub LLC, a Delaware limited liability company (Merger Sub), have entered into an Agreement and Plan of Merger (the Merger Agreement) which, among other things, provides for the merger of Merger Sub with and into the Company with the Company being the surviving entity (the Merger).
B. As a condition and an inducement to the Merger Parties willingness to enter into the Merger Agreement, the Merger Parties have required that the Stockholder agrees, and the Stockholder has agreed to, enter into this Agreement with respect to all common stock, par value $0.10 per share, of Parent (the Parent Common Stock) that the Stockholder owns beneficially (as defined in Rule 13d-3 under the Exchange Act) or of record.
C. The Stockholder is the beneficial or record owner, and has either sole or shared voting power over, such number of shares of the Parent Common Stock (the Parent Stock) as is indicated opposite the Stockholders name on Schedule A attached hereto.
D. The Merger Parties desire that the Stockholder agrees, and the Stockholder is willing to agree, subject to the limitations herein, not to Transfer (as defined below) any of its Subject Securities (as defined below), and to vote its Subject Securities in a manner so as to facilitate consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Merger Agreement. When used in this Agreement, the following terms in all of their tenses, cases and correlative forms shall have the meanings assigned to them in this Section 1 or elsewhere in this Agreement.
Expiration Time shall mean the earlier to occur of (i) the date upon which the Merger becomes effective and (ii) such date and time as the Merger Agreement shall be terminated in accordance with its terms.
Permitted Transfer shall mean, in each case, with respect to the Stockholder, so long as (i) such Transfer is in accordance with applicable Law and (ii) the Stockholder is and at all times has been in compliance with this Agreement, any Transfer of Subject Securities by the Stockholder to any Person so long as such Person, in connection with such Transfer, executes a joinder to this Agreement pursuant to which such Person agrees to become a party to this Agreement and be subject to the restrictions applicable to the Stockholder and otherwise become a party for all purposes of this Agreement (including, without limitation, the grant of proxies pursuant to Section 4 hereof); provided, that no such Transfer shall relieve the transferring Stockholder from its obligations under this Agreement, other than with respect to the Parent Stock transferred in accordance with the foregoing provision.
Specified Matters shall mean the (i) adoption of an amendment to Parents certificate of incorporation to increase the authorized number of shares of Parent Common Stock and to effect a 1 for 30 reverse stock split of the Parent Common Stock (ii) approval of the issuance of Parent Common Stock in connection with the Merger and the issuance of Parent Common Stock upon conversion of preferred stock, par value $0.10 per share, of Parent to be issued by Parent in connection with the consummation of the Merger pursuant to the Stock Purchase Agreement and (iii) any other matter to be voted on as a required condition to closing of the Merger and the transactions contemplated therein.
Subject Securities shall mean, collectively, the Parent Stock and the New Parent Stock.
Transfer shall mean (i) any direct or indirect offer, sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer (by operation of Law or otherwise), either voluntary or involuntary, or entry into any contract, option or other arrangement or understanding with respect to any offer, sale, assignment, encumbrance, pledge, hypothecation, disposition, loan or other transfer (by operation of Law or otherwise), of any Subject Securities (or any security convertible or exchangeable into Subject Securities) or interest in any Subject Securities, excluding, for the avoidance of doubt, entry into this Agreement, or (ii) entering into any swap or any other agreement, transaction or series of transactions that hedges or transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of such capital stock or interest in capital stock, whether any such swap, agreement, transaction or series of transactions is to be settled by delivery of securities, in cash or otherwise. For purposes of this Agreement, capital stock shall include interests in a limited partnership.
2. Agreement to Retain the Parent Stock.
2.1 Transfer and Encumbrance of Subject Securities. Other than a Permitted Transfer, hereafter until the Expiration Time, the Stockholder agrees, with respect to any Subject Securities beneficially owned by the Stockholder, not to (i) Transfer any such Subject Securities, or (ii) deposit any such Subject Securities into a voting trust or enter into a voting agreement or arrangement with respect to such Subject Securities or grant any proxy (except as otherwise provided herein) or power of attorney with respect thereto.
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2.2 Additional Purchases. The Stockholder agrees that any Parent Common Stock and other capital shares of Parent that such Stockholder purchases or otherwise acquires or with respect to which such Stockholder otherwise acquires sole voting power after the execution of this Agreement and prior to the Expiration Time (the New Parent Stock) shall be subject to the terms and conditions of this Agreement to the same extent as if they constituted the Parent Stock.
2.3 Unpermitted Transfers. Any Transfer or attempted Transfer of any Subject Securities in violation of this Section 2 shall, to the fullest extent permitted by Law, be null and void ab initio.
3. Agreement to Vote and Approve. Hereafter until the Expiration Time, at every meeting of the stockholders of Parent called with respect to any of the following matters, and at every adjournment or postponement thereof, and on every action or approval by written consent of the stockholders of Parent with respect to any of the following matters, the Stockholder shall, or shall cause the holder of record on any applicable record date to (including via proxy), vote the Parent Stock and any New Parent Stock owned by the Stockholder: (i) in favor of the Specified Matters, and (ii) against (a) any action or agreement that would reasonably be expected to result in any condition to the consummation of the Merger set forth in Article V of the Merger Agreement not being fulfilled, and (b) any action which could reasonably be expected to delay, postpone or adversely affect consummation of the transactions contemplated by the Merger Agreement.
4. Irrevocable Proxy. By execution of this Agreement, the Stockholder does hereby appoint and constitute the Company, until the Expiration Time (at which time this proxy shall automatically be revoked), with full power of substitution and resubstitution, as the Stockholders true and lawful attorney-in-fact and irrevocable proxy, to the fullest extent of the Stockholders rights with respect to the Subject Securities beneficially owned by the Stockholder, to vote such Subject Securities solely with respect to the matters set forth in Section 3 hereof; provided, however, that the foregoing shall only be effective if the Stockholder fails to be counted as present, to consent or to vote the Stockholders Subject Securities, as applicable, in accordance with Section 3 above. The Stockholder intends this proxy to be irrevocable and coupled with an interest hereafter until the Expiration Time (at which time this proxy shall automatically be revoked) for all purposes and hereby revokes any proxy previously granted by the Stockholder with respect to its Subject Securities. The Stockholder hereby ratifies and confirms all actions that the proxy appointed hereunder may lawfully do or cause to be done in accordance with this Agreement.
5. Representations and Warranties of the Stockholder. The Stockholder hereby represents and warrants to the Company Parties as follows:
5.1 Due Authority. The Stockholder has the full power and authority to make, enter into and carry out the terms of this Agreement and to grant the irrevocable proxy as set forth in Section 4 hereof. This Agreement has been duly and validly executed and delivered by the Stockholder and constitutes a valid and binding agreement of the Stockholder enforceable against it in accordance with its terms, except to the extent enforceability may be limited by the effect of applicable bankruptcy, reorganization, insolvency, moratorium or other Laws affecting the enforcement of creditors rights generally and the effect of general principles of equity, regardless of whether such enforceability is considered in a proceeding at Law or in equity.
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5.2 Ownership of the Parent Stock. As of the date hereof, the Stockholder (i) is the beneficial or record owner of the Parent Common Stock indicated on Schedule A hereto opposite the Stockholders name, free and clear of any and all Liens, other than those created by this Agreement, as disclosed on Schedule A or as would not prevent the Stockholder from performing its obligations under this Agreement, and (ii) has sole voting power over all of the Parent Stock beneficially owned by the Stockholder. As of the date hereof, the Stockholder does not own, beneficially or of record, any capital stock or other securities of Parent other than the Parent Common Stock set forth on Schedule A opposite the Stockholders name. As of the date hereof, the Stockholder does not own, beneficially or of record, any rights to purchase or acquire any shares of capital stock of Parent except as set forth on Schedule A opposite the Stockholders name.
5.3 No Conflict; Consents.
(a) The execution and delivery of this Agreement by the Stockholder does not, and the performance by the Stockholder of the obligations under this Agreement and the compliance by the Stockholder with any provisions hereof do not and will not: (i) conflict with or violate in any material respect any Laws applicable to the Stockholder, or (ii) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the Parent Stock beneficially owned by the Stockholder pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Stockholder is a party or by which the Stockholder is bound.
(b) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or any other Person, is required by or with respect to the Stockholder in connection with the execution and delivery of this Agreement or the consummation by the Stockholder of the transactions contemplated hereby.
5.4 Absence of Litigation. There is no Action pending against, or, to the knowledge of the Stockholder, threatened against or affecting, the Stockholder that could reasonably be expected to materially impair or materially adversely affect the ability of such Stockholder to perform such Stockholders obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
6. Termination. This Agreement shall terminate and shall have no further force or effect immediately as of and following the Expiration Time.
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7. Notice of Certain Events. The Stockholder shall notify the Company promptly of (a) any fact, event or circumstance that would cause, or reasonably be expected to cause or constitute, a breach in any material respect of the representations and warranties of the Stockholder under this Agreement and (b) the receipt by the Stockholder of any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with this Agreement; provided, however, that the delivery of any notice pursuant to this Section 7 shall not limit or otherwise affect the remedies available to any party.
8. Miscellaneous.
8.1 Severability. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
8.2 Binding Effect and Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
8.3 Amendments and Modifications. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto.
8.4 Specific Performance; Injunctive Relief. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof or was otherwise breached. It is accordingly agreed that the parties shall be entitled to specific relief hereunder, including, without limitation, an injunction or injunctions to prevent and enjoin breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (unless the Delaware Court of Chancery shall decline to accept jurisdiction over a particular matter, in which case, in any federal court within the State of Delaware), in addition to any other remedy to which they may be entitled at Law or in equity. Any requirements for the securing or posting of any bond with respect to any such remedy are hereby waived.
8.5 Notices. All notices, requests, claims, consents, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, sent by overnight courier (providing proof of delivery) to the parties or sent by facsimile or e-mail of a pdf attachment (providing confirmation of transmission) at the following addresses or facsimile numbers (or at such other address or facsimile number for a party as shall be specified by like notice):
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(a) if to the Stockholder, to it at:
With a copy to (which shall not constitute notice)
(b) if to Parent, to:
Joes Jeans, Inc.
2340 S. Eastern Avenue
Commerce, CA 90040
Attention: Interim Chief Executive Officer
Fax: (323) 837-3791
With a copy (which shall not constitute notice) to:
Akin Gump Strauss Hauer & Feld LLP
1333 New Hampshire Avenue NW
Washington DC 20036
Attention: Russell W. Parks Jr.
Erica D. McGrady
Fax: (202) 887-4288
Email: rparks@akingump.com
emcgrady@akingump.com
(b) if to the Company, to:
RG Parent, LLC
c/o Tengram Capital Partners
15 Riverside Avenue, First Floor
Westport, CT 06880
Attention: Andrew R. Tarshis
Facsimile: (203) 454-6998
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With a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Fax: (213) 687-5600
Attention: Jeffrey H. Cohen
Andy D. Garelick
Email: jeffrey.cohen@skadden.com
andrew.garelick@skadden.com
Or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective upon receipt.
8.6 Governing Law; Jurisdiction and Venue. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware applicable to agreements entered into and performed entirely therein by residents thereof, without regarding to any provisions relating to choice of laws among different jurisdictions. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any other party or its successors or assigns shall be brought and determined in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (unless the Delaware Court of Chancery shall decline to accept jurisdiction over a particular matter, in which case, in any federal court within the State of Delaware), and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper, or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
8.7 WAIVER OF JURY TRIAL. EACH OF THE COMPANY PARTIES AND THE SHAREHOLDER HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE COMPANY PARTIES OR THE SHAREHOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.
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8.8 Entire Agreement. This Agreement contains the entire understanding of the parties in respect of the subject matter hereof, and supersedes all prior negotiations and understandings between the parties with respect to such subject matter.
8.9 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement.
8.10 Effect of Headings. The section headings herein are for convenience only and shall not affect the construction of interpretation of this Agreement.
8.11 No Agreement Until Executed. Irrespective of negotiations among the parties or the exchanging of drafts of this Agreement, this Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the parties hereto unless and until (i) the Merger Agreement is executed and delivered by all parties thereto, and (ii) this Agreement is executed and delivered by all parties hereto.
8.12 Legal Representation. This Agreement was negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation thereof.
8.13 Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense, whether or not the Merger is consummated.
8.14 Action in Stockholder Capacity Only. The parties acknowledge and agree that this Agreement is entered into by the Stockholder solely in his capacity as the beneficial owner or record holder of Parent Stock and nothing in this Agreement shall restrict, limit or affect (or require the Stockholder to attempt to restrict, limit or affect) in any respect any actions taken by the Stockholder as a director, trustee, officer or fiduciary of Parent in his, her or its capacity as a director, trustee, officer or fiduciary of Parent.
8.15 Documentation and Information. The Stockholder consents to and authorizes the publication and disclosure by Parent and the Company of the Stockholders identity and holdings of the Parent Stock, and the nature of the Stockholders commitments, arrangements and understandings under this Agreement, in any press release or any other disclosure document required in connection with the Merger or any other transaction contemplated by the Merger Agreement. As promptly as reasonably practicable, the Stockholder shall notify Parent and the Company of any required corrections with respect to any written information supplied by the Stockholder specifically for use in any such disclosure document, if and to the extent the Stockholder becomes aware that any have become false or misleading in any material respect.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the date and year first above written.
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RG PARENT, LLC |
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By: |
/s/ William Sweedler |
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Name: William Sweedler |
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Title: Chairman |
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JOES JEANS, INC. |
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By: |
/s/ Hamish Sandhu |
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Name: Hamish Sandhu |
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Title: CFO |
[Signature Page to Voting Agreement]
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STOCKHOLDER: |
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/s/ Joseph M. Dahan |
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Joseph M. Dahan |
[Signature Page to Voting Agreement]
SCHEDULE A
Name |
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Common Stock |
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Joseph M. Dahan |
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12,022,521 |
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Total: |
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12,022,521 |
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Exhibit 10.7
SEPARATION AGREEMENT AND MUTUAL LIMITED RELEASE
This Separation Agreement and Mutual Release (Agreement) is entered into as of September 8, 2015, by and between Joseph M. Dahan (Dahan) and Joes Jeans Inc. (Company) (collectively, the Parties).
RECITALS
WHEREAS, Dahan has been employed by the Company pursuant to the Amended and Restated Employment Agreement between Dahan and Innovo Group Inc. effective as of June 25, 2007 (as amended, the Employment Agreement);
WHEREAS, Dahans current renewal term of the Employment Agreement expires on October 25, 2015;
Whereas, the Company and Sequential Brands Group, Inc., (SBGI) entered into an agreement, dated as of September 8, 2015, pursuant to which SBGI will acquire the Joes Jeans and related licensed trademarks of the Company and its subsidiaries, and related intellectual property;
WHEREAS, the Company and GBG USA Inc. (GBG) entered into an Asset Purchase Agreement, dated as of September 8, 2015 (GBG Purchase Agreement) pursuant to which GBG will acquire certain assets, employees and the operating business of a subsidiary of the Company conducted under the Joes Jeans brand, including inventory, working capital, store leases and certain related assets;
WHEREAS, SBGI will license the Joes Jeans brand to GBG to manufacture, distribute and sell the premium denim products now manufactured, distributed and sold by the Company;
WHEREAS, the Company will terminate Dahan as an employee without Cause as a result of the transactions described above;
WHEREAS, Dahan will be entitled to a severance payment as set forth in Section V of the Employment Agreement through October 25, 2015 by reason of a termination by the Company without Cause; and
WHEREAS, the Parties mutually desire to confirm their mutual understanding of the future of Dahans employment with the Company and bring Dahans employment to a smooth closure;
NOW, THEREFORE, for good and valuable consideration, the sufficiency of which the Parties acknowledge, the Parties agree as follows:
AGREEMENT
1. The Company is terminating Dahans employment without Cause, including any and all positions he holds with any affiliates of the Company, contingent upon and effective as of the Closing Date (as defined in the GBG Purchase Agreement). In addition, contingent upon and effective as of the Closing Date, Dahan resigns as a director of the Company.
2. Contingent upon and on the Closing Date, the Company will pay Dahan an amount equal to his Termination Severance (as defined in the Employment Agreement), calculated from the Closing Date through and including October 25, 2015 .
3. Through the Closing Date, Dahans employment will continue to be governed pursuant to the terms and conditions of the Employment Agreement, and he will continue to be compensated under the Employment Agreement.
4. Contingent upon and effective as of the Closing Date, the Company and Dahan (the Releasor and the Released Party with respect to the other party) hereby forever release and discharge one another for and from any and all claims, causes of action, demands, suits, liabilities, fees, costs, expenses, and/or damages of any kind or nature, whether known or unknown, whether accrued or contingent, which Releasor ever had, now has, or hereafter may have against the Released Party with respect to Dahans employment by the Company, the terms and conditions of Dahans employment, the performance of Dahans duties as an employee, or the termination of Dahans employment (collectively, Employment Claims)by reason of any actual or alleged act, omission, transaction, practice, conduct, statement, occurrence, or other matter up to and including the date of this Agreement, including, but not limited to, Employment Claims arising under any federal, state, local, and/or foreign statutory law, regulatory law, and/or common law. The Releasor specifically intends this release to be the broadest possible release permitted under law with respect to the Employment Claims.
5. Without limiting the generality of Section 4, above, contingent upon and effective as of the Closing Date, Releasor acknowledges and agrees that the Employment Claims being released hereunder include, but are not limited to, any and all claims for compensation, wages, benefits, commissions, bonuses, royalties, stock options, deferred compensation, vacation pay, sick pay, personal day pay, other monetary or equitable relief, fringe benefits, attorneys fees or expenses, or any tangible or intangible property, and any claims under any other laws, regulations, and/or rules applicable to Dahans employment, including but not limited to: (i) any and all claims under Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Civil Rights Act of 1991, the California Civil Code, the California Fair Employment and Housing Act, and all other federal, state, local or foreign law (statutory or decisional) or ordinance prohibiting employment discrimination, harassment, or retaliation, as all such laws may be amended from time to time; (ii) any and all claims under the Employee Retirement Income Security Act, as amended, or any employee benefit plan maintained by the Company; (iii) any and all claims under the Family and Medical Leave Act, the California Family
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Rights Act, the Workers Adjustment and Retraining Notification Act, Article 3 of Division 3 of the California Labor Code, and any applicable state, local or foreign equivalent to any of the foregoing laws, as each of such law may be amended from time to time; (iv) any and all claims for breach of contract (express or implied), or tort, including but not limited to all claims of fraud, duress, wrongful or constructive discharge, intentional or negligent misrepresentation, retaliatory discharge, intentional interference with contract, detrimental reliance, defamation, slander, libel, intentional or negligent affliction of emotional distress, and/or claims based on quantum meruit; (v) any and all claims under the Fair Labor Standards Act, the California Labor Code, or any other federal, state, local or foreign laws governing wages, vacation pay, fringe benefits, and obligations of employees, as all such laws may be amended from time to time; (vi) any and all claims for monetary or equitable relief, or compensatory or punitive damages; (vii) any and all other claims (whether based on federal, state, local or foreign law, statutory or decisional) in connection with, relating to, or arising out of Dahans employment or the terms and conditions of his employment, including but not limited to the separation or termination of such employment and/or any of the events relating directly or indirectly to such separation or termination; and (viii) any claim for attorneys fees, costs, disbursements, or any other amounts; which the Releasor ever had, now has, or hereafter may have against the Released Party by reason of any actual or alleged act, omission, transaction, practice, conduct, statement, occurrence, or other matter up to and including the date of this Agreement. Releasor represents and warrants that Releasor has not assigned or subrogated any of his or its rights, claims, or causes of action, including but not limited to any claims referenced in this Agreement, nor has he or it authorized any other person or entity to assert any such claim or claims on his or its behalf and agrees to indemnify and hold harmless the Released Party against any such assignment or subrogation of any such rights, claims, and/or causes of action.
6. Notwithstanding anything to the contrary stated in this Agreement, and for the avoidance of doubt, the releases contained in Sections 4 and 5, above, shall not apply to:
6.1. any rights or claims that arise under, or are explicitly preserved by, this Agreement; including without limitation rights or claims under the Employment Agreement preserved by Sections 2 and 3, above, and this Section 6;
6.2. any rights to or claims by Dahan for indemnification or insurance pursuant to (a) the Employment Agreement (including, without limitation, entitlement to coverage under the Companys directors and officers insurance policy as set forth in Section XIX of the Employment Agreement), (b) applicable law (including without limitation section 2802 of the California Labor Code); (c) the Companys certificate of incorporation or bylaws or Company policy; or (d) otherwise pursuant to the governance documents of the Company, or under any separate indemnification agreement the Executive may enter (or may have entered) into from time to time;
6.3. any rights to or claims by Dahan for earned but unpaid compensation, including payment upon termination of employment of all earned and unpaid salary; bonus; and accrued, unused vacation or PTO as set forth in Sections III(A) and (B) of the Employment Agreement or otherwise;
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6.4. any rights to or claims by Dahan for reimbursement of business expenses incurred through the termination of his employment as set forth in Section III.C of the Employment Agreement or otherwise;
6.5. any rights to or claims by Dahan under any employee benefit plan of the Company;
6.6. any rights to or claims by Dahan for workers compensation benefits, unemployment insurance benefits; and vested retirement, pension or other benefits;
6.7. the Parties obligations to each other under the Agreement dated as of February 18, 2013 by and among the Company, Joes Jeans Subsidiary, Inc. and Dahan (February 2013 Agreement), including, without limitation, the Companys obligation to pay Dahan the balance remaining on the Amended Payment Amount (as defined in the February 2013 Agreement); provided, however, that this exception to the release given in this Agreement shall not apply to Paragraph 3 of the February 2013 Agreement, which the Parties hereby mutually release;
6.8. the Parties obligations to each other under the Earn Out Subordination Agreement dated as of September 13, 2013, by and among the Company and its affiliates, CIT Group Commercial Services, Inc., Garrison Loan Agency Services LLC and Dahan;
6.9. the Parties rights under the Investor Rights Agreement dated as of October 25, 2007 between the Company and Dahan;
6.10. Dahans rights to his equity interest in the Company;
6.11. the Companys rights to intellectual property as set forth in Section VII of the Employment Agreement; and
6.12. Any right or claim that cannot be released under applicable law.
7. Releasor understands and agrees that because this release specifically covers all known and unknown or unanticipated Employment Claims of every kind and character that would otherwise come within the scope of the released claims, Releasor further waives any rights under Section 1542 of the California Civil Code that he or it has with respect to the Employment Claims (if and to the extent California Civil Code applies at all), which states as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
Releasor knowingly and voluntarily hereby expressly waives and relinquishes all rights and benefits that he or it may now have, or in the future may have with respect to the Employment Claims, under Section 1542 of the California Civil Code and any law of any jurisdiction of similar effect with respect to his or its respective releases of claims, including unknown claims, they may have against the other.
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8. Releasor represents and warrants that he or it has not filed or caused to be filed any lawsuit, complaint, or charge against the Released Party in any court, any municipal, state, federal, or foreign agency, or any other tribunal. Releasor agrees that he or it will not, to the fullest extent permitted by law, sue or file a complaint, grievance or demand for arbitration in any forum pursuing any claim released under this Agreement or accept any monetary or other recovery in connection with any charge, complaint, grievance, demand, or other action brought by any other person or entity. Releasor further expressly waives any claim to any monetary or other damages or any other form of recovery in connection with any proceeding that violates this Agreement.
9. A failure by any party hereto at any time to give notice of any breach by any other party of this Agreement, or to require compliance with any condition or provision of this Agreement shall not (i) be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time or (ii) preclude insistence upon strict compliance in the future. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. This Agreement is binding upon, and shall inure to the benefit of Dahan and the Company and their respective heirs, executors, administrators, successors, and assigns.
10. This Agreement shall be construed and enforced in accordance with the laws of the state of California without regard to the principles of conflict of law. If any provision(s) or clause(s) of this Agreement is found to be invalid or unenforceable under any applicable law, this Agreement shall be considered severable and divisible, and a reviewing court shall have the authority to modify, amend, and/or blue pencil the Agreement so as to make it fully valid and enforceable, while maintaining the parties original intent to the maximum extent possible. This Agreement represents the complete understanding between Dahan and the Company with respect to the subject matter of this Agreement and, except as specifically set forth herein, supersedes any and all other written or oral agreements between the Parties pertaining to the subject matter of this Agreement, including without limitation the Employment Agreement. This Agreement may not be modified orally, and instead may be modified only by a writing signed by both the Company and Dahan after the date on which this Agreement is executed.
11. Within thirty days of submission of documentation by counsel for Dahan (redacted as needed to preserve the attorney-client privilege), the Company agrees to pay for Dahans reasonable attorneys fees and costs up to a maximum of One Hundred Thousand Dollars ($100,000.00) incurred with respect to obtaining advice and representation with respect to the proposed GBG Purchase Agreement, including without limitation, the negotiation of this Agreement, Dahans Employment Agreement with GBG, his Consulting Agreement with SBGI, his Voting Agreement, and related matters.
The parties have read and understand this Agreement.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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JOES JEANS, INC. |
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Name: |
/s/ Hamish Sandhu |
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Title: CFO |
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Date: September 8, 2015 |
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/s/ Joseph M. Dahan |
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JOSEPH M. DAHAN |
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Date: September 4, 2015 |
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Exhibit 99.1
Joes Jeans and Robert Graham Announce Transformative Transactions that will Create a New Omni-Channel, Premium Branded Consumer Platform
· Tengram Capital Partners investing $50 million into the new platform to facilitate acquisitions of complementary premium brands
· Joes Jeans Inc. to change company name to Differential Brands Group Inc. to signify change in business strategy
· Hudson and Robert Graham to serve as the foundation for growth
· Joes Jeans brand and operating assets to be divested to third parties
· Upon the closing of the Merger, William Sweedler to join as Chairman and Michael Buckley to lead Company as Chief Executive Officer
LOS ANGELESSeptember 8, 2015Joes Jeans Inc. (NASDAQ: JOEZ) (the Company) and RG Parent, LLC today announced two transformative transactions. First, the Company has agreed to sell the Joes® brand and operating assets for an aggregate purchase price of $80 million to two separate buyers, Sequential Brands Group Inc. (NASDAQ: SQBG) and Global Brands Group Holding Limited (SEHK Stock Code: 787). Proceeds from the transactions will be used to retire certain outstanding indebtedness, including all indebtedness owed to the Companys senior term loan lender. The closings of the asset sale transactions are subject to satisfaction or waiver of certain conditions, including the simultaneous closings of both asset sales. It is anticipated that the asset sale transactions will close by September 30, 2015.
Second, the Company has agreed to merge the remaining Hudson business with the parent company of Robert Graham, RG Parent LLC, a nationally-recognized fashion brand. The strategic combination of the Robert Graham and Hudson® brands will provide the foundation of a new, premium branded consumer platform that focuses on organically growing its owned brands through a global, omni-channel strategy, including premium wholesale department store and specialty stores, direct-to-consumer retail stores, ecommerce, and licensing. Additionally, the platform intends to seek opportunities to acquire accretive, complementary, premium-plus brands.
Upon the closing of the Joes® brand asset sale transactions, the Company will be renamed Differential Brands Group Inc. (DBG) and remain listed on NASDAQ. The name change signifies the transformation of these standalone businesses and the creation of a unified consumer platform. After the completion of the merger transactions, the Robert Graham equity holders will own approximately 47.3% of the Common Stock, the preferred stock owned by Tengram will be convertible into approximately 23.9% of the Common Stock, the convertible noteholders will own approximately 14.0% of the Common Stock and the existing stockholders (including the outstanding equity awards under the Companys incentive plan) will own approximately 14.2% of the Common Stock, all on a fully diluted basis. The merger is subject to regulatory approval, as well as a vote of the Companys stockholders on certain matters related to the merger, including a one for thirty reverse stock split, and is expected to close during the fourth quarter of 2015.
In connection with the merger, an affiliate of Tengram Capital Partners (Tengram), a consumer-focused private equity firm and the controlling owner of the Robert Graham business, has agreed to sponsor a recapitalization of the combined business to improve and simplify the capital structure. Tengram will purchase $50 million of new series A convertible preferred stock of the Company. Upon the closing of the Merger, the outstanding indebtedness of the Company owed to its senior revolving credit lender will be paid in full, as well as certain indebtedness to the convertible noteholders and Joe Dahan. In connection with the Merger, the holders of the Companys outstanding convertible notes will exchange such notes for common stock, cash and modified convertible notes.
Michael Buckley, current Chief Executive Officer of Robert Graham, who has previous public company leadership experience at True Religion, in addition to building Diesel, and Ben Sherman, has been tapped to lead DBG as Chief Executive Officer, upon the closing of the Merger. Mr. Buckley stated, I believe Differential is uniquely positioned to become one of the leading premium omni-channel brand platforms in the world, and I am thrilled to begin leading the company as Chief Executive Officer after the closing of the Merger. Mr. Buckley stated. I am excited to begin working closely with the Board of Directors, Tengram Capital Partners and each of our current and future portfolio brands in building shareholder value in the years to come. Mr. Sweedler, Co-founder and Managing Partner of Tengram added, Tengram is thrilled to be the lead sponsor in this transformative transaction and to have the opportunity to create a second public platform with a focused operating playbook to fuel strong growth in the foreseeable future.
The issuance of shares and certain other transactions related to the merger will require majority approval of the Companys stockholders at a stockholder meeting expected to be held during the fourth quarter of 2015. Joe Dahan, beneficial owner of approximately 17% of the Companys outstanding stock, has entered into a voting agreement, pursuant to which he has agreed to vote his shares in favor of the merger.
Skadden, Arps, Slate, Meagher & Flom LLP and Piper Jaffray advised Tengram and Robert Graham on the various transactions while Akin Gump Strauss Hauer & Feld LLP and Carl Marks Securities LLC advised Joes Jeans Inc.
B. Riley & Co., LLC served as the exclusive financial advisor to Peter Kim and Fireman Capital Partners on all matters related to this transaction while Sullivan & Cromwell LLP provided legal counsel to Mr. Kim and McDermott Will & Emery LLP provided counsel to Fireman Capital Partners.
About Joes Jeans Inc.
Joes Jeans Inc. designs, produces and sells apparel and apparel-related products to the retail and premium markets under the Joes® and Hudson® brands and related trademarks. More information is available at the companys websites at www.joesjeans.com and www.hudsonjeans.com.
About Robert Graham
Robert Graham is American Eclectic. Since its launch in 2001, Robert Graham was created on the premise of introducing sophisticated, eclectic style to the fashion market as an American-based company with an intention of inspiring a global movement. Robert Graham received the 2014 Menswear Brand of the Year award from the American Apparel & Footwear Association. Robert Graham now operates freestanding stores in 23 locations nationwide. The brand also sells at luxury department stores and boutiques, and it has showrooms located in New York City, Los Angeles, Dallas, Toronto, Montreal, and Vancouver (www.robertgraham.us).
This release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. The matters discussed in this news release involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. All statements in this news release that are not purely historical facts are forward-looking statements, including statements containing the words may, will, expect, anticipate, intend, estimate, continue, believe, plan, project, will be, will continue, will likely result or similar expressions. Any forward-looking statement inherently involves risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to: the parties ability to close the merger, including the receipt and terms and conditions of any required governmental approval of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of managements time and attention from the Companys ongoing business during this time period, the impact of the merger on the Companys stock price, the anticipated benefits of the merger on its financial results, business performance and product offerings, the Companys ability to successfully integrate Robert Graham business and realize cost savings and any other synergies, the risk that the credit ratings of the combined company or its subsidiaries may be different from what the Company expects, continued acceptance of our product, product demand, competition, capital adequacy, general economic conditions and the potential inability to raise additional capital if required; the risk that the Company will be unsuccessful in gauging fashion trends and changing customer preferences; the risk that changes in general economic conditions, consumer confidence, or consumer spending patterns will have a negative impact on the Companys financial performance; the highly competitive nature of the Companys business in the United States and internationally and its dependence on consumer spending patterns, which are influenced by numerous other factors; the Companys ability to respond to the business environment and fashion trends; continued acceptance of the Companys brands in the marketplace; and other risks. The Company discusses certain of these factors more fully in its additional filings with the SEC, including its last annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC, and this release should be read in conjunction with those reports, together with all of the Companys other filings, including current reports on Form 8-K, through the date of this release. The Company urges you to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this release.
Any forward-looking statement is based on information current as of the date of this document and speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update these statements to reflect events or circumstances after the date on which such statement is made. Readers are cautioned not to place undue reliance on forward-looking statements.
Additional Information about the Proposed Merger and Where to Find It
This communication relates to the proposed merger pursuant to the Agreement and Plan of Merger, dated September 8, 2015, by and among RG Parent, LLC, JJ Merger Sub LLC and Joes Jeans Inc.
The Company will file with the SEC a current report on Form 8-K that includes additional information on these transactions as well as the relevant documents. In connection with the proposed merger, the Company expects to file with the SEC a registration statement on Form S-4 that will include a proxy statement of the Company that also constitutes a prospectus of the Company, which proxy statement will be mailed or otherwise disseminated to the Companys stockholders when it becomes available. The Company also plans to file other relevant documents with the SEC regarding the proposed merger. INVESTORS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the proxy statement/prospectus (if and when it becomes available) and other relevant documents filed by the Company with the SEC at the SECs website www.sec.gov. Copies of the documents filed by the Company will be available free of charge on its website at www.joesjeans.com or by contacting the individual listed below.
Certain Information Regarding Participants
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. You can find information about the Companys executive officers and directors in the Companys Form 10-K/A filed with the SEC on March 30, 2015. Additional information regarding the interests of such potential participants will be included in the proxy statement/prospectus and other relevant documents filed with the SEC if and when they become available. You may obtain free copies of these documents from the Company by contacting the individual listed below.
No Offer or Solicitation
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Source: Joes Jeans Inc.
Investor Relations
Hamish Sandhu, 323-837-3700 x 304
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