Exhibit 10.115
EXECUTION VERSION
STOCK PURCHASE AGREEMENT
Among
THE RICHARD STANLEY FAMILY TRUST THE JOHN LOCKE FAMILY TRUST PRECISION METAL WORKS, INC.
(formerly known as NTH HOLDING, Ltd) and
PMW AFFILIATED HOLDINGS, LLC
dated as of July 19, 2023
TABLE OF CONTENTS
iv
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this “Agreement”), dated as of July 19, 2023, is entered into between the trustees of The Richard Stanley Family Trust, a trust formed under the Laws of Ontario, Canada; the trustees of The John Locke Family Trust, a trust formed under the Laws of Ontario, Canada (each, a “Seller” and, together, the “Sellers”); Precision Metal Works, Inc., a Kentucky corporation formerly known as NTH HOLDING, Ltd (Kentucky Organization No. 0940452) (the “Company Parent”); and PMW Affiliated Holdings, LLC, a Delaware limited liability company (Delaware File No. 7468836) (“Buyer”). John Locke and Richard Stanley join in this Agreement solely with respect to Section 5.09 and not with respect to any other section or provision of this Agreement.
RECITALS
WHEREAS, Sellers currently own all of the issued and outstanding shares of common stock, par value $100.00, of the Company Parent (the “Shares”);
WHEREAS, Company Parent owned certain shares of capital stock of the entity formerly known as Precision Metal Works, Inc., a Kentucky corporation (Kentucky Organizational No. 0042190) (the “Company”);
WHEREAS, after the Company adopted certain amendments to its Third Amended and Restated Articles of Incorporation of the Company clarifying, inter alia, the capitalization structure of the Company (the “Charter Amendment”), Company Parent purchased from Gary Cook, Mark Matthews, Devon Jones, Howard Terry, and Bruce Murray additional issued and outstanding shares of capital stock in the Company (collectively, the “Pre-Merger Purchase”) such that Company Parent thereafter owned more than ninety percent (90%) of the issued and outstanding shares of capital stock of all classes of the Company;
WHEREAS, after the consummation of the Pre-Merger Purchase, the Company Parent caused the Company to be merged into Company Parent pursuant to Kentucky Revised Statutes § 271B.11-040 (the “Kentucky Short-Form Merger Statute”);
WHEREAS, pursuant to the Kentucky Short-Form Merger Statute, the Company was merged into the Company Parent with the Company Parent constituting the surviving entity in a merger (the “Short- Form Merger”) and the issued and outstanding shares of capital stock of the Company held by shareholders of the Company prior to the Short-Form Merger were extinguished;
WHEREAS, immediately following the Short-Form Merger, the Company Parent filed Articles of Amendment with the Secretary of State of the Commonwealth of Kentucky to change the name of the Company Parent from “NTH HOLDING, Ltd” to “Precision Metal Works, Inc.”; and
WHEREAS, Sellers now wish to sell to Buyer, and Buyer now wishes to purchase from Sellers, the Shares (the “Sale”), subject to the terms and conditions set forth in this Agreement.
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
The following terms have the meanings specified or referred to in this ARTICLE I: “Acceleration Payment” has the meaning set forth in Section 2.08(e). “Action” means any claim, charge, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
“Adjusted EBITDA” means, with respect to any Calculation Period, the net income before interest, income taxes, depreciation and amortization of the Company Parent for such period, determined in accordance with GAAP but applied and calculated in a manner consistent with the EBITDA calculation derived from Audited Financial Statements for the most recent fiscal year end, (i) adjusted for any non-cash expenses or gains, (ii) adjusted to add back the impact of the General Electric early pay discount in any prior period, (iii) adjusted to add back any management fees or other expenses paid by (A) the Company to Company Parent, Buyer, or any Buyer Affiliate or (B) Company Parent to Buyer or any Buyer Affiliate,
(iv) to add back any allocation of fees for management services provided by Buyer or any of its Affiliates following the Closing, (v) to add back any other fees or expenses paid prior to or in connection with the Closing that were outside the ordinary course of the operation of the Company’s business or the Company Parent’s business prior to the Closing, including, but not limited to, the Transaction Expenses, allocations of overhead or other expenses from Buyer or its Affiliates, and legal fees and costs, (vi) to add back any legal and audit expenses and costs allocated to the Parent Company by Buyer or any Buyer Affiliate to the extent that same exceed the amount paid by the Company in the operation of the Company’s business for the fiscal year ended immediately prior to the Closing Date, and (vii) to add back any other fees or expenses paid that are outside the ordinary course of the operation of the Company’s business or the Company Parent’s business based on the past practices of the Company. A sample calculation of Adjusted EBITDA is set forth on Exhibit A and is provided solely as an example for how Adjusted EBITDA is intended to be calculation pursuant to this Agreement. For the avoidance of doubt, Adjusted EBITDA will include rent expense consistent with historical figures and will not include the impact of incremental rent expense related to sale-leaseback of real property entered into in connection with the Closing. Further, for the purposes of calculating the Earn-out Payment, the calculation of Adjusted EBITDA will include EBITDA of the Company Parent’s operations as in existence as of the Closing (and as such operations may be upgraded or expanded from time to time), but will not include the impact of any acquired additions to EBITDA as a result of business acquisitions (“Acquisitions”) that occur after the Closing (whether structured as asset acquisitions, stock acquisitions, mergers or otherwise), except to the extent such Acquisitions utilize the Company Parent’s operations as in existence as of the Closing and such utilization adversely impacts the Company Parent’s ability to generate Adjusted EBITDA; however, for the avoidance of doubt, incremental EBITDA growth over that of the acquired entity at the time of Acquisitions, will count towards the computation of Adjusted EBITDA but reductions in EBITDA resulting from Acquisitions will not count against the computation of Adjusted EBITDA.
“Adjusted EBITDA Threshold” means, with respect to any Calculation Period, the applicable Adjusted EBITDA threshold amount for such Calculation Period set forth on Exhibit C.
“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. The term “control”
(including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, 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.
“Agreement” has the meaning set forth in the preamble.
“Ancillary Documents” means the Escrow Agreement, the Notes, the Security Agreements, the Consulting Agreement, and the Guaranties.
“Audited Financial Statements” has the meaning set forth in Section 3.08. “Balance Sheet” has the meaning set forth in Section 3.08. “Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in Louisville, Kentucky are authorized or required by Law to be closed for business.
“Calculation Periods” means (a) the period beginning on the Closing Date and ending on September 30, 2023; (b) each of the fiscal years ending on September 30, 2024, 2025, 2026 and 2027, respectively; and (c) the period beginning on October 1, 2027 and ending on June 30, 2028.
“Cash on Hand” means, as to a particular Person, the aggregate cash balance of such Person as of the applicable time, including all cash, commercial paper, certificates of deposit and other bank deposits, treasury bills, and all other cash equivalents in its accounts, and third party checks deposited or held in such Person’s accounts that have not yet cleared; provided, however, that Cash on Hand shall be reduced by (i) the amount of all outstanding checks on draft of such entity that are issued and outstanding at such time and
(ii) customer deposits, restricted cash, deposits in escrow with third parties or cash securing letters of credit or other payment obligations, but, with respect to the items in this clauses (i) or (ii), only to the extent not counted as a current liability in the calculation of Estimated Closing Working Capital or Closing Working Capital.
“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.
“Class A Common Stock” means the Class A Common Stock of the Company, having no par value per share.
“Class A Convertible Preferred Stock” means the Class A Convertible Preferred Stock of the Company, having no par value per share.
“Class B Common Stock” means the Class B Common Stock of the Company, having no par value per share.
“Class B Convertible Preferred Stock” means the Class B Convertible Preferred Stock of the Company, having no par value per share.
“Class C Common Stock” means the Class C Common Stock of the Company, having no par value per share.
“Closing Cash” means the Cash on Hand of the Company Parent (and, to the extent bank accounts remain in the name of the Company, the Company) as of the Effective Time.
“Closing Indebtedness Certificate” means a certificate executed by an officer of the Company Parent certifying an itemized list of all outstanding Indebtedness as of the open of business on the Closing Date and the Person to whom such outstanding Indebtedness is owed and an aggregate total of such outstanding Indebtedness.
“Closing Transaction Expenses Certificate” means a certificate executed by an officer of the Company Parent, certifying the amount of Transaction Expenses remaining unpaid as of the open of business on the Closing Date (including an itemized list of each such unpaid Transaction Expense with a description of the nature of such expense and the Person to whom such expense is owed).
“Closing Working Capital” means: (a) the Current Assets of the Company Parent, less (b) the Current Liabilities of the Company Parent, determined as of the open of business on the Closing Date in accordance with GAAP except as otherwise set forth on Schedule 2.06(a)(ii).
“Closing Working Capital Statement” has the meaning set forth in Section 2.06(b)(i). “Code” means the Internal Revenue Code of 1986, as amended. “Company” has the meaning set forth in the recitals.
“Company Common Stock” means, collectively, the Class A Common Stock, the Class B Common Stock and the Class C Common Stock.
“Company Intellectual Property” means all Intellectual Property that is owned by the Company
Parent.
“Company IP Agreements” means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, waivers, releases, permissions and other
Contracts, whether written or oral, relating to Intellectual Property to which the Company Parent is a party, beneficiary or otherwise bound.
“Company IP Registrations” means all Company Intellectual Property that is subject to any issuance, registration or application by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including issued patents, registered trademarks, domain names and copyrights, and pending applications for any of the foregoing.
“Company IT Systems” means all Software, computer hardware, servers, networks, platforms, peripherals, and similar or related items of automated, computerized, or other information technology (IT) networks and systems (including telecommunications networks and systems for voice, data, and video) owned, leased, licensed, or used (including through cloud-based or other third-party service providers) by the Company Parent.
“Company Parent Charter” has the meaning set forth in Section 3.05.
“Company Parent Charter Documents” has the meaning set forth in Section 3.05.
“Company Preferred Stock” means, collectively, the Class A Convertible Preferred Stock and the Class B Convertible Preferred Stock.
“Consulting Agreement” means the Consulting Agreement to be entered into by Buyer and Bartel Global Inc., substantially in the form of Exhibit B attached hereto.
“Contracts” means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements, whether written or oral.
“Current Assets” means accounts receivable, inventory and prepaid expenses, but excluding (a) the portion of any prepaid expense of which the Company Parent received the benefit of prior to the Closing,
(b) deferred Tax assets, and (c) receivables from any of the Company Parent’s Affiliates, directors, employees, officers or stockholders 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 end as if such accounts were being prepared and audited as of a fiscal year end.
“Current Liabilities” means accounts payable, accrued Taxes and accrued expenses, but excluding
(a) payables to any of the Company Parent’s Affiliates, directors, employees, officers or stockholders and any of their respective Affiliates; (b) deferred Tax Liabilities; (c) Transaction Expenses; (d) the current portion of any Indebtedness of the Company Parent; and (e) the current portion of any operating leases of the Company Parent 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 end as if such accounts were being prepared and audited as of a fiscal year end.
“Disclosure Schedules” means the Disclosure Schedules delivered by the Company Parent and Buyer concurrently with the execution and delivery of this Agreement.
“Disputed Amounts” has the meaning set forth in Section 2.06(c)(iii). “Dollars” or “$” means the lawful currency of the United States.
“Earn-out Calculation Delivery Date” has the meaning set forth in Section 2.08(b)(i). “Earn-out Calculation Objection Notice” has the meaning set forth in Section 2.08(b)(ii). “Earn-out Calculation Statement” has the meaning set forth in Section 2.08(b)(i). “Earn-out Factor” means twenty percent (20%).
“Earn-out Period” means the period beginning on the Closing Date and ending on June 30, 2028. “Earn-out Review Period” has the meaning set forth in Section 2.08(b)(ii). “Employee Stock Bonus Plan” means the nth/works Employee Stock Bonus Plan as amended. “Encumbrance” means any charge, claim, community property interest, pledge, condition,
equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
“Environmental Claim” means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence of, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.
“Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the
protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient or indoor air, soil, surface water or groundwater, or subsurface strata); or
(b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act of 1910, as amended, 7 U.S.C. §§ 136 et seq.; the Oil Pollution Act of 1990, as amended, 33 U.S.C. §§2701 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. §§ 651 et seq.
“Environmental Notice” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.
“Environmental Permit” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other action required under or issued, granted, given, authorized by or made pursuant to Environmental Law.
“Environmental Professional” means an individual licensed by a Governmental Authority to act on behalf of such Governmental Authority to oversee environmental site investigation and remediation.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
“ERISA Affiliate” means all employers (whether or not incorporated) that would be treated together with the Company Parent as a “single employer” within the meaning of Section 414 of the Code.
“Escrow Agent” means Fifth Third Bank, National Association.
“Escrow Agreement” means the Escrow Agreement to be entered into by Buyer, Sellers, and the Escrow Agent at the Closing, substantially in the form of Exhibit D attached hereto.
“Estimated Closing Working Capital” has the meaning set forth in Section 2.06(a)(ii). “Estimated Closing Working Capital Adjustment” has the meaning set forth in
“GAAP” means United States generally accepted accounting principles in effect from time to time. “Government Contracts” has the meaning set forth in Section 3.11(a)(viii). “Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority, including Environmental Professionals (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.
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“Guaranty” or “Guaranties” means the Guaranty executed by Live Ventures Incorporated, a Nevada corporation, in favor of Sellers as security for the performance and payment of all obligations under the Note.
“Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls and per- and poly-fluoroalkyl substances (PFAS) and other emerging contaminants.
“Indebtedness” means, without duplication and with respect to the Company Parent, all
(a) indebtedness for borrowed money; (b) obligations for the deferred purchase price of property or services (other than Current Liabilities taken into account in the calculation of Closing Working Capital), (c) long or short-term obligations evidenced by notes, bonds, debentures or other similar instruments;
(d) obligations under any interest rate, currency swap or other hedging agreement or arrangement;
(e) capital lease obligations; (f) reimbursement obligations under any letter of credit, banker’s acceptance or similar credit transactions; (g) guarantees made by the Company Parent on behalf of any third party in respect of obligations of the kind referred to in the foregoing clauses (a) through (f); and (h) any unpaid interest, prepayment penalties, premiums, costs and fees that would arise or become due as a result of the prepayment of any of the obligations referred to in the foregoing clauses (a) through (g). For purposes of clarity and notwithstanding anything to the contrary set forth in this Agreement, in no event shall deferred Tax Liabilities be construed as “Indebtedness”.
“Indemnification Escrow Amount” means $225,000.
“Indemnification Escrow Fund” has the meaning set forth in Section 2.03(a).
“Intellectual Property” means any and all rights in, arising out of, or associated with any of the following in any jurisdiction throughout the world: (a) issued patents and patent applications (whether provisional or non-provisional), including divisionals, continuations, continuations-in-part, substitutions, reissues, reexaminations, extensions, or restorations of any of the foregoing, and other Governmental Authority-issued indicia of invention ownership (including certificates of invention, petty patents, and patent utility models) (“Patents”); (b) trademarks, service marks, brands, certification marks, logos, trade dress, trade names, and other similar indicia of source or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications for registration, and renewals of, any of the foregoing (“Trademarks”); (c) copyrights and works of authorship, whether or not copyrightable, and all registrations, applications for registration, and renewals of any of the foregoing (“Copyrights”); (d) internet domain names and social media account or user names (including “handles”), whether or not Trademarks, all associated web addresses, URLs, websites and web pages, social media sites and pages, and all content and data thereon or relating thereto, whether or not Copyrights; (e) mask works, and all registrations, applications for registration, and renewals thereof; (f) industrial designs, and all Patents, registrations, applications for registration, and renewals thereof; (g) trade secrets, know-how, inventions (whether or not patentable), discoveries, improvements, technology, business and technical information, databases, data compilations and collections, tools, methods, processes, techniques, and other confidential and proprietary information and all rights therein (“Trade Secrets”); (h) computer programs, operating systems, applications, firmware, and other code, including all source code, object code, application programming interfaces, data files, databases, protocols, specifications, and other documentation thereof (“Software”);
(i) rights of publicity; and (j) all other intellectual or industrial property and proprietary rights.
“Intended Tax Treatment” has the meaning set forth in Section 6.01(c). “Interim Balance Sheet” has the meaning set forth in Section 3.08. “Interim Balance Sheet Date” has the meaning set forth in Section 3.08. “Interim Financial Statements” has the meaning set forth in Section 3.08. “Knowledge” means, when used with respect to Sellers or the Company Parent, (a) the actual knowledge of Richard L. Stanley, John Locke, and Devon Jones; and (b) the knowledge that each such Person in clause (a) above would have obtained after making reasonable inquiry with respect to the particular matter in question.
“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.
“Licensed Intellectual Property” means all Intellectual Property in which the Company Parent holds any rights or interests granted by other Persons, including Sellers or any of their respective Affiliates.
“Losses” means losses, damages, liabilities, deficiencies, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys’ fees and the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers; provided, however, that “Losses” shall not include punitive damages, except to the extent actually awarded to a Governmental Authority or other third party.
“Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to (a) become, individually or in the aggregate, materially adverse to the business, results of operations, condition (financial or otherwise) or assets of the Company Parent, or (b) the ability of Sellers to consummate the transactions contemplated hereby on a materially timely basis; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industries in which the Company Parent operates; (iii) any changes in financial or securities markets in general; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action required or permitted by this Agreement, except pursuant to Section 3.05; (vi) any changes in applicable Laws or accounting rules, including GAAP; or (vii) the public announcement, pendency or completion of the transactions contemplated by this Agreement; provided further, however, that any event, occurrence, fact, condition or change referred to in clauses (i) through (iv) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition or change has a disproportionate effect on the Company Parent compared to other participants in the industries in which the Company Parent conducts its businesses (in which case, only the incremental disproportionate adverse effect may be taken into account in determining whether a Material Adverse Effect has occurred).
“Note” or “Notes” means the secured Promissory Notes in the aggregate principal amount of
$2,500,000 to be issued at the Closing by the Company Parent to Sellers consistent with each Seller’s respective Pro Rata Share in the form of Exhibit E attached hereto.
“Permits” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.
“Permitted Encumbrances” has the meaning set forth in Section 3.12(a).
“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
“Post-Closing Adjustment” means the sum of the Post-Closing Working Capital Adjustment and the Post-Closing Cash Adjustment.
“Post-Closing Tax Period” means any taxable period beginning after the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period beginning after the Closing Date.
“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.
“Post-Closing Working Capital Adjustment” has the meaning set forth in Section 2.06(b)(ii). “Pro Rata Share” means, with respect to any Seller, such Seller’s ownership interest in the Company Parent immediately prior to the Effective Time determined by dividing (a) the number of Shares owned of record by such Seller immediately prior to the Effective Time, by (b) the total number of Shares issued and outstanding immediately prior to the Effective Time.
“Purchase Price” has the meaning set forth in Section 2.02. “Purchase Price Adjustment Escrow Amount” means $1,020,000. “R&W Insurance Policy” means the buyer-side representation and warranty insurance policy to be issued by Archer Transactional, a program of Balance Partners, to Buyer in the form of Exhibit F attached hereto.
“Real Property” means the real property owned, leased or subleased by the Company Parent, together with all buildings, structures and facilities located thereon.
“Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient or indoor air, surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.
“Security Agreement” or “Security Agreements” means the Security Agreements executed by Buyer and the Company Parent granting a security interest in all of the assets of the Company Parent as collateral for the Notes in favor of the holder of each Note in the form of Exhibit G attached hereto.
“Seller” has the meaning set forth in the Recitals.
“Seller Indemnitees” has the meaning set forth in Section 8.03. “Short-Form Merger” has the meaning set forth in the Recitals. “Single Employer Plan” has the meaning set forth in Section 3.22(d).
“Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, 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 or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.
“Tax Claim” has the meaning set forth in Section 6.06. “Tax Law” means Laws with respect to Taxes. “Tax Liabilities” means Liabilities with respect to Taxes.
“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Transaction Expenses” means all fees and expenses incurred by the Company, Company Parent, and Sellers at or prior to the Closing in connection with the preparation, negotiation and execution
of this Agreement and the Ancillary Documents, and the performance and consummation of the transactions
contemplated hereby and thereby, including any unpaid costs of the D&O Tail Policy referenced in Section 5.12(c) and the employer portion of all payroll Taxes payable in respect of the vesting, exercise or cash-out of any stock options, restricted stock or other equity or equity-based incentives. For purposes of clarity, no fee or expense incurred by Buyer or any Affiliate of Buyer prior to the Closing or otherwise related to the Closing shall be construed to be a “Transaction Expense” for purposes of this Agreement.
“WARN Act” means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and employment losses.
ARTICLE II PURCHASE AND SALE
Section 2.01 Purchase and Sale. Subject to the terms and conditions set forth in this Agreement, at the Closing, Sellers shall sell to Buyer, and Buyer shall purchase from Sellers, the Shares, free and clear of all Encumbrances (other than restrictions on transfer arising under applicable state or federal securities Laws), for the consideration specified in Section 2.02.
Section 2.02 Purchase Price. The aggregate purchase price for the Shares shall be
Section 2.03 Transactions to be Effected at Closing.
(a)At the Closing, Buyer shall:
(i)deliver to Sellers the following:
A.the Closing Date Payment less (1) the Purchase Price Adjustment Escrow Amount, (2) the Indemnification Escrow Amount and (3) the aggregate principal amount of the Notes, by wire transfer of immediately available funds to an account designated in writing by Sellers to Buyer no later than two Business Days prior to the Closing Date;
B.the Notes duly executed by the Company Parent;
C.the Security Agreement duly executed by the Company Parent;
D.the Ancillary Documents and all other agreements, documents, instruments or certificates required to be delivered by Buyer at or prior to the Closing pursuant to this Agreement.
E.the Consulting Agreement duly executed by the Company
Parent;
F.the Escrow Agreement duly executed by Buyer;
G.a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by the managers of Buyer authorizing the execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby;
H.a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying the names and signatures of the officers of Buyer authorized to sign this Agreement, the Ancillary Documents and the other documents to be delivered hereunder and thereunder;
I.the Guaranties duly executed by Live Ventures Incorporated; and
J.such other documents or instruments as the Company Parent reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.
(ii)pay, on behalf of the Company Parent or Sellers, the following amounts:
A.Indebtedness of the Company Parent to be paid at Closing, by wire transfer of immediately available funds to the accounts and in the amounts specified on the Closing Indebtedness Certificate; and
B.any Transaction Expenses unpaid at Closing, by wire transfer of immediately available funds to the accounts and in the amounts specified on the Closing Transaction Expenses Certificate, including payment to such third parties any Transaction Expenses as set forth on the Closing Transaction Expenses Certificate.
(iii)deposit or cause to be deposited with the Escrow Agent, in accordance with the Escrow Agreement:
A.the Purchase Price Adjustment Escrow Amount (such amount, including any interest or other amounts earned thereon and less any disbursements therefrom in accordance with the Escrow Agreement, the “Purchase Price Adjustment Escrow Fund”), to be held for the purpose of securing the obligations of Sellers in Section 2.06(d); and
B.the Indemnification Escrow Amount (such amount, including any interest or other amounts earned thereon and less any disbursements therefrom in accordance with the Escrow Agreement, the “Indemnification Escrow Fund” and, together with the Purchase Price Adjustment Escrow Fund, the “Escrow Funds”) by wire transfer of immediately available funds to accounts designated by the Escrow Agent, to be held for the purpose of securing the indemnification obligations of Sellers set forth in ARTICLE VIII and the obligations of Sellers in Section 2.06(d).
(b)At the Closing, Sellers shall deliver to Buyer:
(i)stock certificates evidencing the Shares, free and clear of all Encumbrances (other than restrictions on transfer arising under applicable state or federal securities Laws), duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank, with all required stock transfer tax stamps affixed thereto;
(ii)a Security Agreement duly executed by each Seller;
(iii)the Ancillary Documents and all other agreements, documents, instruments or certificates required to be delivered by Sellers at or prior to the Closing pursuant to this Agreement;
(iv)the Consulting Agreement duly executed by Bartell Global Inc.;
(v)the Escrow Agreement duly executed by the Sellers;
(vi)resignations of the directors and officers of the Company Parent pursuant to Section 5.07;
(vii)a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of the Company Parent certifying that (A) attached thereto are true and complete copies of (1) all resolutions adopted by the Board of Directors of the Company Parent authorizing the execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby and (2) resolutions of the Sellers, as stockholders of the Company Parent, approving this Agreement, and (B) all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby;
(viii)a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of the Company Parent certifying the names and signatures of the officers of the Company Parent authorized to sign this Agreement, the Ancillary Documents and the other documents to be delivered hereunder and thereunder;
(ix)a good standing certificate (or its equivalent) from the secretary of state or similar Governmental Authority of the jurisdiction under the Laws in which the Company Parent is incorporated;
(x)at least two Business Days prior to the Closing, the Closing Transaction Expenses Certificate;
(xi)at least two Business Days prior to the Closing, the Closing Indebtedness Certificate;
(xii)the Estimated Closing Working Capital Statement contemplated in Section 2.06(a);
(xiii)the FIRPTA Statement;
(xiv)executed payoff letters for the Indebtedness of the Company Parent and its subsidiaries and any Encumbrances (other than Permitted Encumbrances) affecting the assets or equity interests of the Company Parent and their subsidiaries, which include a per diem interest amount and an authorization to file (or an agreement by such debtor to file) all UCC termination statements and releases necessary to evidence satisfaction and termination of such Indebtedness and Encumbrances (collectively, the “Payoff Letters”);
(xv)from each Seller and Company Parent, a duly executed IRS Form W-9 (or its equivalent); and
(xvi)such other documents or instruments as Buyer reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.
Section 2.04 Withholding Tax. Buyer and the Company Parent shall be entitled to deduct and withhold from the Purchase Price all Taxes that Buyer and the Company Parent may be required to deduct and withhold under any provision of Tax Law. All such withheld amounts shall be treated as delivered to Sellers hereunder.
Section 2.05 Withholding Rights. Each of the Buyer and the Company Parent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this such amounts as may be required to be deducted and withheld with respect to the making of such payment under any provision of Tax Law; provided, however, that the Person intending to deduct or withhold (other than with respect to compensatory payments) shall use commercially reasonable efforts to notify such Persons of any amounts otherwise payable to such Persons that it intends to deduct and withhold at least five (5) Business Days prior to the due date for any relevant payment, and the Person intending to withhold with respect to such payments shall provide reasonable details regarding the provisions of Law that requires such deduction or withholding and the parties shall work together in good faith to minimize such deduction or withholding. To the extent that amounts are so deducted and withheld by the Buyer, or the Company Parent, as the case may be, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which the Buyer or the Company Parent, as the case may be, made such deduction and withholding.
Section 2.06 Purchase Price Adjustment.
(a)Closing Adjustment.
(i)At the Closing, the Purchase Price shall be adjusted in the following manner:
A.either (1) an increase by the Estimated Closing Working Capital Adjustment, if the Estimated Closing Working Capital (as determined in accordance with Section 2.06(a)(ii)) is greater than the Top Collar, or (2) decreased by the Estimated Closing Working Capital Adjustment, if the Estimated Closing Working Capital is less than the Bottom Collar;
B.an increase by the Estimated Closing Cash;
C.a decrease by the outstanding Indebtedness of the Company Parent as of the open of business on the Closing Date (which shall in no event be an amount less than the amounts paid by the Buyer pursuant to Section 2.03(a)(ii)(A)); and
D.a decrease by the amount of unpaid Transaction Expenses of the Company Parent as of the open of business on the Closing Date (which shall in no event be an amount less than the amounts paid by the Buyer pursuant to Section 2.03(a)(ii)(B)).
The net amount after giving effect to the adjustments listed above shall be the “Closing Date Payment.”
(ii)At least three Business Days before the Closing, the Company Parent shall prepare and deliver to Buyer a statement setting forth its good faith estimate of Closing Working Capital (the “Estimated Closing Working Capital”) and Closing Cash (the “Estimated Closing Cash”), which statement shall contain an estimated balance sheet of the Company Parent as of the Closing Date (without giving effect to the transactions contemplated herein), a calculation of Estimated Closing Working Capital, which shall be substantially in the form of, and include those specific items described in, Schedule 2.06(a)(ii) (the “Estimated Closing Working Capital Statement”), and a certificate of an officer or employee of the Company Parent certifying that the Estimated Closing Working Capital Statement and Estimated Closing Cash were each prepared 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 end as if such Estimated Closing Working Capital Statement was being prepared and audited as of a fiscal year end.
(iii)The Purchase Price has been determined based on the assumption that the Company has Closing Working Capital of $10,200,000 (the “Target Working Capital”). The “Estimated Closing Working Capital Adjustment” shall be an amount equal to (i) the Estimated Closing Working Capital minus $10,500,000 (the “Top Collar”), if Estimated Closing Working Capital is more than the Top Collar; or (ii) $9,900,000 (the “Bottom Collar”) minus the Estimated Closing Working Capital, if the Estimated Closing Working Capital is less than the Bottom Collar. If the Estimated Closing Working Capital is both less than or equal to the Top Collar and greater than or equal to the Bottom Collar, the Estimated Closing Working Capital Adjustment shall be zero.
(b)Post-Closing Adjustments.
(i)Within seventy-five (75) days after the Closing Date, Buyer shall prepare and deliver to Sellers a statement setting forth its calculation of Closing Working Capital and a calculation of the amount of Closing Cash, which statement shall contain a balance sheet of the Company Parent as of the Closing Date (without giving effect to the transactions contemplated herein), a calculation of Closing Working Capital (the “Closing Working Capital Statement”) and a certificate of the Chief Financial Officer (or similar officer or employee) of Buyer certifying that the Closing Working Capital Statement, the amount of Closing Cash and the balance sheet of the Company Parent as
of the Closing Date delivered with the Closing Working Capital Statement were prepared 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 end as if such Closing Working Capital Statement was being prepared and audited as of a fiscal year end as modified pursuant to Schedule 2.06(a)(ii).
(ii)The “Post-Closing Working Capital Adjustment” shall be an amount equal to (i) the Closing Working Capital minus the Estimated Closing Working Capital if Closing Working Capital is $300,000 more than the Estimated Closing Working Capital (and such amount shall be limited only to the amount by which the difference between Closing Working Capital and Estimated Closing Working Capital exceeds $300,000); or
(ii) the Estimated Closing Working Capital minus the Closing Working Capital if the Estimated Closing Working Capital is $300,000 more than the Closing Working Capital (and such amount shall be limited only to the amount by which the difference between Estimated Closing Working Capital and Closing Working Capital exceeds $300,000). Otherwise, the Post-Closing Working Capital Adjustment shall be zero.
(iii)The “Post-Closing Cash Adjustment” shall be an amount equal to the Closing Cash minus the Estimated Closing Cash.
(c)Examination and Review.
(i)Examination. After receipt of the Closing Working Capital Statement, Sellers shall have thirty 30 days (the “Review Period”) to review the Closing Working Capital Statement. During the Review Period, Sellers and Sellers’ accountants shall have full access to the books and records of the Company Parent, the personnel of, and work papers prepared by, Buyer and/or Buyer’s accountants to the extent that they relate to the Closing Working Capital Statement and to such historical financial information (to the extent in Buyer’s possession) relating to the Closing Working Capital Statement as Sellers may reasonably request for the purpose of reviewing the Closing Working Capital Statement and to prepare a Statement of Objections (defined below).
(ii)Objection. On or prior to the last day of the Review Period, Sellers may object to the Closing Working Capital Statement by delivering to Buyer a written statement setting forth Sellers’ objections in reasonable detail, indicating each disputed item or amount and the basis for Sellers’ disagreement therewith (the “Statement of Objections”). If Sellers fail to deliver the Statement of Objections before the expiration of the Review Period, the Closing Working Capital Statement and the Post-Closing Adjustment, as the case may be, reflected in the Closing Working Capital Statement shall be deemed to have been accepted by Sellers. If Sellers deliver the Statement of Objections before the expiration of the Review Period, Buyer and Sellers shall negotiate in good faith to resolve such objections within 30 days after the delivery of the Statement of Objections (the “Resolution Period”), and, if the same are so resolved within the Resolution Period, the Post-Closing Adjustment and the Closing Working Capital Statement with such changes as may have been previously agreed in writing by Buyer and Sellers, shall be final and binding.
(iii)Resolution of Disputes. If Sellers and Buyer fail to reach an agreement with respect to all of the matters set forth in the Statement of Objections before expiration of the Resolution Period, then any amounts remaining in dispute (“Disputed Amounts” and any amounts not so disputed, the “Undisputed Amounts”) shall be submitted for resolution to Bill Meyer in the Louisville office of Strothman + Co (the “Independent Accountant”) who, acting as an expert and not arbitrator, shall resolve the Disputed Amounts only and make any adjustments to the Post-Closing Adjustment, as the case may be, and the Closing Working Capital Statement. The parties hereto agree that all adjustments shall be made without regard to materiality. The Independent Accountant shall only decide the specific items under dispute by the parties, and their decision for each Disputed Amount must be within the range of values assigned to each such item in the Closing Working Capital Statement and the Statement of Objections, respectively.
(iv)Fees of the Independent Accountant. The fees and expenses of the Independent Accountant shall be paid by Sellers, on the one hand, and by Buyer, on the other hand, based upon the percentage that the amount actually contested, but not awarded to, Sellers or Buyer, respectively, bears to the aggregate amount actually contested by Sellers and Buyer.
(v)Determination by Independent Accountant. The Independent Accountant shall make a determination as soon as practicable within 30 days (or such other time as the parties hereto shall agree in writing) after their engagement, and their resolution of the Disputed Amounts and their adjustments to the Closing Working Capital Statement and/or the Post-Closing Adjustment shall be conclusive and binding upon the parties hereto.
(d)Payment of Post-Closing Adjustment.
(i)If the Post-Closing Adjustment is a negative number, Buyer and Sellers shall, within five (5) Business Days after the final determination of the Post-Closing Adjustment, jointly instruct the Escrow Agent to disburse from the Purchase Price Adjustment Escrow Fund by wire transfer of immediately available funds (A) to Buyer, the Post-Closing Adjustment, and (B) to each Seller such Seller’s Pro Rata Share of any amounts remaining in the Purchase Price Adjustment Escrow Fund. If the Post-Closing Adjustment is greater than the amount held in the Purchase Price Adjustment Escrow Fund, then Sellers and Buyer shall jointly instruct the Escrow Agent to disburse from the Indemnification Escrow Fund by wire transfer of immediately available funds to Buyer the amount by which the Post-Closing Adjustment exceeds the amount in the Purchase Price Adjustment Escrow Fund (up to the amount in the Indemnification Escrow Fund).
(ii)If the Post-Closing Adjustment is a positive number, Buyer shall, within five (5) Business Days after the final determination of the Post-Closing Adjustment, (A) distribute the applicable Seller’s Pro Rata Share of the Post-Closing Adjustment to such Seller and (B) Sellers and Buyer shall jointly instruct the Escrow Agent to disburse the Purchase Price Adjustment Escrow Fund to such Seller by wire transfer of immediately available funds the applicable Seller’s Pro Rata Share of the Purchase Price Adjustment Escrow Fund.
(e)Adjustments for Tax Purposes. Any payments made pursuant to Section 2.06 shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Law.
Section 2.07 Closing. Subject to the terms and conditions of this Agreement, the closing of the Sale (the “Closing”) shall take place on the date hereof, remotely by exchange of documents and signatures (or their electronic counterparts), or at such other time or on such other date or at such other place as the Company Parent and Buyer may mutually agree upon in writing (the day on which the Closing takes place being the “Closing Date”). The effective time of the Closing shall be deemed to occur as of 11:59 p.m. Eastern time on the Closing Date (the “Effective Time”).
Section 2.08 Earn-Out.
(a)Earn-out Payments. As additional consideration for the Shares, at such times as provided in Section 2.08(d), Buyer (or, at the direction of Buyer, the Company Parent or another designee of Buyer, so long as Buyer remains an obligor thereof) shall, if the Adjusted EBITDA for the Calculation Period equals or exceeds the Adjusted EBITDA Threshold for such Calculation Period, pay to Sellers with respect to each Calculation Period within the Earn-out Period an amount, if any (each, an “Earn-out Payment”), equal to the product of (i) an amount equal to the Adjusted EBITDA for such Calculation Period multiplied by (ii) the Earn-out Factor; provided, that in no event shall Buyer be obligated to pay Sellers more than $3,000,000 in the aggregate for all Calculation Periods during the Earn-out Period. If the Adjusted EBITDA for a particular Calculation Period does not exceed the applicable Adjusted EBITDA Threshold, no Earn-out Payment shall be due for such Calculation Period.
(b)Procedures Applicable to Determination of the Earn-out Payments.
(i)On or before the date which is ninety-five (95) days after the last day of each Calculation Period or five (5) days after the completion of the audit for a Calculation Period ended at the end of the fiscal year, whichever is first (each such date, an “Earn-out Calculation Delivery Date”), Buyer shall prepare and deliver to Sellers a written statement (in each case, an “Earn-out Calculation Statement”) setting forth in reasonable detail its determination of Adjusted EBITDA for the applicable Calculation Period and its calculation of the resulting Earn-out Payment (in each case, an “Earn-out Calculation”).
(ii)Sellers shall have thirty (30) days after receipt of the Earn-out Calculation Statement for each Calculation Period (in each case, the “Earn-out Review Period”) to review the Earn-out Calculation Statement and the Earn-out Calculation set forth therein. During the Earn-out Review Period, Sellers and their accountants (not to exceed one accounting firm for all Sellers) shall have the right to inspect Buyer’s and the Company Parent’s books and records upon reasonable prior notice and during normal business hours at the Company Parent’s offices, upon reasonable prior notice and solely for purposes reasonably related to the determinations of Adjusted EBITDA and the resulting Earn-out Payment. Prior to the expiration of the Earn-out Review Period, Sellers may object to the Earn-out Calculation set forth in the Earn-out Calculation Statement for the applicable Calculation Period by delivering a written notice of objection (an “Earn-out Calculation Objection Notice”) to Buyer. Any Earn-out Calculation Objection Notice
shall specify the items in the applicable Earn-out Calculation disputed by Sellers and shall describe in
reasonable detail the basis for such objection, as well as the amount in dispute. If Sellers fail to deliver an Earn-out Calculation Objection Notice to Buyer prior to the expiration of the Earn-out Review Period, then the Earn-out Calculation set forth in the Earn-out Calculation Statement shall be final and binding on the parties hereto. If Sellers timely deliver an Earn-out Calculation Objection Notice, Buyer and Sellers shall negotiate in good faith to resolve the disputed items and agree upon the resulting amount of the Adjusted EBITDA and the Earn-out Payment for the applicable Calculation Period. If Buyer and Sellers are unable to reach agreement within thirty (30) days after such an Earn-out Calculation Objection Notice has been given, all unresolved disputed items shall be promptly referred to the Independent Accountant. The Independent Accountant shall be directed to render a written report on the unresolved disputed items with respect to the applicable Earn-out Calculation as promptly as practicable, but in no event greater than thirty (30) days after such submission to the Independent Accountant, and to resolve only those unresolved disputed items set forth in the Earn-out Calculation Objection Notice. In the event that any dispute is referred to the Independent Accountant for resolution pursuant to this Section 2.08, the Adjusted EBITDA and the Earn-out Payment as determined by the Independent Accountant shall not be less than the amounts proposed by Buyer pursuant to this Section 2.08 and shall not be greater than the amounts proposed by Sellers pursuant to this Section 2.08. If unresolved disputed items are submitted to the Independent Accountant, Buyer and Sellers shall each furnish to the Independent Accountant such work papers, schedules and other documents and information relating to the unresolved disputed items as the Independent Accountant may reasonably request. The Independent Accountant shall resolve the disputed items based solely on the applicable definitions and other terms in this Agreement and the presentations by Buyer and Sellers, and not by independent review. The resolution of the dispute and the calculation of Adjusted EBITDA that is the subject of the applicable Earn-out Calculation Objection Notice by the Independent Accountant shall be final and binding on the parties hereto. The fees and expenses of the Independent Accountant shall be borne by Sellers and Buyer in proportion to the amounts by which their respective calculations of Adjusted EBITDA differ from Adjusted EBITDA as finally determined by the Independent Accountant.
(c)Independence of Earn-out Payments. Buyer’s obligation to pay each of the Earn-out Payments to Sellers in accordance with Section 2.08(a) is an independent obligation of Buyer and is not otherwise conditioned or contingent upon the satisfaction of any conditions precedent to any preceding or subsequent Earn-out Payment and the obligation to pay an Earn-out Payment to Sellers shall not obligate Buyer to pay any preceding or subsequent Earn-out Payment. For the avoidance of doubt and by way of example, if the conditions precedent to the payment of the Earn-out Payment for the first Calculation Period are not satisfied, but the conditions precedent to the payment of the Earn-out Payment for the second Calculation Period are satisfied, then Buyer would be obligated to pay such Earn-out Payment for the second Calculation Period for which the corresponding conditions precedent have been satisfied despite the fact that the Earn-out Payment for the first Calculation Period has not yet been paid by Buyer.
(d)Timing of Payment of Earn-out Payments. Any Earn-out Payment that Buyer is required to pay pursuant to Section 2.08(a) hereof shall be paid in full no later than five (5)
Business Days following the date upon which the determination of Adjusted EBITDA for the applicable Calculation Period becomes final and binding upon the parties as provided in
Section 2.08(b)(ii) (including any final resolution of any dispute raised by Sellers in an Earn-out Calculation Objection Notice). Buyer shall pay to each Seller their Pro Rata Share of the applicable Earn-out Payment in cash by wire transfer of immediately available funds pursuant to the written instructions provided by the applicable Seller.
(e)Acceleration upon Buyer’s Election. At any time after the Closing Date, Buyer may, in its sole discretion, elect to make a payment (the “Acceleration Payment”) to Sellers in the amount of $3,000,000 minus any Earn-out Payments previously paid by Buyer to Sellers pursuant to this Section 2.08 which, upon payment thereof, shall fully release and discharge Buyer and its successors and assigns from any further liability or obligation pursuant to this Section 2.08.
(f)Post-closing Operation of the Company Parent. Subject to the terms of this Agreement and the other Ancillary Documents, subsequent to the Closing, Buyer shall continue to operate the Company Parent in good faith and in a manner consistent with the best practices for the industry and with a view toward maximizing the profitability of the Company Parent during the Calculation Periods and the calculation of the Earn-out Payment, and Buyer shall not take any actions that would have the purpose or effect, directly or indirectly, of avoiding or reducing any of the Earn-out Payments that would otherwise be owed pursuant to this Section 2.08 or otherwise evading or mitigating any of the Earn-out Payments that would otherwise be owed pursuant to this Section 2.08. After the Closing until the later of (i) June 30, 2028 and (ii) the date on which the Notes have been paid and otherwise satisfied in full thereunder, Buyer and its Affiliates shall grant access to Sellers or their authorized agents to relevant books and records of Buyer and the Company Parent and their respective Affiliates at such times as Sellers shall reasonably request for purposes of reviewing the performance of the business operated by, or in connection with, the Company Parent and evaluating Buyer’s compliance with this Section 2.08(f). Within thirty (30) days of the Closing Date, Buyer shall deliver to Sellers a true, correct, and accurate consolidated balance sheet of Buyer and its subsidiaries, prepared in accordance with GAAP, reflecting the position of Buyer and its subsidiaries as of 12:01 AM ET on the day after the Closing Date.
(g)Right of Set-off. Buyer shall have the right to withhold and set off against any amount otherwise due to be paid pursuant to this Section 2.08 the amount of (i) any Post-Closing Adjustment owed to it pursuant to Section 2.06 (solely to the extent that such amount is not otherwise satisfied from either Purchase Price Adjustment Escrow Fund or the Indemnification Escrow Fund) and (ii) any Losses to which a Buyer Indemnitee may be entitled to recover from Sellers pursuant to Section 8.08 of this Agreement (solely to the extent that such amount is not satisfied from the Indemnification Escrow Fund and to the extent that there is no coverage for such Losses under the R&W Insurance Policy); provided, that, prior to exercising its rights set forth in this Section 2.08(g), Buyer will provide prior written notice to Sellers of its intent to exercise such set-off rights and will provide Sellers with reasonable opportunity to meet to discuss and attempt to resolve any such issues.
(h)No Security. The parties hereto understand and agree that (i) the contingent rights to receive any Earn-out Payment shall not be represented by any form of certificate or other instrument and do not constitute an equity or ownership interest in Buyer or the Company Parent,
(ii) no Seller shall have any rights as a securityholder of Buyer or the Company Parent as a result of such Seller’s contingent right to receive any Earn-out Payment hereunder, and (iii) no interest is payable with respect to any Earn-out Payment except in the event that Buyer fails to pay such
Earn- out Payment when such Earn-out Payment becomes due and payable pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND COMPANY PARENT
Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Sellers and Company Parent represent and warrant to Buyer that the statements contained in this ARTICLE III are true and correct as of the date hereof.
Section 3.01 Organization and Authority of Sellers and Trustees of Seller. Each Seller is a trust validly existing under the Laws of Ontario, Canada. Each Seller and such Seller’s trustees have full power and authority to enter into this Agreement and the Ancillary Documents to which such Seller and such Seller’s trustees are a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Seller and such Seller’s trustees of this Agreement and the Ancillary Document to which Seller is a party, the performance by each Seller of its obligations hereunder and thereunder, and the consummation by such Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of Seller and such Seller’s trustees. This Agreement has been duly executed and delivered by Seller and such Seller’s trustees, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of such Seller and such Seller’s trustees enforceable against such Seller and such Seller’s trustees in accordance with its terms. When the Ancillary Documents to which such Seller or any of its trustees is or will be a party, if any, have been duly executed and delivered by such Seller and such Seller’s trustees (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Documents will constitute a legal and binding obligation of such Seller and such Seller’s trustees, enforceable against such Persons in accordance with its terms.
Section 3.02 Organization and Authority of Company Parent. Company Parent is a corporation duly organized, validly existing and in good standing under the Laws of the Commonwealth of Kentucky. Company Parent has full corporate power and authority to enter into this Agreement and the Ancillary Documents to which Company Parent 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 Company Parent of this Agreement and the Ancillary Documents to which Company Parent is a party, the performance by Company Parent of its obligations hereunder and thereunder, and the consummation by Company Parent of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of Company Parent. This Agreement has been duly executed and delivered by Company Parent, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of Company Parent enforceable against Company Parent in accordance with its terms. When the Ancillary Documents to which Company Parent is or will be a party, if any, have been duly executed and delivered by Company Parent (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Documents will constitute a legal and binding obligation of Company Parent enforceable against Company Parent in accordance with its terms. The Company Parent is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as conducted by the Company Parent made such licensing or qualification necessary.
Section 3.03 Organization and Qualification of the Company. Prior to the consummation of the Short-Form Merger, the Company was a corporation duly organized, validly existing and in good standing under the Laws of the Commonwealth of Kentucky and had full 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 it has been and is currently conducted. Section 3.03 of the Disclosure Schedules sets forth each
jurisdiction in which the Company was licensed or qualified to do business prior to the consummation of the Short-Form Merger, and the Company was duly licensed or qualified to do business and was in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as conducted by the Company prior to the Short-Form Merger made such licensing or qualification necessary.
Section 3.04 Authority. Company Parent has full corporate power and authority to enter into and perform its obligations under this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Company Parent of this Agreement and any Ancillary Document to which it is a party and the consummation by the Company Parent of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Company Parent, and no other corporate proceedings on the part of the Company Parent are necessary to authorize the execution, delivery and performance of this Agreement or to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Company Parent, and (assuming due authorization, execution and delivery by each other party hereto) this Agreement constitutes a legal, valid and binding obligation of the Company Parent enforceable against the Company Parent in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general principles of equity. When each Ancillary Document to which the Company Parent is or will be a party has been duly executed and delivered by the Company Parent (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Document will constitute a legal and binding obligation of the Company Parent enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general principles of equity.
Section 3.05 No Conflicts; Consents.
(a)The execution, delivery and performance by each Seller of this Agreement and the Ancillary Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, including without limitation the Charter Amendment, the Pre-Merger Purchase, and the Short-Form Merger, do not and will not: (i) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation of the Company Parent (“Company Parent Charter”), or the by-laws or other organizational documents of the Company Parent (together with the Company Parent Charter, the “Company Parent Charter Documents”); (ii) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to such Seller or the Company Parent; or (iii ) result in the creation or imposition of any Encumbrance other than Permitted Encumbrances on any properties or assets of the Company Parent. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to such Seller or the Company Parent in connection with the execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby.
(b)The execution, delivery and performance by each Seller of this Agreement and the Ancillary Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, including the Short-Form Merger, do not and will not (and,
with respect to the Short-Form Merger, did not), except as set forth in Section 3.05(b) of the Disclosure Schedules, require the consent, notice or other action by any Person under, conflict with, result in a violation
or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Material Contract to which such Seller or the Company Parent is a party or by which such Seller or the Company Parent is bound or to which any of their respective properties and assets are subject or any Permit affecting the properties, assets or business of the Company Parent.
Section 3.06 Capitalization.
(a)Immediately prior to the consummation of the Short-Form Merger, with respect to the Company:
(i)The authorized capital stock of the Company consisted of 22,111,000 shares, of which 17,237,235 shares of Company Common Stock and 1,272,487 shares of Company Preferred Stock were issued and outstanding, in the amounts for each class and series of shares as set forth in Section 3.06(a)(i) of the Disclosure Schedules, as of the close of business on the date of this Agreement.
(ii)Section 3.06(a)(ii) of the Disclosure Schedules set forth the name of each Person that is the registered owner of any shares of the Company and the number of shares owned by such Person.
(iii)Except for 453,250 shares of unvested Class A Common Stock issued to employees, (1) no subscription, warrant, option, convertible or exchangeable security, or other right (contingent or otherwise) to purchase or otherwise acquire equity securities of the Company was authorized or outstanding, and (2) there was no commitment by the Company to issue shares, subscriptions, warrants, options, convertible or exchangeable securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset, to repurchase or redeem any securities of the Company or to grant, extend, accelerate the vesting of, change the price of, or otherwise amend any warrant, option, convertible or exchangeable security or other such right. There are no declared or accrued unpaid dividends with respect to any shares of Company Common Stock.
(iv)All issued and outstanding shares of Company Common Stock were (1) duly authorized, validly issued, fully paid and non-assessable; (2) not subject to any preemptive rights created by statute, the organizational documents of the Company or any agreement to which the Company is a party; and (3) free of any Encumbrances created by the Company in respect thereof. All issued and outstanding shares of Company Common Stock were issued in compliance with applicable Law.
(v)Except for 453,250 shares of unvested Class A Common Stock issued to employees, no outstanding Company Common Stock is subject to vesting or forfeiture rights or repurchase by the Company. There are no outstanding or authorized stock appreciation, dividend equivalent, phantom stock, profit participation or other similar rights with respect to the Company or any of its securities.
(vi)All distributions, dividends, repurchases and redemptions of the capital stock (or other equity interests) of the Company were undertaken in compliance with the organizational documents of the Company then in effect, any agreement to which the Company then was a party and in compliance with applicable Law.
(b)With respect to the Company Parent:
(i)The authorized capital stock of the Company Parent consists of 1,000 shares of common stock (“Company Parent Common Stock”), of which 50 shares of Company Parent Common Stock have been issued to The John Locke Family Trust and 50 shares of Company Parent Common Stock have been issued to The Richard Stanley Family Trust. Except for the issued and outstanding shares identified in the preceding sentence, no capital stock of the Company Parent is issued and outstanding.
(ii)(1) there is no subscription, warrant, option, convertible or exchangeable security, or other right (contingent or otherwise) to purchase or otherwise acquire equity securities of the Company Parent authorized or outstanding, and (2) there is no commitment by the Company Parent to issue shares, subscriptions, warrants, options, convertible or exchangeable securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset, to repurchase or redeem any securities of the Company Parent or to grant, extend, accelerate the vesting of, change the price of, or otherwise amend any warrant, option, convertible or exchangeable security or other such right. There are no declared or accrued unpaid dividends with respect to any shares of Company Parent capital stock.
(iii)All issued and outstanding shares of Company Parent capital stock were
(1) duly authorized, validly issued, fully paid and non-assessable; (2) not subject to any preemptive rights created by statute, the Company Parent Charter Documents or any agreement to which the Company Parent is a party; and (3) free of any Encumbrances created by the Company Parent in respect thereof. All issued and outstanding shares of Company Parent Common Stock were issued in compliance with applicable Law.
(iv)No outstanding Company Parent Common Stock is subject to vesting or forfeiture rights or repurchase by the Company Parent. There are no outstanding or authorized stock appreciation, dividend equivalent, phantom stock, profit participation or other similar rights with respect to the Company Parent or any of its securities.
(v)All distributions, dividends, repurchases and redemptions of the capital stock (or other equity interests) of the Company Parent were undertaken in compliance with the Company Parent Charter Documents then in effect, any agreement to which the Company Parent then was a party and in compliance with applicable Law.
Section 3.07 Subsidiaries.
(a)Section 3.07(a) of the Disclosure Schedules (i) contains an accurate and complete list of all subsidiaries of the Company Parent and (ii) sets forth the entire authorized equity interests
of each subsidiary and a complete and correct list of the issued and outstanding equity interests of each subsidiary, including the name of the record and beneficial owner thereof and the number of equity interests held thereby. Other than the Company, the subsidiaries set forth on Section 3.07(a) of the Disclosure Schedules have not had any operations.
(b)Except as set forth on Section 3.07(a) of the Disclosure Schedule, the Company Parent does not own, or have any interest in any shares or have an ownership interest in, any other Person.
Section 3.08 Financial Statements. Complete copies of the Company’s audited financial statements consisting of the balance sheet of the Company as at December 31 in each of the years 2020, 2021 and 2022 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the years then ended (the “Audited Financial Statements”), and unaudited financial statements consisting of the balance sheet of the Company as at May 7, 2023 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the three-month period then ended (the “Interim Financial Statements” and together with the Audited Financial Statements, the “Financial Statements”) are included in the Disclosure Schedules. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse) and the absence of notes (that, if presented, would not differ materially from those presented in the Audited Financial Statements). The Financial Statements are based on the books and records of the Company and fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations of the Company for the periods indicated. The balance sheet of the Company as of December 31, 2022 is referred to herein as the “Balance Sheet” and the date thereof as the “Balance Sheet Date”, and the balance sheet of the Company as of May 7, 2023 is referred to herein as the “Interim Balance Sheet” and the date thereof as the “Interim Balance Sheet Date”. The Company maintains a standard system of accounting established and administered in accordance with GAAP.
Section 3.09 Undisclosed Liabilities. The Company Parent has no liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise (“Liabilities”), except (a) those which are adequately reflected or reserved against in the Balance Sheet as of the Balance Sheet Date and (b) those which have been incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date.
Section 3.10 Absence of Certain Changes, Events and Conditions. Except as set forth on Section 3.10 of the Disclosure Schedules and except for the Charter Amendment, Pre-Merger Purchase, and Short-Form Merger, since the Interim Balance Sheet Date, the business of the Company Parent has been conducted in the ordinary course of business consistent with past practice, and there has not been, with respect to the Company Parent, any:
(a)event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
(b)amendment of the charter, by-laws or other organizational documents of the Company or the Company Parent;
(c)split, combination or reclassification of any shares of its capital stock;
(d)issuance, sale or other disposition of any of its capital stock or grant of any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock;
(e)declaration or payment of any dividends or distributions on or in respect of any of its capital stock or redemption, purchase or acquisition of its capital stock;
(f)material change in any method of accounting or accounting practice of the Company or the Company Parent, except as required by GAAP or as disclosed in the notes to the Financial Statements;
(g)material change in the Company’s or the Company Parent’s cash management practices and its policies, practices and procedures with respect to collection of accounts receivable, establishment of reserves for uncollectible accounts, accrual of accounts receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits;
(h)intentionally omitted;
(i)incurrence, assumption or guarantee of any indebtedness for borrowed money except unsecured current obligations and Liabilities incurred in the ordinary course of business consistent with past practice;
(j)transfer, assignment, sale or other disposition of any of the assets shown or reflected in the Balance Sheet or cancellation of any debts or entitlements other than in the ordinary course of business;
(k)transfer or assignment of or grant of any license or sublicense under or with respect to any Company Intellectual Property or Company IP Agreements except non-exclusive licenses or sublicenses granted in the ordinary course of business consistent with past practice;
(l)abandonment or lapse of or failure to maintain in full force and effect any material Company IP Registration, or failure to take or maintain reasonable measures to protect the confidentiality or value of any Trade Secrets included in the Company Intellectual Property;
(m)material damage, destruction or loss (whether or not covered by insurance) to its property;
(n)capital investment in, or loan to, any other Person;
(o)acceleration, termination, material modification to or cancellation of any Material Contract to which the Company Parent is a party or by which it is bound;
(p)material capital expenditures;
(q)imposition of any Encumbrance upon any of the Company Parent properties, capital stock or assets, tangible or intangible;
(r)unless in the ordinary course of business and consistent with past practice and not, individually or in the aggregate, material, (i) grant of any bonuses, whether monetary or otherwise, or increase in any wages, salary, severance, pension or other compensation or benefits in respect of its current or former employees, officers, directors, independent contractors or consultants, other than as provided for in any written agreements or required by applicable Law, (ii) change in the terms of employment for any employee, to the extent relating to compensation and or benefits for which the aggregate costs and expenses exceed $250,000 or any termination of any employees, except for cause, or (iii) action to accelerate the vesting or payment of any compensation or benefit for any current or former employee, officer, director, independent contractor or consultant;
(s)hiring or promoting of any person as or to (as the case may be) an officer or hiring or promoting any employee that directly reports to an officer except to fill a vacancy in the ordinary course of business;
(t)except as required by applicable law, adoption, modification or termination of any:
(i) employment, severance, retention or other agreement with any current or former employee, officer, director, independent contractor or consultant, (ii) Benefit Plan or (iii) collective bargaining or other agreement with a Union, in each case whether written or oral;
(u)loan to (or forgiveness of any loan to), or entry into any other transaction with, any of its stockholders or current or former directors, officers and employees;
(v)entry into a new line of business or abandonment or discontinuance of existing lines of business;
(w)except for the Short-Form Merger, adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;
(x)purchase, lease or other acquisition of the right to own, use or lease any property or assets for an amount in excess of $200,000, individually (in the case of a lease, per annum) or
$250,000 in the aggregate (in the case of a lease, for the entire term of the lease, not including any option term), except for purchases of inventory or supplies in the ordinary course of business consistent with past practice;
(y)acquisition by merger or consolidation with, or by purchase of a substantial portion of the assets or stock of, or by any other manner, any business or any Person or any division thereof;
(z)action by the Company Parent to make, change or rescind any material Tax election, amend any material Tax Return in any material respect or take any position on any Tax Return, take any action, omit to take any action or enter into any other transaction that would have the effect of materially increasing the Tax liability or materially reducing any Tax asset of Buyer in respect of any Post-Closing Tax Period; or
(aa) Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing.
Section 3.11 Material Contracts.
(a)Section 3.11(a) of the Disclosure Schedules lists each of the following Contracts of the Company Parent (including Contracts that were previously entered into by the Company that became Contracts of the Company Parent by operation of Law as a result of the Short-Form Merger) (such Contracts, together with all Contracts concerning the occupancy, management or operation of any Real Property (including, without limitation, brokerage contracts) listed or otherwise disclosed in Section 3.12(b) of the Disclosure Schedules and all Company IP Agreements set forth in Section 3.14(b) of the Disclosure Schedules, being “Material Contracts”):
(i)each Contract of the Company Parent involving aggregate consideration in excess of $500,000 and which, in each case, cannot be cancelled by the Company Parent without penalty or without more than 90 days’ notice;
(ii)all Contracts that require the Company Parent to purchase its total requirements of any product or service from a third party or that contain “take or pay” provisions;
(iii)all Contracts that provide for the assumption by the Company Parent of any Tax or environmental Liability of any Person;
(iv)all Contracts that relate to the acquisition or disposition by the Company Parent of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise);
(v)all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing consulting and advertising Contracts to which the Company Parent is a party;
(vi)all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) to which the Company Parent is a party and which are not cancellable without material penalty or without more than 90 days’ notice;
(vii)except for Contracts relating to trade payables, all Contracts relating to Indebtedness (including, without limitation, guarantees) of the Company Parent;
(viii)all Contracts with any Governmental Authority to which the Company Parent is a party (“Government Contracts”);
(ix)all Contracts that limit or purport to limit the ability of the Company Parent to compete in any line of business or with any Person or in any geographic area or during any period of time;
(x)any Contracts to which the Company Parent is a party that provide for any joint venture, partnership or similar arrangement by the Company Parent;
(xi)all Contracts between or among the Company Parent on the one hand and a Seller or any Affiliate of a Seller (other than the Company Parent) on the other hand; and
(xii)all collective bargaining agreements or Contracts with any Union to which the Company Parent is a party.
(b)Each Material Contract is valid and binding on the Company Parent in accordance with its terms and is in full force and effect. None of the Company Parent or, to Sellers’ Knowledge, any other party thereto is in breach of, or default under (or is alleged to be in breach of or default under), or has provided or received any written or, to Sellers’ Knowledge, oral notice of any intention to terminate any Material Contract. No event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default by the Company Parent or, to Sellers’ Knowledge, by any other party under any Material Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. Complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made available to Buyer.
Section 3.12 Title to Assets; Real Property.
(a)Except as set forth in Section 3.12(a) of the Disclosure Schedules, the Company Parent has good and valid (and, in the case of owned Real Property, good and marketable fee simple) title to, or a valid leasehold interest in, all Real Property and personal property and other assets reflected in the Audited Financial Statements or acquired after the Balance Sheet Date, other than properties and assets sold or otherwise disposed of in the ordinary course of business consistent with past practice since the Balance Sheet Date. All such properties and assets (including leasehold interests) are free and clear of Encumbrances except for the following (collectively referred to as “Permitted Encumbrances”):
(i)liens for Taxes not yet due and payable, as well as any Taxes currently due and payable being contested in good faith by appropriate proceedings and as to which adequate reserves have been established on the Financial Statements;
(ii)mechanics, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the business of the Company Parent;
(iii)all reservations, covenants, conditions, restrictions, easements, reservations, limitations and other matters of public record;
(iv)any matters not shown by the public records that would be disclosed by an accurate survey of the Real Property.
(v)all applicable zoning and building ordinances, codes and regulations;
(vi)legal highways, roads and rights of way; or
(vii)other than with respect to owned Real Property, liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered
into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the business of the Company Parent.
(b)Section 3.12(b)(i) of the Disclosure Schedules lists (i) the street address of each parcel of Real Property; (ii) if such property is leased or subleased by the Company Parent, the landlord under the lease, the rental amount currently being paid, and the expiration of the term of such lease or sublease for each leased or subleased property; and (iii) the current use of such property. With respect to owned Real Property, Sellers have delivered or made available to Buyer true, complete and correct copies of the deeds and other instruments (as recorded) by which the Company Parent acquired such Real Property that are in the possession of Sellers or the Company Parent, and copies of all title insurance policies, opinions, abstracts and surveys in the possession of Sellers or the Company Parent and relating to the Real Property. With respect to leased Real Property, Sellers have delivered or made available to Buyer true, complete and correct copies of any leases affecting the Real Property. Except as set forth in Section 3.12(b)(ii) of the Disclosure Schedules, the Company Parent is not a sublessor or grantor under any sublease or other instrument granting to any other Person any right to the possession, lease, occupancy or enjoyment of any leased Real Property. The use and operation of the Real Property in the conduct of the Company Parent’s business do not violate in any material respect any Law, covenant, condition, restriction, easement, license, permit or agreement to which the Real Property is subject. No material improvements constituting a part of the Real Property encroach on real property owned or leased by a Person other than the Company Parent. There are no Actions pending nor threatened in writing against or affecting the Real Property or any portion thereof or interest therein in the nature or in lieu of condemnation or eminent domain proceedings.
Section 3.13 Condition and Sufficiency of Assets. Except as set forth on Section 3.13 of the Disclosure Schedules, to Sellers’ Knowledge, the buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property of the Company Parent are, structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs and except to the extent that such maintenance or repair for any individual building, plant, structure, furniture, fixture, machinery, equipment, vehicle, or other item of tangible personal property would not exceed $1,000,000. The buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property currently owned or leased by the Company Parent, together with all other properties and assets of the Company Parent, are sufficient for the continued conduct of the Company Parent’s business after the Closing in substantially the same manner as conducted prior to the Closing and constitute all of the rights, property and assets necessary to conduct the business of the Company Parent as currently conducted.
Section 3.14 Intellectual Property.
(a)Section 3.14(a) of the Disclosure Schedules contains a correct, current, and complete list of: (i) all Company IP Registrations, specifying as to each, as applicable: the title, mark, or design; the record owner and inventor(s), if any; the jurisdiction by or in which it has been issued, registered, or filed; the patent, registration, or application serial number; the issue, registration, or filing date; and the current status; (ii) all unregistered Trademarks included in the Company Intellectual Property; and (iii) all proprietary Software of the Company Parent; and (iv)
all other Company Intellectual Property used or held for use in the Company Parent’s business as currently conducted.
(b)Section 3.14(b) of the Disclosure Schedules contains a correct, current and complete list of all Company IP Agreements, including all modifications, amendments, supplements and/or waivers, specifying for each the date, title and parties thereto, and separately identifying the Company IP Agreements: (i) under which the Company Parent is a licensor or otherwise grants to any Person any right or interest relating to any Company Intellectual Property; (ii) under which the Company Parent is a licensee or otherwise granted any right or interest relating to the Intellectual Property of any Person (excluding shrink-wrap, click-wrap, or other similar agreements for commercially available off-the-shelf Software); and (iii) which otherwise relate to the Company Parent’s ownership or use of Intellectual Property, in each case identifying the Intellectual Property covered by such Company IP Agreement. Sellers have provided Buyer with true and complete copies (or in the case of any oral agreements, a complete and correct written description) of all Company IP Agreements, including all modifications, amendments and supplements thereto and waivers thereunder. Each Company IP Agreement is valid and binding on the Company Parent in accordance with its terms and is in full force and effect. Neither the Company Parent nor any other party thereto is, or is alleged to be, in breach of or default under, or has provided or received any written or, to Sellers’ Knowledge, oral notice of breach of, default under, or intention to terminate (including by non-renewal), any Company IP Agreement.
(c)The Company Parent is the sole and exclusive legal and beneficial, and with respect to the Company IP Registrations, record, owner of all right, title, and interest in and to the Company Intellectual Property, and, to Sellers’ Knowledge, has the valid and enforceable right to use all other Intellectual Property used in or necessary for the conduct of the Company Parent’s business as currently conducted, in each case, free and clear of Encumbrances other than Permitted Encumbrances. The Company Parent has entered into binding, valid and enforceable, written Contracts with each current and former employee and independent contractor who has developed any material Company Intellectual Property on behalf of the Company Parent (if any) whereby such employee or independent contractor (i) acknowledges the Company Parent’s exclusive ownership of all Intellectual Property invented, created, or developed by such employee who has developed any material Intellectual Property on behalf of the Company Parent (if any) or independent contractor within the scope of his or her employment or engagement with the Company Parent; (ii) grants to the Company Parent a present, irrevocable assignment of any ownership interest such employee or independent contractor may have in or to such Intellectual Property; and (iii) irrevocably waives any right or interest, regarding any such Intellectual Property, to the extent permitted by applicable Law. All assignments and other instruments necessary to establish, record, and perfect the Company Parent’s ownership interest in the Company IP Registrations have been validly executed, delivered, and filed with the relevant Governmental Authorities and authorized registrars.
(d)Neither the execution, delivery nor performance of this Agreement, nor the consummation of the transactions contemplated hereunder, will result in the loss or impairment of, or require the consent of any other Person in respect of, the Company Parent’s right to own or use any Company Intellectual Property.
(e)All of the Company Intellectual Property and, to Sellers’ Knowledge, Licensed Intellectual Property are valid and enforceable, and all Company IP Registrations are subsisting
and in full force and effect. All required filings and fees related to the Company IP Registrations have been timely submitted with and paid to the relevant Governmental Authorities and authorized registrars.
(f)The use of the Company Intellectual Property in the Company Parent’s business as currently and formerly conducted has not infringed, misappropriated or otherwise violated the Intellectual Property or other rights of any Person. To Sellers’ Knowledge, the use Licensed Intellectual Property in connection with the conduct of the business as currently and formerly conducted has not infringed, misappropriated or otherwise violated, the Intellectual Property or other rights of any Person. To Sellers’ Knowledge, no Person has infringed, misappropriated or otherwise violated any Company Intellectual Property or Licensed Intellectual Property.
(g)There are no Actions (including any opposition, cancellation, revocation, review or other proceeding), whether settled, pending or, to Sellers’ Knowledge, threatened in writing (including in the form of offers to obtain a license): (i) alleging any infringement, misappropriation, or other violation by the Company Parent of the Intellectual Property of any Person; (ii) challenging the validity, enforceability, registrability, patentability, or ownership of any Company Intellectual Property or the Company Parent’s right, title, or interest in or to any Company Intellectual Property; or (iii) by the Company Parent alleging any infringement, misappropriation or other violation by any Person of the Company Intellectual Property. Neither Sellers nor the Company Parent is aware of any facts or circumstances that could reasonably be expected to give rise to any such Action. The Company Parent is not subject to any outstanding or prospective Governmental Order (including any motion or petition therefor) that does or could reasonably be expected to restrict or impair the use of any Company Intellectual Property or Licensed Intellectual Property.
(h)Section 3.14(h) of the Disclosure Schedules contains a correct, current, and complete list of all social media accounts used in the Company Parent’s business. The Company Parent has complied with all terms of use, terms of service, and other Contracts and all associated policies and guidelines relating to its use of any social media platforms, sites, or services (collectively, “Platform Agreements”). There are no Actions, whether settled, pending, or, to Sellers’ Knowledge, threatened, alleging any (i) breach or other violation of any Platform Agreement by the Company Parent; or (ii) defamation, violation of publicity rights of any Person, or any other violation by the Company Parent in connection with its use of social media.
(i)All Company IT Systems are in good working condition and are sufficient for the operation of the Company Parent’s business as currently conducted and as proposed to be conducted. Except as set forth in Section 3.14(i) of the Disclosure Schedules, in the past two years, there has been no malfunction, failure, continued substandard performance, denial-of-service, or other cyber incident, including any cyberattack, or other impairment of the Company IT Systems that has resulted or is reasonably likely to result in disruption or damage to the business of the Company Parent and that has not been remedied. The Company Parent has taken all commercially reasonable steps to safeguard the confidentiality, availability, security, and integrity of the Company IT Systems, including implementing and maintaining appropriate backup, disaster recovery, and Software and hardware support arrangements.
(j)To Sellers’ Knowledge, the Company Parent has complied in all material respects with all applicable Laws and all internal or publicly posted policies, notices, and statements concerning the collection, use, processing, storage, transfer, and security of personal information
in the conduct of the Company Parent’s business. Except as set forth in Section 3.14(j) of the Disclosure Schedules, in the past two years, the Company Parent has not (i) experienced any actual, alleged, or suspected data breach or other security incident involving personal information in its possession or control or (ii) been subject to or received any written notice of any audit, investigation, complaint, or other Action by any Governmental Authority or other Person concerning the Company Parent’s collection, use, processing, storage, transfer, or protection of personal information or actual, alleged, or suspected violation of any applicable Law concerning privacy, data security, or data breach notification, and to Sellers’ Knowledge, there are no facts or circumstances that could reasonably be expected to give rise to any such Action.
Section 3.15 Inventory. Except as set forth on Section 3.15 of the Disclosure Schedules, all inventory of the Company Parent, whether or not reflected in the Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course of business consistent with past practice, except for obsolete, damaged, defective or slow-moving items that have been written off or written down to fair market value or for which adequate reserves have been established. All such inventory is owned by the Company Parent free and clear of all Encumbrances, and no inventory is held on a consignment basis.
Section 3.16 Accounts Receivable. The accounts receivable reflected on the Interim Balance Sheet and the accounts receivable arising after the Interim Balance Sheet Date (a) have arisen from bona fide transactions entered into by the Company Parent (or, to the extent such transactions were prior to the consummation of the Short-Form Merger, the Company) involving the sale of goods or the rendering of services in the ordinary course of business consistent with past practice; and (b) constitute only valid, undisputed claims of the Company Parent not subject to claims of set-off or other defenses or counterclaims other than normal cash discounts accrued in the ordinary course of business consistent with past practice. The reserve for bad debts shown on the Interim Balance Sheet or, with respect to accounts receivable arising after the Interim Balance Sheet Date, on the accounting records of the Company Parent (or, to the extent such transactions were prior to the consummation of the Short-Form Merger, the Company) have been determined in accordance with GAAP, consistently applied, subject to normal year-end adjustments and the absence of disclosures normally made in footnotes.
Section 3.17 Customers and Suppliers.
(a)Section 3.17(a)(i) of the Disclosure Schedules sets forth (i) each customer who has paid aggregate consideration to the Company or the Company Parent for goods or services rendered in an amount greater than or equal to $2,500,000 for each of the two most recent fiscal years (collectively, the “Material Customers”); and (ii) the amount of consideration paid by each Material Customer during such periods. Except as set forth in Section 3.17(a)(ii) of the Disclosure Schedules, neither the Company nor the Company Parent has received any written or, to Sellers’ Knowledge, oral notice, and has no other Knowledge, that any of its Material Customers has ceased, or intends to cease, to use its goods or services or to otherwise terminate or materially reduce its relationship with the Company Parent (or, prior to the consummation of the Short-Form Merger, the Company).
(b)Section 3.17(b) of the Disclosure Schedules sets forth (i) each supplier to whom the Company or Company Parent has paid consideration for goods or services rendered in an amount greater than or equal to $2,000,000 for each of the two most recent fiscal years (collectively, the “Material Suppliers”); and (ii) the amount of purchases from each Material
Supplier during such periods. The Company Parent (or, prior to the consummation of the Short-Form Merger, the
Company) has not received any written or, to Sellers’ Knowledge, oral notice, and has no other Knowledge, that any of its Material Suppliers has ceased, or intends to cease, to supply goods or services to the Company Parent (or, prior to the consummation of the Short-Form Merger, the Company) or to otherwise terminate or materially reduce its relationship with the Company Parent (or, prior to the consummation of the Short-Form Merger, the Company).
Section 3.18 Insurance. Section 3.18 of the Disclosure Schedules sets forth a true and complete list of all current policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, directors’ and officers’ liability, fiduciary liability and other casualty and property insurance maintained by Company Parent and relating to the assets, business, operations, employees, officers and directors of the Company Parent (or, to the extent such policy or binder was obtained prior to the consummation of the Short-Form Merger, the Company) (collectively, the “Insurance Policies”), and true and complete copies of such Insurance Policies have been made available to Buyer. Such Insurance Policies are in full force and effect and shall remain in full force and effect following the consummation of the transactions contemplated by this Agreement. Neither Sellers nor any of their Affiliates (including the Company) has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if due and payable prior to Closing, will be paid prior to Closing in accordance with the payment terms of each Insurance Policy. The Insurance Policies do not provide for any retrospective premium adjustment or other experience-based liability on the part of the Company Parent. All such Insurance Policies (a) are valid and binding in accordance with their terms and (b) have not been subject to any lapse in coverage. There are no claims related to the business of the Company or the Company Parent pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. None of Sellers or any of their Affiliates (including the Company) is in default under, or has otherwise failed to comply with, in any material respect, any provision contained in any such Insurance Policy. The Insurance Policies are of the type and in the amounts customarily carried by Persons conducting a business similar to the Company or the Company Parent and are sufficient for compliance with all applicable Laws and Contracts to which the Company Parent is a party or by which it is bound.
Section 3.19 Legal Proceedings; Governmental Orders.
(a)Except as set forth in Section 3.19(a) of the Disclosure Schedules, there are no Actions pending or, to Sellers’ Knowledge, threatened in writing (i) against or by the Company Parent affecting any of its properties or assets (or by or against Sellers or any of their Affiliates thereof and relating to the Company Parent); or (ii) against or by the Company Parent, Sellers or any of their Affiliates of a Seller that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. No event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.
(b)Except as set forth in Section 3.19(b) of the Disclosure Schedules, there are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting the Company Parent or any of its properties or assets.
Section 3.20 Compliance With Laws; Permits.
(a)Except as set forth in Section 3.20(a) of the Disclosure Schedules, the Company Parent has complied, and is now complying, with all Laws applicable to it or its business, properties or assets.
(b)All material Permits required for the Company Parent to conduct its business have been obtained by it and are valid and in full force and effect in all material respects. All fees and charges with respect to such Permits as of the date hereof have been paid in full. Section 3.20(b) of the Disclosure Schedules lists all current Permits issued to the Company Parent (or, to the extent such Permits were issued prior to the consummation of the Short-Form Merger, the Company), including the names of the Permits and their respective dates of issuance and expiration. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit set forth in Section 3.20(b) of the Disclosure Schedules.
Section 3.21 Environmental Matters.
(a)Except as set forth in Section 3.21 of the Disclosure Schedules, the Company Parent is currently and has been in material compliance with all Environmental Laws and has not, and no Seller has, received from any Person any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.
(b)The Company Parent has obtained and is in material compliance with all Environmental Permits (or, to the extent such Environmental Permit was obtained prior to the consummation of the Short-Form Merger, the Company has obtained and is in material compliance with all Environmental Permits) (each of which is disclosed in Section 3.21(b) of the Disclosure Schedules) necessary for the ownership, lease, operation or use of the business or assets of the Company Parent and all such Environmental Permits are in full force and effect and shall be maintained in full force and effect by Sellers through the Closing Date in accordance with Environmental Law, and to Sellers’ Knowledge, there is no condition, event or circumstance that might prevent or impede, after the Closing Date, the ownership, lease, operation or use of the business or assets of the Company Parent as currently carried out.
(c)No real property currently or formerly owned, operated or leased by the Company is listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.
(d)Except as set forth in Section 3.21(d) of the Disclosure Schedules there has been no Release of Hazardous Materials in contravention of Environmental Law with respect to the business or assets of the Company Parent or any real property currently or formerly owned, operated or leased by the Company Parent except where such Release was not reportable to Governmental Authorities under Environmental Law, and neither the Company Parent nor any Seller has received an Environmental Notice that any real property currently or formerly owned, operated or leased in connection with the business of the Company Parent (including soils, groundwater, surface water, buildings and other structure located on any such real property) has been contaminated with any Hazardous Material which could reasonably be expected to result in
an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit by, Sellers or the Company Parent.
(e)Section 3.21(e) of the Disclosure Schedules contains a complete and accurate list of all active or abandoned aboveground or underground storage tanks owned or operated by the Company Parent.
(f)Section 3.21(f) of the Disclosure Schedules contains a complete and accurate list of all off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by the Company Parent or Sellers and any predecessors as to which the Company Parent or Sellers may retain liability, and, to Sellers’ Knowledge, none of these facilities or locations has been placed or proposed for placement on the National Priorities List (or CERCLIS) under CERCLA, or any similar state list, and neither Sellers nor the Company Parent has received any Environmental Notice regarding potential liabilities with respect to such off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by the Company Parent or Seller.
(g)Neither Sellers, the Company Parent, nor the Company has retained or assumed, by contract or operation of Law, any liabilities or obligations of third parties under Environmental Law.
(h)Sellers have provided or otherwise made available to Buyer and listed in Section 3.21(h) of the Disclosure Schedules: (i) any and all environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models and other similar documents with respect to the business or assets of the Company Parent or any currently or formerly owned, operated or leased real property which are in the possession or control of the Sellers or Company Parent related to compliance with Environmental Laws, Environmental Claims or an Environmental Notice or the Release of Hazardous Materials; and (ii) any and all material documents concerning planned or anticipated capital expenditures required to reduce, offset, limit or otherwise control pollution and/or emissions, manage waste or otherwise ensure compliance with current or future Environmental Laws (including, without limitation, costs of remediation, pollution control equipment and operational changes).
(i)To Sellers’ Knowledge, as of the Closing Date, there exists no condition, event or circumstance concerning the Release or regulation of Hazardous Materials that might, after the Closing Date, prevent, impede or materially increase the costs associated with the ownership, lease, operation, performance or use of the business or assets of the Company Parent as currently carried out.
Section 3.22 Employee Benefit Matters.
(a)Section 3.22(a) of the Disclosure Schedules contains a true and complete list of each pension, benefit, retirement, compensation, employment, consulting, vacation, paid time off (PTO), profit-sharing, deferred compensation, incentive, bonus, performance award, phantom equity, stock or stock-based, change in control, retention, severance, medical, vision, dental, disability, welfare, Code Section 125 cafeteria, fringe-benefit and other similar agreement, plan, policy, program or arrangement (and any amendments thereto), in each case whether or not reduced to writing and whether funded or unfunded, including each “employee benefit plan”
within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or not subject to
ERISA, which is or has been maintained, sponsored, contributed to, or required to be contributed to by the Company Parent for the benefit of any current or former employee, officer, director, retiree, independent contractor or consultant of the Company or Company Parent or any spouse or dependent of such individual, or under which the Company Parent has any Liability, contingent or otherwise (including by virtue of having ERISA Affiliates) (each, a “Benefit Plan”). At-will employment agreements that do not provide for severance shall not be considered Benefit Plans for purposes hereof. The Company Parent has separately identified in Section 3.22(a) of the Disclosure Schedules each Benefit Plan that is maintained, sponsored, contributed to, or required to be contributed to by the Company Parent primarily for the benefit of employees outside of the United States (a “Non-U.S. Benefit Plan”).
(b)With respect to each Benefit Plan, Sellers have made available to Buyer accurate, current and complete copies of each of the following: (i) where the Benefit Plan has been reduced to writing, the plan document together with all amendments; (ii) where the Benefit Plan has not been reduced to writing, a written summary of all material plan terms as set forth in Section 3.22(b)(ii) of the Disclosure Schedules; (iii) where applicable, copies of any trust agreements or other funding arrangements, custodial agreements, insurance policies and contracts, administration agreements and similar agreements, and investment management or investment advisory agreements, now in effect; (iv) copies of summary plan descriptions, summaries of material modifications; (v) in the case of any Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service; (vi) in the case of any Benefit Plan for which a Form 5500 must be filed, a copy of the most recently filed Form 5500, with all corresponding schedules and financial statements attached; (vii) actuarial valuations and reports related to any Benefit Plans with respect to the most recently completed plan year; (viii) the most recent nondiscrimination tests performed under the Code; and (ix) copies of material notices, letters or other correspondence from the Internal Revenue Service, Department of Labor, Department of Health and Human Services, Pension Benefit Guaranty Corporation or other Governmental Authority relating to the Benefit Plan, in each case issued in the past 24 months.
(c)Each Benefit Plan and any related trust (other than any multiemployer plan within the meaning of Section 3(37) of ERISA (each a “Multiemployer Plan”)) has been established, administered and maintained in accordance with its terms and in compliance with all applicable Laws (including ERISA, the Code and any applicable local Laws). Each Benefit Plan that is intended to be qualified within the meaning of Section 401(a) of the Code (a “Qualified Benefit Plan”) is so qualified, and nothing has occurred that could reasonably be expected to adversely affect the qualified status of any Qualified Benefit Plan. Nothing has occurred with respect to any Benefit Plan that has subjected, or could reasonably be expected to subject the Company Parent to a material penalty under Section 502 of ERISA or to tax or penalty under Sections 4975 or 4980H of the Code.
(d)No pension plan (other than a Multiemployer Plan) which is subject to minimum funding requirements, including any multiple employer plan (each, a “Single Employer Plan”), in which employees of the Company Parent or any ERISA Affiliate participate or have participated has an “accumulated funding deficiency,” whether or not waived, or is subject to a lien for unpaid contributions under Section 303(k) of ERISA or Section 430(k) of the Code. No
Single Employer Plan covering employees of the Company Parent which is a defined benefit plan has an “adjusted
funding target attainment percentage,” as defined in Section 436 of the Code, less than 80%. All benefits, contributions and premiums relating to each Benefit Plan have been timely paid in accordance with the terms of such Benefit Plan and all applicable Laws and accounting principles, and all benefits accrued under any unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with, GAAP. All Non-U.S. Benefit Plans that are intended to be funded and/or book-reserved are funded and/or book-reserved, as appropriate, based upon reasonable actuarial assumptions.
(e)Neither the Company Parent nor any of its ERISA Affiliates has (i) incurred or reasonably expects to incur, either directly or indirectly, any material Liability under Title I or Title IV of ERISA or related provisions of the Code or applicable local Law relating to employee benefit plans; (ii) failed to timely pay premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn from any Multiemployer Plan; (iv) engaged in any transaction which would give rise to liability under Section 4069 or Section 4212(c) of ERISA; (v) incurred taxes under Section 4971 of the Code with respect to any Single Employer Plan; or (vi) participated in a multiple employer welfare arrangement (MEWA).
(f)With respect to each Benefit Plan, (i) no such plan is a Multiemployer Plan except as set forth in Section 3.22(f) of the Disclosure Schedules, and (A) all contributions required to be paid by the Company Parent or its ERISA Affiliates have been timely paid to the applicable Multiemployer Plan, (B) neither the Company Parent nor any ERISA Affiliate has incurred any withdrawal liability under Title IV of ERISA which remains unsatisfied, and (C) a complete withdrawal from all such Multiemployer Plans on the Closing Date would not result in any material liability to the Company Parent and no Multiemployer Plan is in critical, endangered or seriously endangered status or has suffered a mass withdrawal; (ii) no such plan is a “multiple employer plan” within the meaning of Section 413(c) of the Code or a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA); (iii) no Action has been initiated by the Pension Benefit Guaranty Corporation to terminate any such plan or to appoint a trustee for any such plan; (iv) no such plan or the plan of any ERISA Affiliate maintained or contributed to within the last six (6) years is a Single Employer Plan subject to Title IV of ERISA; and (v) no “reportable event,” as defined in Section 4043 of ERISA, with respect to which the reporting requirement has not been waived, has occurred with respect to any such plan.
(g)Each Benefit Plan that is an “employee benefit plan” within the meaning of Section 3(3) of ERISA can be terminated after the Closing, without material liabilities to the Company Parent other than ordinary administrative expenses typically incurred in such termination event. Except as set forth in Section 3.22(g) of the Disclosure Schedules, the Company Parent has no commitment or obligation and has not made any representations to any employee, officer, director, independent contractor or consultant, whether or not legally binding, to adopt, amend, modify or terminate any Benefit Plan or any collective bargaining agreement, in connection with the consummation of the transactions contemplated by this Agreement or otherwise.
(h)Other than as required under Sections 601 to 608 of ERISA or other applicable Law, no Benefit Plan provides post-termination or retiree health benefits to any individual for any reason, and neither the Company Parent nor any of its ERISA Affiliates has any Liability to provide post-termination or retiree health benefits to any individual or ever represented, promised or contracted to any individual that such individual would be provided with post-termination or retiree health benefits.
(i)There is no pending or, to Sellers’ Knowledge, threatened Action relating to a Benefit Plan (other than routine claims for benefits), and no Benefit Plan has within the three years prior to the date hereof been the subject of an examination or audit by a Governmental Authority or the subject of an application or filing under or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority.
(j)Except as required by applicable law, there has been no amendment to any Benefit Plan that would materially increase the annual expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year. Except as set forth in Section 3.22(j) of the Disclosure Schedules, the Company Parent has no commitment or obligation and has made no representation to any director, officer, employee, independent contractor or consultant, whether or not legally binding, to adopt, amend, modify or terminate any Benefit Plan or any collective bargaining agreement.
(k)Each Benefit Plan that is subject to Section 409A of the Code has been administered in material compliance with the requirements of Section 409A of the Code and all applicable regulatory guidance thereunder. The Company Parent does not have any obligation to gross up, indemnify or otherwise reimburse any individual for any excise taxes, interest or penalties incurred pursuant to Section 409A of the Code.
(l)Except with respect to the consummation of the Short-Form Merger and except as set forth in Section 3.22(l) of the Disclosure Schedules, neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events): (i) entitle any current or former director, officer, employee, independent contractor or consultant of the Company Parent to severance pay or any other payment; (ii) accelerate the time of payment, funding or vesting, or increase the amount of compensation (including stock-based compensation) due to any such individual; (iii) limit or restrict the right of the Company Parent to merge, amend or terminate any Benefit Plan; (iv) increase the amount payable under or result in any other material obligation pursuant to any Benefit Plan; (v) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code; (vi) require a “gross-up” or other payment to any “disqualified individual” within the meaning of Section 280G(c) of the Code. Sellers have made available to Buyer true results of any Section 280G analysis prepared (whether or not final) with respect to any disqualified individual in connection with the transactions; or (vii) require the Company Parent to pay any transaction bonuses, stay bonuses, retention payments, change in control payments, severance payments or other similar payments, in connection with the transactions contemplated by this Agreement, to any current or former employee, independent contractor or officer of the Company Parent or any of its Affiliates.
Section 3.23 Employment Matters.
(a)Section 3.23(a) of the Disclosure Schedules contains a list of all persons who are employees, independent contractors or consultants of the Company Parent as of the date hereof, including any employee who is on a leave of absence of any nature, paid or unpaid, authorized or unauthorized, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full-time or part-time and whether an employee, contractor or consultant); (iii) hire or retention date; (iv) current annual base compensation rate or contract fee;
(v) commission, bonus or other incentive-based compensation; (vi) for employees, whether the
individual is classified as exempt or non-exempt under federal wage and hour Laws; (vii) for employees, any accrued but unused vacation time; (viii) a description of the fringe benefits provided to each such individual as of the date hereof; and (ix) employment location. As of the date hereof, all compensation, including wages, commissions, bonuses, fees and other compensation, payable to all employees, independent contractors or consultants of the Company Parent for services performed on or prior to the date hereof have been paid in full (or accrued in full on the audited balance sheet contained in the Closing Working Capital Statement), and there are no outstanding agreements, understandings or commitments of the Company Parent with respect to any compensation, commissions, bonuses or fees. Except as provided in Section 3.23(a) of the Disclosure Schedules, each person who is an employee of the Company Parent is employed at will, with no entitlement to severance in the event of termination.
(b)The Company Parent is not, and neither the Company Parent nor the Company has been for the past five years, a party to, bound by, or negotiating any collective bargaining agreement or other Contract with a union, works council or labor organization (collectively, “Union”), and there is not, and has not been for the past five years, any Union representing or purporting to represent any employee of the Company Parent, and, to Sellers’ Knowledge, no Union or group of employees is seeking or has sought to organize employees of the Company Parent for the purpose of collective bargaining. There has never been, nor has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor disruption or dispute affecting the Company Parent, the Company or any of their employees. The Company Parent has no duty to bargain with any Union.
(c)Except as set forth in Section 3.23(c)(i) of the Disclosure Schedules, the Company Parent is and has been in compliance in all material respects with all applicable Laws pertaining to employment and employment practices, including applicable Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, whistleblower protections, wrongful discharge, immigration, wages, hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’ compensation, leaves of absence, paid sick leave and unemployment insurance. All individuals classified and/or treated by the Company Parent as independent contractors or consultants are properly treated as independent contractors under all applicable Laws. All employees of the Company Parent classified as exempt under the Fair Labor Standards Act and state and local wage and hour laws are properly classified in all material respects. The Company Parent has provided all employees and prospective employees with all disclosures and notices and has received all authorizations and certifications required under the Fair Credit Reporting Act. Except as set forth in Section 3.23(c)(ii) of the Disclosure Schedules, the Company Parent is in compliance with and has complied with all immigration laws, including Form I-9 requirements and any applicable mandatory E-Verify obligations. There are no Actions against the Company Parent pending, or threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant, volunteer, intern or independent contractor of the Company Parent, including, without limitation, any charge, investigation or claim relating to unfair labor practices, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits,
immigration, wages, hours, overtime compensation, employee classification, child labor, hiring, promotion and
termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’ compensation, leaves of absence, paid sick leave, unemployment insurance or any other employment-related matter arising under applicable Laws.
(d)The Company Parent has not implemented any plant closing or mass layoff of employees as those terms are defined in the WARN Act or any similar state or local Law, and it has no plans to undertake any action that would trigger the WARN Act.
Section 3.24 Taxes.
(a)Except as set forth in Section 3.24(a) of the Disclosure Schedules, all Tax Returns required to be filed on or before the Closing Date by the Company Parent or the Company have been, or will be, timely filed, taking into account valid extensions. Such Tax Returns are, or will be, true, complete and correct in all respects. All Taxes due and owing by the Company Parent or the Company (whether or not shown on any Tax Return) have been, or will be, timely paid.
(b)The Company Parent and the Company have withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, shareholder or other party, and complied with all information reporting and backup withholding provisions of applicable Law.
(c)No claim has been made by any taxing authority in writing in any jurisdiction where the Company Parent or the Company do not file Tax Returns that it is, or may be, subject to Tax by that jurisdiction.
(d)No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of the Company Parent or the Company.
(e)The amount of the Company Parent’s or the Company’s Liability for unpaid Taxes for all periods ending on or before December 31, 2022 does not, in the aggregate, exceed the amount of accruals for Taxes (excluding reserves for deferred Taxes) reflected on the Financial Statements. The amount of the Company Parent’s or Company’s Liability for unpaid Taxes for all periods following the end of the recent period covered by the Financial Statements shall not, in the aggregate, exceed the amount of accruals for Taxes (excluding reserves for deferred Taxes) as adjusted for the passage of time in accordance with the past custom and practice of the Company Parent or the Company (and which accruals shall not exceed comparable amounts incurred in similar periods in prior years).
(f)Section 3.24(f) of the Disclosure Schedules sets forth:
(i)those taxable years for which examinations by taxing authorities are presently being conducted; and
(ii)all deficiencies asserted, or assessments made, against the Company as a result of any examinations by any taxing authority have been fully paid.
(g)Neither the Company Parent nor Company is party to any Action by any taxing authority. There are no pending or threatened in writing Actions by any taxing authority.
(h)Sellers have delivered to Buyer copies of all federal, state, local and foreign income, franchise and similar Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by, the Company Parent and the Company for all Tax periods ending after December 31, 2018.
(i)There are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company Parent.
(j)The Company Parent is not a party to, or bound by, any Tax indemnity, Tax sharing or Tax allocation agreement.
(k)No private letter rulings, technical advice memoranda or similar agreement or rulings have been requested, entered into or issued by any taxing authority with respect to the Company Parent or the Company.
(l)Neither the Company Parent nor the Company has been a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes. The Company Parent has no Liability for Taxes of any Person (other than the Company) under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law), as transferee or successor, by contract or otherwise.
(m)The Company Parent will not be required to include any item of income in, or exclude any item or deduction from, taxable income for taxable period or portion thereof ending after the Closing Date as a result of:
(i)any change in a method of accounting under Section 481 of the Code (or any comparable provision of state, local or foreign Tax Laws), or use of an improper method of accounting, for a taxable period ending on or prior to the Closing Date;
(ii)an installment sale or open transaction occurring on or prior to the Closing
Date;
(iii)a prepaid amount received on or before the Closing Date;
(iv)any closing agreement under Section 7121 of the Code, or similar provision of state, local or foreign Law; or
(v)any election under Section 108(i) of the Code.
(n)The Company Parent is not, nor has it been, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period in Section 897(c)(1)(a) of the Code.
(o)The Company Parent has not been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.
(p)The Company Parent is not, and has not been, a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011-4(b).
(q)Except as set forth on Section 3.24(r) of the Disclosure Schedules, immediately prior to the Closing, there is currently no limitation on the utilization of net operating losses, capital losses, built-in losses, tax credits or similar items of the Company under Sections 269, 382, 383, 384 or 1502 of the Code and the Treasury Regulations thereunder (and comparable provisions of state, local or foreign Law).
(r)Section 3.24(s) of the Disclosure Schedules sets forth all foreign jurisdictions in which the Company Parent or the Company is subject to Tax, is engaged in business or has a permanent establishment. Neither the Company Parent nor the Company has entered into a gain recognition agreement pursuant to Treasury Regulations Section 1.367(a)-8. Neither the Company Parent nor the Company has transferred an intangible the transfer of which would be subject to the rules of Section 367(d) of the Code.
(s)No property owned by the Company Parent is (i) required to be treated as being owned by another person pursuant to the so-called “safe harbor lease” provisions of former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, (ii) subject to Section 168(g)(1)(A) of the Code, or (iii) subject to a disqualified leaseback or long-term agreement as defined in Section 467 of the Code.
Section 3.25 Books and Records. The minute books and stock record books of the Company and Company Parent, all of which have been made available to Buyer, are correct and have been maintained in accordance with sound business practices. At the Closing, all of those books and records of the Company and Company Parent will be in the possession of the Company Parent.
Section 3.26 Related Party Transactions. Except as set forth in Section 3.26 of the Disclosure Schedules, no executive officer, director or employee of the Company Parent or any person owning 5% or more of the Shares (or any of such person’s immediate family members or Affiliates or associates) is a party to any Contract with or binding upon the Company Parent or any of its assets, rights or properties or has any interest in any property owned by the Company Parent or has engaged in any transaction with any of the foregoing within the last twelve (12) months.
Section 3.27 Restructuring Transactions. The Charter Amendment, Pre-Merger Purchase, and Short-Form Merger have been undertaken and consummated by all requisite actions, including communications with stockholders, by Sellers, Company Parent, and the Company in accordance with applicable Law.
Section 3.28 Brokers. Except for Invision Capital Advisors, LLC, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Document based upon arrangements made by or on behalf of the Company Parent or the Company.
Section 3.29 No Other Representations or Warranties. (a) Except for the representations and warranties made by Sellers and the Company Parent in this ARTICLE III, neither the Company Parent nor any other Person makes any express or implied representation or warranty with respect to the Company Parent, the Company, any subsidiary of the Company or the Company Parent, or their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and Sellers and the Company Parent hereby disclaim any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither the Company Parent nor any other Person makes or has made any
representation or warranty to Buyer or any of its affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to the Company Parent, the Company, any subsidiary of the Company or the Company Parent, or their respective businesses or, (ii) except for the representations and warranties made by Sellers and the Company Parent in this ARTICLE III, any oral or written information presented to Buyer or any of its affiliates or representatives in the course of their due diligence investigation of the Company Parent and the Company, the negotiation of this Agreement, or in the course of the transactions contemplated hereby.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Buyer represents and warrants to Sellers that the statements contained in this ARTICLE IV are true and correct as of the date hereof.
Section 4.01 Organization and Authority. Buyer is a limited liability company duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization. Buyer has full limited liability company power and authority to enter into and perform its obligations under this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Buyer of this Agreement and any Ancillary Document to which it is a party 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, and no other limited liability company proceedings on the part of Buyer are necessary to authorize the execution, delivery and performance of this Agreement or to consummate the Sale and the other transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by each other party hereto) 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, moratorium and other similar laws affecting creditors’ rights generally and by general principles of equity. When each Ancillary Document to which Buyer is or will be a party has been duly executed and delivered by Buyer (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Document will constitute a legal and binding obligation of Buyer enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general principles of equity.
Section 4.02 No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the Ancillary Documents to which it or any of its Affiliates (including, but not limited to, Live Ventures Incorporated) is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws or other organizational documents of Buyer; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Buyer; or (c) except as set forth in Section 4.02 of the Disclosure Schedules, require the consent, notice or other action by any Person under any Contract to which Buyer is a party. 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, delivery and
performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby.
Section 4.03 Investment Purpose. Buyer is acquiring the Shares solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof, Buyer acknowledges that the Shares are not registered under the Securities Act of 1933, as amended, or any state securities laws, and that the Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable.
Section 4.04 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Document based upon arrangements made by or on behalf of Buyer.
Section 4.05 Sufficiency of Funds; Financing. Buyer has sufficient Cash on Hand or other sources of funds available to it to enable it to make payment of the Purchase Price (including any adjustment amounts that may become payable by Buyer under Section 2.06 of this Agreement) and consummate the transactions contemplated by this Agreement. Section 4.06 Solvency. Immediately after giving effect to the transactions contemplated in this Agreement, each of Buyer and its subsidiaries, including the Company Parent, shall be solvent and shall:
(a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities); and (c) not have an unreasonably small amount of capital with which to carry on its business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated in this Agreement with the intent to hinder, delay or defraud either present or future creditors of Buyer or its subsidiaries, including the Company. In connection with the transactions contemplated in this Agreement, Buyer has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured.
Section 4.07 Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, 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. No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.
ARTICLE V COVENANTS
Section 5.01 Intentionally Omitted.
Section 5.02 Intentionally Omitted.
Section 5.03 Intentionally Omitted.
Section 5.04 Intentionally Omitted.
Section 5.05 Intentionally Omitted
Section 5.06 Intentionally Omitted.
Section 5.07 Resignations. Sellers shall cause the Company Parent to deliver to Buyer written resignations, effective as of the Closing Date, of the officers and directors of the Company Parent set forth
on Section 5.07 of the Disclosure Schedules or otherwise requested by Buyer at least five Business Days prior to the Closing.
Section 5.08 Confidentiality. From and after the Closing, each Seller shall, and shall cause its Affiliates to, hold, and shall use its reasonable best efforts to cause its or their respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Company, except to the extent that such Seller can show that such information (a) is generally available to and known by the public through no fault of Seller, any of its Affiliates or their respective Representatives; or (b) is lawfully acquired by Seller, any of its Affiliates or their respective Representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If a Seller or any of its Affiliates or their respective Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, such Seller shall promptly notify Buyer in writing and shall disclose only that portion of such information which such Seller is advised by its counsel in writing is legally required to be disclosed.
Section 5.09 Restrictive Covenants.
(a)For a period of twenty-four (24) months from the Closing Date, John Locke and Richard Stanley (each, a “Restricted Person” and, together, the “Restricted Persons”) shall not, directly or indirectly:
(i)hire, solicit, encourage or induce any person or entity that is or was an employee or independent contractor of Buyer, the Company or any of their Affiliates within two (2) years prior to the date hereof to: (1) become an employee or independent contractor of the Restricted Person, any Affiliate of the Restricted Person, or any competitor of Buyer, the Company or their Affiliates; or (2) terminate or diminish their employment or engagement with Buyer, the Company or their Affiliates, or otherwise interfere with the relationship between Buyer, the Company or their Affiliates and such current or former employee or independent contractor. For purposes of this Section 5.09, “Affiliate” shall include, but not be limited to, Richard Stanley, John Locke, and Bartel Global Inc.; provided, however, that the foregoing restriction shall not apply to Mark Matthews, nor to any family member of any Restricted Person;
(ii)contact, solicit, encourage, or induce any person or entity who is a current supplier, vendor, service provider, licensor, lessor, distributor, wholesaler or customer of Buyer, the Company or their Affiliates as of the Closing Date to terminate or reduce their business with Buyer, the Company or their Affiliates, or otherwise interfere with the relationship between Buyer, the Company or their Affiliates and such current, former or prospective supplier, vendor, service provider, licensor, lessor, distributor, wholesaler, customer, or prospective customer as of the Closing Date; or
(iii)engage or render any assistance or advice to any person, entity, or business within the United States of America that offers any products or services competitive or alternative to those offered, sold, or developed by the Company as of the Closing Date or within the twelve (12) months prior to the Closing Date, or which the Company took affirmative steps to offer, sell, or develop as of the Closing Date, including as an owner, member, partner, stockholder, director, manager, officer,
employee, agent, independent contractor, consultant, or advisor, whether as an owner, member, partner, stockholder,
director, manager, officer, employee, agent, independent contractor, consultant, or advisor. Notwithstanding the foregoing, Seller or its Affiliate’s performance pursuant to, or in connection with, the Consulting Agreement shall not be a violation of this Section 5.09, and further, nothing in this Agreement shall prohibit any Seller or any Affiliate of any Seller from purchasing or owning less than five percent (5%) of the publicly-traded securities of any corporation as a passive investment.
(b)Each Restricted Person hereby covenants and agrees that, for a period of twenty- four (24) months following the date hereof, such Restricted Person shall not, and such Restricted Person shall cause each of its Affiliates to not, directly or indirectly, either individually or acting through or in concert with another Person or Persons make any negative, derogatory or disparaging statements or communications regarding, Buyer, the Company, their Affiliates with which the Restricted Person has had direct contact with or of which the Restricted Person had actual knowledge prior to the Closing, the business of Buyer, the Company or their respective Affiliates, or any of the products or services of Buyer, the Company or their respective Affiliates; provided that the foregoing shall not restrict or impede (i) any party to this Agreement or any Ancillary Documents from enforcing such Person’s rights (or any other party’s obligations) thereunder in accordance with this Agreement and applicable Law, or (ii) any Person or any of such Person’s Affiliates from making factually true statements to the extent necessary to exercise protected legal rights to the extent that such rights cannot be waived by agreement (including “whistleblowing”) or from providing truthful statements in response to any Governmental Authority, as and if required by Law.
(c)The duration of each and every covenant and restriction set forth in this Section 5.09 shall be tolled and extended during any period when the Restricted Person is in violation of any covenant or restriction set forth in this Section 5.09, regardless of whether or not such violation is known to Buyer.
(d)If the duration, geographical extent of, or business activities covered by, this Section 5.09 are in excess of what is valid and enforceable under applicable law, then such provision shall be construed to cover only that duration, geographical extent or activities that are valid and enforceable. Each Restricted Person acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.
(e)Each Restricted Person acknowledges and agrees that such Restricted Person is a trustee and beneficiary of a Seller and has received or will receive material consideration in respect of such interests in connection with the consummation of the transactions contemplated under this Agreement, including, without limitation, (i) the Sellers’ receipt of the Purchase Price, (ii) payments pursuant to the Notes, and/or (iii) payments pursuant to the Consulting Agreement, and that the transactions contemplated under this Agreement involve the sale of ownership and control of the Company Parent (including as successor to the business of Company).
Section 5.10 R&W Insurance Policy. Prior to the Closing, Buyer shall use reasonable best efforts to obtain and bind the R&W Insurance Policy in the form attached hereto as Exhibit F. Sellers and
the Company Parent shall cooperate with Buyer’s efforts and provide assistance as reasonably requested by Buyer to obtain and bind the R&W Insurance Policy. The costs and expenses of the R&W Insurance
Policy, including the total premium, underwriting costs, brokerage commissions, and other fees and expenses of such policy, which amount shall be characterized as a Transaction Expense hereunder, shall be included in the Company Parent’s Transaction Expenses and shall be paid in connection with the Closing.
Section 5.11 Intentionally Omitted.
Section 5.12 Directors’ and Officers’ Indemnification and Insurance.
(a)Buyer agrees that all rights to indemnification, advancement of expenses and exculpation by the Company and the Company Parent now existing in favor of each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time an officer or director of the Company or the Company Parent (each an “D&O Indemnified Party”) as provided in the Company Parent Charter Documents or the prior governance documents of the Company, in each case as in effect on or prior to the date of this Agreement, or pursuant to any other Contracts in effect on the date hereof and disclosed in Section 5.12 of the Disclosure Schedules, were assumed by the Company Parent in the Short-Form Merger, without further action, and survived the Short-Form Merger and remain in full force and effect in accordance with their terms, and, in the event that any proceeding is pending or asserted or any claim made during such period, until the final disposition of such proceeding or claim.
(b)For six years after the Effective Time, to the fullest extent permitted under applicable Law, Buyer and the Company Parent (the “D&O Indemnifying Parties”) shall indemnify, defend and hold harmless each D&O Indemnified Party against all losses, claims, damages, liabilities, fees, expenses, judgments and fines arising in whole or in part out of actions or omissions in their capacity as such occurring at or prior to the Effective Time (including in connection with the transactions contemplated by this Agreement), and shall reimburse each D&O Indemnified Party for any legal or other expenses reasonably incurred by such D&O Indemnified Party in connection with investigating or defending any such losses, claims, damages, liabilities, fees, expenses, judgments and fines as such expenses are incurred, subject to the Company Parent’s receipt of an undertaking by such D&O Indemnified Party to repay such legal and other fees and expenses paid in advance if it is ultimately determined in a final and non-appealable judgment of a court of competent jurisdiction that such D&O Indemnified Party is not entitled to be indemnified under applicable Law; provided, however, that the Company Parent will not be liable for any settlement effected without the Company Parent’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).
(c)Prior to the Closing, the Company Parent shall obtain and fully pay for “tail” insurance policies with a claims period of at least six years from the Effective Time with at least the same coverage and amount and containing terms and conditions that are not less advantageous to the directors and officers of the Company Parent as the Company Parent’s existing policies with respect to claims arising out of or relating to events which occurred before or at the Effective Time (including in connection with the transactions contemplated by this Agreement) (the “D&O Tail Policy”). The Company Parent shall bear the cost of the D&O Tail Policy, and such costs, to the extent not paid prior to the Closing, shall be Transaction Expenses. During the term of the D&O Tail Policy, Buyer shall not (and shall cause the Company Parent not to) take any action following the Closing to cause the D&O Tail Policy to be cancelled or any provision therein to be
amended or waived; provided, that neither Buyer, the Company Parent nor any Affiliate thereof shall be obligated to pay any premiums or other amounts in respect of such D&O Tail Policy.
(d)The obligations of Buyer and the Company Parent under this Section 5.12 shall survive the consummation of the Short-Form Merger and shall not be terminated or modified in such a manner as to adversely affect any D&O Indemnified Party to whom this Section 5.12 applies without the consent of such affected D&O Indemnified Party (it being expressly agreed that the D&O Indemnified Parties to whom this Section 5.12 applies shall be third-party beneficiaries of this Section 5.12, each of whom may enforce the provisions of this Section 5.12).
(e)In the event Buyer, the Company Parent or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in either such case, proper provision shall be made so that the successors and assigns of Buyer or the Company Parent, as the case may be, shall assume all of the obligations set forth in this Section 5.12. The agreements and covenants contained herein shall not be deemed to be exclusive of any other rights to which any Indemnified Party is entitled, whether pursuant to Law, Contract or otherwise. Nothing in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’ insurance claims under any policy that is or has been in existence with respect to the Company or its officers, directors and employees, it being understood and agreed that the indemnification provided for in this Section 5.12 is not prior to, or in substitution for, any such claims under any such policies.
Section 5.13 Intentionally Omitted.
Section 5.14 Intentionally Omitted.
Section 5.15 Closing Conditions. From the date hereof until the Closing, each party hereto shall use reasonable best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in ARTICLE VII hereof.
Section 5.16 Public Announcements. Unless otherwise required by applicable Law (based upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.
Section 5.17 Further Assurances. At and after the Effective Time, the officers and directors of the Company Parent shall be authorized to execute and deliver, in the name and behalf of the Company Parent, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company Parent, any other actions and things to vest, perfect or confirm of record or otherwise in the Company Parent any and all right, title and interest in, to and under any of the rights, properties or assets of the Company Parent and the Company acquired or to be acquired by the Company Parent as a result of, or in connection with, the Short-Form Merger.
Section 5.18 Intentionally Omitted.
Section 5.19 Section 280G Approval.
(a)Prior to the initiation of the stockholder approval solicitation under Section 5.19(b) below, the Company Parent shall have obtained a waiver (a “Parachute Payment Waiver”) from each Person who, with respect to the Company Parent, is a “disqualified individual” (within the meaning of Section 280G of the Code and the regulations promulgated thereunder) and who might otherwise receive, have received, or have the right or entitlement to receive any parachute payment under Section 280G of the Code in connection with the transactions contemplated by this Agreement, which Parachute Payment Waiver shall include a waiver of such Person’s right to receive those payments and/or benefits that could constitute “parachute payments” under Section 280G of the Code and regulations promulgated thereunder in connection with the transactions contemplated by this Agreement (the “Waived Payments”) unless the Waived Payments are approved by the Company Parent’s stockholders in accordance with Section 280G(b)(5)(B) of the Code.
(b)Prior to the Closing Date, the Company Parent shall solicit the approval of the stockholders of the Company Parent of the Waived Payments in a manner compliant with Section 280G(b)(5)(B) of the Code and Treasury Regulation Section 1.280G-1, Q&A-7 and shall use commercially reasonable efforts to obtain such approval.
ARTICLE VI TAX MATTERS
Section 6.01 Tax Covenants.
(a)Without the prior written consent of Buyer which consent shall not be unreasonably withheld, conditioned or delayed, Sellers (and, prior to the Closing, the Company Parent, its Affiliates and their respective Representatives) shall not, to the extent it may affect, or relate to, the Company Parent make, change or rescind any Tax election, amend any Tax Return or take any position on any Tax Return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of Buyer or the Company Parent in respect of any Post-Closing Tax Period. Each Seller agrees that Buyer is to have no liability for any Tax resulting from any such prohibited action of such Seller, the Company Parent, its Affiliates or any of their respective Representatives, and agrees to, severally (in accordance with their Pro Rata Shares) and not jointly indemnify and hold harmless Buyer (and, after the Closing Date, the Company) against any Tax or material reduction of any Tax asset.
(b)All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the Ancillary Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid by Sellers when due. Each Seller shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Buyer shall cooperate with respect thereto as necessary).
(c)The parties acknowledge and agree that the Sale is intended to be treated as a purchase of the shares of capital stock of the Company Parent by the Buyer for federal income tax purposes, whereby gain or loss is realized and recognized by the holders thereof upon receipt of the taxable consideration hereunder in sale and exchange for such shares of capital stock of the Company Parent under Code Sections 1001 and 1011 (the “Intended Tax Treatment”). Without
the prior written consent of all other parties (which consent may be withheld in a party’s sole discretion), no party shall take, or cause any other Person to take, any action that could prevent or impede the Sale from qualifying for the Intended Tax Treatment, including, without limitation, by making, or attempting to make, any election under Code Section 336 or 338.
Section 6.02 Termination of Existing Tax Sharing Agreements. Any and all existing Tax sharing agreements (whether written or not) binding upon the Company Parent shall be terminated as of the Closing Date. After such date, neither the Company Parent nor any of its Representatives shall have any further rights or liabilities thereunder.
Section 6.03 Tax Indemnification. Except to the extent treated as a liability in the calculation of Closing Working Capital, or otherwise taken into account in calculating the purchase price hereunder, each Seller shall indemnify the Company Parent, Buyer, and each Buyer Indemnitee and hold them harmless from and against (a) any Loss attributable to any breach of or inaccuracy in any representation or warranty made in Section 3.24; (b) any Loss attributable to any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in ARTICLE VI; (c) all Taxes of the Company Parent or the Company or relating to the business of the Company Parent or the Company for all Pre- Closing Tax Periods (“Pre-Closing Taxes”); (d) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company Parent (or any predecessor of the Company Parent) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section 1.1502-6 or any comparable provisions of foreign, state or local Law; and (e) any and all Taxes of any person imposed on the Company Parent arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring before the Closing Date. The indemnification obligations pursuant to this ARTICLE VI shall be subject to those limitations set forth in Section 8.04.
Section 6.04 Tax Returns.
(a)The Company Parent shall prepare and timely file, or cause to be prepared and timely filed, all Tax Returns required to be filed by it that are due on or before the Closing Date (taking into account any extensions) and shall timely pay all Taxes that due and payable on or before the Closing Date (taking into account any extensions) and shall timely pay all Taxes that are due and payable on or before the Closing Date. Any such Tax Return shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and shall not take any position which is inconsistent with the Intended Tax Treatment, except to the extent otherwise required by a final determination within the meaning of Code Section 1313.
(b)Buyer shall prepare and timely file, or cause to be prepared and timely filed, all Tax Returns required to be filed by the Company Parent after the Closing Date with respect to a Pre-Closing Tax Period and for any Straddle Period. Any such Tax Return shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and shall not take any position which is inconsistent with the Intended Tax Treatment, except to the extent otherwise required by a final determination within the meaning of Code Section 1313, and, if it is an income or other material Tax Return, shall be submitted by Buyer to Sellers (together with schedules, statements and, to the extent requested by Sellers, supporting documentation) at least 45 days prior to the due date (including extensions) of such Tax Return. If a Seller objects to any item on any such Tax Return that relates to a Pre-Closing Tax Period, it shall, within ten days after
delivery of such Tax Return, notify Buyer in writing that it so objects, specifying with particularity any such item and stating the specific factual or legal basis for any such objection. If a notice of objection
shall be duly delivered, Buyer and Sellers shall negotiate in good faith and use their reasonable best efforts to resolve such items. If Buyer and Sellers are unable to reach such agreement within 30 days after receipt by Buyer of such notice, the disputed items shall be resolved by the Independent Accountant and any determination by the Independent Accountant shall be final. The Independent Accountant shall resolve any disputed items within 20 days of having the item referred to it pursuant to such procedures as it may require. If the Independent Accountant is unable to resolve any disputed items before the due date for such Tax Return, the Tax Return shall be filed as prepared by Buyer and then amended to reflect the Independent Accountant’s resolution. The costs, fees and expenses of the Independent Accountant shall be borne equally by Buyer and Sellers. The preparation and filing of any Tax Return of the Company Parent that does not relate to a Pre-Closing Tax Period or Straddle Period shall be exclusively within the control of Buyer. Buyer shall be entitled to deduct from the Indemnification Escrow Funds (i) Taxes due with respect to any such Tax Return that relate to Pre-Closing Tax Periods and (ii) Taxes due with respect to any such Tax Return that relate to Straddle Periods that are attributable under Section 6.05 to the portion of such Straddle Period ending on the Closing Date, but only to the extent such Taxes due were not taken into account as liabilities in computing the Closing Working Capital or otherwise taken into account in calculating the Purchase Price hereunder.
Section 6.05 Straddle Period. In the case of Taxes that are payable with respect to a taxable period that begins before and ends after the Closing Date (each such period, a “Straddle Period”), the portion of any such Taxes that are treated as Pre-Closing Taxes for purposes of this Agreement shall be:
(a)in the case of Taxes (i) based upon, or related to, income, receipts, profits, wages, capital or net worth, (ii) imposed in connection with the sale, transfer or assignment of property, or
(iii) required to be withheld, deemed equal to the amount which would be payable if the taxable year ended with the Closing Date; and
(b)in the case of other Taxes, deemed to be the amount of such Taxes for the entire period multiplied by a fraction the numerator of which is the number of days in the period ending on the Closing Date and the denominator of which is the number of days in the entire period.
Section 6.06 Contests. Buyer agrees to give written notice to Sellers of the receipt of any written notice by the Company Parent, Buyer or any of Buyer’s Affiliates which involves the assertion of any claim, or the commencement of any Action, in respect of which an indemnity may be sought by Buyer pursuant to this ARTICLE VI (a “Tax Claim”); provided, that failure to comply with this provision shall not affect Buyer’s right to indemnification hereunder unless the party from whom indemnification is sought was materially prejudiced by such failure. Sellers shall control the contest or resolution of any Tax Claim; provided, however, that Sellers shall obtain the prior written consent of Buyer (which consent shall not be unreasonably withheld, conditioned or delayed) before entering into any settlement of a Tax Claim or ceasing to defend such Tax Claim; and, provided further, that Buyer and its Affiliates (including the Company Parent) shall be entitled to participate in the defense of such Tax Claim and to employ counsel of its choice for such purpose, the fees and expenses of which separate counsel shall be borne solely by Buyer or such Affiliate.
Section 6.07 Cooperation and Exchange of Information. Sellers and Buyer shall provide each other with such cooperation and information as either of them reasonably may request of the other in
filing any Tax Return pursuant to this ARTICLE VI or in connection with any audit or other proceeding in respect of Taxes of the Company Parent or the Company. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by tax authorities. Each of Sellers and Buyer shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company and the Company Parent for any taxable period beginning before the Closing Date until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions for the respective Tax periods. Prior to transferring, destroying or discarding any Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company or the Company Parent for any taxable period beginning before the Closing Date, Sellers or Buyer (as the case may be) shall provide the other party with reasonable written notice and offer the other party the opportunity to take custody of such materials.
Section 6.08 Tax Treatment of Indemnification Payments. Any indemnification payments pursuant to this ARTICLE VI shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Law.
Section 6.09 Payments to Buyer. Any amounts payable to Buyer pursuant to this ARTICLE VI shall be satisfied solely from (i) from the Indemnification Escrow Fund; (ii) the R&W Insurance Policy; and (iii) to the extent such amounts exceed the amount available to Buyer in the Indemnification Escrow Fund, from the Sellers, severally (in accordance with their Pro Rata Shares) and not jointly.
Section 6.10 FIRPTA Statement. On the Closing Date, the Company Parent shall deliver to Buyer a certificate, dated as of the Closing Date, certifying to the effect that no interest in Company Parent is a U.S. real property interest (such certificate in the form required by Treasury Regulation Section 1.897- 2(h) and 1.1445-3(c)) (the “FIRPTA Statement”).
Section 6.11 Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of Section 3.24 and this ARTICLE VI shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus 60 days.
Section 6.12 Overlap. To the extent that any obligation or responsibility pursuant to ARTICLE VIII may overlap with an obligation or responsibility pursuant to this ARTICLE VI, the provisions of this ARTICLE VI shall govern with respect to any inconsistency between this ARTICLE VI and ARTICLE VIII.
ARTICLE VII CONDITIONS TO CLOSING
Section 7.01 Intentionally Omitted.
Section 7.02 Intentionally Omitted.
Section 7.03 Intentionally Omitted.
ARTICLE VIII INDEMNIFICATION
Section 8.01 Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein (other than any representations or warranties contained in Section 3.24 which are subject to ARTICLE VI) shall survive the Closing and shall remain in full force and effect until the date that is 18 months from the Closing Date; provided, that the representations and warranties in Section 3.01, Section 3.02, Section 3.03, Section 3.04, Section 3.05(a), Section 3.06, Section 3.07(a), and Section 3.28, Section 4.01, Section 4.02 and Section 4.04 (collectively, the “Fundamental Representations”) shall survive thirty (30) days after the expiration of the applicable statute of limitations. All covenants and agreements of the parties contained herein (other than any covenants or agreements contained in ARTICLE VI which are subject to ARTICLE VI) shall survive the Closing indefinitely or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the Indemnified Party to the Indemnifying Party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.
Section 8.02 Indemnification By Sellers. Subject to the other terms and conditions of this ARTICLE VIII, from and after Closing, Sellers severally in accordance with their Pro Rata Shares and not jointly, shall indemnify and defend each of Buyer and its Affiliates (including the Company Parent) and their respective Representatives (collectively, the “Buyer Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Buyer Indemnitees based upon, arising out of, with respect to or by reason of:
(a)Any inaccuracy in or breach of any of the representations or warranties of Sellers, or the Company Parent contained in this Agreement or in any certificate or instrument delivered by or on behalf of the Company Parent pursuant to this Agreement (other than in respect of Section 3.24, it being understood that the sole remedy for any such inaccuracy in or breach thereof shall be pursuant to ARTICLE VI), as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);
(b)Any breach or non-fulfillment of any covenant, agreement or obligation to be performed by the Company Parent pursuant to this Agreement (other than any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in ARTICLE VI, it being understood that the sole remedy for any such breach, violation or failure shall be pursuant to ARTICLE VI);
(c)Any claim made by any stockholder of the Company relating to the Charter Amendment, the Pre-Merger Purchase, or the Short-Form Merger, including any claim relating to such stockholder’s rights with respect to the merger consideration received in connection with the Short-Form Merger;
(d)All Losses and Liabilities arising out of or relating to the Company’s failure to properly withhold any Taxes or report income, in accordance with applicable Law, in connection
with the vesting, exercise or cash-out of any stock options, restricted stock or other equity or equity- based incentives equity grants to employees and service providers of the Company (“Withholding Losses”);
(e)All Losses and Liabilities for, arising out of or relating to, Pre-Closing Taxes that are sales or use Taxes; or
(f)Any Transaction Expenses or Indebtedness of the Company outstanding as of the Closing to the extent not paid or satisfied by the Company at or prior to the Closing, or if paid by Buyer at or prior to the Closing, to the extent not deducted in the determination of the Closing Date Payment.
Section 8.03 Indemnification By Buyer. Subject to the other terms and conditions of this ARTICLE VIII, from and after Closing, Buyer shall indemnify and defend each of the Sellers and their Affiliates and their respective Representatives (collectively, the “Seller Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Seller Indemnitees based upon, arising out of, with respect to or by reason of:
(a)Any inaccuracy in or breach of any of the representations or warranties of Buyer contained in this Agreement or in any certificate or instrument delivered by or on behalf of Buyer pursuant to this Agreement, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);
(b)Any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement (other than ARTICLE VI, it being understood that the sole remedy for any such breach thereof shall be pursuant to ARTICLE VI); or
(c)Any Third-Party Claims based upon, resulting from, or arising out of the operations of the business by Buyer, the Company Parent, or the Company after the Closing or properties, assets, or obligations of Buyer, the Company Parent, or the Company after the Closing.
Section 8.04 Certain Limitations. The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the following limitations:
(a)The Buyer Indemnitees shall not be entitled to indemnification under Section 8.02(a) until the aggregate amount of all Losses in respect of indemnification under Section 8.02(a) exceeds $100,000 (the “Basket”), in which event Sellers shall be required to pay or be liable for all such Losses from the first dollar.
(b)The aggregate amount of all Losses, other than Losses based upon, arising out of, with respect to or by reason of any inaccuracy in or breach of any representation or warranty in the Fundamental Representations (“Fundamental Losses”), for which Sellers shall be liable pursuant to Section 8.02(a) shall not exceed 15% of the Purchase Price (the “Cap”).
Notwithstanding the foregoing, the limitations set forth in this Section 8.04(a) shall not apply to Fundamental Losses.
(c)The Buyer Indemnitees shall not be entitled to indemnification under Section 8.02(d) until the aggregate amount of all Withholding Losses in respect of indemnification under Section 8.02(d) exceeds $35,000 (the “Withholding Basket”), in which event Sellers shall be required to pay or be liable for only all such Withholding Losses in excess of the Withholding Basket.
(d)The Seller Indemnitees shall not be entitled to indemnification under Section 8.03(a) until the aggregate amount of all Losses in respect of indemnification under Section 8.03(a) exceeds the Basket, in which event Buyer shall be required to pay or be liable for all such Losses from the first dollar. The aggregate amount of all Losses for which Buyer shall be liable pursuant to Section 8.03(a) shall not exceed the Cap.
(e)The aggregate amount of all Losses for which Sellers shall be liable shall not exceed the Purchase Price.
(f)For purposes of this ARTICLE VIII (including for purposes of determining the existence of any inaccuracy in, or breach of, any representation or warranty and for calculating the amount of any Loss with respect thereto), any inaccuracy in or breach of any representation or warranty shall be determined without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty.
Section 8.05 Indemnification Procedures. The party making a claim under this ARTICLE VIII is referred to as the “Indemnified Party”, and the party against whom such claims are asserted under this ARTICLE VIII is referred to as the “Indemnifying Party”. For purposes of this ARTICLE VIII, (i) if Buyer (or any other Buyer Indemnitee) comprises the Indemnified Party, any references to Indemnifying Party (except provisions relating to an obligation to make payments) shall be deemed to refer to Sellers, and (ii) if Buyer comprises the Indemnifying Party, any references to the Indemnified Party shall be deemed to refer to Sellers.
(a)Third-Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any Action made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (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 give the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 calendar days after receipt of such notice of such Third-Party Claim. The failure to give such prompt written notice 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, or the rights or defenses of the Indemnifying Party are otherwise impaired in any material respect by reason of such failure. Such notice by the Indemnified Party shall describe the Third-Party Claim 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 Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third-Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to
Section 8.05(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. The Indemnified Party shall have the right to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party. If the Indemnifying Party elects not to compromise or defend such Third-Party Claim, fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third-Party Claim, the Indemnified Party may, subject to Section 8.05(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. Sellers and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party Claim, including making available records relating to such Third-Party Claim and furnishing, without expense (other than reimbursement of actual out-of- pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim.
(b)Settlement of Third-Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third-Party Claim without the prior written consent of the Indemnified Party, except as provided in this Section 8.05(b). If a firm offer is made to settle a Third-Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third-Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent to such firm offer within ten days after its receipt of such notice, the Indemnified Party may continue to contest or defend such Third-Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third-Party Claim shall not exceed the amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such Third-Party Claim, the Indemnifying Party may settle the Third-Party Claim upon the terms set forth in such firm offer to settle such Third-Party Claim; provided, however, that the Indemnifying Party shall not settle or compromise a claim by acceding to injunctive or other equitable relief without the express written consent of the Indemnified Party If the Indemnified Party has assumed the defense pursuant to Section 8.05(a), it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed).
(c)Direct Claims. Any Action 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, but in any event not later than 20 days after the Indemnified Party becomes aware of such Direct Claim. The failure to give such prompt written notice 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. Such notice by the Indemnified Party shall describe the Direct Claim 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 Indemnifying Party shall have 20 days after its receipt of such notice to respond in writing to such Direct Claim. The Indemnified Party shall
allow the Indemnifying Party and its professional advisors 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 Party’s investigation by giving such information and assistance (including access to the Company Parent’s premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such 20-day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.
(d)Tax Claims. Notwithstanding any other provision of this Agreement, the control of any claim, assertion, event or proceeding in respect of Taxes of the Company or Company Parent (including, but not limited to, any such claim in respect of a breach of the representations and warranties in Section 3.24 hereof or any breach or violation of or failure to fully perform any covenant, agreement, undertaking or obligation in ARTICLE VI) shall be governed exclusively by ARTICLE VI hereof.
Section 8.06 Payments; Indemnification Escrow Fund.
(a)Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this ARTICLE VIII, the Indemnifying Party shall satisfy its obligations within 15 Business Days of such final, non-appealable adjudication by wire transfer of immediately available funds. The parties hereto agree that should an Indemnifying Party not make full payment of any such obligations within such 15 Business Day period.
(b)Any Losses payable to a Buyer Indemnitee pursuant to ARTICLE VIII shall be satisfied: (i) from the Indemnification Escrow Fund; (ii) to the extent the amount of Losses exceeds the amounts available to the Buyer Indemnitee in the Indemnification Escrow Fund, from the R&W Insurance Policy; and (iii) to the extent provided in Section 8.08, from the Sellers, severally and not jointly (in accordance with their Pro Rata Shares);
(c)Upon the termination of the Indemnification Escrow Fund pursuant to the terms of the Escrow Agreement, the Escrow Agent shall pay any amounts remaining in the Indemnification Escrow Fund to the Sellers as set forth in the Escrow Agreement in accordance with their Pro Rata Shares.
Section 8.07 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.
Section 8.08 Manner of Payment. Subject to the limitations set forth elsewhere in this ARTICLE VIII (including Section 8.04):
(a)From and after the Closing, any Losses for which a Buyer Indemnitee is entitled to indemnification pursuant to the terms of Section 8.02(a) shall be solely and exclusively satisfied as follows:
(i)first, from the Indemnification Escrow Fund pursuant to the terms of the Escrow Agreement until the retention amount under the R&W Insurance Policy is met;
(ii)second, by recovery under the R&W Insurance Policy;
(iii)third, to the extent such Losses are not covered by the R&W Insurance Policy for any reason (including the coverage limit being exceeded and coverage being denied), from the Indemnification Escrow Fund; and
(iv)fourth, to the extent the Losses both exceed the Indemnification Escrow Fund and are Fundamental Losses, then by the Sellers, severally and not jointly (in accordance with their Pro Rata Shares).
(b)From and after the Closing, any Losses for which a Buyer Indemnitee is entitled to indemnification pursuant to the terms of Section 8.02(b) through Section 8.02(f), be solely and exclusively satisfied as follows:
(i)first, from the Indemnification Escrow Fund pursuant to the terms of the Escrow Agreement until no portion of the Indemnification Escrow Fund remains; and
(ii)second, by the Sellers, severally and not jointly (in accordance with their Pro Rata Shares).
Section 8.09 No Effect on R&W Insurance. Notwithstanding anything to the contrary contained herein, no limitations (including any survival limitations and other limitations set forth in this ARTICLE VIII), qualifications or procedures in this Agreement shall be deemed to limit or modify the ability of Buyer to make claims under or recover under the R&W Insurance Policy; it being understood that any matter for which there is coverage available under the R&W Insurance Policy shall be subject to the terms, conditions and limitations, if any, set forth in the R&W Insurance Policy. In the event that any Losses may be subject to coverage under the R&W Insurance Policy, Buyer shall use its best efforts to recover for such Losses through the R&W Insurance Policy.
Section 8.10 Exclusive Remedies. Subject to Section 2.06(b) to Section 2.06(e) and Section 10.12, the parties acknowledge and agree that from and after Closing their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud, criminal activity or willful misconduct on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in ARTICLE VI and this ARTICLE VIII. In furtherance of the foregoing, each party hereby waives, from and after Closing, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in ARTICLE VI and this ARTICLE VIII. Nothing in this Section 8.10 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled or to seek any remedy on account of any party’s fraudulent, criminal or intentional misconduct.
ARTICLE IX TERMINATION
Section 9.01 Intentionally Omitted.
Section 9.02 Intentionally Omitted.
ARTICLE X MISCELLANEOUS
Section 10.01 Intentionally Omitted.
Section 10.02 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, 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; provided, however, and the Company Parent shall pay all amounts payable to Invision Capital Advisors, LLC.
Section 10.03 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 delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. 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 10.03):
If to the Company or Company Parent:
Precision Metal Works, Inc.
6901 Preston Hwy, Louisville, KY 40219 E-mail: rstanley@lhpg.ca
Attention: Richard Stanley E-mail: jlocke@lhpg.ca Attention: John Locke
with a copy to: Dinsmore & Shohl LLP
255 East Fifth Street, Suite 1900
Cincinnati, OH 45202
E-mail: Jerrad.Howard@Dinsmore.com Attention: Jerrad Howard, Esq.
If to Sellers The Richard Stanley Family Trust Attn: Richard Stanley
54 Ireland Point Road, Nobel, Ontario, Canada, P0G 1G0 Email: rstanley@lhpg.ca
The John Locke Family Trust Attn: John Locke
5065 Wellington Rd. 125, Acton, Ontario, Canada, L7J 2L9 Email: jlocke@lhpg.ca
with a copy to: Dinsmore & Shohl LLP
255 East Fifth Street, Suite 1900
Cincinnati, OH 45202
E-mail: Jerrad.Howard@Dinsmore.com Attention: Jerrad Howard, Esq.
If to Buyer: PMW Affiliated Holdings, LLC
125 E. Warm Springs Road, Suite #102 Las Vegas, NV 89119
E-mail: ealthofer@liveventures.com; wipsen@liveventures.com Attention: Eric Althofer and Wayne Ipsen
with a copy to: Greenberg Traurig, LLP
10845 Griffith Peak Drive, Suite 600 Las Vegas, NV 89135
E-mail: bonnerm@gtlaw.com Attention: Michael J. Bonner, Esq.
Section 10.04 Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and
Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein. The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, 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.
Section 10.05 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
Section 10.06 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 10.07 Entire Agreement. This Agreement and the Ancillary 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 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 Ancillary Documents, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.
Section 10.08 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. 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, conditioned or delayed. Notwithstanding the foregoing, Buyer may, without the prior written consent of Sellers, assign this Agreement or all or any portion of Buyer’s rights, interests and obligations hereunder as a collateral assignment to any creditor of Buyer or its Affiliates, in each case, upon notice given to Sellers. No assignment shall relieve the assigning party of any of its obligations hereunder.
Section 10.09 No Third-Party Beneficiaries. Except as provided in Section 5.12, Section 6.03 and ARTICLE VIII, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 10.10 Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by Buyer and Sellers. Any failure of Buyer, on the one hand, or the Sellers or the Company Parent, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by Sellers (with respect to any failure by Buyer) or by Buyer (with respect to any failure by the Company Parent or Sellers), respectively, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
Section 10.11 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 giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction).
(b)ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY SHALL BE BROUGHT EXCLUSIVELY IN THE DELAWARE COURT OF CHANCERY IN NEW CASTLE COUNTY, OR IN THE EVENT (BUT ONLY IN THE EVENT) THAT SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH PROCEEDING, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF DELAWARE IN EACH CASE LOCATED IN THE CITY OF WILMINGTON AND COUNTY 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 PARTY’S 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 ANCILLARY 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 ANCILLARY 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 10.11(c).
Section 10.12 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 the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity. Each party further agrees that: (i) no such party will oppose the granting of an injunction or specific performance as provided herein on the basis that the other party has an adequate remedy at law or that an award of specific performance is not an appropriate remedy for any reason at law or equity; (ii) no such party will oppose the specific performance of the terms and provisions of this Agreement; and (iii) no other party 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 10.12, and each party irrevocably waives any right it may have to require the obtaining, furnishing, or posting of any such bond or similar instrument.
Section 10.13 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]
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be
executed as of the date first written above by their duly authorized representatives.
SELLERS:
THE RICHARD STANLEY FAMILY TRUST
By k-
Name: Mary Ell
Title: Trustee
By:ame: John Locke
Title: Trustee
THE JOHN LOCKE FAMILY TRUST
By: _ Name: John Locke
Title: Trustee
By: _
ame: Ann Locke Title: Trustee
[Signa/ure Page 10 S1ock Purchase Agreement]
TN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be executed as of the date first written above by their duly authorized representatives.
SELLERS:
THE RICHARD STANLEY FAMILY TRUST
By
Name: Richard Stanley
Title: Trustee
By:
Name: Mary Ellen Stanley Title: Trustee
THE JOHN LOCKE FAMILY TRUST
By u2'.L
N&?'Toin:Locke
Ti e: Trustee
By l&Yb.
Name: Ann Locke
Title: Trustee
By:
ame: Richard Stanley
Title: Trustee
[Signature Page to Stock Purchase Agreement]
COMPANY PARENT:
PRECISION METAL WORKS, INC.
By:---1---1--- ,-...4-
Name: Ri Title: President
[Signalure Page to S10ck Purchase Agreement]
BUYER:
LDrNGS, LLC
By:_,_,._-----=. ..L....tll-..:::e!!!I
Name:Title: President
[Signature Page to Stock Purchase Agreemenlj
IN WITNESS WHEREOF. John Locke and Richard Stanley have executed this Stock Purchase Agreement as of the date first written above solely for purposes of agreeing to the tenns and conditions set forth in Section 5.09 of the Stock Purchase Agreement (and neither John Locke nor Richard Stanley shall be construed to be parties to the Stock Purchase Agreement for any reason other than with respect to Section5.09 of the Stock Purchase Agreement).
RICHARD STANLEY
JOHN LOCKE
[Signature Page lo Stock Purchase Agreement]
IN WITNESS WHEREOF, John Locke and Richard Stanley have executed this Stock Purchase Agreement as of the date first written above solely for purposes of agreeing to the terms and conditions set forth in Section 5.09 of the Stock Purchase Agreement (and neither John Locke nor Richard Stanley shall be construed to be parties to the Stock Purchase Agreement for any reason other than with respect to Section
5.09 of the Stock Purchase Agreement).
RICHARD STANLEY
JOHN LOCKE
[Signature Page to Stock Purchase Agreement]
Schedule 2.06(a)(ii)Estimated Closing Working Capital Statement
Current Assets1
| | | | | | | | |
Accounts Receivables (A/R) | $12,699,400 | |
Unbilled Tooling A/R | 168,250 |
Miscellaneous A/R (Scrap) | | (Scrap A/R) |
Allowance for Doubtful Accounts | (187,579) | |
Production Inventories | 4,679,251 | |
Production Inventories SS Surcharge | | (SS Surcharge) |
Production Inventories Provision | (224,981) | |
Tool Crib Inventories | 1,337,702 | |
Tool Crib Provisions | (8,672) | |
Other/Prepaid Current Assets | 866,938 | (should re-allocate Scrap A/R to Misc A/R |
Total Current Assets | 19,330,309 | & SS Surcharge to Inv) |
Current Liabilities2 | | |
Accounts Payable | 9,677,425 | |
Accrued Liabilities | 950,000 | |
Deferred Tooling Revenue | 200,000 | |
Accrued Property Taxes | 116,269 | |
Accrued Payroll | 50,000 | |
Total Current Liabilities | 10,993,694 | |
Closing Estimated Working Capital | 8,336,615 | |
| |
|
Target Working Capital | $10,200,000 | + - $300,000 |
SPA Sec 2.06(a)(iii) Excess (shortfall) | ($1,563,385) | |
Estimated Closing Cash ( Sec 2.06(a)(ii) ) | |
$811,207 |
EXHIBIT A
SAMPLE ADJUSTED EBITDA CALCULATION
[See attached.]
ACTIVE 687632206v25
| | | | | | | | | | | | | | | | | |
Stub Period7 | | | | | |
Closing Date to | Oct 1st to | Oct 1st to | Oct 1st to | Oct 1st to | Oct 1st to |
Sept 30th | Sept 30th | Sept 30th | Sept 30th | Sept 30th | June 30th |
2023 | 2024 | 2025 | 2026 | 2027 | 2028 |
350,000 | 1,200,000 | 2,750,000 | 3,750,000 | 4,750,000 | 5,750,000 |
200,000 |
800,000 |
800,000 |
800,000 |
800,000 |
800,000 |
150,000 | 650,000 | 650,000 | 650,000 | 650,000 | 650,000 |
30,000 | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 |
730,000 | 2,750,000 | 4,300,000 | 5,300,000 | 6,300,000 | 7,300,000 |
10,000 |
30,000 |
200,000 |
200,000 |
200,000 |
200,000 |
100,000 | 500,000 | 500,000 | 500,000 | 500,000 | 500,000 |
65,000 | 300,000 | 300,000 | 300,000 | 300,000 | 300,000 |
90,000 | 450,000 | 450,000 | 450,000 | 450,000 | 450,000 |
15,000 | | | | | |
(75,000) |
(300,000) |
(300,000) |
(300,000) |
(300,000) |
(300,000) |
205,000 | 980,000 | 1,150,000 | 1,150,000 | 1,150,000 | 1,150,000 |
935,000 | 3,730,000 | 5,450,000 | 6,450,000 | 7,450,000 | 8,450,000 |
| | | | | |
922,500 | 4,000,000 | 3,500,000 | 3,500,000 | 3,000,000 | 3,000,000 |
187,000 |
0 |
1,090,000 |
1,290,000 |
433,000 | |
Exhibit A
Audited Net Income
EBITDA Addbacks
EBITDA
Adjustments Adjusted EBITDA Addbacks
Adjusted EBITDA Deductions
Total Adjustments Adjusted EBITDA
EBITDA Threshold
Taxes Interest Depreciation Amortization
(i)Adjusted for any non-cash expense or (gain)
(ii)Any General Electric early pay Discount
(iii)Corporate Charges from LIVE1
(iii)Rent Frankfort Plant2
(iv)Rent Allmond Plant3
(v)All Fees associated with Sale Leaseback4
(vi)Other
Rent Allmond Plan
Earn-Out Payment Rolling Aggregate Earn- Out Payment
| | | | | |
1 | Any costs or expenses allocated or charged by Buyer or any Affiliate of Buyer (including, but not limited to, costs or expenses related to the Sale). |
2 | If Buyer or any Affiliate of Buyer sell the Fankfort plant and leases it back to Parent Company or its Affiliates, the rent expense and related costs would be added back to Adjusted EBITDA for purposes of this calculation. |
3 | If Buyer or any Affiliate of Buyer purchases the Allmond plant and leases it back to Parent Company or its Affiliates, the rent expense and related costs would be added back to Adjusted EBITDA for purposes of this calculation. |
4 | Any costs and expenses allocated or charged to the Company Parent, including, without limitation, legal, accounting, appraisal, diligence, broker, and environmental costs. |
5 | Rent expense due under real property leases in effect prior to Closing. |
6 | If the Parent Company or any of its Affiliates completes an acquisition or other transaction and the Parent Company or its employees, systems, properties, or assets are utilized in connection with the acquisition or management or operation of that business after the acquisition, then the positive incremental EBITDA shall be included as an additional to Adjusted EBITDA for purposes of this calculation. |
7 | The EBITDA Threshold for the stub period between the Closing and September 30, 2023 will be pro-rated based on the ratio with a numerator equal to the number of days between the Closing Date and September 30, 2023 and a denominator of 365. For instance, assuming Closing occurs on July 17th, the proportion would be 75/365 (20.5%); so, the EBITDA Threshold for the Stub Period would be 20.5% of $4,500,000, which equals $922,500 |
EXHIBIT B CONSULTING AGREEMENT
[See attached.]
EXECUTION VERSION
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this “Agreement”) is made and entered as of July 19, 2023 (the “Effective Date”) by and between Precision Metal Works, Inc., a Kentucky corporation formerly known as NTH HOLDING, Ltd (the “Company”), and Bartell Global Inc., an Ontario, Canada corporation (“Consultant”). The Company and Consultant are sometimes hereinafter referred to individually as a “Party” and together as the “Parties”. The Company is the successor by merger to the business and operations of the entity formerly known as Precision Metal Works, Inc., a Kentucky corporation. Live Ventures Incorporated, a Nevada corporation, joins this Agreement as a party solely with respect to its obligations pursuant to Section 6.
WHEREAS, this Agreement is being entered into in connection with the transactions contemplated under that certain Stock Purchase Agreement (the “Purchase Agreement”), dated as of the Effective Date, by and among the trustees of The Richard Stanley Family Trust, a trust formed under the Laws of Ontario, Canada; the trustees of The John Locke Family Trust, a trust formed under the Laws of Ontario, Canada (each, a “Seller” and, together, the “Sellers”); PMW Affiliated Holdings, LLC, a Delaware limited liability company (“Buyer”); and the Company, pursuant to which the Buyer purchased from Sellers all of the issued and outstanding capital stock of the Company; and
WHEREAS, the Company desires to engage Consultant to provide to the Company certain consulting and other services upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, intending to be legally bound, the Parties agree as follows:
1.Definitions. As used in this Agreement, the following terms have the meanings set forth
below:
“Affiliate” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. For purposes of this definition, the term “control” means the possession, directly or indirectly, 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, and the terms “controlled” and “controlling” have meanings correlative thereto.
“Board” means the board of directors of Company.
“Note” shall have the meaning set forth in the Purchase Agreement.
“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company or partnership, proprietorship, other business organization, trust, union, association or governmental or regulatory entities, department, agency or authority.
Other capitalized terms used in this Agreement shall have the meanings given to them herein.
2.Duties. During the Term, Consultant shall provide those services set forth on Exhibit A attached hereto and incorporated herein (collectively, the “Services”).
3.Compensation. The Company shall pay Consultant an annual base consulting fee of
$200,000 (the “Consulting Fee”) in equal installments in accordance with the Company’s customary
payroll practices, but no less frequently than monthly. The Consulting Fee shall be reviewed at least annually by the Board, and the Board may, but shall not be required to, increase the Consulting Fee during the Term; provided, however, that the Consulting Fee shall not be decreased during the Term without Consultant’s prior written consent, which Consultant may withhold, condition, or deny for any reason or no reason within Consultant’s sole and absolute discretion.
4.Reimbursement of Expenses. The Company (or an Affiliate of the Company) will reimburse Consultant for all reasonable out-of-pocket business expenses incurred by Consultant in performing the Services, in accordance with the expense reimbursement policy adopted by the Board.
5.Term. This Agreement shall commence on the Effective Date and shall terminate on July 19, 2025 (the “Initial Term”) unless earlier terminated in accordance with Section 6 hereof. The Initial Term may be extended by mutual consent of the Parties (the “Extended Term”). The Initial Term and the Extended Term, if any, are together called the “Term”.
6.Termination. Either Party may terminate this Agreement for any reason or no reason after July 19, 2024 by providing no less than thirty (30) days’ written notice to the other Party; provided, however, that, in the event that this Agreement is terminated by the Company prior to Sellers’ receipt of Earn-out Payments (as defined in the Purchase Agreement) in an aggregate amount equal to $3,000,000 (the “Maximum Earn-out Consideration”) from Buyer or its designee (including the Company), the Company shall make a pre-payment to each Seller in an amount equal to fifty percent (50%) of the then- outstanding Principal Amount (as defined in such Note, defined below) under the Subordinated Secured Promissory Note issued by the Company to each Seller as of the date hereof (each, a “Note” and, together, the “Notes”); provided, further, that the Company shall only be required to make such payments to Sellers to the extent permitted under the Subordination Agreement dated as of the Effective Date, by and between Fifth Third Bank, National Association and Sellers. Notwithstanding the foregoing or anything else to the contrary in this Agreement, the Purchase Agreement, or any of the Ancillary Documents (as defined in the Purchase Agreement), in the event that the Company is prohibited from paying the amount that becomes due and payable under the Note in accordance with this Section 6, whether by virtue of the Subordination Agreement or otherwise,, Live Ventures Incorporated, a Nevada corporation, shall promptly pay such amount on behalf of the Company to Sellers in accordance with this Section 6. Notwithstanding anything to the contrary set forth in this Agreement, the foregoing provision requiring the Company to make any such prepayment of the Notes to Sellers shall not apply if the Company terminates this Agreement for Cause. For purposes of this Agreement, “Cause” shall mean any of the following: (i) Consultant’s gross negligence or willful misconduct that results in substantial harm and documented pecuniary loss to the Company; (ii) Consultant’s material breach of this Agreement or material breach of any policy of, or other obligation or duty owed to the Company, which breach remains uncured, if subject to cure, for ten (10) days after Consultant receives written notice thereof; provided, however, that if the breach outlined in the written notice cannot be cured in ten (10) days, it shall be sufficient for Consultant to undertake to cure the breach set forth in the written notice within such ten (10) day period if Consultant pursues a cure as expeditiously as reasonably possible; provided, further, that repeated failure to perform Consultant’s duties shall not be subject to cure; (iii) Consultant’s violation of law that has, or is likely to, result in material and documented pecuniary loss to the Company; (iv) Consultant’s failure to follow company policies or any lawful instructions from the Board or other person or entity to whom Consultant reports, which failure remains uncured, if subject to cure, for ten (10) days after Consultant receives written notice thereof from the Board (provided, that repeated failure to perform his or her duties shall not be subject to cure); (v) Consultant’s commission of, or charge with, a felony involving fraud or moral turpitude; (vi) Consultant’s misappropriations of funds or property of the Company or engagement in any material act of dishonesty involving the Company; or (vii) Consultant’s attempt to obtain a personal profit from any transaction in
that would otherwise be prohibited under the restrictive covenants set forth in Section 5.09 of the Purchase Agreement.
7.Directors and Officers Liability Insurance. The Company will maintain at all times during the Term and for a period of no less than five years thereafter (either pursuant to an occurrence- based policy or a tail policy) director’s and officer’s liability insurance that inures to the benefit of Stanley for the Services performed by Stanley in the capacity as an officer of the Company. Such insurance shall, in each case, be substantially on the same terms and conditions as the insurance provided to directors and officers of Live Ventures Incorporated or its Affiliates.
8.Access to Information. The Company shall furnish, or cause to be furnished to Consultant, such information as Consultant reasonably believes is necessary and appropriate in connection with its performance of the Services. During the Term, the Company shall provide Consultant with financial statements reflecting the operations of the Company for each month-end, quarter-end, and year-end period.
9.Visa/Work Authorization. To the extent that any employee or contractor of Consultant requires sponsorship or other assistance to obtain a visa or work authorization to perform the Services in connection with this Agreement, the Company shall sponsor or take any other commercially reasonable actions necessary, at the Company’s sole cost and expense, in order to allow such employee or contractor of Consultant to obtain a visa or other work authorization so that such employee or contractor of Consultant may perform the Services in connection with this Agreement.
10.Confidentiality.
10.1.Definition of Confidential Information. The term “Confidential Information” means all information of a confidential or proprietary nature (whether or not specifically labeled or identified as “confidential” or “proprietary”), in any form or medium, whether evidenced in writing, electronic data or otherwise, that is developed on or after the Effective Date and which is specific to the Company and its operations, including, without limitation: (i) business information, financial records, projections, budgets, plans, practices, training, marketing, sales practices, cost and pricing structures; (ii) identities and requirements of, and specific contractual arrangements with, suppliers, distributors, customers, independent contractors or other business relations; (iii) know-how, methods, analyses, techniques, systems, formulae, processes, research, records, reports, manuals, documentation, models, and data relating thereto; and (iv) inventions, innovations, improvements, developments, trade secrets, designs, drawings and other intellectual property (whether or not patentable or registrable). Confidential Information shall not include any materials or information developed by Consultant or its employees that is not specific to the Company and its operations or any materials or information developed by Consultant or its employees prior to the Effective Date.
10.2.Confidentiality Obligations. During the Term and for a period of two (2) years following termination of this Agreement, Consultant shall, and shall cause it employees and independent contractors to: (a) hold all Confidential Information in strict confidence; (b) not use or disclose any Confidential Information, directly or indirectly, except in the performance of Consultant’s duties on behalf of the Company or its Affiliates pursuant to this Agreement (and then only in accordance with the policies of the Company); and (c) promptly deliver to the Company or destroy, at the request and option of the Company, all tangible embodiments or electronic copies of the Confidential Information in the possession or under the control of Consultant. If Consultant is required to produce or disclose any Confidential Information pursuant to the valid order of any court or governmental authority, Consultant shall: (x) promptly notify the Company of such requirement prior to production or disclosure of such Confidential Information; (y) cooperate with the Company to contest such disclosure or seek an appropriate protective
order at the direction of the Company at the Company’s sole expense; and (z) thereafter disclose only so much of the Confidential Information as Consultant, in the good faith opinion of Consultant’s legal counsel, is legally compelled to disclose or else stand liable for contempt. The foregoing provisions shall not apply to any Confidential Information that is or becomes generally available to the public, unless such Confidential Information is so available due to the actions or omissions of Consultant or its employees or independent contractors.
11.Assignment of Business Ideas.
11.1.Assignment. The Company will own, and Consultant hereby assigns, and agrees to assign, to the Company, all rights in all Business Ideas that Consultant or its employees or independent contractor originates or develops, in whole or in part, either alone or working with others, in the course of Consultant performing the Services using the Company’s assets and that are specific to the Company and its operations. All Business Ideas that are or form the basis for copyrightable works are hereby assigned to the Company and/or shall be assigned to the Company or shall be considered “Works for Hire” as that term is defined by United States copyright law. While employed by the Company, Consultant will promptly disclose all Business Ideas to the Company. Consultant, at any time during or after the term of its engagement with the Company, will promptly execute all documents that the Company may reasonably require to perfect its patent, copyright and other rights to such Business Ideas throughout the world at the Company’s sole expense.
11.2.Records. Consultant will keep complete, accurate and authentic accounts, notes, data and records of all Business Ideas in the manner and form requested by the Company. Such accounts, notes, data and records shall be the property of the Company, and, upon its request, Consultant will promptly surrender same to it or, if not previously surrendered upon its request or otherwise, Consultant will surrender the same, and all copies thereof, to the Company upon the conclusion of its engagement with the Company.
11.3.Definition of Business Idea. The term “Business Ideas” means all ideas, designs, modifications, formulations, concepts, know-how, Confidential Information, trade secrets, discoveries, inventions, data, software, developments and copyrightable works, whether or not patentable or registrable, which Consultant originates or develops, in whole, either alone or jointly with others, in connection with Consultant’s performance of the Services and using the assets of the Company, and which are substantially related to the then-existing business of the Company known to Consultant to be engaged in by Company.
12.Confidential Information of Others. Consultant represents and warrants to the Company that Consultant is not subject to any employment, consulting or services agreement, or any restrictive covenants or agreements of any type, which would conflict or prohibit Consultant from fully carrying out Consultant’s duties as described in this Agreement. Further, Consultant warrants and represents to the Company that Consultant has not and will not retain or use, for the benefit of the Company, any confidential information, records, trade secrets, or other property of a former employer.
13.Miscellaneous.
13.1.Notices. Any notice or communication required or permitted under this Agreement will be made in writing and (a) sent by overnight courier or (b) mailed by overnight U.S. express mail, postage prepaid and return receipt requested. Any notice or communication to Consultant will be sent to Consultant at 54 Ireland Point Rd, Nobel, Ontario, Canada, P0G 1G0. Any notice or communication to the Company will be sent to the Company at 125 E. Warm Springs Road, Suite #102, Las Vegas, NV 89119.
Notwithstanding the foregoing, either Party may change the address for notices or communications hereunder by providing written notice to the other in the manner specified in this paragraph.
13.2.Relationships.
13.2.1.Independent Contractor. Nothing herein shall be construed to create a joint venture or partnership between the Parties or an employee/employer relationship. Consultant shall be an independent contractor pursuant to this Agreement. Neither Party shall have any express or implied right or authority to assume or create any obligations on behalf of, or in the name of, the other Party or to bind the other Party to any contract, agreement, or undertaking with any third party. Nothing in this Agreement shall be deemed or construed to enlarge the fiduciary duties and responsibilities, if any, of Consultant or any of its Affiliates.
13.2.2.Business Efforts. The Company acknowledges and agrees that the Consultant shall not necessarily be required to devote full time and business efforts to the duties of the Consultant specified in this Agreement, but instead shall devote only so much of such time and efforts as the Consultant reasonably deems necessary. This Agreement shall not preclude Consultant from engaging in business activities or performing services for its or their own account or for the account of others, and the Company shall not take any action to preclude or restrict Consultant or its employees from engaging in any such business activities or performing such services.
13.2.3.Other Consultants and Advisors. This Agreement shall in no way prohibit or limit the Company or any of its Affiliates from engaging one or more Persons (as defined below) other than the Consultant to advise the Company concerning any matters related to the business, administration and policies of the Company or Affiliate.
13.3.Governing Law and Enforcement. This Agreement will be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the principles of conflicts of laws. Any legal proceeding arising out of or relating to this Agreement will be instituted exclusively in a state or federal court in Wilmington, Delaware.
13.4.Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. However, if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision, and this Agreement will be reformed, construed and enforced as though the invalid, illegal or unenforceable provision had never been herein contained.
13.5.Entire Agreement Waivers; Amendments. This Agreement may not be amended, changed, or modified, except by an agreement in writing signed by all of the Parties. No term or condition of this Agreement shall be deemed to have been waived, except by a statement in writing signed by the Party against whom enforcement of the waiver is sought. Any written waiver shall not be deemed a continuing waiver of such term or condition and shall not constitute a waiver as to any act other than that specifically waived. This Agreement contains the entire agreement and understanding of the Parties relating to the subject matter hereof and merges, replaces, and supersedes all prior and contemporaneous discussions, agreements, and understandings of every nature between Consultant, on the one hand, and the Company, on the other hand.
13.6.Headings. The headings of sections and paragraphs of this Agreement are inserted for convenience only and will not in any way affect the meaning or construction of any provision of this Agreement.
13.7.Counterparts; Facsimile. This Agreement may be executed in electronically and in multiple counterparts (including, without limitation, by means of facsimile, DocuSign, and portable document format (.PDF)), each of which will be deemed to be an original, and all of which together will constitute one and the same agreement.
{SIGNATURE PAGE FOLLOWS}
IN WITNESS WHEREOF, the parties hereto have executed this Consulting Agreement, or caused this Consulting Agreement to be executed, as of the date first above written.
COMPANY:
PRECISION METAL WORKS, INC.
By: Name: Title:
{SIGNATURE PAGE TO CONSULTING AGREEMENT}
IN WITNESS WHEREOF, Live Ventures Incorporated has executed this Consulting Agreement as of the date first written above solely for purposes of agreeing to the terms and conditions set forth in Section 6 of the Consulting Agreement.
LIVE VENTURES INCORPORATED
By: Name: Eric Althofer
Title: COO and Managing Director
{SIGNATURE PAGE TO CONSULTING AGREEMENT}
CONSULTANT:
Bartell Global Inc.
By: Name: Richard L. Stanley
Title:
{SIGNATURE PAGE TO CONSULTING AGREEMENT}
EXHIBIT A SERVICES
Richard Stanley (“Stanley”) will serve as President and Chief Executive Officer of the Company on a part- time basis. Stanley will have the duties, responsibilities, and authority as the Board shall delegate to such offices and will report to the Board or such other person or persons designated by the Board, who may be one or more of the managers or officers of the parent of the Company.
A-1
