ASSET PURCHASE
AGREEMENT
DATED AS OF OCTOBER 31,
2006
BY AND AMONG
ICONIX BRAND GROUP, INC.,
(THE “BUYER”),
THE WARNACO GROUP, INC.,
(THE “PARENT”)
AND
OCEAN PACIFIC APPAREL
CORP.,
(THE “SELLER”).
Table of Contents
Page
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1. Certain Definitions
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1
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2. Sale and Purchase of Assets.
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7
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2.1 Assets
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7
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2.2 Excluded Assets
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8
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2.3 Assumption of Certain Liabilities
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8
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2.4 Non-Assumption of Liabilities
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9
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2.5 Delivery of Certain Assets
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9
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3. Closing; Purchase Price .
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9
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3.1 Closing
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9
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3.2 Purchase Price
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9
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3.3 Purchase Price Allocation
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9
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3.4 Reconciliation of Royalty
Payments
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10
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4. Representations, Warranties and Covenants of
Seller and Parent
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10
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4.1 Due Incorporation and Qualification;
Subsidiaries
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10
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4.2 Capitalization; Options
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10
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4.3 Authority to Execute and Perform
Agreement
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11
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4.4 Financial Statements
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11
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4.5 No Material Adverse Change
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11
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4.6 Tax Matters.
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11
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4.7 Compliance with Laws
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12
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4.8 Permits
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12
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4.9 No Breach
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12
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4.10 Consents; Approvals
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12
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4.11 Judgments and Proceedings
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13
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4.12 Employee Relations
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13
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4.13 Specified Contracts
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13
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4.14 Real Property.
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14
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4.15 Tangible Property
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14
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4.16 Intangibles.
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14
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4.17 Title
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15
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4.18 Indebtedness
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15
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4.19 Undisclosed Liabilities
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15
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4.20 Suppliers, Customers and
Licensees
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15
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4.21 ERISA
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15
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4.22 Insurance
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16
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4.23 Potential Conflicts of Interest
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16
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4.24 No Broker
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16
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4.25 Full Disclosure
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16
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4.26 Related Party Transactions
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16
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5. Representations and Warranties of
Buyer
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17
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5.1 Organization, Standing and Power
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17
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5.2 Capitalization/Issuance of Buyer’s
Stock
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17
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5.3 Interests in Other Entities
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18
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5.4 Authorization.
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18
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5.5 Noncontravention
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18
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i
Table of Contents
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5.6 Financial Statements
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19
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5.7 Absence of Changes
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19
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5.8 Litigation
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19
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5.9 No Violation
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19
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5.10 Properties; Assets
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19
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5.11 Intangibles
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19
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5.12 Tax Matters
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20
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5.13 Governmental Approvals/Consents
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20
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5.14 ERISA
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20
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5.15 Regulatory Compliance; Information
Supplied.
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20
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5.16 Indebtedness; Lien in Assets
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21
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5.17 Internal Accounting Controls
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21
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5.18 Listing and Maintenance
Requirements
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22
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5.19 No Broker
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22
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5.20 Full Disclosure
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22
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6. Covenants and Agreements
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22
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6.1 Certain Pre-Closing Covenants
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23
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6.2 Pre-Closing Tax Returns
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25
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6.3 Cooperation on Tax Matters
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25
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6.4 Investment Matters
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25
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6.5 Confidentiality
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26
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6.6 Formation of OP Holdings and OP
Management
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26
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6.7 Certain Post-Closing Obligations
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27
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6.8 Intellectual Property
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27
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7. Deliveries by Seller
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27
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8. Deliveries by Buyer
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28
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9. Conditions to Closing by the
Parties
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29
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10. Indemnification.
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30
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10.1 Indemnification.
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30
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10.2 Certain Limitations Regarding
Indemnification.
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30
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10.3 Third Party Claims
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31
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10.4 Payment of Indemnity Claims.
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32
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10.5 Calculation of Losses
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32
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10.6 Survival of Representations and
Warranties
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32
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10.7 Right of Set-Off
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33
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11. Waiver of Bulk Sales Compliance
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33
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12. Expenses
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33
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13. Further Assurances.
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33
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14. Termination and Abandonment.
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34
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14.1 Termination
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34
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14.2 Effect of Termination.
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35
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15. Miscellaneous.
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35
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15.1 Publicity
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35
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15.2 Notices
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36
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15.3 Entire Agreement
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37
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ii
Table of Contents
Page
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15.4 Waivers and Amendments
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37
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15.5 Binding Agreement
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37
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15.6 Governing Law
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37
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15.7 Assignment
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37
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15.8 Variations in Pronouns
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37
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15.9 Severability
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37
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15.10 Counterparts
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38
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15.11 Exhibits and Schedules
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38
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15.12 Headings
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38
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15.13 Consent to Jurisdiction and Service of
Process
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38
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15.14 Waiver of Jury Trial; Exemplary
Damages
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38
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iii
SCHEDULES
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SCHEDULE
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DESCRIPTION
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1.54
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Executive Officers of Parent and
Seller
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2.1
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Assets
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2.1(2)
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Specified Contracts
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2.3(2)
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Assumed Liabilities
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3.3
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Purchase Price Allocation
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4.1
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Due Incorporation and Qualification;
Subsidiaries
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4.2
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Capitalization; Options
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4.4
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Financial Statements
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4.5
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No Material Adverse Change
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4.7
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Compliance with Laws
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4.8
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Permits
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4.9
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No Breach
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4.10
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Consents
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4.11
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Judgments and Proceedings
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4.12
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Employee Relations
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4.13
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Contracts
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4.14
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Real Property
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4.15
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Tangible Property
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4.16
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Intangibles
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4.17
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Title
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4.18
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Indebtedness
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4.19
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Liabilities
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4.20
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Suppliers, Customers and Licensees
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4.21
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Employee Benefit Plans
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4.22
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Insurance
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4.24
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Broker Fees of Seller
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4.26
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Related Party Transactions
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5.2
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Buyer Capital Stock
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5.3
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Interests in Other Entities
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5.5
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Noncontravention
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5.16
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Indebtedness
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5.19
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No Buyer Broker
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iv
EXHIBITS
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EXHIBIT
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DESCRIPTION
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A
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Promissory Note
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B
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Bill of Sale
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C
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U.S. Trademark Assignment and Worldwide Omnibus
Assignment of Intellectual Property
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D
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Copyright Assignment
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E
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Grant of Security Interest in
Trademarks
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F
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Grant of Security Interest in
Copyright
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G
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Assignment and Assumption Agreement
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H
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Product License Agreement
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I
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Limited Recourse Guaranty and Security
Agreement
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J
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Release of Security Interest
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K
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Transition Services Agreement
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ASSET PURCHASE
AGREEMENT
AGREEMENT, dated as of October 31,
2006, by and among Iconix Brand Group, Inc., a Delaware corporation
(the “Buyer”), The Warnaco Group, Inc., a Delaware
corporation (the “Parent”) and Ocean Pacific Apparel
Corp., a Delaware corporation (the
“Seller”).
Background
WHEREAS, Seller is engaged in the
business of marketing, licensing and managing the Ocean
Pacific® family of marks and names for use in connection with
a range of apparel, sportswear and sporting goods;
WHEREAS, Buyer desires to become
engaged in the Business (as defined herein) and to acquire
substantially all of the assets of the Business of Seller and
Seller desires to sell the assets of the Business to Buyer, all
upon the terms and subject to the conditions hereinafter set forth
(the “Transaction”).
NOW, THEREFORE, in consideration of
the mutual agreements and covenants contained herein, and intending
to be legally bound, the parties agree as follows:
1.
Certain Definitions . For purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise
requires, (1) the terms defined in this Section have the
meanings assigned to them in this Section, wherever they appear in
this Agreement; (2) all accounting terms not otherwise defined
herein have the meanings assigned under U.S. generally accepted
accounting principles consistently applied and as in effect on the
date hereof (“GAAP”); (3) all words
“herein,” “hereof” and
“hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Section or
other subdivision; (4) the words “include,”
“includes” and “including” when used in
this Agreement shall be deemed to be followed by the phrase
“without limitation;” and (5) the words
“or,” “either” and “any” shall
not be exclusive.
1.1 “Acquisition
Proposal” means any offer or proposal concerning any
(a) merger, consolidation, business combination, or similar
transaction involving Seller; (b) sale, lease or other
disposition directly or indirectly by merger, consolidation,
business combination, share exchange, joint venture, or otherwise
of assets of Seller representing twenty percent (20%) or more of
the consolidated assets of Seller; (c) issuance, sale, or
other disposition of (including by way of merger, consolidation,
business combination, share exchange, joint venture, or any similar
transaction) securities (or options, rights or warrants to
purchase, or securities convertible into or exchangeable for such
securities) representing twenty percent (20%) or more of the voting
power of Seller; (d) transaction in which any person or group
shall acquire beneficial ownership, or the right to acquire
beneficial ownership of twenty percent (20%) or more of the
outstanding voting capital stock of Seller or (e) any
combination of the foregoing (other than the
Transaction).
1.2 “Affiliate”
means, with respect to a specified Person, any other Person that
directly or indirectly through one or more intermediaries’
controls, is controlled by, or is under common control with, the
specified Person.
1.3 “Business”
means the business conducted by Seller and Parent of the marketing,
licensing and managing of the Ocean Pacific® family of marks
for use in connection with the related goods and
services.
1.4 “Business
Day” means any day other than a Saturday, Sunday or legal
holiday in connection with which banks in New York, New York are
authorized or permitted to close.
1.5 “Buyer
Basket” means Two Hundred Fifty Thousand Dollars
($250,000).
1.6 “Buyer
Indemnified Parties” means Buyer and its managers, members,
officers, directors, partners, employees, Affiliates, agents,
successors and assigns.
1.7 “Buyer
Indemnity Cap” means an amount equal to the outstanding
principal balance of the Note at the time that Buyer becomes
obligated to make an indemnity payment to a Seller Indemnified
Party under Section 10.1(2) or if the Note is no longer
outstanding, the amount of the Note which was converted by Buyer
into Buyer Stock under the Note on the day of such
conversion.
1.8 “Buyer
Intangibles” shall have the meaning set forth in Section
5.11.
1.9 “Buyer
Material Adverse Change” means a material adverse change (i)
in the properties, results of operations, or financial condition of
Buyer taken as a whole or (ii) in the ability of Buyer to
consummate the transactions contemplated by this
Agreement.
1.10 “Buyer
Preferred Stock” shall have the meaning set forth in Section
5.2.
1.11 “Buyer
SEC Reports” shall have the meaning set forth in Section
5.15.
1.12 “Buyer’s
Stock” means shares of common stock, par value $0.001 per
share, of Iconix Brand Group, Inc.
1.13 “Buyer
Transaction Documents” shall have the meaning set forth in
Section 5.4.
1.14 “Charter
Documents” means the certificate of formation, certificate of
incorporation, corporate charter, by-laws, minute books, stock
books and related documents of the respective entity.
2
1.15 “Claim”
means any and all notices, claims, demands, proceedings,
deficiencies, orders and losses assessed or sustained, including
the defense or settlement of any such Claim and the enforcement of
all rights to indemnification under this Agreement.
1.16 “Closing”
means the closing of the Transaction contemplated by this
Agreement.
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1.17
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“Closing Date” means the
date on which the Closing occurs.
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1.18
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“Code” means the
Internal Revenue Code of 1986, as amended.
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1.19 “Confidentiality
Agreement” shall have the meaning set forth in Section
6.1(5).
1.20 “Consent”
means any consent, approval, order or authorization of, or any
declaration, filing or registration with, or any application or
report to, or any waiver by, or any other action (whether similar
or dissimilar to any of the foregoing) of, by or with, any Person,
which is necessary in order to take a specified action or actions
in a specified manner and/or to achieve a specified result or to
avoid the occurrence of a default.
1.21 “Contract”
means any written or oral contract, agreement, instrument, order,
commitment or binding arrangement of any nature
whatsoever.
1.22 “Contract
Right” means any right, power or remedy under any Contract,
including but not limited to rights to receive property or services
or otherwise to derive benefits from the payment, satisfaction or
performance of another party’s obligations.
1.23 “DGCL”
means the General Corporation Law of the State of
Delaware.
1.24 “Documents”
means and includes any document, agreement, instrument,
certificate, notice, Consent, affidavit, correspondence (by letter,
electronic mail, telex or otherwise), written statement, schedule
or exhibit whatsoever.
1.25 “Employee
Benefit Plan” means (1) any employee benefit plan, as
defined in Section 3(3) of ERISA, or (2) any other plan, trust
agreement or arrangement for any bonus, severance, hospitalization,
vacation, deferred compensation, pension or profit sharing,
retirement, payroll savings, stock option, group insurance, death
benefit, fringe benefit, welfare or any other employee benefit plan
or fringe benefit arrangement of any nature whatsoever, including
those benefiting former employees.
1.26 “Encumbrance”
means any lien, security interest, pledge, mortgage, easement,
leasehold, assessment, covenant, restriction, or any other
encumbrance, Claim, burden or charge of any kind or nature
whatsoever.
1.27 “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
3
1.28 “Governmental
Entity” means any government or agency, district, bureau,
board, commission, court, department, official, political
subdivision, tribunal, taxing authority or other instrumentality of
any government, whether federal, state or local, domestic or
foreign.
1.29 “Indebtedness”
means all items which, in accordance with GAAP, would be included
in determining total liabilities as shown on the liability side of
a balance sheet for borrowed money as of the date Indebtedness is
to be determined.
1.30 “Insurance
Policies” means any policy or binder for fire, public
liability, product liability, general liability, life, hospital,
medical, disability, comprehensive, automobile, property damage,
workmen’s compensation, key man, fidelity bond, theft,
forgery, vehicular, or errors and omissions insurance, or for any
other insurance of any nature whatsoever.
1.31 “Intangible”
means, throughout the world, all Marks (as defined in Section
1.37), licenses to exploit Intellectual Property Rights (as defined
in Section 1.32), designs, patterns, pressbooks, promotional
material, artwork, trade dress, copyrights, copyright applications,
copyright registrations; web sites, including the content contained
therein, domain names used to access such web sites, trade secrets
(to the extent such have been retained as trade secrets), know-how,
patents, patent applications, formula, invention, technology, and
proprietary information comprising a database (in use, operational,
active, under development or design, owned, marketed, maintained,
supported, used, licensed or otherwise held for use by, or licensed
to or with respect to which rights are granted to a Person), and
all goodwill, whether arising under statutory or common law in any
jurisdiction or otherwise, and includes, without limitation, any
and all Intellectual Property Rights in and to the
foregoing.
1.32 “Intellectual
Property Right(s)” means any proprietary rights (throughout
the world, in all media, now existing or created in the future, and
for the entire duration of such rights) arising under statutory or
common law, Contract, or otherwise, and whether or not perfected,
including without limitation, all (a) rights in and to trademarks,
service marks, trade names, and logos; (b) proprietary rights
associated with works of authorship, namely, copyrights, moral
rights, design rights, copyright applications, copyright
registrations, and rights to prepare derivative works; (c) rights
relating to the protection of trade secrets and confidential
information (to the extent such information has been heretofore
retained as confidential and as trade secrets); (d) rights in
patents, reissues and reexamined patents, patent applications,
divisions, divisionals, continuations, continuations in part,
substitutes, reissues and extensions, whenever filed and wherever
issued, and all priority rights resulting from such applications;
(e) all other proprietary rights, if any, relating to Intangibles
not already included herein; and (f) the right to sue for past
infringement of any Intangible and/or Intellectual Property Rights,
provided any such Intellectual Property Right is related to the
Business.
1.33 “Judgment”
means any order, writ, injunction, fine, citation, award, decree or
any other judgment of any kind whatsoever of any foreign, federal,
state or local court, governmental body, administrative agency,
regulatory authority or arbitration tribunal.
4
1.34 “Law”
means any provision of any law, statute, ordinance, order,
constitution, charter, treaty, rule or regulation enacted, approved
or adopted by any governmental, administrative or regulatory
authority, including common law.
1.35 “Liabilities”
means any direct or indirect Indebtedness, liability, Claim, loss,
damage, Judgment, deficiency or obligation, known or unknown, fixed
or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise whether or not of a kind
required by GAAP to be set forth on financial
statements.
1.36 “Losses”
means any and all Liabilities, costs and expenses including,
without limitation, costs of investigation, actual interest costs,
penalties and attorneys’ fees associated with the enforcement
of any terms and conditions of this Agreement.
1.37 “Marks”
means all names, corporate names, domain names, fictitious names,
trademarks, trademark applications, trademark registrations,
service marks, service mark applications, service mark
registrations, trade names, brand names, logos, and slogans owned
or used by Seller.
1.38 “Order”
means any decree, injunction, judgment, order, award, ruling,
assessment or writ by a court, administrative agency, other
Governmental Entity, arbitrator or arbitration panel.
1.39 “Permit”
means any license, permit, certificate, Consent, right or privilege
of any kind or nature whatsoever, in each case granted, issued,
approved or allowed by any foreign, federal, state or local
governmental, administrative or regulatory authority including
those relating to Real Property.
1.40 “Person”
means any individual, sole proprietorship, joint venture,
partnership, corporation, limited liability company, association,
joint-stock company, unincorporated organization, cooperative,
trust, estate, government entity or authority (including any
branch, subdivision or agency thereof), administrative or
regulatory authority, or any other entity of any kind or nature
whatsoever.
1.41 “Proceeding”
means any Claim, suit, action, equitable action, litigation,
investigation undertaken by a governmental agency, arbitration,
trademark opposition, trademark cancellation action, administrative
hearing or any other judicial or administrative proceeding of any
kind or nature whatsoever, or any formal demand which might lead to
any of the foregoing.
1.42 “Property”
means real, personal or mixed
property.
1.43 “Real
Property” means any real estate, land, building, structure,
improvement or other real property of any kind or nature whatsoever
owned, leased or occupied by Seller and all appurtenant and
ancillary rights thereto, including, without limitation, easements,
covenants, water rights, sewer rights and utility
rights.
5
1.44 “Sarbanes-Oxley
Act” means the Sarbanes-Oxley Act of 2002, as
amended.
1.45 “Seller
Basket” means Two Hundred Fifty Thousand Dollars
($250,000).
1.46 “Seller
Indemnity Cap” means in the aggregate Forty-Four Million
Dollars ($44,000,000).
1.47 “Seller
Indemnified Parties” means Seller, Parent and their
respective managers, members, officers, directors, partners,
employees, Affiliates, agents, successors and assigns.
1.48 “Seller
Material Adverse Change” means a material adverse change: (i)
in the properties, results of operations or financial condition of
Seller taken as a whole or (ii) in the ability of Seller to
consummate the transactions contemplated by this
Agreement.
1.49 “Subsidiaries”
with respect to any Person, means any other Person or business
entity, with respect to whom 50% or more of the equity interest (or
debt or other interest convertible into an equity interest) is
owned directly or indirectly by such Person.
1.50 “Superior
Proposal” means a bona fide Acquisition Proposal (except that
references in the definition of Acquisition Proposal to the
percentage “twenty percent (20%)” shall be deemed to be
“fifty percent (50%)” for the purposes of this
definition) that Seller determines in its good faith business
judgment (after consultation with its financial advisors and legal
counsel): (i) would result in a transaction that is more favorable
to Seller, from a financial point of view, than the transactions
contemplated by this Agreement (including any amendments hereto),
and (ii) is a proposal for which financing, to the extent required,
is then fully committed and which is reasonably capable of being
completed on the terms proposed.
1.51 “Tangible
Property” means any machinery, buildings, fixtures,
equipment, parts, furniture, leasehold improvements, office
equipment, vehicles, tools, forms, supplies or other tangible
property of any kind or nature whatsoever.
1.52 “Tax”
or “Taxes” means all taxes and governmental impositions
of any kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority or other
governmental authority, including, but not limited to, those on or
measured by or referred to as income, franchise, profits, gross
receipts, capital, ad valorem , custom duties, alternative
or add-on minimum taxes, estimated, environmental, disability,
registration, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, employment,
social security, workers’ compensation, unemployment
compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes,
interest, penalties and additions to tax imposed with respect
thereto.
1.53 “Tax
Return” means any return (including any information return),
report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or
information (including any amendments thereto) that is or has been
filed with or submitted to, or required to be filed with or
submitted to, any governmental authority in
6
connection with the determination,
assessment, collection or payment of any Tax or in connection with
the administration, implementation or enforcement of or compliance
with any Law relating to any Tax.
1.54 “To
the knowledge of Seller” and “To Seller’s
knowledge” and phrases of similar import means the actual
knowledge of the executive officers of both Seller and Parent as
set forth in Schedule 1.54 .
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1.55
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“Transaction” has the
meaning set forth in the Recitals.
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1.56 “Transaction
Documents” means this Agreement together with all schedules
and exhibits hereto, including but not limited to, the Note, the
Bill of Sale, the License Agreement, the Guaranty and Security
Agreement and the Transition Services Agreement, by and between
Buyer and Seller, dated as of the Closing Date.
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2.
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Sale and Purchase of
Assets .
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2.1
Assets . Subject to Section 2.2, Seller hereby sells,
transfers, conveys, assigns and delivers to Buyer, and Buyer hereby
purchases and acquires from Seller, all right, title and interest
in and to all of Seller’s assets and rights of every nature,
kind and description wheresoever located and whether or not
reflected on Seller’s books and records of the Business (as
set forth in their entirety in Schedule 2.1 attached hereto)
including without limitation, the following (all of which being
hereinafter collectively referred to as the
“Assets”):
(1) The
Intangibles, including all Marks, owned by Seller and all
Intellectual Property Rights associated therewith, all goodwill,
licenses and sublicenses granted or obtained with respect thereto,
and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all
jurisdictions;
(2) Seller’s
rights, powers and privileges in and to the Contracts described in
Schedule 2.1(2) (“Specified
Contracts”) and all Contract Rights thereunder;
(3) All
current samples, sample books, prototypes, patterns, archive files
(including any expired license agreements to the extent the same
are retained), marketing materials, web site content, graphics, and
other tangible or electronic materials embodying, displaying,
incorporating, or otherwise relating to the Assets;
(4) All
prepaid assets of the Business (including the pro rata portion of
advances or guaranteed minimum royalty and advertising payments
credited against royalties earned after the Closing Date under the
Specified Contracts or payments under terminated license agreements
related to the Marks (which are Assets) with payments (e.g. sell
off) due past Closing and any unpaid liquidated damages under the
Specified Contracts) and expenses other than rent escrows and
security deposits; and
(5) All
of Seller’s Claims, causes of action and other legal rights
and remedies, whether or not known as of the Closing, relating to
Seller’s ownership of the
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Assets and/or the Business, but
excluding Claims against Buyer with respect to the transactions
contemplated herein.
2.2
Excluded Assets . Notwithstanding anything to the contrary
contained herein, there is excluded from the sale and purchase
contemplated by this Agreement the following assets (the
“Excluded Assets”):
(1) All
Contracts of Seller which are not listed in Schedule
2.1(2) whether or not relating to an Asset being purchased
hereby;
(2) All
cash in the bank or invested on the Closing Date, except prepaid
assets of the Business (including the pro rata portion of advances
or guaranteed minimum royalty or advertising payments credited
against royalties earned after the Closing Date under the Specified
Contracts (which shall be delivered to Buyer pursuant to Section
3.4) or payments under terminated license agreements related to the
Marks (which are Assets) with payments (e.g. sell off) due past
Closing) and any unpaid liquidated damages under the Specified
Contracts;
(3) All
of Seller’s rights, title and interests in and to
Seller’s Real Property and all of Seller’s rights under
all Contracts relating to Real Property, as more particularly
described in Schedule 4.14 ;
(4) All
Tangible Property, Intangibles, Intellectual Property Rights and
Marks of any type of description used by Seller for and in
connection with any other business, products, goods, services and
activities which are not used exclusively for, in, and in
connection with the Business;
(5) All
rights of Seller in and to this Agreement, including proceeds from
the sale of the Purchased Assets;
(6) The
stock ledger and minute books of Seller, and all books and records
relating to any Excluded Asset or Liabilities not assumed pursuant
to this Agreement;
2.3
Assumption of Certain Liabilities . On the terms set forth
herein, on and after the Closing Date, Buyer shall assume, perform
and pay only the following Liabilities (“Specified
Liabilities”) but only to the extent the same are not
incurred or resulting from (directly or indirectly) any breach or
default by Seller under any Contract with any Person or any
representation, warranty or covenant of Seller noted
herein:
(1) All
Liabilities of Seller arising and relating to periods after the
Closing in the nature of services to be performed, payments to be
made or goods to be delivered under the Specified Contracts
transferred pursuant to this Agreement.
(2) The
Liabilities of Seller, if any, with respect to the Business, all of
which are listed on Schedule 2.3(2 ).
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(3) All
Liabilities, duties, responsibilities and other obligations arising
after the consummation of the Closing with respect to the Assets
(excluding Specified Contracts).
2.4
Non-Assumption of Liabilities . Notwithstanding anything
herein capable of interpretation to the contrary, except for the
Specified Liabilities, Seller shall pay or otherwise fully
discharge, as the same shall become due, all of its Liabilities
existing as of the Closing Date or thereafter whether or not
disclosed to Buyer on any schedule hereto, and Buyer does not
assume and shall in no event be liable therefore (the
“Retained Liabilities”).
2.5
Delivery of Certain Assets . At the Closing, Seller shall
deliver all of its right, title and interest in the Assets directly
to OP Holdings LLC, a Delaware limited liability company and an
indirect, wholly-owned Subsidiary of Buyer to be formed by Buyer
immediately prior to the Closing (“OP Holdings”). The
parties hereto acknowledge and agree that, notwithstanding this
Section, all of the Assets, including the Assets subject to this
Section, are being acquired by Buyer hereunder and the delivery by
Seller of the Assets, subject to this Section, to OP Holdings shall
be deemed to be a delivery of such Assets initially to Buyer
followed by a contribution of such Assets by Buyer to the capital
of OP Holdings.
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3.
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Closing; Purchase
Price .
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3.1
Closing . The Closing of the transactions contemplated by
this Agreement shall take place on the first Business Day after the
satisfaction of the terms and conditions of Section 9 at the
offices of Blank Rome LLP, 405 Lexington Avenue, New York, New York
10174 or such other location mutually acceptable to the parties
hereto or by the exchange of documents and instruments by mail,
courier, telecopy and wire transfer to the extent mutually
acceptable to the parties hereto. All transactions occurring at the
Closing shall be deemed to occur concurrently.
3.2
Purchase Price . In consideration of the sale, transfer,
conveyance and delivery of the Assets, and in reliance upon the
representations and warranties made herein by Seller, Buyer shall,
in full payment thereof, pay to Seller, or its designees, the
aggregate consideration of Fifty-Four Million Dollars ($54,000,000)
payable as follows: (i) Ten Million Dollars ($10,000,000)
shall be payable by wire transfer in immediately available funds at
the Closing (the “Cash Consideration”) and
(ii) the remaining Forty-Four Million Dollars ($44,000,000)
shall be evidenced by the issuance of a first lien secured
promissory note of Buyer in the form of Exhibit A attached
hereto (the “Note” and together with the Cash
Consideration, the “Purchase Price”). The Note shall
bear interest at a rate of seven percent (7%) and become due and
payable in full, together with all accrued interest, by Buyer on or
prior to December 31, 2006 subject to certain extension provisions
set forth in the Note. On or prior to December 31, 2006, Buyer may
elect, subject to the terms and conditions of the Note, to pay up
to Twenty-Seven Million Dollars ($27,000,000) of the principal of
the Note through the issuance of shares of its Stock, as more fully
set forth in the Note (the “Shares”).
3.3
Purchase Price Allocation . The Purchase Price for the
Assets shall be allocated in a manner set forth in Schedule
3.3 hereto. In connection with the determination of such
schedule, the parties shall cooperate with each other and provide
such information as any of
9
them shall reasonably request. The
parties shall (i) prepare and, where applicable, file each report
relating to the federal, state, local, foreign and other Tax
consequences of the purchase and sale contemplated hereby
(including the filing of IRS Form 8594 in accordance with Section
1060 of the Code and this Section 3.3) in a manner consistent with
such allocation schedule and (ii) take no position in any Tax
Return or other Tax filing, proceeding, audit or otherwise which is
inconsistent with such allocation. In the event that any allocation
hereunder is questioned, audited or disputed by any Governmental
Entity, the party receiving notice thereof shall promptly notify
and consult with the other parties concerning the strategy for the
resolution thereof, and shall keep the other parties apprised of
the status of such question, audit or dispute and the resolution
thereof.
3.4
Reconciliation of Royalty Payments . Within ninety (90) days
after the Closing Date, the parties shall in good faith reconcile
any royalty payments received by such parties for periods ending
prior to or following the Closing Date pursuant to their rights and
obligations set forth under Sections 2.1(4) and 2.2(2) of this
Agreement. Each party agrees to forward or otherwise pay any
royalty payments it receives to which the other party hereto is
entitled.
4.
Representations, Warranties and Covenants of Seller and
Parent . Knowing that Buyer relies thereon, Seller and Parent,
jointly and severally, represent, warrant and covenant to Buyer as
of the Closing as follows:
4.1
Due Incorporation and Qualification; Subsidiaries . Each of
Seller and Parent is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization. Seller has the corporate power and authority to own,
lease and operate the Assets and Business, to carry on the Business
as and where such Business is now conducted and to enter into and
perform this Agreement and to consummate the transactions
contemplated hereby upon the terms and conditions herein provided.
Seller is duly qualified as a foreign entity in good standing under
the Laws of each jurisdiction set forth in Schedule 4.1 .
There is no other jurisdiction in which the nature of the Business
requires such licensing or qualification where such failure to
obtain such license or qualification would result in a material
adverse effect on Seller. Except as set forth in Schedule
4.1 , Seller does not have any Subsidiaries, and does not own,
directly or indirectly any shares of stock or other equity interest
in or control, alone or in combination with others, any Persons.
Schedule 4.1 sets forth the names and titles of
Seller’s directors and officers.
4.2
Capitalization; Options . Schedule 4.2 sets forth the
capital structure of Seller, including the number of shares
authorized and each class of stock that has been issued and is
outstanding. Schedule 4.2 contains an accurate and complete
list of: (i) the full legal names of the shareholders of Seller;
(ii) the addresses of such shareholders; (iii) the federal tax
identification or social security number of such shareholders; and
(iv) the number of shares, warrants, options or other securities
owned of record and beneficially by such shareholders and the
certificate numbers of the certificates representing such shares.
Except for the shareholders listed in Schedule 4.2 , there
are no other record or beneficial shareholders of Seller or any
other securities of Seller including, but not limited to, any
options, warrants, convertible securities, calls, commitments or
conversion privileges. Except for the capital stock listed in
Schedule 4.2 , there were and currently is no other issued
or outstanding capital stock. All of the issued and
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outstanding capital stock of Seller
has been duly authorized and validly issued and is fully paid and
non-assessable. Except as set forth in Schedule 4.2 , there
exists no right of first refusal or other preemptive right with
respect to Seller or the capital stock, Business or
Assets.
4.3
Authority to Execute and Perform Agreement . Each of Seller
and Parent has all the requisite corporate power and authority and
approvals required to enter into, execute, deliver and perform this
Agreement and its obligations hereunder and to consummate the
transactions contemplated herein. The execution, delivery and
performance of this Agreement (and all other Documents required to
effect the transactions contemplated herein) and the consummation
of the transactions contemplated herein have been duly authorized
by all necessary corporate action on the part of both Seller and
Parent. This Agreement has been duly executed and delivered by
Seller and Parent and constitutes Seller’s and Parent’s
valid and legally binding obligation, enforceable against Seller or
Parent in accordance with its terms and conditions, except as the
same may be limited by bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of creditors’ rights
generally, now or hereafter in effect, and subject to the
availability of equitable remedies.
4.4
Financial Statements . Attached as Schedule
4.4 are true, complete and correct copies of the balance
sheet and statement of operations thereof of Seller for the year
ended December 31, 2005. Schedule 4.4 also sets
forth Seller’s balance sheet and statement of operations at
and for the six months ended June 30, 2006. The foregoing financial
statements are hereinafter collectively referred to as the
“Financial Statements”. The Financial Statements have
been prepared from the books and records of Seller and fairly
present in all material respects its financial position as at such
dates and the results of its operations for the periods then ended,
and, such financial positions have been recorded in accordance with
GAAP, consistently applied throughout the periods indicated
(except, in the case of the Financial Statements for the six month
period ended June 30, 2006, for immaterial year-end adjustments,
and the absence of footnotes, and certain reclassifications for
management reporting purposes). The Financial Statements do not
contain any material misstatements or omissions regarding the
Business and the Assets or condition (financial or otherwise) of
Seller and its Subsidiaries with respect to the Business and the
Assets. Since the most recent fiscal year end, there have been no
material changes in the accounting policies of Seller and its
Subsidiaries except for any such changes required pursuant to
GAAP.
4.5
No Material Adverse Change . Except as set forth in
Schedule 4.5 , since June 30, 2006 there has
been no Seller Material Adverse Change. Any change which has
occurred reflects only the ordinary and regular conduct of the
Business or the normal use or operation of the Assets. To the
knowledge of Seller, there is no change which is impending, nor has
there been any material damage, destruction or loss affecting the
Assets, Business or financial condition of Seller, whether or not
covered by insurance.
(1) Seller
has filed with the appropriate governmental agencies all material
Tax Returns, and has paid in full, or is contesting in good faith
and has made adequate provision for the payment of, material Taxes
due and owing (whether or not shown on any Tax Return) for all Tax
periods ending on or prior to the date hereof. All such Tax
Returns
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were true, correct and complete in
all material respects and have been prepared in substantial
compliance with all applicable laws and regulations.
(2) Since
August of 2004, with respect to the Business, each of Seller and
Parent has complied in all material respects with the provisions of
the Code relating to the withholding and payment of Taxes,
including, without limitation, the withholding and reporting
requirements under Code sections 1441 through 1464, 3401 through
3406, and 6041 through 6049, as well as similar provisions under
any other Laws, and has, within the time and in the manner
prescribed by Law, withheld from employee wages and paid over to
the proper governmental authorities all amounts required. Since
August of 2004, with respect to the Business, each of Seller and
Parent has undertaken in good faith to appropriately classify all
service providers as either employees or independent contractors
for all Tax purposes.
4.7
Compliance with Laws . Except as set forth in
Schedule 4.7 , Seller has complied in all
material respects with all Laws relating to the Business or the
Assets. Except as set forth and specifically identified in
Schedule 4.7 , neither Seller nor Parent has
received, with respect to Seller, notice of any alleged material
violation of or claim under any such Laws, and no investigation,
charge, Claim or other action under any such Laws is pending or, to
the knowledge of Seller, threatened.
4.8
Permits . Except as set forth in Schedule
4.8 , no material Permits are necessary for the conduct of
the Business or the use and operation of the Assets. At Closing,
Seller holds all material Permits which are material to or
necessary for it to conduct the Business or its operations as
heretofore conducted (“Material Permits”). A true,
correct and complete list of Seller’s Permits is set forth in
Schedule 4.8 . All Material Permits are in full force and
effect, no violations are or have been recorded in respect of any
Material Permit and no Proceeding is pending or, to the knowledge
of Seller, threatened to revoke, terminate or limit any Material
Permit. Except as set forth and specifically identified in
Schedule 4.8 , Seller is not in default, and
has not received any notice of any claim of default, with respect
to any Material Permit or of any notice of any other Claim or
Proceeding (or, to the knowledge of Seller, threatened Proceeding)
relating to any Material Permit. Except as set forth in
Schedule 4.8 , all Permits are assignable and
transferable by Seller to Buyer without the Consent of any
Person.
4.9
No Breach . Except as set forth and specifically identified
in Schedule 4.9 , the consummation of the
transactions herein contemplated including, without limitation, the
execution, delivery and performance of this Agreement and the
documents required to effect the transactions herein contemplated,
do not and will not: (1) constitute a violation of or default
under (either immediately or upon notice, lapse of time or both),
conflict with or result in a breach of (a) Seller’s
Charter Documents, (b) the terms of any Specified Contract,
(c) any Judgment relating to the Assets or Business and
binding upon Seller, or (d) any material Laws affecting the
Assets or Business; or (2) result in the creation or
imposition of any Encumbrance on any of the Assets or give to any
Person any interest or right in any of the Assets; or
(3) accelerate the maturity of or otherwise modify any
Liability or obligation of Seller relating to the Assets or the
Specified Liabilities.
4.10
Consents; Approvals . Except as set forth in Schedule
4.10 , no Consent or approval is required by any
third party or any governmental authority in connection
12
with the execution, delivery and
performance by Seller of this Agreement or the consummation of the
transactions contemplated hereby, including, but not limited to,
the assignment of any and all of the Specified
Contracts.
4.11
Judgments and Proceedings . Except as set forth in
Schedule 4.11 , there is no outstanding
Judgment against or affecting the Assets. Except as set forth in
Schedule 4.11 , there is no Proceeding
pending, or to the knowledge of Seller, threatened, against or
affecting any of the Assets or the Business and Seller does not
know nor has reasonable grounds to know of any basis for any such
Proceeding. True and correct copies of all complaints, pleadings,
petitions, notices, motions and other papers filed in connection
with the Proceedings listed in Schedule 4.11 have been
delivered to Buyer. Except as set forth and specifically identified
in Schedule 4.11 , there are no Proceedings pending or, to
the knowledge of Seller, threatened, or any contingent liability,
which would give rise to any right of indemnification on the part
of any officer, director, employee or agent of Seller or its heirs,
executors or administrators thereof against Seller or any
successor. Except as set forth in Schedule
4.11 , to Seller’s knowledge, no breach of contract,
tort, or other Claim relating to the Business has been asserted by
any Person against Seller, nor to the knowledge of Seller, has
there been any occurrence which could give rise to such a Claim,
and no breach of contract claim has been asserted by Seller against
any Person, nor, to the knowledge of Seller, has there been any
occurrence which could give rise to such Claim, with regard to the
Specified Contracts.
4.12
Employee Relations . Seller is not a party to any collective
bargaining agreement or any other Contract with any labor unions or
any other representatives of Seller’s employees. Except as
set forth in Schedule 4.12 , Seller is not a
party to any written or oral employment agreement with any of its
officers, directors, employees, consultants, agents, or other
Persons, and any such agreement is terminable by Seller at will
without penalty or cost to Seller. True and correct copies of all
agreements disclosed in Schedule 4.12 (or
summaries of oral agreements so disclosed) have been delivered to
Buyer. To the knowledge of Seller, except as set forth and
specifically identified in Schedule 4.12 ,
(1) no grievance which might have an adverse effect on the
Assets or the Business is pending and no Claim therefor has been
asserted, and (2) no collective bargaining agreement is
currently being negotiated by Seller. Seller does not know of any
present or, to the knowledge of Seller, threatened walkout, strike
or any similar occurrence which adversely affects or may adversely
affect the Assets or the Business.
4.13
Specified Contracts . Schedule 4.13
sets forth a true and correct list of all material Contracts to
which the Assets are bound or subject. True and correct copies
of all Specified Contracts have been delivered to Buyer and
Schedule 4.13 includes a complete and accurate
description of all Specified Contracts. All of the Specified
Contracts set forth in Schedule 2.1(2) and
referred to in this Agreement or in the other schedules hereto are
in full force and effect; Seller is not in default under any of
them nor, to the knowledge of Seller, is any other party to any
such Specified Contract in default thereunder, nor is there any
condition or basis currently known to Seller for any Claim of a
default by any party thereto or event which, with notice, lapse of
time or both, would constitute a default thereunder; and Seller has
paid in full or accrued all amounts due thereunder for periods on
or prior to the date hereof (whether or not currently payable) and
has taken all commercially reasonable steps to satisfy or provided
in full for all of its Liabilities and obligations thereunder for
periods on or prior to the date hereof. Except as disclosed in
Schedule 4.13 , all rights of Seller under the
Specified Contracts extending
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beyond the Closing Date are
assignable to Buyer without (a) the Consent (except for any
Consent(s) which have been or will be obtained at or before the
Closing) of any Person or (b) the payment of any penalty, the
incurrence of any additional obligation or the change of any
term.
(1) Seller
does not own, and has not at any time owned, all or any portion of
any Real Property.
(2)
Schedule 4.14 sets forth a true and correct
list and summary description of (a) all Contracts under which
Seller is lessor, lessee, sublessor or sublessee of any Real
Property; (b) all options held or given by Seller and all
contractual obligations on the part of Seller to sell, purchase or
acquire any interest in Real Property; and (c) all other
Contracts affecting or relating to Seller’s leased Real
Property.
4.15
Tangible Property . The Assets of Seller, including those
Assets acquired subsequent to the date of the latest Financial
Statements (and before the Closing), consist of items of a quality
and quantity useable in the normal course of business (except for
the Assets which were obsolete or below standard quality listed in
Schedule 4.15 , the values of which have been
written down to realizable market value). The Tangible Property is
in good operating condition and repair, subject to reasonable wear
and tear, and is adequate and sufficient for all of Seller’s
operations, and Seller has not received notice that any item of
Tangible Property is in violation of any Laws.
(1) All
Intangibles of the Business, including all Marks, owned, used,
applied for and/or registered in the name of or licensed to Seller
are listed in Schedule 4.16 . Except as
specifically identified and disclosed in Schedule
4.16 , all Seller’s rights in and to the Intangibles
set forth in Schedule 4.16 are free and clear
of any Encumbrance. Except as set forth in Schedule 4.16 ,
Seller has not received written notice of any adverse claim against
an Intangible of any other Person or notice of any Claim of any
other Person relating to any of the Intangibles set forth in
Schedule 4.16 or any process or confidential
information of Seller, and Seller does not know of any basis for
any such charge or Claim. Seller has not infringed upon or
misappropriated any Intellectual Property Rights of any Person and
none of the Intangibles in Schedule 4.16 infringes upon or
violates the Intellectual Property Rights or other proprietary
rights of any Person. Except as set forth on Schedule 4.16 ,
Seller has not licensed any Person to use any Intangible or other
Intellectual Property Rights of Seller, nor is Seller obligated to
pay any royalties, licensing fees or similar payments to any Person
for use of these Intangibles and Intellectual Property
Rights.
(2)
Schedule 4.16 contains a complete and accurate list and
summary description of all registrations and pending applications
for the Marks. All registered and pending Marks have been
registered or applied for and pending, respectively (as indicated
on the schedule) with the United States Patent and Trademark Office
or the trademark office of the jurisdiction to which the
registration or application pertains, and are currently in good
faith compliance with all applicable Laws in all material respects.
The Marks are valid, subsisting, and
14
enforceable and are not subject to
any maintenance fees or taxes or actions falling due within sixty
(60) days after the date hereof. Except as set forth in Schedule
4.16 , (i) no Mark is now involved in any opposition,
invalidation or cancellation Proceeding or any other Proceeding
relating to the validity or registrability thereof; (ii) none of
the Marks is the subject of a current challenge or, to the
knowledge of Seller, threat asserted in writing by any third party;
(iii) where applicable, use of the Marks has been accompanied by
the proper federal registration notice where required by law except
for where such failure to comply with federal registration notice
is not material to the operation of the Business.
4.17
Title . Except as set forth in Schedule
4.17 , Seller owns outright and has good, valid and
marketable title to all of the Assets, free and clear of all
Encumbrances. There are no outstanding options or commitments to
which Seller is a party which relate to the Assets or the sale by
it of the Assets. The Assets being sold hereunder by Seller (other
than the Excluded Assets) constitute all property necessary to
conduct the Business as currently conducted by Seller.
4.18
Indebtedness . All Indebtedness of Seller as at the Closing
Date is set forth in Schedule 4.18 . Schedule
4.18 sets forth a true and correct aged list of
Seller’s accounts payable as of the Closing Date. Except as
disclosed in Schedule 4.18 , all of
Seller’s Indebtedness has arisen only in the ordinary course
of business and represents valid arms-length Indebtedness of
Seller.
4.19
Undisclosed Liabilities . As of the date of the latest
Financial Statements, Seller has no Liabilities related to the
Assets that were not fully and adequately reflected in the said
financial statements or on a schedule hereto. Except as set forth
in Schedule 4.19 , Seller has no Liabilities
related to the Assets, other than (1) Liabilities fully
and adequately reflected in the Financial Statements and
(2) those incurred since June 30, 2006 in the ordinary course
of business consistent with past practices. Seller has no knowledge
of any circumstances, bases (either with notice, lapse of time or
both), conditions, events or arrangements which may hereafter give
rise to any Liabilities of Seller with respect to the Assets or any
successor to the Business except in the ordinary course of business
consistent with past practices. Except as set forth in
Schedule 4.19 and except to the extent
specifically reflected or reserved against in the Financial
Statements or elsewhere in this Agreement, Seller is not directly
or indirectly liable, by guarantee or otherwise, upon or with
respect to, or obligated to guarantee or assume, any Liability or
obligation of any Person with respect to the Assets, except
endorsements made in the ordinary course of business in connection
with the deposit of items for collection.
4.20
Suppliers, Customers and Licensees . Except as set forth in
Schedule 4.20 , no single customer, supplier
or licensee provides more than ten (10) percent of Seller’s
revenue. No material supplier, customer or licensee of Seller has
cancelled or otherwise terminated, or, to Seller’s knowledge,
threatened in writing to cancel or otherwise terminate, its
relationship with Seller or has during the last 12 months
decreased materially, or, to Seller’s knowledge, threatened
to decrease or limit materially, its services, supplies or
materials to Seller or its usage of the services or products of
Seller. Seller has no knowledge that any such material supplier,
customer or licensee intends to cancel or modify its relationship
with Seller to decrease
15
materially its orders, services,
supplies or materials to Seller or its usage of the services or
products of Seller.
4.21
ERISA . Except as has not had or would not, individually or
in the aggregate, have a material adverse effect on Seller, each
employee pension benefit plan set forth in Schedule
4.21 complies currently and has been maintained in
compliance with its terms and, both as to form and in operation,
with all requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such plans, including
ERISA and the Code. Except as has not had or would not,
individually or in the aggregate, have a material adverse effect on
Seller, each welfare benefit plan set forth in Schedule
4.21 complies currently and has been maintained in
compliance with its terms and, both as to form and in operation,
with all requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such plans, including
ERISA and the Code. Seller does not sponsor, maintain, or
contribute to any welfare benefit plan that provides health or
death benefits to former employees of Seller other than as required
by Section 4980B of the Code or other applicable
laws.
4.22
Insurance . Schedule 4.22 sets forth
all Insurance Policies held by or on behalf of Seller related to
the Business, specifying the insurer, the policy number (or
covering note number with respect to binders), the risks covered,
the premium, the deductibles and the amount of coverage provided
and describing each pending Claim thereunder of more than $1,000
with respect to the Assets. All such Insurance Policies are
enforceable and in full force and effect.
4.23
Potential Conflicts of Interest . No owner nor any officer,
director or employee of Seller (1) owns, directly or
indirectly, any interest in (excepting not more than 1% stock
holdings for investment purposes in securities of publicly held and
traded companies) or is an officer, director, employee or
consultant of any person which is a competitor or customer of
Seller or (2) to Seller’s knowledge, has made a Claim
against, or owes any amount to, Seller.
4.24
No Broker . Except as set forth in Schedule 4.24 , no
broker, finder, agent or similar intermediary has acted for or on
behalf of Seller in connection with this Agreement or the
Transaction contemplated hereby, and no broker, finder, agent or
similar intermediary is entitled to any broker’s fee,
finder’s fee, or similar fee or commission in connection
therewith based on any agreement, arrangement or understanding with
Seller or any action taken by Seller. Any item disclosed in
Schedule 4.24 will be paid by
Seller.
4.25
Full Disclosure . No representation or warranty by Seller
contained in or connected to this Agreement, any other Transaction
Document, nor any written statement or certificate furnished or to
be furnished by or on behalf of Seller to Buyer in connection
herewith or pursuant hereto or listed on any schedule hereto,
contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact required to make
the statements herein or therein contained not misleading or omits
any material facts necessary in order to provide Buyer with
adequate information as to Seller and its condition (financial and
otherwise), operations, properties, assets and liabilities, and
Seller have disclosed to Buyer in writing all material facts known
to them relating to the same. To the extent that any disclosure in
any single schedule reasonably puts Buyer on actual notice of the
facts reflected therein, such disclosure shall be deemed to be a
disclosure in all other schedules under this Agreement as to such
facts.
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4.26
Related Party Transactions . Except as described in
Schedule 4.26 and otherwise disclosed on the schedules, to
Seller’s knowledge, there are currently no personal property
leases, loans, guarantees, Contracts, transactions, understandings
or other arrangements of any nature between Seller and any current
or former member, owner, shareholder, partner, director, officer or
controlling Person of Seller or any other Person affiliated with
Seller.
5.
Representations and Warranties of Buyer. Knowing that Seller
relies thereon, Buyer represents, warrants and covenants to Seller
on the Closing Date as follows:
5.1
Organization, Standing and Power . Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware, with full corporate power and
corporate authority to (a) own, lease and operate their properties,
(b) carry on its business as currently conducted by it and (c)
execute and deliver, and perform under this Agreement and each
other Transaction Document and instrument to be executed and
delivered by it pursuant hereto. Buyer is qualified to do business
as a foreign corporation in each jurisdiction in which the
character and location of the properties owned or leased by Buyer,
as the case may be, or the conduct of the business makes it
necessary for them to qualify to do business as a foreign
corporation, except where the failure to be so qualified,
individually or in the aggregate, has not had a material adverse
effect of Buyer, as the case may be.
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5.2
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Capitalization/Issuance of
Buyer’s Stock
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(1) The
authorized capital stock of Buyer consists of 75,000,000 shares of
the Buyer’s Stock, 44,266,126 of which shares are issued and
outstanding, and 5,000,000 shares of preferred stock, $.001 par
value (the “Buyer Preferred Stock”), none of which is
issued and outstanding. All of the Buyer’s Stock and Buyer
Preferred Stock has been duly authorized, and, with respect to the
outstanding Buyer’s Stock, validly issued, fully paid and is
nonassessable.
(2) Except
as set forth in Schedule 5.2 , there are no options,
warrants, convertible debt or other rights, agreements,
arrangements or commitments of any character binding upon Buyer
with respect to the issued or unissued capital stock of Buyer or
obligating Buyer to issue or sell any shares of capital stock of or
other equity interests in Buyer. There are no preemptive rights
with regard to the capital stock of Buyer. Except as set forth in
Schedule 5.2 and except for the transactions
contemplated by this Agreement, there are no outstanding
contractual obligations or other commitments or arrangements of
Buyer to (A) repurchase, redeem or otherwise acquire any shares of
capital stock of Buyer (or any interest therein), (B) provide funds
to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity, (C) issue or
distribute to any person any capital stock of Buyer, or (D) issue
or distribute to holders of any of the capital stock of Buyer any
evidences of indebtedness or assets of Buyer. All of the
outstanding securities of Buyer have been issued and sold by Buyer
in full compliance with applicable federal and state securities
Laws.
(3) The
Shares to be issued in connection with this Agreement and the Note
are duly authorized and, when issued in accordance herewith, will
be duly and validly issued, fully paid and non-assessable, free and
clear of all Encumbrances and other third party rights and shall
not be subject to pre-emptive or similar rights. Buyer has a
sufficient
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number of authorized shares of
Buyer’s Stock to issue the Shares. No registration under the
Securities Act is required for the offer and sale of the Shares to
Seller under this Agreement. Buyer is eligible to register the
Shares for resale by Seller under the Securities Act.
5.3
Interests in Other Entities . Buyer has no direct or
indirect subsidiaries except as set forth in Buyer’s Annual
Report on Form 10-K for the fiscal year ended
December 31, 2005 (the “Buyer Form 10-K”) and
except as set forth on Schedule 5.3 . Other than the
subsidiaries set forth in Buyer’s Form 10-K and on
Schedule 5.3 , Buyer does not own any equity interest in any
Person.
(1) The
execution and delivery of this Agreement by Buyer and of all of the
Transaction Documents to be executed and delivered by Buyer
pursuant hereto (collectively, the “Buyer Transaction
Documents”), the performance by Buyer of its obligations
hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of Buyer,
and Buyer has all necessary corporate power and corporate authority
with respect thereto. This Agreement is, and when executed and
delivered by Buyer, each of the other Buyer Transaction Documents
to be delivered by Buyer pursuant hereto will be, the valid and
binding obligations of Buyer in accordance with its respective
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of
creditors generally and subject to the rules of law governing (and
all limitations on) specific performance, injunctive relief, and
other equitable remedies. Buyer has determined that it is in the
best interests of Buyer and its stockholders for Buyer to enter
into the Transaction upon the terms and subject to the conditions
set forth herein.
(2) The
execution, delivery and performance of this Agreement by Buyer and
the consummation of the Transaction by Buyer require no material
actions in respect of, or filing with, any governmental body,
agency, official or authority other than compliance with any
applicable requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).
5.5
Noncontravention . Except as set forth in Schedule
5.5 , neither the execution and delivery by Buyer of this
Agreement nor of any other Buyer Transaction Documents, nor the
consummation of any of the transactions contemplated hereby or
thereby, nor the performance by Buyer of any of its respective
obligations hereunder or thereunder, will (nor with the giving of
notice or the lapse of time or both would) (a) conflict with or
result in a breach of any provision of the certificate of
incorporation or by-laws or similar organization documents of
Buyer, as the case may be, as amended to date, (b) give rise to a
default, or any right of termination, cancellation or acceleration,
or otherwise be in conflict with or result in a loss of contractual
benefits to Buyer, under any of the terms, conditions or provisions
of any material note, bond, mortgage, indenture, license, Contract
or other instrument or obligation to which Buyer is a party or by
which Buyer or any of its respective assets may be bound, or,
except as set forth in Schedule 5.5 , require any consent,
approval, notice or payment under the terms of any such document or
instrument, (c) violate Judgment, Law, statute, rule or regulation
of any court or governmental authority which is applicable to
Buyer, or (d) result in the creation or imposition of
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any lien, adverse claim,
restriction, charge or encumbrance upon any of the material assets
of Buyer, the Buyer’s Stock or the Assets where acquired,
(other than pursuant to the Note issued to Seller at Closing).
Except as stated in Schedule 5.5 , failure to obtain any
such consent or the effect of any item described in (b) or (d) has
not had, individually or in the aggregate, a material adverse
effect on Buyer.
5.6
Financial Statements . Each of the consolidated financial
statements (including, in each case, any notes thereto) contained
in Buyer SEC Reports (as defined in Section 5.15) was prepared in
accordance with GAAP applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes
thereto), and each presented fairly the consolidated financial
position, results of operations and cash flows of Buyer and the
consolidated subsidiaries of Buyer as of the respective dates
thereof and for the respective periods indicated therein (subject,
in the case of unaudited statements, to normal year-end adjustments
which did not individually or in the aggregate, have a material
adverse effect on Buyer). No report of auditors in such Buyer SEC
Reports has been withdrawn or modified. The books and records of
Buyer and each of its subsidiaries are complete and correct in all
material respects and have been, and are being, maintained in
accordance with applicable material legal and accounting
requirements, except for such failures as would not, individually
or in the aggregate, have a material adverse effect on
Buyer.
5.7
Absence of Changes . Since June 30, 2006, there has been no
Buyer Material Adverse Change.
5.8
Litigation . Except as set forth in Buyer SEC Reports, filed
prior to the date hereof, including the notes thereto, there are no
material claims, suits or actions, or administrative, arbitration
or other proceedings or governmental investigations, pending or, to
Buyer’s knowledge, threatened, against or relating to Buyer,
or any subsidiary of Buyer, including OP Holdings.
5.9
No Violation . Neither Buyer nor any of its subsidiaries is
engaging in any activity or omitting to take any action as a result
of which it is in material violation of any law, rule, regulation,
zoning or other ordinance, statute, order, injunction or decree, or
any other requirement of any court or governmental or
administrative body or agency, applicable to Buyer or any of its
subsidiaries, including, without limitation, the Sarbanes-Oxley
Act. Since January 1, 2004, neither Buyer nor any of its
subsidiaries have received any notice of violation by the staff of
the Commission or any notice that the Commission will or intends to
initiate an enforcement proceeding against Buyer or any of its
subsidiaries.
5.10
Properties; Assets . Buyer SEC Reports set forth
(a) all material real property which is owned, leased (whether
as lessor or lessee) or subject to contract or commitment of
purchase or sale or lease (whether as lessor or lessee) by Buyer or
its subsidiaries, or which is subject to a title retention or
conditional sales agreement or other security device, and
(b) tangible personal property which is owned, leased (whether
as lessor or lessee) or subject to contract or commitment of
purchase or sale or lease (whether as lessor or lessee) by Buyer or
its subsidiaries with an individual value of $50,000 or more. Buyer
has title to all material assets thereof except as disclosed in
Buyer SEC Reports.
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5.11
Intangibles . Except as has not had individually or in the
aggregate, have a material adverse effect on Buyer, its business,
or its ability to continue to conduct its business, (1) Buyer and
its subsidiaries and affiliates own or are authorized to use in
connection with their business all of the intellectual property
that is relevant or necessary to the conduct of the business of
Buyer and its subsidiaries and affiliates (the “Buyer
Intangibles”); (2) no proceedings have been instituted, are
pending, or to Buyer’s knowledge, are threatened, which
challenge the rights of Buyer or any of its subsidiaries and
affiliates with respect to Buyer Intangibles or their use thereof
in connection with their respective businesses or the validity
thereof; (3) to the best of Buyer’s knowledge, neither
Buyer’s nor any of its subsidiaries’ ownership of Buyer
Intangibles nor the use of such Intangibles in connection with
their respective businesses violates any Laws, statutes, ordinances
or regulations, or upon or violates any rights of others, or, to
Buyer’s knowledge, is being infringed by others; and (4) none
of Buyer Intangibles, or Buyer’s or its subsidiaries use
thereof in connection with its respective businesses, is subject to
any outstanding order, decree, Judgment, stipulation or
encumbrance.
5.12
Tax Matters . Buyer has filed with the appropriate
governmental agencies all material Tax Returns, and has paid in
full, or is contesting in good faith and has made adequate
provision for the payment of, material Taxes due and owing (whether
or not shown on any Tax Return) for all Tax periods ending on or
prior to the date hereof. All such Tax Returns were true, correct
and complete in all material respects and have been prepared in
substantial compliance with all applicable laws and
regulations.
5.13
Governmental Approvals/Consents . Buyer and its subsidiaries
currently hold all Permits which are necessary for the operation of
their respective businesses, all of which are in full force and
effect and will remain in full force and effect immediately
following the Transaction without the payment of any penalty or the
incurrence of any additional debt, liability or obligation of any
nature whatsoever or the change of any term and no violations of
the terms thereof have heretofore occurred within the past three
years or, to Buyer’s knowledge, exist as of the date of this
Agreement, except for such violations which have not had,
individually or in the aggregate, a material adverse effect on
Buyer.
5.14
ERISA . Except as has not had, individually or in the
aggregate, a material adverse effect on Buyer, each employee
pension benefit plan of Buyer complies currently and has been
maintained in compliance with its terms and, both as to form and in
operation, with all requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to such
plans, including ERISA and the Code. Except as has not had,
individually or in the aggregate, a material adverse effect on
Buyer, each welfare benefit plan of Buyer complies currently and
has been maintained in compliance with its terms and, both as to
form and in operation, with all requirements prescribed by any and
all statutes, orders, rules and regulations that are applicable to
such plans, including ERISA and the Code. Buyer does not sponsor,
maintain, or contribute to any welfare benefit plan that provides
health or death benefits to former employees of Buyer other than as
required by Section 4980B of the Code or other applicable
laws.
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5.15
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Regulatory Compliance;
Information Supplied .
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(1) Buyer
has duly and timely filed all reports, statements, forms,
schedules, registration statements, prospectuses, proxy statements,
and other documents
20
required to be filed by it with the
Commission pursuant to the Exchange Act or the Securities Act of
1933 (the “Securities Act”), as the case may be, since
December 31, 2003 (the “Buyer SEC Reports”). Each of
Buyer SEC Reports, at the time of its filing, complied in all
material respects with the requirements of the Exchange Act and the
rules and regulations of the SEC promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to
such documents, and did not, at the time filed except as otherwise
disclosed in an amendment to such filing, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated there
