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Assignment And Assumption Agreement

Assignment and Assumption Agreement

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 This Assignment and Assumption Agreement involves

SEQUENTIAL BRANDS GROUP, INC. | Gaiam Brand Holdco LLC | Gaiam, Inc | LIFE, LLC | SEQUENTIAL BRANDS GROUP, INC | STRETCH BEND HOLDINGS, LLC

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Title: ASSIGNMENT AND ASSUMPTION AGREEMENT
Governing Law: New York     Date: 5/16/2016
Industry: Apparel/Accessories     Law Firm: White Case     Sector: Consumer Cyclical

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Exhibit 10.1

  

EXECUTION VERSION

  

 

 

 

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

BY AND AMONG

 

STRETCH & BEND HOLDINGS, LLC,

 

FIT FOR LIFE, LLC

 

AND, SOLELY FOR PURPOSES OF SECTION 8.9,

 

SEQUENTIAL BRANDS GROUP, INC.

 

DATED MAY 10, 2016

  

 

 

 

 

 

  

Table of Contents

 

 

 

Page

 

 

 

Article I DEFINITIONS

2

 

 

 

Section 1.1

Definitions

2

Section 1.2

Construction

5

 

 

 

Article II ASSIGNMENT OF ASSETS AND ASSUMPTION OF LIABILITIES; CLOSING

5

 

 

 

Section 2.1

Closing

5

Section 2.2

Assignment of Assets; Excluded Assets

5

Section 2.3

Assumption of Liabilities; Excluded Liabilities

6

Section 2.4

Transfer of Assigned Assets and Assumed Liabilities

6

Section 2.5

Required Consents

7

Section 2.6

Purchase Price

7

Section 2.7

Conditions to Closing

7

Section 2.8

Current Deliverables; Closing Deliverables

8

Section 2.9

Allocation of Purchase Price

9

 

 

 

Article III REPRESENTATIONS AND WARRANTIES OF ASSIGNOR

10

 

 

 

Section 3.1

Due Organization; Good Standing

10

Section 3.2

Authorization; Non Contravention

10

Section 3.3

Consents and Approvals

10

Section 3.4

Benefit Plans

10

Section 3.5

Non Foreign Person

12

Section 3.6

Environmental Matters

12

Section 3.7

Customers and Suppliers

13

Section 3.8

Intellectual Property

13

Section 3.9

Certain Contracts

13

Section 3.10

Acknowledgement by Assignor

13

Section 3.11

Brokers

13

Section 3.12

No Other Representations

13

 

 

 

Article IV REPRESENTATIONS AND WARRANTIES OF ASSIGNEE

14

 

 

 

Section 4.1

Due Organization; Good Standing

14

Section 4.2

Authorization; Non Contravention

14

Section 4.3

Consents and Approvals

14

Section 4.4

No Other Representations

14

Section 4.5

Financing

15

Section 4.6

Acknowledgement by Assignee

15

Section 4.7

Brokers

15

 

 

 

Article V COVENANTS

15

 

 

 

Section 5.1

Public Announcements

15

Section 5.2

Hired Employees

16

Section 5.3

Benefit Plans

17

Section 5.4

Financing

19

Section 5.5

Closing Conditions

19

Section 5.6

Insurance

19

Section 5.7

Books and Records

19

Section 5.8

Bulk Transfer Laws

19

  

-i- 

 

   

Table of Contents

(continued)

  

 

 

Page

 

 

 

Section 5.9

Rights of Assignee under the MIPA

20

Section 5.10

Severance Obligations

20

Section 5.11

Gaiam-FFL APA and MIPA

20

Section 5.12

Reimbursement of Expenses

20

 

 

 

Article VI TERMINATION

20

 

 

 

Section 6.1

Termination Events

20

Section 6.2

Effect of Termination

20

 

 

 

Article VII INDEMNIFICATION

21

 

 

 

Section 7.1

Indemnification by Assignor

21

Section 7.2

Indemnification by Assignee

21

Section 7.3

Survival; Expiration; Indemnification Claims

21

Section 7.4

Defense of Third Party Claims

22

Section 7.5

Indemnification Limitations

24

Section 7.6

R&W Claim

25

Section 7.7

Exclusive Remedy

27

Section 7.8

Specific Performance

27

Section 7.9

Characterization of Indemnification Payment

27

Section 7.10

No Liability of Representatives

27

Section 7.11

Indemnified Persons

27

 

 

 

Article VIII MISCELLANEOUS

27

 

 

 

Section 8.1

Fees and Expenses; Taxes

27

Section 8.2

Waiver

27

Section 8.3

Entire Agreement

28

Section 8.4

Severability

28

Section 8.5

Binding Effect; Benefit; Assignment

28

Section 8.6

Amendment and Modification

28

Section 8.7

Governing Law; Venue

28

Section 8.8

Waiver of Jury Trial

29

Section 8.9

Parent Guaranty

29

 

Annex A – Membership Interest Purchase Agreement

Annex B – Gaiam-FFL APA

Annex C – License Agreement

 

Exhibit A – Amended Lease Agreement

 

Schedule 1.1(a) – Hired Employees

Schedule 2.2(a) – Certain Assumed Contracts

Schedule 5.3(c) – Company Benefit Plans

 

-ii- 

 

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Agreement ”) is entered into as of May 10, 2016, by and among:

 

Stretch & Bend Holdings, LLC, a Delaware limited liability company (“ Assignor ”);

 

Fit For Life, LLC, a Delaware limited liability company (“ Assignee ”); and

 

solely for purposes of Section 8.9 , Sequential Brands Group, Inc., a Delaware corporation (“ Parent ”).

 

The parties above are hereinafter sometimes referred to, collectively, as the “Parties” and, individually, as a “Party.”

 

RECITALS

 

WHEREAS, concurrently with the execution and delivery of this Agreement, Assignor is has entered into that certain Membership Interest Purchase Agreement, dated as of the date hereof (the “ MIPA ”), by and among Assignor, Gaiam, Inc., a Colorado corporation (“ Gaiam ”), and Parent, a copy of which is attached hereto as Annex A ;

 

WHEREAS, concurrently with the execution and delivery of this Agreement. Assignee has entered into that certain Asset Purchase Agreement, dated as of the date hereof (the “ Gaiam-FFL APA ”), by and between Assignee and Gaiam, a copy of which is attached hereto as Annex B ;

 

WHEREAS, it is contemplated that, pursuant to the MIPA, Assignor would acquire the Brand Business (as defined in the MIPA), including, but not limited to, the Company Trademarks (as defined in the MIPA), which includes the “Gaiam” trademark, through the purchase of all of the equity interests of Gaiam Brand Holdco LLC, a Delaware limited liability company (“ HoldCo ”, together with HoldCo’s Subsidiaries, the “ Brand Companies ”);

 

WHEREAS, it is contemplated that, pursuant to the Gaiam-FFL APA, immediately prior to the closing of the transactions contemplated by the MIPA, Gaiam will transfer certain assets and liabilities of the Brand Companies to Assignee, as specified therein;

 

WHEREAS, concurrently with the execution and delivery of this Agreement. Assignor and Assignee have entered into that certain Licensing Agreement, dated as of the date hereof (the “ License Agreement ”), a copy of which is attached hereto as Annex C , pursuant to which, among other things, Assignor is licensing to Assignee the right to use certain of the Company Trademarks (as defined in the MIPA), including the “Gaiam” trademark, in accordance with terms and conditions set forth therein;

 

WHEREAS, contemporaneously with the closing of the transactions contemplated by the Gaiam-FFL APA, Gaiam and Assignee shall enter into that certain Third Amendment to and Assignment and Assumption of Lease, dated as of the Closing Date, in the form attached hereto as Exhibit A , pursuant to which, among other things, Assignee will lease from Gaiam the right to use certain existing office space of Gaiam in accordance with the terms and conditions set forth therein (the “ Amended Lease Agreement ”); and

 

 

 

  

WHEREAS, contingent upon the closing of the transactions contemplated by the Gaiam-FFL APA and the MIPA, and as an inducement to Assignor entering into the License Agreement, Assignor desires to assign to Assignee, and Assignee desires to accept and assume, certain assets and liabilities of the Brand Companies identified herein, on the terms and subject to the conditions set forth in this Agreement (the “ Transaction ”).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and covenants herein contained, which are intended to be legally binding upon the Parties, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

Article I

DEFINITIONS

 

Section 1.1            Definitions . In addition to the terms defined elsewhere in this Agreement, when used in this Agreement, the following terms shall have the respective meanings specified therefor below.

 

Acquired Business ” means the manufacture, distribution, marketing, sale and/or licensing of the Products (as defined in the License Agreement).

 

Affiliate ” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. For purposes hereof, the terms “control,” “under common control with” or “controlled by” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such Person or the power to veto major policy decisions of any such Person, whether through the ownership of equity securities, by contract or otherwise.

 

Applicable Law ” means, with respect to any Person, any federal, state, local, municipal, foreign or other law, statute, legislation, constitution, code, regulations, enacted, adopted, approved, promulgated, made, implemented or otherwise put into effect (and all judicial interpretations thereof), in each case as of the date of this Agreement, by any Governmental Entity that applies to such Person, its business and its properties.

 

Code ” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor statute, and the rules and regulations promulgated thereunder. Any reference herein to a particular provision of the Code shall mean, where appropriate, the corresponding provision in any successor statute.

 

Damages ” of any Person means (i) any and all actual out-of-pocket claims, actions, causes of action, judgments, awards, Taxes, liabilities, losses, costs and damages (including the reasonable fees and expenses of outside counsel, accountants and other professional advisors), whether involving a dispute solely between the Parties hereto or otherwise, incurred or suffered by such Person and (ii)  any losses or costs incurred by such Person in investigating, defending or settling any claim, action or cause of action described in clause (i), whether or not the underlying claim, action or cause of action is actually asserted or is merely alleged or threatened; provided, however, that exemplary, punitive, special, incidental and consequential damages (including any claim for lost profits or diminution in value) are excluded from this definition of Damages; provided , further , that all exemplary, consequential, punitive and special damages actually paid to a third party shall constitute direct Damages notwithstanding the characterization of such damages vis-à-vis the third party.

 

 

  

Environment ” means soil, land surface or subsurface strata, surface waters (including navigable waters and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource.

 

Environmental Laws ” means any Applicable Law that requires or relates to: (a) advising appropriate authorities, employees or the public of intended or actual Releases of pollutants or hazardous substances or materials, violations of discharge limits or other prohibitions and the commencement of activities, such as resource extraction or construction, that could have significant impact on the Environment; (b) preventing or reducing to acceptable levels the Release of pollutants or hazardous substances or materials into the Environment; (c) reducing the quantities, preventing the Release or minimizing the hazardous characteristics of wastes that are generated; (d) protecting resources, species or ecological amenities; (e) reducing to acceptable levels the risks inherent in the transportation of any Hazardous Material or other potentially harmful substance; (f) cleaning up a Release of pollutants, preventing the threat of Release or paying the costs of such clean up or prevention; (g) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets; (h) the authority of any Governmental Entity regulating, or creating any liability for, Hazardous Materials, including but not limited to CERCLA, federal Solid Waste Disposal Act, federal Clean Air Act, federal Clean Water Act, federal Toxic Substances Control Act, federal Hazardous Materials Transportation Act, federal Occupational Safety and Health Act, federal Oil Pollution Act, federal Endangered Species Act, federal Emergency Planning and Community Right-to-Know Act, and their state counterparts; and (i) the protection or preservation of public health or the Environment.

 

Excluded Taxes ” all Liabilities or obligations for (A) Taxes relating to the operation of the Acquired Business or ownership or use of the Assigned Assets prior to the Closing Date; (B) Taxes related to the Excluded Assets; (C) any other Taxes of Assignor, Gaiam or the Brand Companies or any stockholders of Assignor, Gaiam or the Brand Companies for any taxable period, including Taxes of any Person for which the Assignor, Gaiam or the Brand Companies is or has been liable, as a transferee or successor, by contract, or otherwise which such Taxes relate to an event or transaction occurring on or before the Closing Date; (D) the portion of transfer Taxes for which Assignor has agreed to be responsible for hereunder; and (E) any liabilities imposed as a result of a failure to comply with applicable bulk sales laws in connection with the transactions contemplated hereunder.

 

GAAP ” means United States generally accepted accounting principles in effect as of the Closing Date applied on a consistent basis with the past practice of the Brand Companies.

 

Governmental Entity ” means any federal, state, local or foreign government or any court of competent jurisdiction, administrative or regulatory body, agency, bureau, or commission in any domestic or foreign jurisdiction, and any appropriate division of any of the foregoing.

 

Hazardous Material ” means: (a) any petroleum products, petroleum by-products or breakdown products, waste oil, crude oil, asbestos, pesticides, urea formaldehyde or polychlorinated biphenyl; (b) any waste, gas or other substance or material that is explosive or radioactive; and (c) any “hazardous substance,” “pollutant,” “contaminant,” “waste,” “hazardous waste,” “regulated substance,” “hazardous chemical” or “toxic chemical” as designated, listed, defined (whether expressly or by reference), or regulated in any statute, regulation or other Environmental Law.

 

 

  

Hired Employees ” means the employees of the Brand Companies set forth on Schedule 1.1(a) attached hereto who accept an offer of employment from Assignee pursuant to Section 5.2 no later than the Closing Date.

 

IRS ” means the United States Internal Revenue Service.

 

Judgment ” means any order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, verdict, sentence, writ or award issued, made, entered, rendered or otherwise put into effect by or under the authority of any Governmental Entity or any arbitrator.

 

Liens ” means mortgages, security interests, charges, easements, rights, options, claims, restrictions, encumbrances, encroachments, indentures, deeds of trust, title irregularities, licenses or leases to third parties, or other liens or limitations of any kind.

 

Permitted Liens ” means (a) Liens imposed by Applicable Law related to the sale, transfer, pledge or other disposition of securities, (b) Liens for Taxes not yet due and payable or for Taxes being contested in good faith through appropriate proceedings and for which appropriate reserves have been established in accordance with GAAP, (c) purchase money Liens and Liens securing rental payments incurred in the ordinary course of business, (d) Real Estate Liens (as defined in the MIPA), (e) Liens set forth on Section 5.08 of the Disclosure Schedule of the MIPA, and (f) other Liens incurred in ordinary course of business and not incurred in connection with the borrowing of money, if any, which do not, individually or in the aggregate, materially impair the continued use and operation of any Assigned Asset as currently used or operated.

 

Person ” means any individual, corporation, partnership, limited liability company, professional association, trust or other entity or Governmental Entity.

 

Proceedings ” means any formal action, arbitration, claim, hearing, inquiry, investigation, litigation or suit (whether civil, criminal, administrative or judicial, whether public or private, at law or in equity) commenced, brought, or conducted by or before any Governmental Entity or arbitrator.

 

R&W Policy ” means that certain representations and warranties insurance policy issued by the R&W Policy Insurer and purchased by Assignor under the MIPA.

 

R&W Policy Insurer ” means, collectively, the insurers under the R&W Policy in accordance with their respective quota share percentage.

 

Release ” means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the Environment or into or out of any property.

 

“Representative” means, with respect to any Person, such Person’s officers, directors, managers, executive employees, financial advisors, legal counsel, accountants, consultants, and other representatives and agents.

 

Subsidiary ” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body, or, if there are no such voting interests, 50% or more of the equity interests of which is owned directly or indirectly by such first Person or by another subsidiary of such first Person.

 

 

  

Tax(es) ” means all Federal, state, local and foreign taxes, customs, duties or other taxes, fees and assessments, including all interest, penalties and additions with respect thereto.

 

Treasury Regulations ” means the Treasury Regulations promulgated pursuant to the Code, as amended from time to time, including the corresponding provisions of any successor regulations.

 

Section 1.2            Construction . In this Agreement, unless the context otherwise requires:

 

(a)          words expressed in the singular number shall include the plural and vice versa; words expressed in the masculine shall include the feminine and neuter gender and vice versa;

 

(b)          references to Articles, Sections and Recitals are references to the articles, sections and recitals of and to this Agreement;

 

(c)          headings are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement;

 

(d)          the words “hereof”, “herein”, “hereto” and “hereunder”, and words of similar import, shall refer to this Agreement as a whole and not to any provision of this Agreement; and

 

(e)          this “Agreement” or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented.

 

Article II

ASSIGNMENT OF ASSETS AND ASSUMPTION OF LIABILITIES; CLOSING

 

Section 2.1            Closing . The closing of the Transaction (the “ Closing ”) shall take place at the offices of White & Case LLP, 1155 Avenue of the Americas, New York, New York, 10036-2787, immediately after the closing of the transactions contemplated by the MIPA, subject to Section 2.7(d) . The date on which the Closing is actually held is referred to herein as the “ Closing Date ”.

 

Section 2.2            Assignment of Assets; Excluded Assets .

 

(a)          On the terms and subject to the conditions of this Agreement, Assignee agrees to accept and assume from the applicable Brand Company, and Assignor agrees to cause the applicable Brand Company to assign, convey, transfer and deliver to Assignee, on the Closing Date, the Assigned Assets and all of the applicable Brand Company’s right, title and interest in and to the Assigned Assets, free and clear of any Liens of any kind whatsoever except Permitted Liens. The “ Assigned Assets ” shall mean all the right, title and interest of the applicable Brand Company as of the Closing Date in and to the contracts identified and set forth on Schedule 2.2(a) .

 

(b)           Excluded Assets . Notwithstanding anything herein to the contrary, the Assigned Assets shall not include (i) any assets of Assignor or any of the Brand Companies other than the Assigned Assets, (ii) any cash or cash equivalents of Assignor or any of the Brand Companies or (iii) any Intellectual Property (as defined in the MIPA) owned by Assignor or any of the Brand Companies.

 

 

  

Section 2.3            Assumption of Liabilities; Excluded Liabilities .

 

(a)           Assumed Liabilities . On the terms and subject to the conditions of this Agreement, Assignee agrees, effective at the Closing, to assume and to pay, perform and discharge when due, only the following, and no other: (i) any and all liabilities and obligations (whether known or unknown, fixed, absolute, matured, unmatured, accrued or contingent) arising from or related to the Assigned Assets in respect of the periods on or after the Closing Date; and (ii) the obligations and liabilities relating to the Hired Employees as provided in Section 5.2 (collectively, the “ Assumed Liabilities ”).

 

(b)           Excluded Liabilities . Notwithstanding anything contained herein to the contrary, Assignee shall not assume, or cause to be assumed, or be deemed to have assumed or caused to have assumed or be liable or responsible for any liabilities or obligations (whether known or unknown, fixed, absolute, matured, unmatured, accrued or contingent, now existing or arising after the date hereof), other than the Assumed Liabilities (such liabilities and obligations not assumed, the “ Excluded Liabilities ”). For the avoidance of doubt, Excluded Liabilities (x) shall include but not be limited to (i) any claims by Hired Employees arising from their employment with any Brand Company prior to the Closing Date, (ii) any liabilities and obligations of any Brand Company that do not arise from and are not related to any Assigned Asset, (iii) Excluded Taxes, (iv) any liabilities and obligations of any Brand Company to the extent based upon a theory of successor liability, including any successor liability claims with respect to employees of the Brand Companies (provided, that this clause (iv) shall not apply in any respect to Assignee’s assumption of the Assumed Liabilities), (v) any liabilities and obligations under any agreement, contract or license relating to any event occurring prior to Closing and (vi) any claims by, liabilities or obligations to any employee or former employee of any of the Brand Companies, other than Hired Employees, under the federal Worker Adjustment and Retraining Notification Act of 1988, as amended, or under any state or local plant closing or mass layoff law, (y) but, notwithstanding the foregoing clause (x), shall exclude any liabilities and obligations assumed by Assignee pursuant to the Gaiam-FFL APA.

 

Section 2.4            Transfer of Assigned Assets and Assumed Liabilities . The Assigned Assets shall be assigned, conveyed, transferred and delivered to Assignee, free and clear of all Liens except for Permitted Liens, and the Assumed Liabilities shall be assumed by Assignee, pursuant to transfer and assumption contracts, bills of sale in registrable form, endorsements, assurances, conveyances, releases, discharges, assignments, certificates, drafts, checks or other instruments in such form as is necessary to effect a sale, conveyance, transfer and assignment of the Assigned Assets and an assumption of the Assumed Liabilities in the jurisdictions in which such transfers are to be made, as Assignee and Assignor shall reasonably agree, or as required by Applicable Law in order to consummate the Transaction and to vest in Assignee good and marketable title to the Assigned Assets free and clear of any Liens except Permitted Liens, which documents and instruments shall be executed (upon the terms and subject to the conditions hereof) on the Closing Date by Assignor and Assignee.

 

 

  

Section 2.5            Required Consents . Notwithstanding anything contained herein to the contrary, to the extent that the assignment, conveyance, transfer or delivery or attempted assignment, conveyance, transfer or delivery to Assignee of any contract identified on Schedule 2.2(a) (collectively, the “ Assumed Contracts ”) is prohibited by any Applicable Law or would require any third party or Governmental Entity’s authorization, approval, consent or waiver, and such authorization, approval, consent or waiver shall not have been obtained prior to the Closing, this Agreement shall not constitute an assignment, conveyance, transfer or delivery, or an attempted assignment, conveyance, transfer or delivery thereof. For a period of three (3) months following the Closing, the Parties shall use commercially reasonable efforts to cooperate with each other with a view to obtaining all such authorizations, approvals, consents or waivers; provided , that neither Assignor nor any of its Affiliates shall be required to commence any litigation or offer or grant any material accommodation (financial or otherwise) to any third party to obtain any such authorizations, approvals, consents or waivers and shall have no liability to Assignee should any such authorization, approval, consent or waiver for any reason fail to be obtained. In the event the Parties obtain any requisite authorization, approval, consent or waiver with respect to an Assumed Contract following the Closing, Assignor shall promptly assign, convey, transfer and deliver, or cause to be assigned, conveyed, transferred and delivered, such Assumed Contract to Assignee hereunder. Notwithstanding any provision contained in this Agreement to the contrary, Assignor shall have no responsibility or liability of any kind to Assignee resulting from any failure to obtain any required authorization, approval, consent or waiver under any Assumed Contract.

 

Section 2.6            Purchase Price . In consideration for the assignment, conveyance, transfer and delivery of the Assigned Assets, Assignee shall assume the Assumed Liabilities.

 

Section 2.7            Conditions to Closing .

 

(a)          The obligations of each Party to consummate the transactions that are to be consummated at the Closing pursuant to the terms of this Agreement shall be subject to the satisfaction, as of the Closing Date, of the following conditions (any of which may be waived by the Parties in whole or in part):

 

(i)          The transactions contemplated under the MIPA shall have been consummated, subject to Assignee’s delivery of the documents set forth in Section 2.8(c)(ii)(iv) .

 

(b)          The obligations of Assignee to consummate the transactions that are to be consummated at the Closing pursuant to the terms of this Agreement shall be subject to the satisfaction, as of the Closing Date, of the following conditions (any of which may be waived by Assignee in whole or in part):

 

(i)          Assignor shall have delivered to Assignee a binder in respect of the R&W Policy.

 

(ii)         Each of (i) the representations and warranties of Assignor set forth in Section 3.1 ( Due Organization; Good Standing ), Section 3.2(a) ( Authorization ), and Section 3.5 ( Non Foreign Person ) (the “ Assignor Fundamental Representations ”) shall be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such Assignor Fundamental Representations are made as of another date, which Assignor Fundamental Representations shall be true and correct in all respects as of such date) and (ii) the other representations and warranties of Assignor set forth in Article III shall be true and correct (without giving effect to any “material,” “materially,” “materiality,” “material adverse effect,” “material adverse change” or similar qualifiers contained in any of such representations and warranties) in all respects, except where the failure to be so true and correct, individually or in the aggregate, does not and would not reasonably be expected to have a material adverse effect on Assignor’s ability to perform its obligations under this Agreement and to consummate the transactions contemplated hereunder, in each case as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such representations and warranties speak as of another date, which representations and warranties shall be true and correct in all respects as of such other date).

 

 

  

(iii)        Assignor shall have performed or complied in all material respects with all covenants required by this Agreement to be performed or complied with by Assignor at or prior to the Closing Date.

 

(c)          The obligations of Assignor to consummate the transactions that are to be consummated at the Closing pursuant to the terms of this Agreement shall be subject to the satisfaction, as of the Closing Date, of the following conditions (any of which may be waived by Assignor in whole or in part):

 

(i)          Each of (i) the representations and warranties of Assignee set forth in Section 4.1 ( Due Organization; Good Standing ) and Section 4.2(a) ( Authorization ) (the “ Assignee Fundamental Representations ”) shall be true and correct in all respects as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such Assignee Fundamental Representations are made as of another date, which Assignee Fundamental Representations shall be true and correct in all respects as of such date) and (ii) the other representations and warranties of Assignee set forth in Article IV shall be true and correct (without giving effect to any “material,” “materially,” “materiality,” “material adverse effect,” “material adverse change” or similar qualifiers contained in any of such representations and warranties) in all respects, except where the failure to be so true and correct, individually or in the aggregate, does not and would not reasonably be expected to have a material adverse effect on Assignee’s ability to perform its obligations under this Agreement and to consummate the transactions contemplated hereunder, in each case as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such representations and warranties speak as of another date, which representations and warranties shall be true and correct in all respects as of such other date).

 

(ii)         Assignee shall have performed or complied in all material respects with all covenants required by this Agreement to be performed or complied with by Assignee at or prior to the Closing Date.

 

(d)          Assignor agrees that (i) Assignor shall reasonably and in good faith assess whether a Company Material Adverse Effect (as defined in the MIPA) has occurred prior to consummating the transactions contemplated by the MIPA, (ii) Assignor shall in good faith (A) consider whether an objective and reasonable third party would conclude that a Company Material Adverse Effect had occurred based on the facts and circumstances at the relevant time, (B) base such assessment on the Brand Companies as a whole and not solely on the intellectual property assets of the Brand Companies, and (C) in good faith consider any factors raised by Assignee affecting the Assigned Assets and the Acquired Assets (as defined in the Gaiam-FFL APA), and (iii) if Assignor reasonably and in good faith concludes that a Company Material Adverse Effect has occurred and is ongoing such that the condition set forth in Section 8.02(c) of the MIPA is not satisfied, then Assignor shall not waive the condition set forth in Section 8.02(c) of the MIPA without the prior written consent of Assignee, such consent not to be unreasonably withheld, conditioned or delayed.

 

Section 2.8            Current Deliverables; Closing Deliverables .

 

(a)          Concurrently herewith, Assignor shall deliver to Assignee a fully executed copy of the MIPA with all exhibits and Schedules.

 

(b)          At the Closing, Assignor shall deliver to Assignee:

 

 

  

(i)          a counterpart to the License Agreement, duly executed by an authorized officer of Assignor; and

 

(ii)         any amendment to the MIPA executed between the date hereof and the Closing Date.

 

(c)          At the Closing, Assignee shall deliver to Assignor:

 

(i)          a counterpart to the License Agreement, duly executed by an authorized officer of Assignee.

 

Section 2.9            Allocation of Purchase Price . The Parties agree to allocate the Purchase Price to be paid in respect of the Assigned Assets in accordance with Section 1060 of the Code. The Parties agree that Assignee shall prepare and provide to Assignor a draft allocation of the Purchase Price among the Assigned Assets within ninety (90) days after the Closing Date. Assignor shall notify Assignee within thirty (30) days of receipt of such draft allocation of any objection Assignor may have thereto. Unless Assignor delivers a notice of objection with respect to the allocation of the Purchase Price by the conclusion of such thirty (30) day period, the draft allocation provided by Assignee to Assignor pursuant to the second sentence of this Section 2.9 shall become final and binding upon the Parties. The Parties agree to resolve any disagreement with respect to such allocation in good faith. If a resolution of such disagreement has not been effected within fifteen (15) days (or longer, as mutually agreed by the Parties) after delivery of an objection by Assignor, then either Party may submit such disagreement to an arbitrator (chosen by mutual consent of the Parties) for determination. The determination of the arbitrator with respect to any such disagreement shall be completed within thirty (30) days after the submission to the arbitrator. The decision of the arbitrator shall be final and binding upon each Party, and the decision of the arbitrator shall constitute an arbitral award that is final, binding and non-appealable and upon which a judgment may be entered by a court having jurisdiction thereover. If Assignor and Assignee submit any dispute to the arbitrator for resolution pursuant to this Section 2.9 , Assignor and Assignee shall each pay their own costs and expenses incurred under this Section 2.9 . Each of Assignee and Assignor shall bear fifty percent (50%) of the costs and expenses of the arbitrator incurred pursuant to this Section 2.9 . In addition, the Parties hereby agree to file timely any information that may be required to be filed pursuant to Treasury Regulations promulgated under Section 1060(b) of the Code in a manner that is consistent with the allocation determined pursuant to this Section 2.9 in connection with the preparation of IRS Form 8594 and any other forms, reports, or information statements required to be filed pursuant to Section 1060 of the Code and the applicable Treasury Regulations, and any similar or corresponding provision of state or local tax law. Neither Party shall file any Return or other document or otherwise take any position which is inconsistent with the allocation determined pursuant to this Section 2.9 , except as may be adjusted by subsequent agreement following an audit by the IRS or by a Judgment; provided , that neither Party (nor their respective Affiliates) shall be obligated to litigate any challenge to such allocation of the Purchase Price by any Governmental Entity. The allocation of the Purchase Price shall be revised to take into account subsequent adjustments to the Purchase Price in the manner provided by Section 1060 of the Code and the Treasury Regulations thereunder and consistent with the preparation of the Purchase Price allocation hereunder, and the Parties shall cooperate with each other in good faith to promptly amend the Purchase Price allocation. The Parties shall promptly inform one another of any challenge by any Governmental Entity to any allocation made pursuant to this Section 2.9 and agree to consult with and keep one another informed with respect to the state of, and any discussion, proposal or submission with respect to, such challenge.

 

 

  

Article III

REPRESENTATIONS AND WARRANTIES OF ASSIGNOR

 

Concurrently with the execution of this Agreement, Assignor, on behalf of itself and the Brand Companies that are transferring the Assigned Assets, hereby represents and warrants to Assignee as follows as of the Closing Date.

 

Section 3.1            Due Organization; Good Standing . Assignor is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.

 

Section 3.2            Authorization; Non Contravention .

 

(a)          Assignor has the requisite power and authority and has taken all limited liability company action necessary to execute and deliver this Agreement and all other instruments and agreements to be delivered by Assignor as contemplated hereby, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by Assignor of this Agreement and all other instruments and agreements to be delivered by Assignor as contemplated hereby, the consummation by Assignor of the transactions contemplated hereby and thereby and the performance of its obligations hereunder and thereunder have been, and in the case of documents required to be delivered at Closing will be, duly authorized and approved. This Agreement and all other instruments and agreements to be executed and delivered by Assignor as contemplated hereby and thereby will be, duly executed and delivered by Assignor. This Agreement constitutes a valid and binding obligation of Assignor enforceable against Assignor in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Applicable Laws affecting the enforcement of creditors’ rights generally and to general equitable principles.

 

(b)          The execution and delivery of this Agreement and all other instruments and agreements to be delivered by Assignor as contemplated hereby do not, and the consummation of the transactions contemplated hereby and thereby will not (i) conflict with any of the provisions of the certificate of formation or limited liability company agreement of Assignor, (ii) create any Lien upon any of the properties or assets of Assignor, (iii) with or without notice, lapse of time (or both), conflict with or result in a breach of, or constitute a default under, or result in the acceleration of any obligation or loss of any benefits under, any contract or other instrument to which Assignor is a party or by which any of its properties or assets are bound, or (iv) contravene any Law or any Judgment applicable to Assignor or by which any of its properties or assets are bound.

 

Section 3.3            Consents and Approvals . Except as set forth on Schedule 3.3, no consent of or filing with any Governmental Entity or any other Person must be obtained or made in connection with the execution and delivery of this Agreement by Assignor or the consummation by Assignor of the transactions contemplated by this Agreement.

 

Section 3.4            Benefit Plans . The representations and warranties contained in this Section 3.4 are made by Assignor as to Gaiam and the Brand Companies as of the date hereof, but, except as provided in Section 3.4(d) , only to the extent that such representations and warranties relate to the Assigned Assets or the Acquired Business:

 

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(a)          Section 5.15(a) of the Disclosure Schedule to the MIPA sets forth an accurate and complete list of each "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) and each other compensation, bonus, pension, profit sharing, deferred compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, employment, change-in-control, welfare, collective bargaining, severance, disability, death benefit, hospitalization and medical plan, program, policy and arrangement maintained or contributed to (or required to be contributed to) for the benefit of any and all current and/or former employees, officers and directors (and/or their beneficiaries or dependents) of one or more of the Brand Companies, who primarily performed service for or at the behest of Gaiam, any Brand Company or their respective Affiliates or with respect to which any Gaiam or any Brand Company would reasonably be expected to have direct, indirect, joint and several or contingent liability (the “ Company Benefit Plans ”);

 

(b)          Each Company Benefit Plan intended to qualify under Code Section 401(a) is the subject of a favorable determination, advisory or opinion letter issued by the Internal Revenue Service as to its qualified status under the Code, which determination, advisory or opinion letter may still be relied upon as to the qualified status of the Company Benefit Plan, and no circumstances have occurred since the date of such favorable determination or opinion letter that would result in the loss of the tax-qualified status of any such Company Benefit Plan;

 

(c)          None of the Company Benefit Plans that are “welfare benefit plans” as defined in ERISA Section 3(1) provide for continuing benefits or coverage for any participant or beneficiary of a participant after such participant's termination of employment, except to the extent required by Applicable Law;

 

(d)          No employee pension benefit plan (as defined under Section 3(2) of ERISA) sponsored, maintained or contributed to at any time by Gaiam, any Brand Company or any of their Affiliates: (i) provides or provided any benefit guaranteed by the Pension Benefit Guaranty Corporation; (ii) is or was a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA; or (iii) is or was subject to the minimum funding standards of Section 412 of the Code or Section 302 of ERISA;

 

(e)          Assignor has made available to Assignee, with respect to each Company Benefit Plan: (i) a copy of the Company Benefit Plan and all amendments (including any amendment that is scheduled to take effect in the future) and, in the case of any Company Benefit Plan not set forth in writing, a written description thereof; (ii) a copy of each Contract (including any trust agreement, funding agreement, service provider agreement, insurance agreement, investment management agreement or recordkeeping agreement) relating to the Company Benefit Plan; (iii) a copy of any summary plan description for the Company Benefit Plan; (iv) a copy of any Form 5500 for the last three Company Benefit Plan years; and (v) a copy of any determination, advisory, or opinion letter related to the Company Benefit Plan and any notice or other document that has been issued by, or that has been received by the sponsor of such Company Benefit Plan from any Governmental Entity with respect to the Company Benefit Plan;

 

(f)          Each Company Benefit Plan has been operated and administered in all material respects in accordance with its terms and in compliance with Applicable Law, including the Code and ERISA;

 

(g)          Each contribution or other payment that is required to have been accrued or made to, under, or with respect to any Company Benefit Plan has been duly accrued or made on a timely basis;

 

(h)          No prohibited transaction within the meaning of Code Section 4975 or ERISA Section 406 or 407, and not otherwise exempt under ERISA Section 408, or other violation of Applicable Law has occurred with respect to a Company Benefit Plan that would reasonably be expected to subject Assignee to any liability;

 

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(i)          There are no Proceedings pending nor threatened with respect to any Company Benefit Plan or the assets of any Company Benefit Plan or any related trust (other than routine claims for benefits);

 

(j)          Other than in the ordinary course of business, there has been no amendment to, announcement by Gaiam, Assignor or any of their Affiliates relating to, or change in employee participation or coverage under, any Company Benefit Plan that would increase the annual expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year with respect to any current and/or former employee, officer or director (and/or their beneficiaries or dependents) of any one or more of the Brand Companies. Other than in the ordinary course of business, neither Gaiam nor Assignor have any commitment or obligation and have not made any representations to any current and/or former employee, officer or director (and/or their beneficiaries or dependents) of any one or more of the Brand Companies, whether or not legally binding, to adopt, amend or modify any Company Benefit Plan; and

 

(k)          Neither the execution and delivery of this Agreement or of the MIPA, nor the consummation of the transactions contemplated thereunder could (i) entitle any current and/or former employee, officer or director of any one or more of the Brand Companies to material severance pay or any increase in severance pay, (ii) accelerate the time of payment or vesting, or increase the amount of compensation due to any such person, (iii) directly or indirectly cause Gaiam or Assignor to transfer or set aside any assets to fund any benefits under any Company Benefit Plan, (iv) otherwise give rise to any liability under any Company Benefit Plan, or (v) or require a “gross-up” or other payment to any “disqualified individual” within the meaning of Section 280G(e) of the Code due to the imposition of the excise tax under Section 4999 of the Code on any payment by Gaiam or a Brand Company to such disqualified individual or due to the failure of any payment to such disqualified individual to be deductible under Section 280G of the Code. There is no Agreement to which Assignor, Gaiam or any of the Brand Companies (or any of their Affiliates) is a party that could, individually or collectively, result (or has resulted) in the payment of any amount that would not be deductible by reason of Section 280G of the Code.

 

Any other representation or warranty contained in this Agreement notwithstanding, the representations and warranties contained in this Section 3.4 constitute the sole representations and warranties of Assignor relating to employee benefit plan matters.

 

Section 3.5            Non Foreign Person . Assignor is not a “ foreign person ” as that term is used in Treasury Regulations Section 1.1445-2.

 

Section 3.6            Environmental Matters .

 

(a)          The Brand Companies are, and since January 1, 2010, have been in material compliance with, and operate, and have operated, the Brand Business in material compliance with, all Environmental Laws applicable to the operations of the Brand Business at the facilities to be leased pursuant to the terms of the Amended Lease Agreement.

 

(b)          Since January 1, 2010, no Hazardous Materials have been produced, sold, used, stored, transported, arranged for transport, handled, released, discharged, or disposed of by any of the Brand Companies or any other Person or any of their respective Representatives at or from any of the facilities to be leased under the Amended Leased Agreement in a manner that violated or would reasonably be expected to give rise to a material liability under any applicable Environmental Law.

 

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Section 3.7            Customers and Suppliers . Except as disclosed in the disclosure schedules in the MIPA, since December 31, 2015 no customers or suppliers that are required to be identified in Section 5.11(a)(i) of the Disclosure Schedule of the MIPA and Section 5.11(a)(ii) of the Disclosure Schedule of the MIPA, have given Assignor or the Brand Companies notice of their intention to alter their respective relationship with any of the Brand Companies in a manner that would materially adversely affect the operation of the Brand Business as it relates to the Assigned Assets.

 

Section 3.8            Intellectual Property . The Brand Companies own or have the right to use, free and clear of all Liens (other than (i) Permitted Liens and (ii) non-exclusive licenses granted in the ordinary course of business consistent with past practice), all Material Registered Company Intellectual Property (as defined in the MIPA) licensed to Assignee pursuant to the License Agreement, but solely with respect to products that are to be sold in the United States and/or Canada.

 

Section 3.9            Certain Contracts . Except as set forth in Section 5.10(j) of the Disclosure Schedule to the MIPA, none of the contracts and agreements constituting Assigned Assets contains both (i) the right to use or exploit (A) the services, name and/or likeness of any individual (including, without limitation, audio and/or audiovisual recordings embodying the performances of any yoga and/or fitness talent) or (B) Intellectual Property owned by a Person other than Seller or the Brand Companies and (ii) an obligation to pay advances, minimum guarantees or any other payment which is not contingent on sales, but in each case, excluding royalty payment obligations, which are contingent on sales.

 

Section 3.10          Acknowledgement by Assignor . Assignor has no knowledge of any facts, events, and/or circumstances that could make any of the representations and warranties of Assignee contained in Article IV untrue or misleading in any respect. For all purposes of this Agreement, the “knowledge” of Assignor and other phrases of like substance applicable to Assignor shall mean the actual knowledge of Yehuda Shmidman, Chad Wagenheim, and Andy Tarshis.

 

Section 3.11          Brokers . Assignor has not retained any Person to act as a broker or agreed or become obligated to pay, or has taken any action that might result in any Person claiming to be entitled to receive, any brokerage commission, finder’s fee or similar commission or fee from Assignee in connection with the Transaction.

 

Section 3.12          No Other Representations . The representations and warranties made by Assignor pursuant to this Article III are the exclusive representations and warranties made by Assignor. Assignor hereby disclaims any other express or implied representation or warranty with respect to itself or any other Person. Except as expressly set forth herein, the condition of the assets of the Brand Companies shall be “as is” and “where is” and Assignor makes no warranty of merchantability, suitability, fitness for a particular purpose or quality with respect to any of the tangible assets that are included in the Assigned Assets or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent. Assignor and the Brand Companies are not, directly or indirectly, making any representations or warranties regarding any pro-forma financial information, financial projections or other forward-looking statements of the Brand Companies, Assignor or Assignee. It is understood that any due diligence materials made available to Assignee or its Affiliates and their respective Representatives do not, directly or indirectly, and shall not be deemed to, directly or indirectly, contain any representations or warranties of any kind of the Brand Companies, Assignor or any of their respective Affiliates or Representatives.

 

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Article IV

REPRESENTATIONS AND WARRANTIES OF ASSIGNEE

 

Concurrently with the execution of this Agreement, Assignee hereby represents and warrants to Assignor as follows:

 

Section 4.1            Due Organization; Good Standing . Assignee is a limited liability company duly organized, validly existing and is in good standing under the Applicable Laws of the State of Delaware and has all requisite limited liability company power and au


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