ASSET PURCHASE AGREEMENT
by and between
MERIDIAN CONSUMER BRANDS LLC
(Buyer)
and
BRIARWOOD HOME ESSENTIALS, INC.
(Seller)
Dated as of July 19, 2022
DRAFT — Subject to Further Review and Negotiation
Prepared by Calderwood & Harkness LLP — Counsel to Buyer
C&H Matter No. 1011-00005
TABLE OF CONTENTS
Right-click to update Table of Contents
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of July 19, 2022, by and between Meridian Consumer Brands LLC, a Delaware limited liability company ("Buyer"), with its principal offices at 440 Park Avenue South, 18th Floor, New York, NY 10016, and Briarwood Home Essentials, Inc., an Ohio corporation ("Seller"), with its principal offices at 1175 Creekside Drive, Suite 400, Columbus, OH 43215. Buyer and Seller are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Seller owns and operates, among other businesses, a consumer product line consisting of home cleaning products marketed under the "CleanLeaf" brand name and personal care products marketed under the "PureHaven" brand name (collectively, the "Business"); and
WHEREAS, Seller also operates a Commercial Janitorial Services Division, which is a separate business unit from the Business and is not being sold, transferred, or otherwise conveyed to Buyer pursuant to this Agreement; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, substantially all of the assets used or held for use in the operation of the Business, upon the terms and subject to the conditions set forth herein; and
WHEREAS, Buyer and Seller entered into that certain Letter of Intent dated March 28, 2022 (the "LOI"), which set forth certain preliminary terms and conditions with respect to the transactions contemplated by this Agreement, including binding confidentiality and exclusivity provisions; and
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties contained herein, 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 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Accounts Receivable" means all accounts receivable, notes receivable, and other rights to payment for goods sold or services rendered by or on behalf of the Business that are outstanding as of the Closing Date, together with all security and collateral therefor.
"Acquired Assets" has the meaning set forth in Section 2.1.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
"Ancillary Agreements" means the Bill of Sale, the Assignment and Assumption Agreement, the IP Assignment Agreement, the Transition Services Agreement, the Escrow Agreement, the Non-Competition Agreement, and each other agreement, instrument, or document to be executed and delivered in connection with the transactions contemplated by this Agreement.
"Assigned Contracts" means the contracts listed on Schedule 2.1(d), including the twenty-three (23) customer contracts and key supply agreements identified therein.
"Assignment and Assumption Agreement" means the Assignment and Assumption Agreement substantially in the form of Exhibit B attached hereto.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Bill of Sale" means the Bill of Sale substantially in the form of Exhibit A attached hereto.
"Business" means the consumer product line operated by Seller under the "CleanLeaf" and "PureHaven" brand names, consisting of approximately one hundred forty-two (142) active stock-keeping units (SKUs), including all activities related to the development, manufacture, marketing, distribution, and sale of such products.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in New York, New York are authorized or required by Law to be closed.
"Buyer" has the meaning set forth in the preamble of this Agreement.
"Buyer Fundamental Representations" means the representations and warranties of Buyer set forth in Section 6.1 (Organization and Good Standing), Section 6.2 (Authority; Binding Effect), and Section 6.5 (Brokers).
"Cash Consideration" means Eighty-Seven Million Dollars ($87,000,000), being equal to the Purchase Price minus the Earnout Amount.
"Closing" has the meaning set forth in Section 4.1.
"Closing Date" has the meaning set forth in Section 4.1.
"Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.
"Confidentiality Agreement" means the confidentiality provisions set forth in the LOI dated March 28, 2022, between Buyer and Seller, as supplemented by any separate confidentiality or non-disclosure agreement entered into by the Parties or their Representatives in connection with the transactions contemplated hereby.
"Consent" means any approval, consent, ratification, waiver, permission, authorization, exemption, or order of, registration, declaration, or filing with, or notice to, any Person, including any Governmental Authority or any party to any contract.
"Disclosure Schedules" means the disclosure schedules delivered by Seller pursuant to Article V of this Agreement.
"Distribution Center" means the owned real property located at 500 Commerce Boulevard, West Jefferson, OH 43162, together with all buildings, structures, improvements, fixtures, and appurtenances situated thereon.
"Earnout Amount" means Eight Million Dollars ($8,000,000), subject to satisfaction of the Earnout Milestone in accordance with Section 3.4.
"Earnout Milestone" means Year 1 Revenue of the Business equal to or exceeding Seventy-Two Million Dollars ($72,000,000).
"Earnout Period" means the twelve (12) month period commencing on the first day of the first full calendar month following the Closing Date and ending on the last day of the twelfth (12th) full calendar month thereafter.
"Earnout Statement" has the meaning set forth in Section 3.4(e).
"Encumbrance" means any lien, pledge, mortgage, deed of trust, security interest, charge, claim, easement, encroachment, restriction, right of first refusal, right of preemption, option, judgment, assessment, or other encumbrance of any kind or nature whatsoever.
"Environmental Laws" means all federal, state, local, and foreign Laws relating to pollution, protection of the environment, human health and safety (as related to exposure to Hazardous Materials), or the generation, treatment, storage, transportation, disposal, release, or threatened release of Hazardous Materials, including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §§ 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Clean Water Act (33 U.S.C. §§ 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.), and any analogous state or local Laws.
"Escrow Agent" means Atlantic Fiduciary Trust Company, a national trust company organized under the laws of the Commonwealth of Massachusetts.
"Escrow Agreement" means the Escrow Agreement substantially in the form of Exhibit E attached hereto, to be entered into among Buyer, Seller, and the Escrow Agent.
"Escrow Amount" means Nine Million Five Hundred Thousand Dollars ($9,500,000), representing ten percent (10%) of the Purchase Price.
"Escrow Period" means the period commencing on the Closing Date and ending on the date that is twenty-four (24) months following the Closing Date.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"Fundamental Representations" means (a) with respect to Seller, the Seller Fundamental Representations, and (b) with respect to Buyer, the Buyer Fundamental Representations. Fundamental Representations shall survive the Closing indefinitely.
"GAAP" means generally accepted accounting principles in the United States as in effect from time to time, consistently applied.
"Governmental Authority" means any federal, state, provincial, local, municipal, or foreign government, governmental authority, regulatory or administrative agency, governmental commission, court, tribunal, or arbitral body.
"Governing Law" means the laws of the State of New York, without regard to conflict of laws principles that would require the application of the laws of any other jurisdiction.
"Hazardous Materials" means any pollutant, contaminant, chemical, waste, or any toxic, radioactive, ignitable, corrosive, reactive, or otherwise hazardous substance, waste, or material, including petroleum, petroleum products, asbestos or asbestos-containing materials, polychlorinated biphenyls, lead or lead-based paint, radon, and per- and polyfluoroalkyl substances (PFAS), in each case that is regulated under or gives rise to liability under any Environmental Law.
"Indemnification Basket" means Nine Hundred Fifty Thousand Dollars ($950,000), representing one percent (1%) of the Purchase Price, as further described in Section 9.4(a).
"Indemnification Cap" means Thirty-Three Million Two Hundred Fifty Thousand Dollars ($33,250,000), representing thirty-five percent (35%) of the Purchase Price, as further described in Section 9.4(b).
"intellectual Property" means all intellectual property and proprietary rights of any kind, including (a) trademarks, service marks, trade names, brand names, trade dress, logos, and slogans, together with all registrations and applications therefor and the goodwill associated therewith, (b) patents and patent applications, (c) copyrights and copyrightable works, together with all registrations and applications therefor, (d) trade secrets, know-how, formulations, recipes, processes, techniques, inventions, and confidential business information, (e) domain names and social media accounts, and (f) all other proprietary rights relating to any of the foregoing.
"IP Assignment Agreement" means the intellectual Property Assignment Agreement substantially in the form of Exhibit C attached hereto.
"Knowledge" (of Seller or Seller's Knowledge) means the actual knowledge of Malcolm Greer (President of Seller) and Janet Tsao (Vice President of Operations of Seller), in each case after reasonable inquiry of those employees of Seller who would reasonably be expected to have knowledge of the relevant matter.
"Law" means any federal, state, provincial, local, municipal, or foreign statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree, or other requirement enacted, issued, promulgated, enforced, or entered by any Governmental Authority.
"Lease" means that certain lease agreement, dated as of January 15, 2018, between Buckeye Industrial Properties LLC, as landlord, and Seller, as tenant, for the Manufacturing Facility, as amended, modified, or supplemented from time to time.
"Losses" means any and all losses, damages, liabilities, costs, expenses (including reasonable attorneys' fees and expenses), judgments, fines, penalties, interest, settlement amounts, deficiencies, claims, actions, suits, proceedings, and diminutions in value, whether or not involving a Third-Party Claim.
"Manufacturing Facility" means the leased real property located at 2800 Industrial Parkway, Marysville, OH 43040, together with all buildings, structures, improvements, fixtures, and appurtenances situated thereon, which is leased by Seller pursuant to the Lease.
"Material Adverse Effect" means any change, event, circumstance, occurrence, effect, or state of facts that, individually or in the aggregate with other changes, events, circumstances, occurrences, effects, or states of facts, (a) is or would reasonably be expected to be materially adverse to the business, financial condition, results of operations, or assets of the Business, taken as a whole, or (b) would reasonably be expected to prevent or materially delay the ability of Seller to consummate the transactions contemplated by this Agreement; provided, however, that in no event shall any of the following, alone or in combination, be deemed to constitute or be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur: (i) changes in general economic, business, financial, or market conditions, (ii) changes affecting the consumer products industry generally, (iii) changes in applicable Laws or GAAP (or the interpretation or enforcement thereof), (iv) acts of war, armed hostilities, sabotage, or terrorism, or any escalation or worsening thereof, (v) epidemics, pandemics (including COVID-19), earthquakes, hurricanes, floods, or other natural disasters or acts of God, (vi) the announcement or pendency of the transactions contemplated by this Agreement, (vii) any action taken or omitted to be taken by Seller at the written request of Buyer, or (viii) any failure by the Business to meet internal projections or forecasts (provided that the underlying causes of such failure may be considered); except, in the case of clauses (i) through (v), to the extent such changes, events, or occurrences have a disproportionate adverse effect on the Business relative to other businesses operating in the same industry and geographic markets.
"Non-Competition Agreement" means the Non-Competition and Non-Solicitation Agreement substantially in the form of Exhibit F attached hereto, to be executed by Malcolm Greer.
"Ordinary Course of Business" means the ordinary and usual course of business of the Business, consistent with past custom and practice (including with respect to frequency, quantity, and amount).
"Organizational Documents" means, with respect to any Person, the articles or certificate of incorporation, certificate of formation, articles of organization, bylaws, operating agreement, partnership agreement, limited liability company agreement, or other similar organizational or governing documents of such Person.
"Outside Date" means the date that is one hundred eighty (180) days from the date of this Agreement.
"Party" or "Parties" has the meaning set forth in the preamble of this Agreement.
"Permitted Encumbrances" means those Encumbrances set forth on Schedule 2.1(g), together with (a) statutory liens for current Taxes not yet due and payable or being contested in good faith by appropriate proceedings, (b) mechanics', carriers', workers', repairers', and similar statutory liens arising or incurred in the Ordinary Course of Business for amounts not yet due and payable, (c) zoning, entitlement, building, and other land use regulations imposed by any Governmental Authority having jurisdiction over the Real Property that are not violated by the current use or occupancy of such Real Property, and (d) easements, covenants, conditions, restrictions, and other similar matters of record affecting the Real Property that do not materially impair the use or occupancy of such Real Property for the operation of the Business as currently conducted.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority, or other entity.
"Phase I Report" means the Phase I Environmental Site Assessment for the Manufacturing Facility, prepared or to be prepared by Terrapoint Environmental Group, Inc. (Report No. TEG-2022-0441).
"Purchase Price" means Ninety-Five Million Dollars ($95,000,000), as more fully described in Section 3.1.
"Real Property" means, collectively, the Manufacturing Facility and the Distribution Center.
"Representative" means, with respect to any Person, such Person's directors, officers, managers, members, partners, employees, agents, consultants, accountants, attorneys, financial advisors, and other authorized representatives.
"Retained Business" means the Commercial Janitorial Services Division of Seller, including all assets, liabilities, operations, employees, contracts, and business activities primarily related thereto.
"Seller" has the meaning set forth in the preamble of this Agreement.
"Seller Fundamental Representations" means the representations and warranties of Seller set forth in Section 5.1 (Organization and Good Standing), Section 5.2 (Authority; Binding Effect), Section 5.4 (Title to Acquired Assets), and Section 5.20 (Brokers).
"Survival Period" means (a) with respect to the Fundamental Representations, indefinitely, and (b) with respect to all other representations and warranties, twenty-four (24) months from the Closing Date.
"Tax" or "Taxes" means all taxes, assessments, charges, duties, fees, levies, or other governmental charges, including all federal, state, local, and foreign income, franchise, profits, gross receipts, capital gains, capital stock, transfer, property, sales, use, value-added, occupation, excise, severance, windfall profits, stamp, license, payroll, social security, withholding, employment, unemployment, disability, workers' compensation, ad valorem, and other taxes, assessments, charges, duties, fees, levies, or governmental charges of any kind whatsoever, whether disputed or not, and including any interest, penalties, additions to tax, or additional amounts imposed with respect thereto by any Governmental Authority.
"Third-Party Claim" means any claim, action, suit, proceeding, demand, assessment, or judgment asserted or commenced by any Person who is not a Party to this Agreement or an Affiliate of a Party to this Agreement.
"Transition Services Agreement" or "TSA" means the Transition Services Agreement substantially in the form of Exhibit D attached hereto.
"Transferred Employees" means those employees of Seller who are engaged primarily in the operation of the Business, numbering approximately one hundred eighty-six (186) individuals, as more particularly identified on Schedule 5.12(a).
"Year 1 Revenue" means the aggregate net revenue of the Business during the Earnout Period, calculated in accordance with GAAP consistently applied with Seller's historical accounting practices, as more fully described in Section 3.4.
Section 1.2 — Interpretation
Unless the context of this Agreement otherwise requires, (a) words of any gender include each other gender, (b) words using the singular or plural number also include the plural or singular number, respectively, (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement, (d) the terms "Article," "Section," "Schedule," and "Exhibit" refer to the specified Article, Section, Schedule, or Exhibit of or to this Agreement unless otherwise specified, (e) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless otherwise specified, (f) the word "or" shall not be exclusive, (g) references to "dollars" or "$" shall mean United States dollars, (h) references to any Law shall be deemed to include references to such Law as amended, modified, supplemented, restated, or superseded from time to time and to all rules and regulations promulgated thereunder, (i) references to any contract shall be deemed to include references to such contract as amended, modified, supplemented, restated, or replaced from time to time in accordance with its terms and the terms of this Agreement, (j) the table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement, and (k) when calculating the period of time before which, within which, or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded, and if the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day.
ARTICLE II — PURCHASE AND SALE OF ASSETS
Section 2.1 — Acquired Assets
Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, convey, assign, transfer, and deliver to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of all Encumbrances (other than Permitted Encumbrances), all of Seller's right, title, and interest in, to, and under the following assets, properties, and rights, in each case solely to the extent used or held for use in the operation of the Business (collectively, the "Acquired Assets"):
(a) Inventory. All inventory of the Business, including all raw materials, work-in-process, finished goods, packaging materials, supplies, samples, and promotional items, wherever located, including all such inventory in transit or held at third-party locations on consignment or otherwise. As of June 30, 2022, the reference date book value of such inventory was approximately Fourteen Million Three Hundred Thousand Dollars ($14,300,000).
(b) Accounts Receivable. All Accounts Receivable of the Business as of the Closing Date, including all trade accounts receivable, notes receivable, and other rights to payment arising from the sale of products or the provision of services by the Business, together with any security held by Seller with respect thereto, all rights of offset or counterclaim, and all credits, refunds, and rebates related thereto. As of June 30, 2022, the estimated aggregate amount of such Accounts Receivable was approximately Nine Million Seven Hundred Thousand Dollars ($9,700,000).
(c) Tangible Personal Property. All tangible personal property, machinery, equipment, tools, dies, molds, furniture, fixtures, furnishings, vehicles, office equipment, computer hardware, telecommunications equipment, and other tangible assets of every kind and description used or held for use in the operation of the Business, wherever located, including all such assets located at the Manufacturing Facility, the Distribution Center, or otherwise in the possession or control of Seller or its agents.
(d) Assigned Contracts. All of Seller's rights and obligations under the Assigned Contracts, as more particularly described on Schedule 2.1(d), which includes twenty-three (23) customer contracts with major retailers and key supply agreements related to the Business.
(e) Distribution Center. The Distribution Center, being the owned real property located at 500 Commerce Boulevard, West Jefferson, OH 43162, together with all buildings, structures, improvements, fixtures, systems, and appurtenances situated thereon, and all of Seller's right, title, and interest in and to all easements, rights-of-way, and other rights appurtenant thereto.
(f) Lease for Manufacturing Facility. All of Seller's right, title, and interest in and to the Lease for the Manufacturing Facility located at 2800 Industrial Parkway, Marysville, OH 43040, subject to obtaining the Consent of Buckeye Industrial Properties LLC, as landlord, to the assignment of the Lease to Buyer in accordance with Section 2.5.
(g) intellectual Property. All intellectual Property related to the Business, including (i) the "CleanLeaf" trademark and all registrations and applications therefor, (ii) the "PureHaven" trademark and all registrations and applications therefor, (iii) all trade dress, packaging designs, and label designs associated with the Business, (iv) all domain names and website content related to the Business, (v) all formulation trade secrets, recipes, processes, and know-how related to the products of the Business, (vi) all copyrights and copyrightable works related to the Business, and (vii) all other intellectual Property used or held for use in the operation of the Business, as more particularly described on Schedule 5.7.
(h) Permits and Licenses. All permits, licenses, approvals, authorizations, registrations, certificates, variances, and similar rights obtained from any Governmental Authority that are held by Seller and relate to the operation of the Business, to the extent transferable under applicable Law.
(i) Books and Records. All books, records, files, data, correspondence, lists (including customer lists, supplier lists, and mailing lists), specifications, drawings, blueprints, creative materials, advertising and promotional materials, studies, reports, and other similar documents and records of the Business, in whatever form or medium, whether written, electronic, or otherwise; provided, however, that Seller may retain copies of such books and records as reasonably necessary for the operation of the Retained Business, Tax compliance, legal proceedings, or regulatory requirements.
(j) Goodwill. All goodwill associated with the Business, including customer relationships, vendor relationships, going-concern value, and the value of the Business as a going concern.
(k) Prepaid Expenses and Deposits. All claims, deposits, prepaid expenses, advance payments, credits, security deposits, refunds, causes of action, rights of recovery, rights of set-off, and rights of recoupment related to the Business.
(l) Other Assets. All other assets, properties, and rights of every kind and description, whether tangible or intangible, real, personal, or mixed, that are primarily used or held for use in the operation of the Business, whether or not reflected on the books and records of Seller, and regardless of where such assets are located.
Section 2.2 — Excluded Assets
Notwithstanding anything to the contrary in Section 2.1 or elsewhere in this Agreement, the following assets (collectively, the "Excluded Assets") are expressly excluded from the Acquired Assets and shall be retained by Seller:
(a) All assets, properties, and rights of the Retained Business (the Commercial Janitorial Services Division of Seller), including all inventory, equipment, contracts, intellectual property, permits, books and records, and goodwill of the Retained Business.
(b) The lease for the corporate headquarters located at 1175 Creekside Drive, Suite 400, Columbus, OH 43215, and all furniture, fixtures, equipment, and other assets located at such premises that are not primarily used in the operation of the Business.
(c) All cash, cash equivalents, bank accounts, certificates of deposit, short-term investments, and marketable securities of Seller.
(d) All Tax refunds, credits, and overpayments attributable to Taxes paid by Seller with respect to Pre-Closing Tax Periods (as defined in Section 10.14), whether received before or after the Closing Date.
(e) Seller's Organizational Documents, corporate seals, minute books, stock records, Tax Returns and workpapers, and all other entity-level records of Seller that are not exclusively related to the Business.
(f) All rights of Seller under this Agreement, the Ancillary Agreements, and the LOI.
(g) All assets specifically listed on Schedule 2.2.
Section 2.3 — Assumed Liabilities
Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer shall assume and agree to pay, perform, and discharge when due only the following liabilities and obligations of Seller (collectively, the "Assumed Liabilities"):
(a) Trade Payables. All trade accounts payable and accrued expenses related to the Business that are incurred in the Ordinary Course of Business and are outstanding as of the Closing Date. As of June 30, 2022, the estimated aggregate amount of such trade payables was approximately Four Million Two Hundred Thousand Dollars ($4,200,000).
(b) Product Warranty Obligations. All accrued product warranty obligations related to the Business that are outstanding as of the Closing Date, in an estimated aggregate amount of Six Hundred Twenty Thousand Dollars ($620,000) as of June 30, 2022.
(c) Post-Closing Contract Obligations. All obligations arising after the Closing Date under the Assigned Contracts, but only to the extent such obligations relate to periods after the Closing Date and do not arise from any breach, default, or violation by Seller prior to the Closing Date.
(d) Other Assumed Liabilities. All other liabilities and obligations specifically listed on Schedule 2.3.
Section 2.4 — Excluded Liabilities
Notwithstanding anything to the contrary in this Agreement, Buyer shall not assume and shall not be responsible for any liabilities or obligations of Seller of any kind or nature whatsoever, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due, other than the Assumed Liabilities (all such liabilities and obligations not constituting Assumed Liabilities, collectively, the "Excluded Liabilities"). Without limiting the generality of the foregoing, the Excluded Liabilities shall include:
(a) All liabilities, obligations, and commitments related to the Retained Business, whether arising before, on, or after the Closing Date.
(b) All indebtedness for borrowed money of Seller, including any loans, credit facilities, notes payable, capital leases (other than the Lease to the extent it is an Assumed Liability), and guarantees of the foregoing, together with all accrued and unpaid interest, premiums, penalties, and fees related thereto.
(c) All liabilities arising from or related to the operation of the Business prior to the Closing Date, except to the extent constituting Assumed Liabilities.
(d) All Tax liabilities of Seller, including all Taxes attributable to (i) the operation of the Business for any period (or portion thereof) ending on or before the Closing Date, (ii) the Excluded Assets, (iii) the Retained Business, or (iv) the Excluded Liabilities.
(e) All liabilities related to Seller's employee benefit plans, including any defined benefit pension plan, 401(k) plan, health insurance plan, severance plan, or other employee welfare or retirement benefit plan, whether arising before, on, or after the Closing Date.
(f) All product liability claims, warranty claims, and similar claims arising from or related to products manufactured, distributed, or sold by the Business prior to the Closing Date, to the extent such claims relate to products shipped or delivered prior to the Closing Date (other than accrued product warranty obligations included in the Assumed Liabilities).
(g) All environmental liabilities, obligations, costs, and expenses arising from or related to environmental conditions existing at, on, under, or migrating from the Real Property or any formerly owned or operated real property of the Business prior to the Closing Date, including any liability under any Environmental Law for the investigation, remediation, cleanup, or monitoring of any contamination.
Section 2.5 — Non-Assignable Assets
(a) Notwithstanding anything to the contrary in this Agreement, to the extent that the sale, assignment, transfer, conveyance, or delivery of any Acquired Asset or any claim, right, or benefit arising thereunder or resulting therefrom requires the Consent of any Person other than Seller (including any Governmental Authority, landlord, or contract counterparty), and such Consent has not been obtained prior to the Closing, this Agreement shall not constitute a sale, assignment, transfer, conveyance, or delivery of such Acquired Asset if such sale, assignment, transfer, conveyance, or delivery would constitute a breach, violation, or default thereof or a violation of applicable Law in the absence of such Consent.
(b) The Parties acknowledge that seven (7) of the twenty-three (23) Assigned Contracts contain change-of-control provisions, assignment consent provisions, or other restrictions that require the Consent of the applicable counterparty prior to the assignment of such contracts to Buyer. The Parties further acknowledge that the Lease for the Manufacturing Facility at 2800 Industrial Parkway, Marysville, OH 43040 requires the Consent of Buckeye Industrial Properties LLC, as landlord, to any assignment by Seller to Buyer.
(c) If any such Consent is not obtained prior to the Closing, then (i) the applicable Acquired Asset shall not be transferred or assigned to Buyer at the Closing and shall be held by Seller in trust for the benefit of Buyer, (ii) Seller shall continue to use commercially reasonable efforts to obtain such Consent following the Closing, and (iii) Seller shall cooperate with Buyer in any reasonable arrangement designed to provide to Buyer the economic benefits, rights, and obligations of such Acquired Asset, including by way of subcontracting, sublicensing, agency, or other similar arrangement, with all costs and expenses associated with such arrangement to be borne by Buyer. Promptly upon receipt of any such Consent, Seller shall assign, transfer, and deliver the applicable Acquired Asset to Buyer, and Buyer shall assume the related obligations thereunder.
(d) Seller shall not, without the prior written consent of Buyer, terminate, modify, amend, or waive any material right under any Acquired Asset for which a Consent has not yet been obtained.
ARTICLE III — PURCHASE PRICE AND PAYMENT
Section 3.1 — Purchase Price
The aggregate purchase price for the Acquired Assets shall be Ninety-Five Million Dollars ($95,000,000) (the "Purchase Price"), subject to the terms and conditions set forth in this Article III. The Purchase Price shall be comprised of (a) the Cash Consideration payable at the Closing in the amount of Eighty-Seven Million Dollars ($87,000,000) (being the Purchase Price minus the Earnout Amount of Eight Million Dollars ($8,000,000)) and (b) the Earnout Amount, if and to the extent payable in accordance with Section 3.4.
Section 3.2 — Payment at Closing
At the Closing, Buyer shall pay the Cash Consideration as follows:
(a) Escrow Deposit. Buyer shall deposit the Escrow Amount of Nine Million Five Hundred Thousand Dollars ($9,500,000) with the Escrow Agent, Atlantic Fiduciary Trust Company (Attention: Gregory Fenn), pursuant to the terms of the Escrow Agreement, by wire transfer of immediately available funds to the account designated by the Escrow Agent.
(b) Direct Payment to Seller. Buyer shall pay the balance of Seventy-Seven Million Five Hundred Thousand Dollars ($77,500,000) (being the Cash Consideration of $87,000,000 minus the Escrow Amount of $9,500,000) directly to Seller, by wire transfer of immediately available funds to the account(s) designated by Seller in writing no later than three (3) Business Days prior to the Closing Date.
Section 3.3 — Escrow
(a) The Escrow Amount of Nine Million Five Hundred Thousand Dollars ($9,500,000) shall be deposited with the Escrow Agent, Atlantic Fiduciary Trust Company, at 100 Federal Street, Suite 1500, Boston, MA 02110, Attention: Gregory Fenn, at the Closing in accordance with Section 3.2(a) and the terms of the Escrow Agreement.
(b) The Escrow Amount shall be held by the Escrow Agent for a period of twenty-four (24) months following the Closing Date (the "Escrow Period") for the purpose of securing the indemnification obligations of Seller under Article IX.
(c) The Escrow Amount shall be governed by the terms and conditions of the Escrow Agreement, which shall be substantially in the form attached hereto as Exhibit E and shall set forth, among other things, the procedures for making indemnification claims against the Escrow Amount, the investment of funds held in escrow, and the distribution of the Escrow Amount.
(d) Promptly following the expiration of the Escrow Period (but in no event later than ten (10) Business Days thereafter), the Escrow Agent shall release to Seller the remaining balance of the Escrow Amount, net of (i) any amounts previously distributed to Buyer in satisfaction of indemnification claims, and (ii) an amount sufficient to satisfy any indemnification claims that have been asserted by Buyer in accordance with the terms of the Escrow Agreement but that remain pending and unresolved as of the expiration of the Escrow Period, which amounts shall continue to be held by the Escrow Agent until such pending claims are finally resolved in accordance with the Escrow Agreement.
Section 3.4 — Earnout
(a) Earnout Amount. Subject to the terms and conditions of this Section 3.4, Buyer shall pay to Seller a contingent payment of up to Eight Million Dollars ($8,000,000) (the "Earnout Amount") if the Earnout Milestone is satisfied during the Earnout Period.
(b) Earnout Milestone. The "Earnout Milestone" shall be deemed to have been satisfied if Year 1 Revenue of the Business during the Earnout Period equals or exceeds Seventy-Two Million Dollars ($72,000,000).
(c) Payment. If the Earnout Milestone is satisfied, Buyer shall pay to Seller the full Earnout Amount of Eight Million Dollars ($8,000,000) by wire transfer of immediately available funds within ninety (90) days after the last day of the Earnout Period. If Year 1 Revenue during the Earnout Period is less than Seventy-Two Million Dollars ($72,000,000), no Earnout Amount shall be payable, and Seller shall have no further right or claim to any portion of the Earnout Amount. For the avoidance of doubt, the Earnout Amount is a binary payment: if the Earnout Milestone is met, the full Eight Million Dollars ($8,000,000) shall be payable; if the Earnout Milestone is not met, no payment shall be due.
(d) Revenue Calculation Methodology. Year 1 Revenue shall be calculated in accordance with GAAP consistently applied in a manner consistent with Seller's historical accounting practices as reflected in the financial information delivered to Buyer pursuant to Section 5.9. "Year 1 Revenue" shall mean the aggregate net revenue of the Business during the Earnout Period, determined after deduction of returns, allowances, discounts, chargebacks, and credits, all as calculated in accordance with GAAP.
(e) Earnout Statement. Within sixty (60) days after the last day of the Earnout Period, Buyer shall prepare and deliver to Seller a written statement (the "Earnout Statement") setting forth in reasonable detail Buyer's calculation of Year 1 Revenue for the Earnout Period, together with reasonable supporting documentation.
(f) Dispute Resolution. Seller shall have thirty (30) days following receipt of the Earnout Statement (the "Review Period") to review the Earnout Statement and deliver to Buyer a written notice of disagreement (a "Dispute Notice") specifying in reasonable detail each item in the Earnout Statement that Seller disputes and the basis for such dispute. If Seller does not deliver a Dispute Notice within the Review Period, the Earnout Statement as delivered by Buyer shall be deemed final and binding on the Parties. If Seller delivers a timely Dispute Notice, the Parties shall negotiate in good faith to resolve the disputed items for a period of thirty (30) days following delivery of the Dispute Notice. If the Parties are unable to resolve all disputed items within such thirty (30)-day period, then any remaining disputed items shall be submitted to an independent accounting firm of national reputation mutually agreed upon by the Parties (the "Independent Accountant"), which shall render a final determination of the disputed items within thirty (30) days of its engagement. The determination of the Independent Accountant shall be final and binding on the Parties, absent manifest error. The fees and expenses of the Independent Accountant shall be borne by the Party whose position is furthest from the final determination, or equally if the final determination is equidistant from the positions of the Parties.
(g) Buyer's Covenants During Earnout Period. During the Earnout Period, Buyer shall (i) operate the Business in good faith and in the ordinary course consistent with past practice, (ii) not take any actions for the primary purpose of reducing Year 1 Revenue below the Earnout Milestone, and (iii) provide Seller with reasonable access to the books and records of the Business as reasonably necessary for Seller to monitor and verify Year 1 Revenue; provided, however, that nothing in this Section 3.4(g) shall be construed to prohibit Buyer from operating the Business in its reasonable business judgment, including making changes to product lines, pricing, distribution, marketing, or personnel that Buyer determines in good faith are in the best interests of the Business.
Section 3.5 — Purchase Price Allocation
(a) Within ninety (90) days following the Closing Date, Buyer shall prepare and deliver to Seller a draft allocation of the Purchase Price (and any other amounts treated as consideration for federal income Tax purposes) among the Acquired Assets in accordance with Section 1060 of the Code and the Treasury Regulations promulgated thereunder (the "Allocation Schedule").
(b) Seller shall have thirty (30) days following receipt of the Allocation Schedule to review and provide written comments thereto. If Seller does not deliver written comments within such thirty (30)-day period, the Allocation Schedule as delivered by Buyer shall be deemed final and binding on the Parties.
(c) If Seller delivers timely written comments and the Parties are unable to reach agreement on the Allocation Schedule within thirty (30) days following delivery of such comments, then the disputed items shall be submitted to an independent accounting firm of national reputation mutually agreed upon by the Parties, and such firm's determination shall be final and binding on the Parties.
(d) Buyer and Seller agree that (i) they will each report the allocation of the Purchase Price on IRS Form 8594 (Asset Acquisition Statement Under Section 1060) and all federal, state, local, and foreign Tax Returns in a manner consistent with the final Allocation Schedule, and (ii) neither Party shall take any position on any Tax Return, before any Governmental Authority, or in any judicial proceeding that is inconsistent with such final Allocation Schedule, except as required by a final determination of a Governmental Authority.
Section 3.6 — Withholding
Buyer shall be entitled to deduct and withhold from any amounts otherwise payable to Seller pursuant to this Agreement such amounts as Buyer is required to deduct and withhold under the Code or any other applicable Tax Law. To the extent that amounts are so deducted and withheld and remitted to the applicable Governmental Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to Seller.
ARTICLE IV — CLOSING
Section 4.1 — Closing Date
The closing of the transactions contemplated by this Agreement (the "Closing") shall take place on the date that is five (5) Business Days after the satisfaction or waiver of all conditions precedent set forth in Article VII and Article VIII (other than those conditions that by their nature are to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions), or such other date as may be mutually agreed upon in writing by the Parties (the "Closing Date"). The target Closing Date shall be determined by mutual agreement of the Parties following the date of this Agreement; provided, however, that in no event shall the Closing Date be later than the Outside Date, which is one hundred eighty (180) days from the date of this Agreement.
Section 4.2 — Closing Location
The Closing shall take place remotely via the electronic exchange of documents and signatures, or, if either Party so requests in writing at least five (5) Business Days prior to the Closing Date, at the offices of Calderwood & Harkness LLP, 599 Lexington Avenue, 36th Floor, New York, NY 10022, or at such other place as the Parties may mutually agree in writing.
Section 4.3 — Seller's Closing Deliveries
At or prior to the Closing, Seller shall deliver or cause to be delivered to Buyer each of the following:
(a) The Bill of Sale, substantially in the form of Exhibit A, duly executed by Seller.
(b) The Assignment and Assumption Agreement, substantially in the form of Exhibit B, duly executed by Seller.
(c) The IP Assignment Agreement, substantially in the form of Exhibit C, duly executed by Seller.
(d) The Transition Services Agreement, substantially in the form of Exhibit D, duly executed by Seller.
(e) The Escrow Agreement, substantially in the form of Exhibit E, duly executed by Seller.
(f) The Non-Competition and Non-Solicitation Agreement, substantially in the form of Exhibit F, duly executed by Malcolm Greer.
(g) A certificate of good standing (or equivalent certification) for Seller issued by the Secretary of State of the State of Ohio, dated no more than ten (10) Business Days prior to the Closing Date, and, if applicable, a certificate of good standing (or equivalent certification) for Seller from the Secretary of State of any other jurisdiction in which Seller is qualified to do business and where the Business is conducted.
(h) A secretary's certificate of Seller, executed by the Secretary or an Assistant Secretary of Seller, certifying (i) true and complete copies of Seller's Organizational Documents as then in effect, (ii) copies of the resolutions of Seller's board of directors (and, to the extent required, of Malcolm Greer as sole shareholder) authorizing the execution, delivery, and performance of this Agreement and each Ancillary Agreement to which Seller is a party, and (iii) the incumbency and signatures of each officer of Seller executing this Agreement or any Ancillary Agreement on behalf of Seller.
(i) A properly executed certificate of non-foreign status pursuant to Treasury Regulation Section 1.1445-2(b)(2) in the form of an IRS Form W-9 or an affidavit of non-foreign status, certifying that Seller is not a "foreign person" within the meaning of Section 1445 of the Code.
(j) All Consents required under Section 7.1(c) in form and substance reasonably satisfactory to Buyer, including the Consent of Buckeye Industrial Properties LLC for the assignment of the Lease and the Consents of the counterparties to the seven (7) Assigned Contracts containing change-of-control or assignment consent provisions.
(k) Payoff letters from all holders of indebtedness for borrowed money of Seller that is secured by any Encumbrance on the Acquired Assets, together with UCC-3 termination statements or other instruments of release or discharge in form sufficient for recording or filing to release all such Encumbrances on the Acquired Assets.
(l) A special warranty deed (or equivalent conveyance instrument under Ohio law) for the Distribution Center at 500 Commerce Boulevard, West Jefferson, OH 43162, duly executed by Seller, in recordable form, conveying fee simple title to the Distribution Center to Buyer, subject only to the Permitted Encumbrances.
(m) Such other documents, instruments, or certificates as Buyer may reasonably request and as may be reasonably necessary to effect the transactions contemplated by this Agreement.
Section 4.4 — Buyer's Closing Deliveries
At or prior to the Closing, Buyer shall deliver or cause to be delivered to Seller (or, in the case of the Escrow Amount, to the Escrow Agent) each of the following:
(a) The Cash Consideration, payable in accordance with Section 3.2, consisting of (i) the direct payment of $77,500,000 to Seller and (ii) the deposit of the Escrow Amount of $9,500,000 with the Escrow Agent.
(b) The Escrow Amount, deposited with the Escrow Agent in accordance with Section 3.3.
(c) The Assignment and Assumption Agreement, substantially in the form of Exhibit B, duly executed by Buyer.
(d) The Transition Services Agreement, substantially in the form of Exhibit D, duly executed by Buyer.
(e) The Escrow Agreement, substantially in the form of Exhibit E, duly executed by Buyer.
(f) A certificate of good standing (or equivalent certification) for Buyer issued by the Secretary of State of the State of Delaware, dated no more than ten (10) Business Days prior to the Closing Date.
(g) A secretary's or manager's certificate of Buyer, executed by an authorized officer or manager of Buyer, certifying (i) true and complete copies of Buyer's Organizational Documents as then in effect, (ii) copies of the resolutions of Buyer's members or managers authorizing the execution, delivery, and performance of this Agreement and each Ancillary Agreement to which Buyer is a party, and (iii) the incumbency and signatures of each officer or manager of Buyer executing this Agreement or any Ancillary Agreement on behalf of Buyer.
(h) Such other documents, instruments, or certificates as Seller may reasonably request and as may be reasonably necessary to effect the transactions contemplated by this Agreement.
ARTICLE V — REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the Disclosure Schedules (subject to Section 12.13), Seller hereby represents and warrants to Buyer as follows:
Section 5.1 — Organization and Good Standing
Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Ohio. Seller has the corporate power and authority to own, lease, and operate its properties and to carry on the Business as presently conducted. Seller is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased, or operated by Seller or the nature of the Business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Seller's Employer Identification Number is 31-1684239. This Section 5.1 is a Seller Fundamental Representation.
Section 5.2 — Authority; Binding Effect
Seller has full corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which Seller is or will be a party, and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance of this Agreement and each Ancillary Agreement to which Seller is or will be a party, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action on the part of Seller, including the approval of Seller's board of directors and the approval of Malcolm Greer as the sole shareholder of Seller. No other corporate proceedings on the part of Seller are necessary to authorize the execution, delivery, and performance of this Agreement or any Ancillary Agreement to which Seller is or will be a party. This Agreement has been, and upon their execution each Ancillary Agreement to which Seller is or will be a party will have been, duly executed and delivered by Seller and constitutes, or upon execution will constitute, a legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar Laws affecting creditors' rights generally and to general principles of equity (whether considered in a proceeding in equity or at law). This Section 5.2 is a Seller Fundamental Representation.