SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 23, 2015 Date of earliest event reported: June 22, 2015
MARTHA STEWART LIVING
OMNIMEDIA, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-15395 | 52-2187059 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) | ||
| 601 West 26th Street New York, NY |
10001 | |||
| (Address of principal executive offices) | (Zip Code) | |||
(212) 827-8000
Registrant’s telephone number, including area code
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| x | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| x | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement |
Merger Agreement
On June 22, 2015, Sequential Brands Group, Inc., a Delaware corporation ( “Sequential”), Martha Stewart Living Omnimedia, Inc., a Delaware corporation (“MSLO”), Madeline Merger Sub., Inc., a Delaware corporation and wholly owned subsidiary of TopCo (“Madeline Merger Sub”), and Singer Merger Sub., Inc., a Delaware corporation and wholly owned subsidiary of TopCo (“Singer Merger Sub” and, together with the Madeline Merger Sub, the “Merger Subs”), and Singer Madeline Holdings, Inc., a Delaware corporation (“TopCo”), entered into an Agreement and Plan of Merger (the “Merger Agreement”).
Pursuant to the Merger Agreement, at the closing (the date on which the closing occurs, the “Closing Date”), Madeline Merger Sub will merge with and into MSLO (the “MSLO Merger”), with MSLO continuing as the surviving corporation of the MSLO Merger and a wholly owned subsidiary of TopCo, upon the terms and subject to the conditions set forth in the Merger Agreement. Substantially concurrently with the MSLO Merger, Singer Merger Sub will merge with and into Sequential (the “Sequential Merger” and together with the MSLO Merger, the “Mergers”), with Sequential continuing as the surviving corporation of the Sequential Merger and a wholly owned subsidiary of TopCo, upon the terms and subject to the conditions set forth in the Merger Agreement.
In connection with the MSLO Merger, each issued and outstanding share of MSLO’s Class A common stock, par value $0.01 per share, and Class B Common stock, par value $0.01 per share (collectively, the “MSLO Common Stock”), will, at the stockholders election, be converted into the right to receive either $6.15 in cash (the “MSLO Cash Consideration”) or a number of fully-paid and nonassessable shares of TopCo’s common stock, par value $0.01 per share (the “TopCo Common Stock”) together with cash, in lieu of fractional shares of TopCo Common Stock, equal to the MSLO Cash Consideration divided by the volume weighted average price per share of Sequential’s common stock, par value $0.01 per share (“Sequential Common Stock”), on the Nasdaq Stock Market (“Nasdaq”) for the consecutive period over the five consecutive trading days ending on the trading day immediately preceding the Closing Date, as calculated by Bloomberg Financial LP under the function “VWAP.” Stockholders of MSLO may receive, with respect to their aggregate shares of MSLO Common Stock, consideration in the form of cash, TopCo Common Stock, or a combination of the two, subject to certain proration procedures described more fully in the Merger Agreement. In connection with the Sequential Merger, each issued and outstanding share of Sequential Common Stock will be converted into the right to receive one fully-paid and nonassessable share of TopCo Common Stock (“the Sequential Merger Consideration” and such exchange ratio, the “Sequential Exchange Ratio”).
The Board of Directors of MSLO (the “MSLO Board”) (except for Martha Stewart, who recused herself), acting upon the unanimous recommendation of a special committee comprised solely of independent directors (the “Special Committee”) unanimously (1) determined that the MSLO Merger and the other transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of, MSLO and its stockholders, (2) approved the execution, delivery and performance of the Merger Agreement by MSLO and the consummation of the Mergers and the other transactions contemplated by the Merger Agreement, and (3) resolved to recommend the approval and adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement by the stockholders of MSLO. The Special Committee received a fairness opinion from its financial advisor, Moelis & Company. The fairness opinion was subsequently shared with MSLO’s Board of Directors.
The stockholders of MSLO will be asked to vote on the adoption of the Merger Agreement at a special stockholders meeting that will be held on a date to be announced. Consummation of the Mergers is contingent upon obtaining the approval of both MSLO stockholders holding at least a majority in combined voting power of the outstanding MSLO common stock and holders of at least fifty 50% in combined voting power of the outstanding MSLO common stock not owned, directly or indirectly, by Martha Stewart and her affiliates (together, the “MSLO Stockholder Approval”).
Sequential and MSLO will prepare, and Sequential will cause TopCo to file with the Securities and Exchange Commission (“SEC”), a registration statement on Form S-4 in connection with the issuance of shares of TopCo Common Stock in the Mergers (the “Form S-4”), which will include a prospectus with respect to the shares to be issued in the MSLO Merger, a preliminary and definitive proxy statement with respect to the required vote of the stockholders of MSLO in connection with the MSLO Merger, and a preliminary and definitive information statement for Sequential’s stockholders (the “Combined Statement”) in connection with the approval by the written consent of the holders of a majority of the outstanding shares of Sequential Common Stock (the “Sequential Stockholder Approval”) (which was obtained by written consent on June 22, 2015 following execution and delivery of the Merger Agreement).
After the Closing Date, TopCo will be renamed Sequential Brands Group, Inc., TopCo Common Stock will be listed on Nasdaq, Sequential’s current board will become the board of directors of TopCo and Martha Stewart will join the TopCo Board.
The Merger Agreement generally contains reciprocal representations and warranties of each of MSLO and Sequential that are typical for a public company merger, and are qualified by information contained in each party’s respective SEC filings.
In addition to the MSLO Stockholder Approval described above, consummation of the Mergers is subject to customary conditions, including without limitation (i) the expiration or termination of any waiting period applicable to the consummation of the Mergers under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) obtaining the MSLO Stockholder Approval, (iii) obtaining the Sequential Stockholder Approval (which was obtained by written consent on June 22, 2015 following execution and delivery of the Merger Agreement, (iv) the receipt of certain tax opinions, (v) the effectiveness of the Form S-4, (vi) obtaining authorization for TopCo shares to be listed on Nasdaq and (vii) the absence of any law or order prohibiting the Mergers. Moreover, each party’s obligation to consummate the Mergers is subject to certain other conditions, including without limitation (x) the accuracy of the other party’s representations and warranties (subject to customary materiality qualifiers) and (y) the other party’s compliance with its covenants and agreements contained in the Merger Agreement (subject to customary materiality qualifiers).
During the period beginning on June 22, 2015 and continuing until 11:59 p.m. on July 22, 2015 (the “No Shop Period Start Date”), MSLO and its representatives may initiate, solicit and encourage any alternative acquisition proposals from third parties and participate in discussions and negotiate with third parties with respect to alternative acquisition proposals. Notwithstanding the No Shop Period Start Date, MSLO and its representatives may continue to engage in such activities until August 6, 2015 with any person or group of persons that submits a bona fide written acquisition proposal prior to the No Shop Period Start Date (each, an “Excluded Party”) that the MSLO Board of Directors determines in good faith constitutes or would reasonably be expected to result in a superior proposal, (provided such date and time shall be extended to the extent and during such period thereafter as MSLO is in active discussions with an Excluded Party). From and after the No Shop Period Start Date, MSLO will become subject to customary “no-shop” restrictions on its ability to solicit, initiate, endorse, knowingly encourage or knowingly facilitate alternative acquisition proposals. However, at any time prior to receipt of the MSLO Stockholder Approval, MSLO may provide information to and negotiate with third parties who submit alternative acquisition proposals that the MSLO Board has determined, after consultation with outside counsel and its financial advisor, are or are reasonably likely to lead to Superior Proposals (as defined below).
Prior to receipt of the MSLO Stockholder Approval, the MSLO Board may (at the recommendation of the Special Committee) change its recommendation (a “Change in Recommendation”) upon the occurrence of a development or change in circumstances that occurs or arises after the execution of the Merger Agreement (other than an acquisition proposal) that was not known to the MSLO Board at the time of execution of the Merger Agreement (an “Intervening Event”) or upon receipt of an alternative acquisition proposal that the MSLO Board has determined in good faith, after consultation with outside counsel and its financial advisor, is more favorable to the Company’s stockholders than the Mergers and the other transactions contemplated by the Merger Agreement (taking into account any proposed adjustments to the Merger Agreement as described below), after due consideration of all of the terms and conditions of such acquisition proposal (including all legal, financial, regulatory and other aspects of the proposal) (such proposal, a “Superior Proposal”) if, in each case, the MSLO Board determines in good faith, after consultation with its outside counsel and financial advisor, that failure to do so would be inconsistent with its fiduciary duties to the Company’s stockholders. In addition, prior to receipt of the MSLO Stockholder Approval, the MSLO Board may cause MSLO to terminate the Merger Agreement in order to enter into an alternative acquisition agreement with respect to an unsolicited Superior Proposal received after the date of the Merger Agreement.
Prior to effecting a Change in Recommendation or terminating the Merger Agreement, the MSLO Board must provide Sequential with advance written notice of its intention to do so, which notice shall specify the basis for the Change in Recommendation or termination and, in the case of a Superior Proposal, specifies the terms and conditions of, and the identity of the person making, such Superior Proposal, and contemporaneously furnishes a copy (if any) of the proposed alternative acquisition agreement and any other relevant transaction documents. Sequential has three business days after receipt of such notice (the “Match Period”) to negotiate with MSLO to make such adjustments in the terms and conditions of the Merger Agreement as would permit the MSLO Board not to effect a Change in Recommendation or terminate the Agreement. Any material amendment to the financial terms
or any other material term of a Superior Proposal or material change in the facts or circumstances relating to an Intervening Event shall require a new written notice by MSLO and a new Match Period. The MSLO Board may effect a Change in Recommendation or terminate the Merger Agreement only if Sequential does not make a proposal (including any revisions to the terms of the Merger Agreement) within the Match Period that the MSLO Board determines in good faith obviates the need for a Change of Recommendation or termination of the Merger Agreement.
The Merger Agreement also contains mutual customary pre-closing covenants of Sequential and MSLO, including covenants, among others, (i) each to operate its businesses in the ordinary course consistent with past practice and to refrain from taking certain actions without the other party’s consent and (ii) each to use their respective reasonable best efforts to obtain governmental, regulatory and third party approvals. In addition, the Merger Agreement contains covenants that require MSLO to call and hold a special stockholder meeting and, subject to certain exceptions, require the MSLO Board to recommend that the MSLO stockholders approve the MSLO Merger and the Merger Agreement.
In connection with the financing of the transactions contemplated by the Merger Agreement, Sequential has entered into a commitment letter (the “Commitment Letter”) with GSO Capital Partners LP (“GSO Capital”), dated as of June 22, 2015, pursuant to which GSO Capital has committed (the “Debt Commitment”) to make available to Sequential two senior secured term loans facilities (the “Term Loans Facilities”) under which Sequential (and following the Closing Date, TopCo) may borrow (i) on the Closing Date, up to $300 million, plus (ii) on or after the Closing Date, up to an additional $60 million. In addition, GSO Capital has committed (the “Equity Commitment” and, together with the Debt Commitment, the “Financing Commitments”) under the Commitment Letter to purchase $10 million of TopCo Common Stock at a price of $13.50 per share. The proceeds of the Financing Commitments will be used to fund the MSLO Merger pursuant to the terms of the Merger Agreement, to repay existing debt of Sequential, to pay fees and expenses in connection with the foregoing, for working capital, capital expenditures, and other lawful corporate purposes of Sequential and its subsidiaries (and following the Closing Date, of TopCo and its subsidiaries). The Financing Commitments are subject to various conditions, including the negotiation and execution of definitive financing agreements prior to December 22, 2015 and the consummation of the Mergers in accordance with the terms and conditions set forth in the Merger Agreement.
The Merger Agreement contains certain provisions giving each of Sequential and MSLO rights to terminate the Merger Agreement, including in the event that: (i) the Mergers are not consummated on or before December 22, 2015, for reasons other than a breach by either party, (ii) the MSLO Stockholder Approval is not obtained, (iii) the MSLO Board effects a Change in Recommendation, or fails to publicly reaffirm its recommendation of the MSLO Merger or (iv) MSLO enters into a binding agreement providing for a superior alternative transaction before obtaining stockholder approval, subject to certain conditions.
The Merger Agreement further provides, that in the event that the Merger Agreement is terminated due to either a failure of MSLO to obtain the MSLO Stockholder Approval or a breach by MSLO of any covenants or agreements of the Merger Agreement (and such breach led to MSLO’s failure to consummate the transactions contemplated by the Merger Agreement), then MSLO will reimburse Sequential for all expenses incurred in connection with the Merger Agreement in an amount not to exceed $2.5 million. Additionally, upon termination in the event of certain circumstances, including a Change in Recommendation by the MSLO Board or MSLO entering into a binding agreement with another party providing for a superior alternative transaction, then MSLO will pay Sequential a termination fee. If the termination fee becomes payable as a result of MSLO entering into an alternative acquisition agreement prior to the No Shop Period Start Date or with an Excluded Party prior to August 6, 2015, the amount of the termination fee is $7.5 million. If the termination fee becomes payable under any other circumstances, the amount of the termination fee is $12.8 million.
Treatment of Benefit Plans in the Merger Agreement
At the effective time of the Mergers (the “Effective Time”), each option to acquire shares of MSLO Common Stock that is subject solely to a time-based condition (a “MSLO Stock Option”), whether vested or unvested, will be cancelled and converted into the right to receive a cash payment equal to the product of (A) the number of shares of MSLO Common Stock for which such MSLO Stock Option is exercisable and (B) the excess of the MSLO Cash Consideration over the per share exercise price of such MSLO Stock Option. In addition to the amounts in the immediately preceding sentence, if any such MSLO Stock Option was granted pursuant to an employment
agreement requirement and subject to a performance vesting condition that has been satisfied and had included a minimum post-termination exercise period of 18 months, the holder of such MSLO Stock Options shall receive further consideration based on the MSLO Cash Consideration with value adjustments to reflect such holder’s specific exercise terms. If the exercise price per share of any MSLO Stock Option is equal to or greater than the MSLO Cash Consideration, such MSLO Stock Option will be cancelled without any payments.
Pursuant to the Merger agreement, at the Effective Time, each outstanding option to acquire shares of MSLO Common Stock that is subject to performance-based vesting conditions (a “MSLO Performance Stock Option”) and that is vested as of the Effective Time (taking into account the next following sentence) will be cancelled and converted into the right to receive a cash payment equal to the product of (A) the number of shares of MSLO Common Stock for which such MSLO Stock Performance Stock Option is exercisable and (B) the excess of the MSLO Cash Consideration over the per share exercise price of such MSLO Performance Stock Option. At the Effective Time, each unvested MSLO Performance Stock Option will vest at the Effective Time, unless and to the extent that the specified stock price condition(s) at which such MSLO Performance Stock Option would have vested in the ordinary course, as specified in the applicable award agreement, are higher than the MSLO Cash Consideration. All of the MSLO Performance Stock Options that remain unvested at the Effective Time held by any single holder will be collectively converted into the right for such holder to receive a cash payment in the amount equal to the MSLO Cash Consideration with value adjustments to reflect such holder’s specific vesting and exercise terms.
At the Effective Time, each outstanding award of restricted stock units corresponding to shares of MSLO Common Stock that is subject solely to a time-based vesting conditions (a “MSLO RSU Award”), will be cancelled and converted into the right to receive a cash payment equal to the MSLO Cash Consideration for each share of MSLO Common Stock subject to such MSLO RSU Award.
Pursuant to the Merger Agreement, at the Effective Time, each outstanding award of restricted stock units corresponding to shares of MSLO Common Stock that is subject to performance-based vesting conditions (a “MSLO Performance RSU Award”) and that is vested as of the Effective Time (taking into account the next following sentence) will be cancelled and converted into the right to receive a cash payment equal to the MSLO Cash Consideration for each share of MSLO Common Stock subject to such MSLO Performance RSU Award. At the Effective Time, each unvested MSLO Performance RSU Award will vest at the Effective Time, unless and to the extent that the specified stock price condition(s) at which such MSLO Performance RSU Award would have vested in the ordinary course, as specified in the applicable award agreement, are higher than the MSLO Cash Consideration. All of the MSLO Performance RSU Awards that remain unvested at the Effective Time held by any single holder will be collectively converted into the right for such holder to receive a cash payment in the amount equal to the MSLO Cash Consideration with value adjustments to reflect such holder’s specific vesting and exercise terms.
Pursuant to the Merger Agreement, any payments in respect of the MSLO Stock Options, MSLO Performance Stock Options, MSLO RSU Awards and MSLO Performance RSU Awards will be less any applicable taxes.
At the effective time of the Sequential Merger (the “Sequential Effective Time”), each outstanding option to acquire shares of Sequential Common Stock (a “Sequential Stock Option”), whether vested or unvested, will be converted into an option to purchase (A) that number of shares of TopCo Common Stock, rounded down to the nearest whole share, equal to the product determined by multiplying (x) the total number of shares of Sequential Common Stock subject to such Sequential Stock Option immediately prior to the Sequential Effective Time by (y) the Sequential Exchange Ratio, (B) at a per-share exercise price, rounded up to the nearest whole cent, equal to the quotient determined by dividing (x) the exercise price per share of Sequential Common Stock at which such Sequential Stock Option was exercisable immediately prior to the Sequential Effective Time by (y) the Sequential Exchange Ratio.
At the Sequential Effective Time, each outstanding award of restricted stock units corresponding to shares of Sequential Common Stock (a “Sequential RSU Award”), whether vested or unvested, will be converted into a TopCo restricted stock unit award with respect to a number of shares of TopCo Common Stock, rounded up to the nearest whole share, determined by multiplying the number of shares of Sequential Common Stock subject to such Sequential RSU Award immediately prior to the Sequential Effective Time by the Sequential Exchange Ratio. To the extent that the Sequential RSU Awards vest in whole or in part based on the achievement of performance goals, the compensation committee of the Sequential Board will appropriately adjust such performance goals to reflect the effect of the transactions contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, at the Sequential Effective Time, each unvested outstanding award of restricted Sequential Common Stock (a “Sequential Restricted Stock Award”) will be converted into a Topco restricted stock award with respect to a number of shares of TopCo Common Stock, rounded up to the nearest whole share, determined by multiplying the number of shares of Sequential Common Stock subject to such Sequential Restricted Stock Award immediately prior to the Sequential Effective Time by the Sequential Exchange Ratio. To the extent that the Sequential Restricted Stock Awards vest in whole or in part based on the achievement of performance goals, the compensation committee of the Sequential Board will appropriately adjust such performance goals to reflect the effect of the transactions contemplated by this Agreement.
At the Sequential Effective Time, each outstanding warrant to purchase any shares of Sequential Common Stock or other equity interests (a “Sequential Warrant”), whether vested or unvested, will be converted into a warrant to purchase shares of TopCo Common Stock with respect to a number of TopCo Common Stock, rounded up the nearest whole share, determined by multiplying the number of shares of Sequential Common Stock subject to such Sequential Warrant immediately prior to the Effective Time by the Sequential Exchange Ratio.
Additional Information about the Merger Agreement
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 and is incorporated herein by reference.
The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about Sequential, Singer Merger Sub, MSLO, Madeline Merger Sub, TopCo or any of their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Merger Agreement (a) were made by the parties thereto only for purposes of that agreement and as of specific dates; (b) were made solely for the benefit of the parties to the Merger Agreement; (c) may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement (such disclosures include information that has been included in public disclosures, as well as additional non-public information); (d) may have been made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts; and (e) may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding Sequential, Singer Merger Sub, MSLO, Madeline Merger Sub, TopCo or their respective businesses. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Sequential, Singer Merger Sub, MSLO, Madeline Merger Sub, TopCo or any of their respective subsidiaries or affiliates. Additionally, the representations, warranties, covenants, conditions and other terms of the Merger Agreement may be subject to subsequent waiver or modification. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in MSLO’s public disclosures. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding MSLO that is or will be contained in, or incorporated by reference into, the Forms 10-K, Forms 10-Q and other documents that are filed with the Securities and Exchange Commission.
Voting Agreement
In connection with the execution of the Merger Agreement, MSLO’s Founder and Chief Creative Officer, Martha Stewart and the Martha Stewart Family Limited Partnership (“MSFLP” and, together with Ms. Stewart, the “MS Stockholders”), Sequential and TopCo entered into a Voting and Support Agreement (the “Voting Agreement”). Under the Voting Agreement the MS Stockholders agreed to vote or cause to be voted, in person or by proxy, their shares of Class A Common Stock and Class B Common Stock (i) in favor of the MSLO Merger, (ii) against any action or agreement submitted for the vote or written consent of stockholders that is in opposition to the MSLO Merger and (iii) against any alternative acquisition proposal. The Voting Agreement terminates on the earliest of (i) the date the Merger Agreement is terminated in accordance with its terms, (ii) the closing of the MSLO Merger, (iii) the MSLO Board withdrawing or modifying the recommendation of advisability of the MSLO Merger or recommending or declaring advisable the approval by MSLO stockholders of an alternative proposal, (iv) the date the MSLO Stockholder Approval has been obtained, (v) the delivery of notice by
Sequential of the termination of the Voting Agreement and (vi) the delivery of notice by the MS Stockholders to Sequential of the termination of the Voting Agreement, to the extent permitted under applicable law, in the event of certain fundamental amendments to the Merger Agreement without the prior consent of the MS Stockholders. The MS Stockholders also agreed not to exercise any appraisal rights they may have under Delaware law in connection with the MSLO Merger, and TopCo and Sequential agreed, following the Closing Date, to cause MSLO to reimburse up to $4,000,000 in out-of-pocket fees and expenses incurred by the MS Stockholders in connection with the negotiation, execution, and delivery of the Merger Agreement, the Voting Agreement and the other agreements contemplated thereby. Also pursuant to the Voting Agreement, (i) the revocable proxy, dated October 6, 2004, whereby Martha Stewart appointed Alexis Stewart as her true and lawful proxy, attorney-in-fact and agent with respect to all of the securities of MSLO that are owned by Martha Stewart from time to time and (ii) the power of attorney, dated October 6, 2004, whereby MSFLP appointed Alexis Stewart as its true and lawful proxy, attorney-in-fact and agent with respect to all of the securities of the Company that are owned by MSFLP from time to time, were each revoked.
The foregoing description of the Voting Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Voting Agreement, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein by reference.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
Martha Stewart Employment Agreement
On June 22, 2015, in connection with the transactions contemplated by the Merger Agreement, TopCo entered into an agreement with Martha Stewart with respect to her employment, as described below. At the Effective Time, this agreement will replace (and is based on) the employment agreement currently in existence between Ms. Stewart and MSLO. The employment agreement has an initial term commencing on the Closing Date and ending on December 31, 2020, provided that the term will automatically be renewed for five additional calendar years ending December 31, 2015 if either the aggregate gross licensing revenues (as defined in the employment agreement) for calendar years 2018 through 2020 exceed $195 million or the gross licensing revenues for calendar year 2020 equal or exceed $65 million.
During the term of her new employment agreement with TopCo, Ms. Stewart will, among other things, serve as Founder and Chief Creative Officer of TopCo and will be entitled to receive, among other things, (i) an annual base salary of $500,000 per year, (ii) a guaranteed annual payment of $1.3 million (the “Guaranteed Payment”), (iii) annually, 10% of the gross licensing revenues in excess of a specified threshold (the “Incentive Payment”), (iv) the opportunity to earn an annual bonus, and (v) payment of certain of Ms. Stewart’s expenses, up to an annual maximum amount.
In the event that the new employment agreement is not renewed after its initial term, Ms. Stewart instead will consult for TopCo through December 31, 2025, and she will receive an annual fee ranging from $1.5 million to $4.5 million, determined based on gross licensing revenues.
In addition, and regardless of whether Ms. Stewart remains employed with TopCo, beginning in 2026 and ending on the later of December 31, 2030 and the date of her death, TopCo will pay to Ms. Stewart 3.5% of the annual gross licensing revenues for each such year.
Upon certain qualifying terminations of her employment, Ms. Stewart will be entitled to, among other things, continued payment of (a) her base salary, the Guaranteed Payment, the Incentive Payment and reimbursement of expenses, all as if Ms. Stewart had remained employed through the end of the then-current term, and (b) continuation of certain benefits and perquisites for a specified period of time post-termination. If such termination occurs at the end of the initial term of the employment agreement, when it (i) would have been extended under the terms of the agreement, the payments in clause (a) above will continue through the end of what would have been the extended term; or (ii) would not have been extended under the terms of the agreement, then Ms. Stewart will receive the consulting fee as described above.
If the Merger Agreement is terminated, Ms. Stewart’s employment agreement with TopCo will automatically terminate and Ms. Stewart’s employment agreement with MSLO will continue in accordance with its terms.
The foregoing description of the employment agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the employment agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Martha Stewart Amended and Restated Intellectual Property License and Preservation Agreement
Also on June 22, 2015, MSLO and Martha Stewart entered into an Amended and Restated Intellectual Property License and Preservation Agreement (the “Amended IP Agreement”), which, at the Effective Time, will supersede the Intellectual Property License and Preservation Agreement, dated as of October 22, 1999 between MSLO and Martha Stewart (as amended prior to the date hereof, the “Prior IP Agreement”). Under the terms of the Amended IP Agreement, Martha Stewart grants MSLO an exclusive, worldwide, perpetual, royalty-free license to use her name, image, signature, voice and likeness for MSLO’s products and services, subject to certain standards and restrictions set forth therein. The Amended IP Agreement contains various customary provisions regarding MSLO’s obligations to preserve the quality of the licensed marks and to protect these marks from infringement by third parties. If the Merger Agreement is terminated, the Amended IP Agreement will automatically terminate and the Prior IP Agreement will continue in accordance with its terms.
The foregoing description of the Amended IP Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amended IP Agreement, a copy of which is attached hereto as Exhibit 10.2 and incorporated herein by reference.
Martha Stewart Amended and Restated Intangible Asset License Agreement
Also on June 22, 2015, MSLO entered into an Amended and Restated Intangible Asset License Agreement (the “Amended Intangible Agreement”) with MS Real Estate Management Company (the “Licensor”), an entity owned by Martha Stewart, which, at the Effective Time, will supersede the Intangible Asset License Agreement between the Licensor and MSLO, dated as of June 13, 2008, as such agreement was amended from time to time (the “Prior Intangible Agreement”). Pursuant to the Amended Intangible Agreement, MSLO will pay an annual fee of $1.7 million to the Licensor over the term for the perpetual, exclusive right to use Ms. Stewart’s lifestyle intangible asset in connection with MSLO products and services and during the term of the Amended Intangible Agreement to access various real properties owned by Ms. Stewart. The Amended Intangible Agreement has an initial term which commences on the Effective Time and expires on December 31, 2020, subject to a five-year automatic renewal in the event that gross licensing revenues exceed certain thresholds set forth in the Amended Intangible Agreement. The Licensor will be responsible, at its expense, to maintain, landscape and garden the properties in a manner consistent with past practices; provided, however, that MSLO will be responsible for Company-approved costs associated with the Licensor’s business expenses, and will reimburse Licensor for up to $100,000 of approved and documented household expenses. If the Merger Agreement is terminated, the Amended Intangible Agreement will automatically terminate and the Prior Intangible Agreement will continue in accordance with its terms.
The foregoing description of the Amended Intangible Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amended Intangible Agreement, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.
Allison Hoffman Amendment to Employment Agreement
On June 22, 2015, MSLO and Allison Hoffman amended her employment agreement to provide for a special bonus. Under the amendment, Ms. Hoffman will receive a one-time, non-recurring, guaranteed bonus in the amount of $150,000 if Ms. Hoffman is still employed with MSLO through December 31, 2015 or her employment is terminated prior to such date by MSLO without “cause” (as such term is defined in her employment agreement). The special bonus will be separate and distinct from, and in addition, to any payment that may be payable to Ms. Hoffman under MSLO’s annual incentive plan.
In addition, if Ms. Hoffman’s employment terminates prior to December 31, 2015 on account of her death or disability, she will receive payment of a pro-rated special bonus, based on her service through the date of termination. If Ms. Hoffman is terminated with “cause” or she terminates her employment for any reason other than death or disability prior to the date the special bonus is paid, her special bonus will be forfeited.
The foregoing description of the amendment to employment agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the amendment to employment agreement, a copy of which is attached hereto as Exhibit 10.4 and incorporated herein by reference.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
On June 22, 2015, the MSLO Board amended the MSLO By-Laws to adopt a new Section 8 to Article VI, which is set forth as follows:
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Corporation, (ii) action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s shareholders, (iii) action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the Certificate of Incorporation or Bylaws (as either may be amended from time to time) of the Corporation or (iv) any action asserting a claim governed by the internal affairs doctrine. If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (b) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
| Item 8.01 | Other Events |
Also on June 22, 2015, Martha Stewart, MSFLP, Alexis Stewart, the Martha Stewart 1999 Family Trust, the Martha Stewart 2000 Family Trust and the Martha and Alexis Stewart Charitable Foundation (collectively, the “Stewart Stockholders”) entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with TopCo, which grants the Stewart Stockholders certain “demand” registration rights for up to two offerings of greater than $15 million each, certain “S-3” registration rights for up to three offerings of greater than $5 million each and “piggyback” registration rights with respect to the shares of TopCo common stock held by the Stewart Stockholders (whether issued pursuant to the Merger Agreement or acquired thereafter) and their transferees. All reasonable expenses incident to such registrations generally are required to be borne by the TopCo. The Registration Rights Agreement becomes effective upon the Effective Time and terminates if the Merger Agreement is terminated.
The foregoing description of the Registration Rights Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Registration Rights Agreement, a copy of which is attached hereto as Exhibit 99.2 and incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits |
| (d) | Exhibits |
| Exhibit |
Description | |
| 2.1* |
Agreement and Plan of Merger, dated as of June 22, 2015, by and among MSLO, Madeline Merger Sub, Inc., Sequential Brands Group, Inc., Singer Merger Sub, Inc., and Singer Madeline Holdings, Inc. | |
| 3.1 |
By-Law Amendment, Article VI Section 8. | |
| 10.1 |
Employment Agreement, dated as of June 22, 2015, by and between Singer Madeline Holdings, Inc. and Martha Stewart. | |
| 10.2 |
Amended and Restated Intellectual Property License and Preservation Agreement, dated as of June 22, 2015, by and between Martha Stewart and MSLO. | |
| 10.3 |
Amended and Restated Intangible Asset License Agreement, dated as of June 22, 2015, by and between MS Real Estate Management Company and MSLO. | |
| 10.4 |
Employment Agreement between Allison Hoffman and MSLO, dated October 16, 2014, as amended June 22, 2015. | |
| 99.1 |
Voting Support and Agreement, dated as of June 22, 2015, by and among Sequential Brands Group, Inc., Singer Madeline Holdings, Inc., and certain stockholders of Martha Stewart Living Omnimedia, Inc. | |
| 99.2 |
Registration Rights Agreement, dated as of June 22, 2015, by and between Singer Madeline Holdings, Inc. and certain stockholders of MSLO. | |
| * | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. MSLO hereby agrees to furnish supplementally a copy of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission. |
Additional Information and Where to Find It
In connection with the proposed merger transaction, MSLO and Sequential will cause TopCo to file with the SEC a Registration Statement on Form S-4 that will contain a proxy statement/prospectus for MSLO’s special meeting and other relevant documents. MSLO intends to furnish to MSLO’s stockholders the proxy statement/prospectus and other relevant documents. BEFORE MAKING ANY VOTING DECISION, MSLO’S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT/PROSPECTUS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND THE PARTIES TO THE MERGER. MSLO’s stockholders will be able to obtain a free copy of documents filed with the SEC at the SEC’s website at http://www.sec.gov. In addition, MSLO’s stockholders may obtain a free copy of the proxy statement/prospectus and other of MSLO’s filings with the SEC from MSLO’s website at www.marthastewart.com/IR or by directing a request to: Martha Stewart Living Omnimedia, Inc., Attn: Corporate Secretary, 601 West 26th Street, New York, New York 10001 or knash@marthastewart.com.
The directors, executive officers and certain other members of management and employees of MSLO may be deemed “participants” in the solicitation of proxies from stockholders of MSLO in favor of the proposed merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the stockholders of MSLO in connection with the proposed merger will be set forth in the proxy statement and the other relevant documents to be filed with the SEC. You can find information about MSLO’s executive officers and directors in its Annual Report on Form 10-K filed with the SEC on March 6, 2015, Amendment No. 1 to the Annual Report on Form 10-K/A filed with the SEC on April 27, 2015 and in its definitive proxy statement filed with the SEC on Schedule 14A on April 7, 2014. Information about Sequential’s directors and executive officers is available in Sequential’s proxy statement for its 2015 Annual Meeting of Stockholders filed with the SEC on April 16, 2015. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC regarding the Mergers when they become available. Investors should read the proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents from using the applicable sources indicated above.
This document and the information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.
Forward-Looking Statements
Statements in this Current Report on Form 8-K and the exhibits furnished or filed herewith that relate to future results and events are forward-looking statements based on MSLO’s current expectations. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Risks, uncertainties and assumptions include, but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (2) the inability to complete the proposed merger due to the failure to obtain stockholder approvals for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; (3) the failure of Sequential to obtain the necessary financing arrangements to consummate the transaction; (4) risks related to disruption of management’s attention from MSLO’s ongoing business operations due to the transaction; and (5) the effect of the announcement of the proposed merger on MSLO’s relationships with its licensing partners, operating results and business generally.
Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent MSLO’s views as of the date on which such statements were made. MSLO anticipates that subsequent events and developments will cause its views to change. However, although MSLO may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing MSLO’s views as of any date subsequent to the date hereof. Additional factors that may cause results to differ materially from those described in the forward-looking statements are set forth in MSLO’s Annual Report on Form 10-K filed with the SEC on March 6, 2015, Amendment No. 1 to the Annual Report on Form 10-K/A filed with the SEC on April 27, 2015, and in subsequent reports on Forms 10-Q and 8-K filed with the SEC by MSLO.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MARTHA STEWART LIVING OMNIMEDIA, INC. | ||||||||||
| By: | /s/ Allison Hoffman | |||||||||
| Name: | Allison Hoffman | |||||||||
| Date: June 23, 2015 |
Title: | Executive Vice President, General Counsel and Corporate Secretary | ||||||||
EXHIBIT INDEX
| Exhibit |
Description | |
| 2.1* |
Agreement and Plan of Merger, dated as of June 22, 2015, by and among MSLO, Madeline Merger Sub, Inc., Sequential Brands Group, Inc., Singer Merger Sub, Inc., and Singer Madeline Holdings, Inc. | |
| 3.1 |
By-Law Amendment, Article VI Section 8. | |
| 10.1 |
Employment Agreement, dated as of June 22, 2015, by and between Singer Madeline Holdings, Inc. and Martha Stewart. | |
| 10.2 |
Amended and Restated Intellectual Property License and Preservation Agreement, dated as of June 22, 2015, by and between Martha Stewart and MSLO. | |
| 10.3 |
Amended and Restated Intangible Asset License Agreement, dated as of June 22, 2015, by and between MS Real Estate Management Company and MSLO. | |
| 10.4 |
Employment Agreement between Allison Hoffman and MSLO, dated October 16, 2014, as amended June 22, 2015. | |
| 99.1 |
Voting Support and Agreement, dated as of June 22, 2015, by and among Sequential Brands Group, Inc., Singer Madeline Holdings, Inc., and certain stockholders of Martha Stewart Living Omnimedia, Inc. | |
| 99.2 |
Registration Rights Agreement, dated as of June 22, 2015, by and between Singer Madeline Holdings, Inc. and certain stockholders of MSLO. | |
| * | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. MSLO hereby agrees to furnish supplementally a copy of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission. |
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
MARTHA STEWART LIVING OMNIMEDIA, INC.,
MADELINE MERGER SUB, INC.,
SEQUENTIAL BRANDS GROUP, INC.,
SINGER MERGER SUB, INC.,
and
SINGER MADELINE HOLDINGS, INC.
DATED AS OF JUNE 22, 2015
TABLE OF CONTENTS
| Page | ||||||||
| ARTICLE I THE MERGERS |
2 | |||||||
| 1.1 |
The Mergers. |
2 | ||||||
| 1.2 |
Closing. |
3 | ||||||
| 1.3 |
Effective Time. |
3 | ||||||
| 1.4 |
Effects. |
3 | ||||||
| 1.5 |
Organizational Documents. |
3 | ||||||
| 1.6 |
Directors and Officers. |
4 | ||||||
| 1.7 |
Reservation of Right to Change Structure. |
4 | ||||||
| ARTICLE II EFFECT ON CAPITAL STOCK AND EQUITY AWARDS; PAYMENT PROCEDURES |
5 | |||||||
| 2.1 |
Effect on Capital Stock and Equity Awards of MSLO and Sequential. |
5 | ||||||
| 2.2 |
Exchange of Shares and Certificates. |
10 | ||||||
| 2.3 |
Election Procedures |
14 | ||||||
| 2.4 |
Proration. |
16 | ||||||
| 2.5 |
Certain Adjustments. |
17 | ||||||
| 2.6 |
Further Assurances. |
18 | ||||||
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF MADELINE |
18 | |||||||
| 3.1 |
Corporate Organization. |
18 | ||||||
| 3.2 |
Capitalization. |
19 | ||||||
| 3.3 |
Corporate Authorization. |
20 | ||||||
| 3.4 |
Governmental Authorization. |
21 | ||||||
| 3.5 |
Non-Contravention. |
21 | ||||||
| 3.6 |
MSLO SEC Filings. |
22 | ||||||
| 3.7 |
Form S-4. |
24 | ||||||
| 3.8 |
Absence of Certain Changes or Events. |
25 | ||||||
| 3.9 |
Compliance with Laws; Permits. |
25 | ||||||
| 3.10 |
Litigation. |
26 | ||||||
| 3.11 |
Title to Properties; Absence of Liens. |
26 | ||||||
| 3.12 |
Taxes. |
26 | ||||||
| 3.13 |
Employee Benefit Plans. |
27 | ||||||
| 3.14 |
Employees, Labor Matters. |
29 | ||||||
| 3.15 |
Environmental Matters. |
29 | ||||||
| 3.16 |
Intellectual Property. |
30 | ||||||
| 3.17 |
MSLO Material Contracts. |
32 | ||||||
| 3.18 |
Licensees. |
32 | ||||||
| 3.19 |
Affiliate Transactions. |
33 | ||||||
| 3.20 |
Insurance. |
33 | ||||||
| 3.21 |
Brokers’ and Finders’ Fees. |
34 | ||||||
| 3.22 |
No Other Representations or Warranties. |
34 | ||||||
i
| Page | ||||||||
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SEQUENTIAL |
34 | |||||||
| 4.1 |
Corporate Organization. |
34 | ||||||
| 4.2 |
Capitalization. |
35 | ||||||
| 4.3 |
Corporate Authorization. |
36 | ||||||
| 4.4 |
Governmental Authorization. |
37 | ||||||
| 4.5 |
Non-Contravention. |
37 | ||||||
| 4.6 |
Sequential SEC Filings. |
37 | ||||||
| 4.7 |
Form S-4. |
40 | ||||||
| 4.8 |
Absence of Certain Changes or Events. |
40 | ||||||
| 4.9 |
Compliance with Laws; Permits. |
41 | ||||||
| 4.10 |
Litigation. |
41 | ||||||
| 4.11 |
Title to Properties; Absence of Liens. |
41 | ||||||
| 4.12 |
Taxes. |
42 | ||||||
| 4.13 |
Employee Benefit Plans. |
43 | ||||||
| 4.14 |
Employees, Labor Matters. |
44 | ||||||
| 4.15 |
Environmental Matters. |
45 | ||||||
| 4.16 |
Intellectual Property. |
45 | ||||||
| 4.17 |
Sequential Material Contracts. |
47 | ||||||
| 4.18 |
Financing. |
47 | ||||||
| 4.19 |
Licensees. |
48 | ||||||
| 4.20 |
Affiliate Transactions. |
49 | ||||||
| 4.21 |
Insurance. |
49 | ||||||
| 4.22 |
Brokers’ and Finders’ Fees. |
50 | ||||||
| 4.23 |
TopCo and Merger Subs. |
50 | ||||||
| 4.24 |
No Other Representations or Warranties. |
51 | ||||||
| ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS |
51 | |||||||
| 5.1 |
Conduct of Businesses Prior to the Effective Time. |
51 | ||||||
| 5.2 |
MSLO Forbearances. |
51 | ||||||
| 5.3 |
Sequential Forbearances. |
54 | ||||||
| 5.4 |
Control of Other Party’s Business. |
56 | ||||||
| 5.5 |
No Solicitation; Recommendation of the Merger. |
56 | ||||||
| 5.6 |
Directors. |
61 | ||||||
| 5.7 |
Financing |
61 | ||||||
| 5.8 |
Termination of Certain Agreements. |
64 | ||||||
| ARTICLE VI ADDITIONAL AGREEMENTS |
64 | |||||||
| 6.1 |
Preparation of the Form S-4 and the Proxy Statement; MSLO Stockholders Meeting. |
64 | ||||||
| 6.2 |
Access to Information; Confidentiality. |
65 | ||||||
| 6.3 |
Required Actions. |
66 | ||||||
ii
| Page | ||||||||
| 6.4 |
Indemnification and Insurance. |
67 | ||||||
| 6.5 |
Sequential Stockholder Approval. |
68 | ||||||
| 6.6 |
Public Announcements. |
69 | ||||||
| 6.7 |
Takeover Laws. |
69 | ||||||
| 6.8 |
Section 16 Matters. |
69 | ||||||
| 6.9 |
Stockholder Litigation. |
69 | ||||||
| 6.10 |
Nasdaq Listing. |
70 | ||||||
| 6.11 |
Employees and Employee Benefits. |
70 | ||||||
| ARTICLE VII CONDITIONS PRECEDENT |
71 | |||||||
| 7.1 |
Conditions to Each Party’s Obligation to Effect the Mergers. |
71 | ||||||
| 7.2 |
Conditions to Obligations of MSLO. |
72 | ||||||
| 7.3 |
Conditions to Obligations of Sequential. |
73 | ||||||
| ARTICLE VIII TERMINATION AND AMENDMENT |
74 | |||||||
| 8.1 |
Termination. |
74 | ||||||
| 8.2 |
Effect of Termination. |
75 | ||||||
| 8.3 |
Amendment. |
76 | ||||||
| 8.4 |
Extension; Waiver. |
77 | ||||||
| ARTICLE IX GENERAL PROVISIONS |
77 | |||||||
| 9.1 |
Nonsurvival of Representations and Warranties. |
77 | ||||||
| 9.2 |
Fees and Expenses. |
77 | ||||||
| 9.3 |
Notices. |
77 | ||||||
| 9.4 |
Definitions. |
78 | ||||||
| 9.5 |
Interpretation. |
82 | ||||||
| 9.6 |
Severability. |
83 | ||||||
| 9.7 |
Counterparts. |
83 | ||||||
| 9.8 |
Entire Agreement; No Third-Party Beneficiaries. |
83 | ||||||
| 9.9 |
Governing Law. |
83 | ||||||
| 9.10 |
Assignment; Successors. |
83 | ||||||
| 9.11 |
Specific Enforcement. |
84 | ||||||
| 9.12 |
Submission to Jurisdiction. |
84 | ||||||
| 9.13 |
Waiver of Jury Trial. |
85 | ||||||
| 9.14 |
No Presumption Against Drafting Party. |
85 | ||||||
| Annex A | Defined Terms | A-1 | ||
| Exhibit A | Form of MSLO Support Agreement | |||
| Exhibit B | Form of Sequential Written Consent | |||
| Exhibit C | Certificate of Incorporation of MSLO Surviving Corporation | |||
| Exhibit D | Bylaws of MSLO Surviving Corporation | |||
| Exhibit E | Certificate of Incorporation of Sequential Surviving Corporation | |||
| Exhibit F | Bylaws of Sequential Surviving Corporation | |||
iii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of June 22, 2015, is by and among Martha Stewart Living Omnimedia, Inc., a Delaware corporation (“MSLO”), Madeline Merger Sub, Inc., a Delaware corporation and wholly owned Subsidiary of TopCo (“Madeline Merger Sub”), Sequential Brands Group, Inc., a Delaware corporation (“Sequential”), Singer Merger Sub, Inc., a Delaware corporation and wholly owned Subsidiary of TopCo (“Singer Merger Sub” and, together with Madeline Merger Sub, Inc., the “Merger Subs”), and Singer Madeline Holdings, Inc., a Delaware corporation (“TopCo”).
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of MSLO and Sequential deem it advisable and in the best interests of each corporation and its respective stockholders that MSLO and Sequential engage in a business combination upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of MSLO, acting upon the recommendation of a special committee comprised solely of independent directors (the “Special Committee”) has approved entry into this Agreement and the merger of Madeline Merger Sub with and into MSLO (the “MSLO Merger”), with MSLO continuing as the surviving corporation and a wholly owned subsidiary of TopCo (the “MSLO Surviving Corporation”), pursuant to which each share of Class A common stock, par value $.01 per share, of MSLO (the “MSLO Class A Common Stock”), and Class B common stock, par value $.01 per share, of MSLO (the “MSLO Class B Common Stock” and collectively with the MSLO Class A Common Stock, the “MSLO Common Stock”) shall be converted into the right to receive shares of common stock, par value $0.01 per share of TopCo (the “TopCo Common Stock”) and/or cash, in each case upon the terms and subject to the conditions set forth in this Agreement, and has directed that this Agreement be submitted to stockholders and recommended to holders of MSLO Common Stock that they adopt and approve this Agreement in accordance with the DGCL on the terms and conditions set forth herein;
WHEREAS, the Board of Directors of Sequential has approved this Agreement and the merger of Singer Merger Sub with and into Sequential (the “Sequential Merger” and, together with the MSLO Merger, the “Mergers”), with Sequential continuing as the surviving corporation and a wholly owned subsidiary of TopCo (the “Sequential Surviving Corporation”), pursuant to which each share of common stock, par value $.001 per share, of Sequential (the “Sequential Common Stock”) shall be converted into the right to receive shares of TopCo Common Stock, upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, Sequential and MSLO desire to make certain representations, warranties, covenants and agreements in connection with the Mergers and also to prescribe various conditions to the Mergers;
WHEREAS, for U.S. federal income tax purposes, it is intended that the Mergers will qualify as a transaction described in Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”);
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition to the willingness of Sequential to enter into this Agreement, certain stockholders of MSLO (the “MSLO Supporting Stockholders”) are entering into a voting and support agreement with Sequential substantially in the form attached hereto as Exhibit A (the “MSLO Support Agreement”), pursuant to which, among other things, the MSLO Supporting Stockholders have irrevocably agreed, subject to the terms of the MSLO Support Agreement, to vote all shares of MSLO Common Stock owned by such stockholders in favor of the MSLO Merger; and
WHEREAS, immediately following the execution and delivery of this Agreement, certain stockholders of Sequential will be executing and delivering to MSLO a written consent pursuant to which such holders shall adopt and approve this Agreement in accordance with Section 228 and Section 251(c) of the DGCL (as defined below), substantially in the form attached hereto as Exhibit B.
NOW, THEREFORE, in consideration of the foregoing and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1 The Mergers.
(a) On the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “DGCL” ), Madeline Merger Sub shall be merged with and into MSLO at the MSLO Effective Time. Following the MSLO Effective Time, the separate corporate existence of Madeline Merger Sub shall cease, and MSLO shall continue as the surviving corporation in the MSLO Merger and shall succeed to and assume all the rights, privileges, immunities, properties, powers and franchises of Madeline Merger Sub in accordance with the DGCL.
(b) On the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, Singer Merger Sub shall be merged with and into Sequential at the Sequential Effective Time. Following the Sequential Effective Time, the separate corporate existence of Singer Merger Sub shall cease, and Sequential shall continue as the surviving corporation in the Sequential Merger and shall succeed to and assume all the rights, privileges, immunities, properties, powers and franchises of Singer Merger Sub in accordance with the DGCL.
(c) In connection with the Mergers, TopCo shall take such actions as may be necessary to reserve, prior to the Mergers, a sufficient number of shares of TopCo Common Stock to permit the issuance of shares of TopCo Common Stock to the holders of shares of MSLO Common Stock and Sequential Common Stock as of the Effective Time in accordance with the terms of this Agreement.
2
1.2 Closing. The closing (the “Closing”) of the Mergers shall take place at 10:00 a.m., Eastern time, on the second business day after satisfaction or waiver of all of the conditions set forth in ARTICLE VII (other than those conditions that by their nature are to be fulfilled at the Closing, but subject to the fulfillment or waiver of such conditions), at the offices of Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York 10166, unless another time, date or place is agreed to in writing by the parties hereto (the date on which the Closing actually occurs shall be referred to as the “Closing Date”).
1.3 Effective Time. Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties shall cause the Mergers to be consummated substantially concurrently with each other by filing with the Secretary of State of the State of Delaware (a) a Certificate of Merger (the “Sequential Certificate of Merger”) with respect to the Sequential Merger, and (b) a Certificate of Merger (the “MSLO Certificate of Merger”) with respect to the MSLO Merger, each duly executed and completed in accordance with the relevant provisions of the DGCL, and shall make all other filings or recordings required under the DGCL. The Sequential Merger shall become effective at such time on the Closing Date as the Sequential Certificate of Merger is duly filed with the Delaware Secretary of State or at such other time as MSLO and Sequential shall agree and specify in the Sequential Certificate of Merger (such time as the Sequential Merger becomes effective being the “Sequential Effective Time”). The MSLO Merger shall become effective at such time as the MSLO Certificate of Merger is duly filed with the Delaware Secretary of State or at such other time as MSLO and Sequential shall agree and specify in the MSLO Certificate of Merger, provided that the MSLO Merger shall not become effective until the Sequential Effective Time (such time as the MSLO Merger becomes effective being the “MSLO Effective Time”, and such time as the Mergers become effective being the “Effective Time”).
1.4 Effects. The Mergers shall have the effects set forth in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, (i) upon the consummation of the MSLO Merger, all the property, rights, privileges, powers and franchises of Madeline Merger Sub shall vest in MSLO, and all debts, liabilities and duties of Madeline Merger Sub shall become the debts, liabilities and duties of MSLO and (ii) upon the consummation of the Sequential Merger, all the property, rights, privileges, powers and franchises of Singer Merger Sub shall vest in Sequential, and all debts, liabilities and duties of Singer Merger Sub shall become the debts, liabilities and duties of Sequential.
1.5 Organizational Documents.
(a) MSLO Certificate of Incorporation and Bylaws. Upon the consummation of the MSLO Merger, (i) the certificate of incorporation of the MSLO Surviving Corporation shall be amended and restated to read in its entirety as set forth in Exhibit C, and as so amended and restated, will be the certificate of incorporation of the MSLO Surviving Corporation and (ii) the bylaws of the MSLO Surviving Corporation shall be amended and restated to read in its entirety as set forth in Exhibit D, and as so amended and restated, will be the bylaws of the MSLO Surviving Corporation.
(b) Sequential Certificate of Incorporation and Bylaws. Upon the consummation of the Sequential Merger, (i) the certificate of incorporation of the Sequential
3
Surviving Corporation shall be amended and restated to read in its entirety as set forth in Exhibit E, and as so amended and restated, will be the certificate of incorporation of the Sequential Surviving Corporation and (ii) the bylaws of the Sequential Surviving Corporation shall be amended and restated to read in its entirety as set forth in Exhibit F, and as so amended and restated, will be the bylaws of the Sequential Surviving Corporation.
(c) TopCo Certificate of Incorporation and Bylaws; Name. As of the Closing, the certificate of incorporation and bylaws of TopCo shall remain the certificate of incorporation and bylaws of TopCo, until thereafter amended as provided therein or by applicable Law, except that TopCo’s name shall be changed to “Sequential Brands Group, Inc.”
1.6 Directors and Officers.
(a) MSLO Surviving Corporation Directors and Officers. The directors and officers of Madeline Merger Sub immediately prior to the consummation of the MSLO Merger shall be the directors and officers of the MSLO Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.
(b) Sequential Surviving Corporation Directors and Officers. The directors and officers of Singer Merger Sub immediately prior to the consummation of the Sequential Merger shall be the directors and officers of the Sequential Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.
(c) TopCo Directors and Officers. As of the Closing, the directors and officers of TopCo shall be the individuals listed in Section 1.6(c) of the Sequential Disclosure Schedule, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.
1.7 Reservation of Right to Change Structure. Notwithstanding anything to the contrary contained in this Agreement, before the Effective Time, Sequential and MSLO may, with the prior written consent of the other party in its sole discretion, and to the extent permitted by applicable Law, at any time change the method of effecting the business combination contemplated by this Agreement if and to the extent that they deem such a change to be desirable; provided, that (A) any such change shall not affect the U.S. federal income tax consequences of the MSLO Merger to holders of MSLO Common Stock and (B) no such change shall (i) alter or change the amount or kind of the consideration to be issued to holders of MSLO Common Stock or Sequential Common Stock as Merger Consideration, (ii) adversely affect the rights of the holders of MSLO Equity Awards, or (iii) materially impede or delay consummation of the transactions contemplated by this Agreement. In the event Sequential and MSLO elect to make such a change pursuant to this Section 1.7, the parties agree to execute appropriate documents to reflect such change.
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ARTICLE II
EFFECT ON CAPITAL STOCK AND EQUITY AWARDS;
PAYMENT PROCEDURES
2.1 Effect on Capital Stock and Equity Awards of MSLO and Sequential.
(a) Conversion of MSLO Common Stock and Madeline Merger Sub Common Stock. As of the MSLO Effective Time, by virtue of the MSLO Merger and without any action on the part of MSLO, TopCo, Madeline Merger Sub or the holders of any shares of MSLO Common Stock (or options thereon) or TopCo Common Stock:
(i) Each issued and outstanding share of MSLO Common Stock (other than any shares of MSLO Common Stock to be canceled pursuant to Section 2.1(c) and subject to Section 2.1(f)) shall be converted into the right to receive (A) in the case of a share of MSLO Common Stock with respect to which an election to receive cash (a “Cash Election”) has been properly made and not revoked or lost pursuant to Section 2.3 (each, a “Cash Election Share”), $6.15 in cash, without interest (the “MSLO Cash Consideration”), (B) in the case of a share of MSLO Common Stock with respect to which an election to receive stock (a “Stock Election”) has been properly made and not revoked or lost pursuant to Section 2.3 (each, a “Stock Election Share”), a number of fully paid and nonassessable shares of TopCo Common Stock, together with cash in lieu of fractional shares of TopCo Common Stock as specified below, without interest, equal to the quotient determined by dividing (x) the MSLO Cash Consideration by (y) the Sequential Trading Price (the “MSLO Stock Consideration” and, together with the MSLO Cash Consideration, the “MSLO Merger Consideration”) or (C) in the case of a share of MSLO Common Stock with respect to which neither a Cash Election nor a Stock Election has been properly made and not revoked or lost pursuant to Section 2.3 (each, a “Non-Election Share”), the MSLO Cash Consideration or the MSLO Stock Consideration or a combination of both, subject in each case to Section 2.4. As of the MSLO Effective Time, all such shares of MSLO Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist. As of the MSLO Effective Time, each holder of a certificate or book-entry share representing any shares of MSLO Common Stock shall cease to have any rights with respect thereto, except the right to receive, upon the surrender thereof, subject to Section 2.1(f), the MSLO Merger Consideration in accordance with Section 2.2.
(ii) Each share of common stock of Madeline Merger Sub issued and outstanding immediately prior to the MSLO Effective Time shall be converted into one fully paid and nonassessable share of the common stock of the MSLO Surviving Corporation.
(iii) The “Sequential Trading Price” shall mean the volume weighted average price per share of Sequential Common Stock on the NASDAQ Stock Market (“Nasdaq”) for the consecutive period over the five trading days ending on the trading day immediately preceding the Closing Date, as calculated by Bloomberg Financial LP under the function “VWAP”.
(iv) The aggregate MSLO Cash Consideration received by each MSLO Holder will be rounded to the nearest whole cent.
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(b) Conversion of Sequential Common Stock and Singer Merger Sub Common Stock. As of the Sequential Effective Time, by virtue of the Sequential Merger and without any action on the part of Sequential, TopCo, Singer Merger Sub or the holders of any shares of Sequential Common Stock (or options thereon) or TopCo Common Stock:
(i) Each issued and outstanding share of Sequential Common Stock (other than any shares of Sequential Common Stock to be canceled pursuant to Section 2.1(c)) shall be converted into the right to receive one fully paid and nonassessable share of TopCo Common Stock (the “Sequential Merger Consideration” and, together with the MSLO Merger Consideration, the “Merger Consideration”). Such exchange ratio shall be referred to herein as the “Sequential Exchange Ratio”. As of the Sequential Effective Time, all such shares of Sequential Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist. As of the Sequential Effective Time, each holder of a certificate or book-entry share representing any shares of Sequential Common Stock shall cease to have any rights with respect thereto, except the right to receive, upon the surrender thereof, the Sequential Merger Consideration in accordance with Section 2.2.
(ii) Each share of common stock of Singer Merger Sub issued and outstanding immediately prior to the Sequential Effective Time shall be converted into one fully paid and nonassessable share of the common stock of the Sequential Surviving Corporation.
(c) Cancellation of Treasury Shares. Each share of MSLO Common Stock held in the treasury of MSLO immediately prior to the MSLO Effective Time, and each share of Sequential Common Stock held in the treasury of Sequential immediately prior to the Sequential Effective Time, shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.
(d) Treatment of MSLO Equity Awards.
(i) Each outstanding option to acquire shares of MSLO Common Stock that is subject solely to a time-based condition (a “MSLO Stock Option”), whether vested or unvested, that is outstanding immediately prior to the MSLO Effective Time shall, as of the MSLO Effective Time, automatically and without any action on the part of the holder thereof, be cancelled and, in exchange therefor, the holder will be entitled to receive a cash payment equal to the product of (A) the number of shares of MSLO Common Stock for which such MSLO Stock Option is exercisable and (B) the excess of the MSLO Cash Consideration over the per share exercise price of such MSLO Stock Option. In addition to the foregoing amounts, to the extent that any such MSLO Stock Option that was granted pursuant to an employment agreement requirement and is identified on Section 2.1(d)(i) of the MSLO Disclosure Schedule as having also been subject to a performance vesting condition that has been satisfied and having included a minimum post-termination exercise period of 18 months, the holder of such MSLO Stock
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Option shall receive the further consideration (which shall be payable in the form) specified in such section of the MSLO Disclosure Schedule. The amounts described in this Section 2.1(d)(i) shall be deemed to have been paid in full satisfaction of all rights pertaining to such MSLO Stock Options; provided, that if the exercise price per share of any such MSLO Stock Option is equal to or greater than the MSLO Cash Consideration, such MSLO Stock Option shall be cancelled without any payments being made or other consideration being delivered in respect thereof.
(ii) Each outstanding option to acquire shares of MSLO Common Stock that is subject to performance-based vesting conditions (a “MSLO Performance Stock Option”) and that is outstanding immediately prior to the Effective Time and vested as of the Effective Time (taking into account the next-following sentence) shall, as of the Effective Time, automatically and without any action on the part of the holder thereof, be cancelled and, in exchange therefor, the holder will be entitled to receive a cash payment equal to the product of (A) the number of shares of MSLO Common Stock for which such MSLO Performance Stock Option is exercisable and (B) the excess of the MSLO Cash Consideration over the per share exercise price of such MSLO Performance Stock Option. Each unvested MSLO Performance Stock Option shall vest at the Effective Time, unless and to the extent that the specified stock price condition(s) at which such MSLO Performance Stock Option would have become vested in the ordinary course, as specified in the applicable award agreement, are higher than the MSLO Cash Consideration. MSLO Performance Stock Options that remain unvested at the Effective Time pursuant to the preceding sentence shall, as of the Effective Time, automatically and without any action on the part of the holder thereof, be cancelled and in exchange thereof, all such MSLO Performance Stock Options held by any single holder shall collectively be converted into and thereafter evidence the right to receive a cash payment in the amount set forth on Section 2.1(d)(ii) of the MSLO Disclosure Schedule next to such holder’s name. The amounts described in this Section 2.1(d)(ii) shall be deemed to have been paid in full satisfaction of all rights pertaining to such MSLO Performance Stock Options.
(iii) Each award of restricted stock units corresponding to shares of MSLO Common Stock that is subject solely to a time-based vesting condition (a “MSLO RSU Award”) and that is outstanding immediately prior to the MSLO Effective Time shall, as of the MSLO Effective Time, automatically and without any action on the part of the holder thereof, be cancelled and converted into the right to receive a cash payment equal to the MSLO Cash Consideration for each share of MSLO Common Stock subject to such MSLO RSU Award.
(iv) Each award of restricted stock units corresponding to shares of MSLO Common Stock that is subject to performance-based vesting conditions (a “MSLO Performance RSU Award”) and that is outstanding immediately prior to the MSLO Effective Time and becomes vested pursuant to the next-following sentence shall, as of the Effective Time, automatically and without any action on the part of the holder thereof, be cancelled and converted into the right to receive a cash payment equal to the MSLO Cash Consideration for each share of MSLO Common Stock subject to such MSLO Performance RSU Award. Each unvested MSLO Performance RSU Award shall
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vest at the MSLO Effective Time, unless and to the extent that the specified stock price condition(s) at which such MSLO Performance RSU Award would have become vested in the ordinary course, as specified in the applicable award agreement, are higher than the MSLO Cash Consideration. MSLO Performance RSU Awards that remain unvested at the MSLO Effective Time pursuant to the preceding sentence shall, as of the Effective Time, automatically and without any action on the part of the holder thereof, be cancelled and in exchange thereof, all such MSLO Performance RSU Awards held by any single holder shall collectively be converted into and thereafter evidence the right to receive a cash payment in the amount set forth on Section 2.1(d)(iv) of the MSLO Disclosure Schedule next to such holder’s name. The amounts described in this Section 2.1(d)(iv) that are payable in respect to MSLO Performance RSU Awards shall be deemed to have been paid in full satisfaction of all rights pertaining to such MSLO Performance RSU Awards.
(v) Prior to the MSLO Effective Time, the Board of Directors of MSLO or the appropriate committee thereof shall adopt resolutions providing for the treatment of the MSLO Stock Options, MSLO Performance Stock Options, MSLO RSU Awards and MSLO Performance RSU Awards (collectively, the “MSLO Equity Awards”) as contemplated by this Section 2.1(d). TopCo, MSLO and Sequential shall cooperate to provide any required notices to the holders of MSLO Equity Awards required in connection with the consummation of the Mergers.
(vi) The aggregate cash payment made to each holder of MSLO Stock Options, MSLO Performance Stock Options, MSLO RSU Awards and/or MSLO Performance RSU Awards contemplated by this Section 2.1(d) will be rounded to the nearest whole cent. Any payments made with respect to the MSLO Equity Awards shall be made by the MSLO Surviving Corporation through payroll promptly after the Effective Time.
(e) Treatment of Sequential Equity Awards and Warrants.
(i) Each outstanding option to acquire shares of Sequential Common Stock (a “Sequential Stock Option”), whether vested or unvested, that is outstanding immediately prior to the Sequential Effective Time shall, as of the Sequential Effective Time, automatically and without any action on the part of the holder thereof, be converted into an option to purchase, on the terms and conditions (including applicable vesting requirements) under the applicable plan and award agreement in effect immediately prior to the Sequential Effective Time, (A) that number of shares of TopCo Common Stock, rounded down to the nearest whole share, equal to the product determined by multiplying (x) the total number of shares of Sequential Common Stock subject to such Sequential Stock Option immediately prior to the Sequential Effective Time by (y) the Sequential Exchange Ratio, (B) at a per-share exercise price, rounded up to the nearest whole cent, equal to the quotient determined by dividing (x) the exercise price per share of Sequential Common Stock at which such Sequential Stock Option was exercisable immediately prior to the Sequential Effective Time by (y) the Sequential Exchange Ratio.
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(ii) Each award of restricted stock units corresponding to shares of Sequential Common Stock (a “Sequential RSU Award”), whether vested or unvested, that is outstanding immediately prior to the Sequential Effective Time shall, as of the Sequential Effective Time, automatically and without any action on the part of the holder thereof, be converted into a TopCo restricted stock unit award on the terms and conditions (including applicable vesting requirements) under the applicable plan and award agreement in effect immediately prior to the Sequential Effective Time, with respect to a number of shares of TopCo Common Stock, rounded up to the nearest whole share, determined by multiplying the number of shares of Sequential Common Stock subject to such Sequential RSU Award immediately prior to the Sequential Effective Time by the Sequential Exchange Ratio. To the extent that the Sequential RSU Awards vest in whole or in part based on the achievement of performance goals, the compensation committee of the Sequential Board shall appropriately adjust such performance goals to reflect the effect of the transactions contemplated by this Agreement.
(iii) Each unvested award of restricted Sequential Common Stock (a “Sequential Restricted Stock Award”) that is outstanding immediately prior to the Sequential Effective Time shall, as of the Sequential Effective Time, automatically and without any action on the part of the holder thereof, be converted into a TopCo restricted stock award on the terms and conditions (including applicable vesting requirements) under the applicable plan and award agreement in effect immediately prior to the Sequential Effective Time, with respect to a number of shares of TopCo Common Stock, rounded up to the nearest whole share, determined by multiplying the number of shares of Sequential Common Stock subject to such Sequential Restricted Stock Award immediately prior to the Sequential Effective Time by the Sequential Exchange Ratio. To the extent that the Sequential Restricted Stock Awards vest in whole or in part based on the achievement of performance goals, the compensation committee of the Sequential Board shall appropriately adjust such performance goals to reflect the effect of the transactions contemplated by this Agreement.
(iv) Each warrant to purchase any shares of Sequential Common Stock or other equity interests (a “Sequential Warrant”), whether vested or unvested, that is outstanding immediately prior to the Effective Time shall, as of the Effective Time, automatically and without any action on the part of the holder thereof, be converted into a warrant to purchase shares of TopCo Common Stock on the terms and conditions (including applicable strike price and vesting requirements) under the applicable plan and award agreement in effect immediately prior to the Effective Time, with respect to a number of shares of TopCo Common Stock, rounded up to the nearest whole share, determined by multiplying the number of shares of Sequential Common Stock subject to such Sequential Warrant immediately prior to the Effective Time by the Sequential Exchange Ratio. TopCo and Sequential shall cooperate to provide any required notices to the holders of Sequential Equity Awards and Sequential Warrants required in connection with the consummation of the Mergers.
(v) Prior to the Sequential Effective Time, the Sequential Board or the appropriate committee thereof shall adopt resolutions providing for the treatment of (i)
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the Sequential Stock Options, Sequential RSU Awards and Sequential Restricted Stock Awards (collectively, the “Sequential Equity Awards”) and (ii) the Sequential Warrants, each as contemplated by this Section 2.1(e). As soon as practicable after the Sequential Effective Time, TopCo shall prepare and file with the SEC a Form S-8 (or file such other appropriate form) registering a number of shares of TopCo Common Stock necessary to fulfill TopCo’s obligations under this Section 2.1(e). TopCo shall take all corporate action necessary to reserve for issuance a sufficient number of shares of TopCo Common Stock for delivery with respect to the Sequential Equity Awards and Sequential Warrants assumed by it in accordance with this Section 2.1(e). TopCo and Sequential shall cooperate to provide any required notices to the holders of Sequential Equity Awards and Sequential Warrants required in connection with the consummation of the Mergers.
(f) Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of MSLO Common Stock issued and outstanding immediately prior to the MSLO Effective Time that are held by any holder who has not voted in favor of the MSLO Merger and who is entitled to demand and properly demands appraisal of such shares pursuant to Section 262 of the DGCL (“Dissenting Shares”) shall not be converted into the right to receive the MSLO Merger Consideration, unless and until such holder shall have failed to perfect, or shall have effectively withdrawn or lost, such holder’s right to appraisal under the DGCL. Dissenting Shares shall be treated in accordance with Section 262 of the DGCL. If any such holder fails to perfect or withdraws or loses any such right to appraisal, each such share of MSLO Common Stock of such holder shall thereupon be converted into and become exchangeable only for the right to receive, as of the later of the MSLO Effective Time and the time that such right to appraisal has been irrevocably lost, withdrawn or expired, the MSLO Merger Consideration in accordance with Section 2.1(a). Notwithstanding anything to the contrary in this Section 2.1(f), if this Agreement is terminated prior to the Effective Time, then the right of any stockholder to be paid the fair value of such stockholder’s Dissenting Shares pursuant to Section 262 of the DGCL will cease. MSLO shall serve prompt notice to Sequential of any demands for appraisal of any shares of MSLO Common Stock, attempted withdrawals of such notices or demands and any other instruments received by MSLO relating to rights to appraisal, and Sequential shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. MSLO shall not, without the prior written consent of Sequential, make any payment with respect to, settle or offer to settle any such demands, and prior to the Effective Time, Sequential shall not, without the prior written consent of MSLO (such consent not to be unreasonably withheld, conditioned or delayed), make any payment with respect to, settle or offer to settle, any such demands.
2.2 Exchange of Shares and Certificates.
(a) Exchange Agent. No later than five Business Days prior to the mailing of the Proxy Statement/Prospectus, Sequential shall designate a bank, trust company or nationally recognized shareholder services provider reasonably acceptable to MSLO (the “Exchange Agent”), for the purpose of receiving Elections and exchanging, in accordance with this ARTICLE II, Certificates and Book-Entry Shares for the Merger Consideration. Prior to the Effective Time, TopCo shall deposit, or cause to be deposited, with the Exchange Agent, as needed, the Merger Consideration to be delivered in respect of the number of shares of TopCo Common Stock issuable pursuant to Section 2.1 in exchange for outstanding shares of MSLO
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Common Stock and shares of Sequential Common Stock. In addition, at or prior to the MSLO Effective Time, Sequential shall deposit, or cause to be deposited, with the Exchange Agent for the benefit of the holders of shares of MSLO Common Stock at the MSLO Effective Time, for exchange in accordance with this ARTICLE II, immediately available funds equal to the aggregate MSLO Cash Consideration (other than in respect of any Dissenting Shares), including any additional amounts necessary to fund the adjustment set forth in Section 2.1(a)(iv). In addition, Sequential shall deposit with the Exchange Agent, as necessary from time to time after the Effective Time, cash in lieu of any fractional shares payable pursuant to Section 2.2(e). All shares of TopCo Common Stock and cash deposited with the Exchange Agent pursuant to this Section 2.2 shall be referred to herein as the “Exchange Fund”. Sequential shall instruct the Exchange Agent to timely pay the Merger Consideration in accordance with this Agreement.
(b) Exchange Procedures. As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail (1) to each holder of record of a certificate (a “Sequential Certificate”) that immediately prior to the Sequential Effective Time represented outstanding shares of Sequential Common Stock and (2) to each holder of record of a certificate (a “MSLO Certificate” and, together with a Sequential Certificate, a “Certificate”) that immediately prior to the MSLO Effective Time represented outstanding shares of MSLO Common Stock, in each case whose shares were converted into the right to receive the applicable Merger Consideration, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 2.2(j)) to the Exchange Agent, and which shall be in such form and have such other provisions as agreed among the parties hereto) and (ii) instructions for use in effecting the surrender of the Certificates or affidavits of loss in exchange for the applicable Merger Consideration. Upon surrender of a Certificate for cancellation or affidavit of loss to the Exchange Agent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate or affidavit of loss shall be entitled to receive in exchange therefor that number of whole shares of TopCo Common Stock and/or cash, as applicable, that such holder has the right to receive pursuant to the provisions of this ARTICLE II, and the Certificate or affidavit of loss so surrendered shall forthwith be canceled. Promptly after the Effective Time and in any event not later than the third Business Day thereafter, Sequential shall cause the Exchange Agent to issue and deliver to each holder of uncertificated shares of Sequential Common Stock represented by book-entry (the “Sequential Book-Entry Shares”) and uncertificated shares of MSLO Common Stock represented by book-entry (the “MSLO Book-Entry Shares” and, together with the Sequential Book-Entry Shares, the “Book-Entry Shares”) the applicable Merger Consideration that such holder is entitled to pursuant to the provisions of this ARTICLE II in respect of such Book-Entry Shares, without such holder being required to deliver a Certificate or an executed letter of transmittal to the Exchange Agent, and such Book-Entry Shares shall then be cancelled. No interest shall be paid or shall accrue for the benefit of holders of Certificates or Book-Entry Shares on the applicable Merger Consideration payable. If any portion of the applicable Merger Consideration is to be registered in the name of a person other than the person in whose name the applicable surrendered Certificate is registered, it shall be a condition to the registration of such Merger Consideration that the surrendered Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such delivery of the applicable Merger Consideration shall pay to the Exchange Agent any transfer or other taxes required by reason of
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such registration in the name of a person other than the registered holder of such Certificate or establish to the reasonable satisfaction of the Exchange Agent that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Consideration.
(c) Distributions with Respect to Unexchanged Shares. All TopCo Common Stock to be paid as a portion of the Merger Consideration shall be deemed issued and outstanding as of the Effective Time. No dividends or other distributions declared or made with respect to TopCo Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate or Book-Entry Share with respect to any shares of TopCo Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.2(e), in each case until the surrender of such Certificate or Book-Entry Share in accordance with this ARTICLE II. Subject to the effect of applicable Law, following surrender of any such Certificate or Book-Entry Share, there shall be paid to the holder of shares of TopCo Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a fractional share of TopCo Common Stock to which such holder is entitled pursuant to Section 2.2(e) and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such shares of TopCo Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such shares of TopCo Common Stock.
(d) No Further Ownership Rights in Sequential Common Stock and MSLO Common Stock. All shares of TopCo Common Stock issued and cash paid upon the surrender for exchange of Certificates or Book-Entry Shares in accordance with the terms of this ARTICLE II (including any cash paid pursuant to Section 2.2(e)) shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to the shares of Sequential Common Stock or MSLO Common Stock, as applicable, theretofore represented by such Certificates or Book-Entry Shares, subject, however, to the obligation of TopCo to pay any dividends or make any other distributions with a record date prior to the Effective Time that may have been declared or made by Sequential or MSLO, as applicable, on such shares of Sequential Common Stock or MSLO Common Stock in accordance with the terms of this Agreement and that remain unpaid at the Effective Time, and there shall be no further registration of transfers on the stock transfer books of the Sequential Surviving Corporation of the shares of Sequential Common Stock, or the MSLO Surviving Corporation of the shares of MSLO Common Stock, that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares are presented to TopCo or the Exchange Agent for any reason, they shall be canceled and exchanged as provided in this ARTICLE II, except as otherwise provided by Law.
(e) Fractional Shares.
(i) No certificates representing fractional shares of TopCo Common Stock shall be issued upon the surrender for exchange of Certificates or Book-Entry Shares, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of TopCo.
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(ii) Notwithstanding any other provision of this Agreement, each holder of shares of MSLO Common Stock converted pursuant to the MSLO Merger who would otherwise have been entitled to receive a fraction of a share of TopCo Common Stock (after taking into account all Certificates and Book-Entry Shares delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fraction as determined below. As promptly as practicable following the Effective Time, the Exchange Agent shall determine the excess of (i) the number of full shares of TopCo Common Stock delivered to the Exchange Agent by TopCo for issuance to holders of Certificates or Book-Entry Shares over (ii) the aggregate number of full shares of TopCo Common Stock to be distributed to holders of Certificates or Book-Entry Shares (such excess being herein referred to as the “Excess Shares”). As soon as practicable after the Effective Time, the Exchange Agent, as agent for such holders of Certificates or Book-Entry Shares, shall sell the Excess Shares at then prevailing prices on Nasdaq all in the manner provided herein.
(iii) The sale of the Excess Shares by the Exchange Agent shall be executed on Nasdaq and shall be executed in round lots to the extent practicable. Until the proceeds of any such sale or sales have been distributed to the holders of Certificates or Book-Entry Shares, the Exchange Agent shall hold such proceeds in trust for such holders. The Exchange Agent shall determine the portion of such proceeds to which each holder of Certificates or Book-Entry Shares shall be entitled, if any, by multiplying the amount of the aggregate proceeds by a fraction, the numerator of which is the amount of the fractional share interest to which such holder of Certificates or Book-Entry Shares is entitled (after taking into account all Certificates and Book-Entry Shares then held by such holder) and the denominator of which is the aggregate amount of fractional share interests to which all holders of Certificates or Book-Entry Shares are entitled. As soon as practicable after the determination of the amount of cash, if any, to be paid to holders of Certificates or Book-Entry Shares with respect to any fractional share interests, the Exchange Agent shall promptly pay such amounts to such holders subject to and in accordance with this Section 2.2(e).
(f) Return of Merger Consideration. Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.2(a) (including any interest or other amounts received with respect thereto) that remains undistributed to the holders of the Certificates or Book-Entry Shares for nine months after the Effective Time shall be delivered to TopCo, upon demand, and any holders of the Certificates or Book-Entry Shares who have not theretofore complied with this ARTICLE II shall thereafter be entitled to look only to TopCo for payment of their claim for any shares of TopCo Common Stock, any MSLO Cash Consideration, any cash in lieu of fractional shares of TopCo Common Stock and any dividends or distributions with respect to TopCo Common Stock, as applicable.
(g) No Liability. None of Sequential, MSLO, TopCo, Singer Merger Sub, the Sequential Surviving Corporation, Madeline Merger Sub, the MSLO Surviving Corporation or the Exchange Agent shall be liable to any person in respect of any portion of the Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificate or Book-Entry Share has not been surrendered prior to seven years after the Effective Time, or immediately prior to such earlier date on which any cash,
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any shares of TopCo Common Stock, any cash in lieu of fractional shares, as applicable, of TopCo Common Stock or any dividends or distributions with respect to TopCo Common Stock in respect of such Certificate or Book-Entry Share would otherwise escheat to or become the property of any Governmental Entity, any such shares, cash, dividends or distributions in respect of such Certificate or Book-Entry Share shall, to the extent permitted by applicable Law, become the property of TopCo, free and clear of all claims or interests of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Sequential, provided, that no losses on such investments shall affect the cash payable to former holders of shares of MSLO Common Stock pursuant to this ARTICLE II. TopCo shall replace, as necessary, any cash deposited with the Exchange Agent lost through any investment made pursuant to this Section 2.2(h). Any interest and other income resulting from such investments shall be paid to TopCo.
(i) Withholding Rights. Each of TopCo, Sequential, MSLO, Singer Merger Sub, the Sequential Surviving Corporation, Madeline Merger Sub, the MSLO Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from any amounts otherwise payable to any Person pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under applicable Tax Law. Any amounts so deducted and withheld shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction or withholding was made. Notwithstanding any other provision of this Agreement, TopCo shall make all payments of stock (other than payments treated as compensation for U.S. federal income tax purposes) under this Agreement free and clear of all deductions and withholdings in respect of Taxes other than “backup withholding” if required under Section 3406 of the Code.
(j) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by TopCo or the Exchange Agent, the posting by such Person of a bond in such amount as TopCo or the Exchange Agent, as applicable, may determine is reasonably necessary as indemnity against any claim that may be made against it, the Exchange Agent shall deliver in exchange for such lost, stolen or destroyed Certificate, the applicable Merger Consideration with respect to the shares of Sequential Common Stock or shares of MSLO Common Stock, as the case may be, formerly represented thereby, any cash in lieu of fractional shares of TopCo Common Stock, and unpaid dividends and distributions on shares of TopCo Common Stock deliverable in respect thereof, pursuant to this Agreement.
2.3 Election Procedures. Each holder of record of shares of MSLO Common Stock issued and outstanding immediately prior to the Election Deadline (a “MSLO Holder”) shall have the right, subject to the limitations set forth in this ARTICLE II, to submit an election on or prior to the Election Deadline in accordance with the following procedures.
(a) Each MSLO Holder may specify in a request made in accordance with the provisions of this Section 2.3 (an “Election”) (i) the number of shares of MSLO Common Stock owned by such MSLO Holder with respect to which such MSLO Holder desires to make a Stock Election, (ii) the number of shares of MSLO Common Stock owned by such MSLO Holder with
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respect to which such MSLO Holder desires to make a Cash Election and (iii) the particular shares for which the MSLO Holder desires to make either such election, and the order in which either such election is to apply to any such shares if the election is subject to proration under Section 2.4. Any MSLO Holder who wishes to make an Election shall be required to waive all dissenters’ rights in connection with making such Election.
(b) TopCo shall prepare a form reasonably acceptable to MSLO and Sequential (the “Form of Election”), which shall be mailed by TopCo to record holders of MSLO Common Stock so as to permit those MSLO Holders to exercise their right to make an Election prior to the Election Deadline.
(c) TopCo shall mail or cause to be mailed or delivered, as applicable, the Form of Election to record holders of MSLO Common Stock as of the record date for the MSLO Stockholders Meeting not less than 20 Business Days prior to the anticipated Election Deadline. TopCo shall make available one or more Forms of Election as may reasonably be requested from time to time by all persons who become holders of record of MSLO Common Stock during the period following the record date for the MSLO Stockholders Meeting and prior to the Election Deadline.
(d) Any Election shall have been made properly only if the Exchange Agent shall have received, prior to the Election Deadline, a Form of Election properly completed and signed and accompanied by MSLO Certificates (or affidavits of loss in lieu of the MSLO Certificates, subject to Section 2.2(j)) to which such Form of Election relates, duly endorsed in blank or otherwise in form acceptable for transfer on the books of MSLO or by an appropriate customary guarantee of delivery of such MSLO Certificates, as set forth in such Form of Election, from a firm that is an eligible guarantor institution (as defined in Rule 17Ad-15 under the Exchange Act); provided, that such MSLO Certificates are in fact delivered to the Exchange Agent by the time required in such guarantee of delivery, and, in the case of MSLO Book-Entry Shares, any additional documents specified in the procedures set forth in the Form of Election. Failure to deliver shares of MSLO Common Stock covered by such a guarantee of delivery within the time set forth on such guarantee shall be deemed to invalidate any otherwise properly made Election, unless otherwise determined by Sequential, in its sole and absolute discretion. As used herein, unless otherwise jointly agreed in advance by Sequential and MSLO, “Election Deadline” means 5:00 p.m. local time (in the city in which the principal office of the Exchange Agent is located) on the later of (i) the date immediately prior to the MSLO Stockholders Meeting and (ii) if on the date immediately prior to the MSLO Stockholders Meeting, the condition set forth in Section 7.1(d) has not been satisfied, three Business Days prior to the Closing Date. MSLO and Sequential shall issue a joint press release reasonably satisfactory to each of them announcing the anticipated date of the Election Deadline not more than 15 Business Days before, and at least five Business Days prior to, the anticipated date of the Election Deadline. If the Closing is delayed to a subsequent date, the Election Deadline shall be similarly delayed to a subsequent date (which shall be three Business Days prior to the Closing Date) and MSLO and Sequential shall cooperate to promptly publicly announce such rescheduled Election Deadline.
(e) Any MSLO Holder may, at any time prior to the Election Deadline, change or revoke such MSLO Holder’s Election by written notice received by the Exchange
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Agent prior to the Election Deadline accompanied by a properly completed and signed revised Form of Election or by withdrawal prior to the Election Deadline of such MSLO Holder’s MSLO Certificates, or of the guarantee of delivery of such MSLO Certificates, or any documents in respect of MSLO Book-Entry Shares, previously deposited with the Exchange Agent. After an Election is validly made with respect to any shares of MSLO Common Stock, any subsequent transfer of such shares of MSLO Common Stock shall automatically revoke such Election. Notwithstanding anything to the contrary in this Agreement, all Elections shall be automatically deemed revoked upon receipt by the Exchange Agent of written notification from MSLO or Sequential that this Agreement has been terminated in accordance with ARTICLE VIII. The Exchange Agent shall have reasonable discretion to determine if any Election is not properly made with respect to any shares of MSLO Common Stock (none of Sequential, MSLO, TopCo, Singer Merger Sub, Madeline Merger Sub or the Exchange Agent being under any duty to notify any stockholder of any such defect). In the event the Exchange Agent makes such a determination, such Election shall be deemed to be not in effect, and the shares of MSLO Common Stock covered by such Election shall, for purposes hereof, be deemed to be Non-Election Shares, unless a proper Election is thereafter timely made with respect to such shares.
(f) Sequential and MSLO, in the exercise of their reasonable discretion, shall have the joint right to make all determinations, not inconsistent with the terms of this Agreement, governing the manner and extent to which Elections are to be taken into account in making the determinations prescribed by Section 2.4.
2.4 Proration.
(a) Notwithstanding any other provision contained in this Agreement, the total number of shares of MSLO Common Stock to be converted into the MSLO Cash Consideration pursuant to Section 2.1(a)(i) (which, for this purpose, shall be deemed to include the Dissenting Shares determined as of the MSLO Effective Time) (the “Cash Conversion Number”) shall be equal to the quotient obtained by dividing (x) $176,681,757.15 by (y) the MSLO Cash Consideration. All other shares of MSLO Common Stock (other than cancelled shares and Dissenting Shares) shall be converted into MSLO Stock Consideration.
(b) Within three Business Days after the MSLO Effective Time, Sequential shall cause the Exchange Agent to effect the allocation among the holders of shares of MSLO Common Stock of the rights to receive the MSLO Cash Consideration and the MSLO Stock Consideration as follows:
(i) first, with respect to each MSLO Holder who has made a Cash Election with respect to one-half of the number of shares of such MSLO Holder’s MSLO Common Stock and a Stock Election with respect to one-half of the number of shares of such MSLO Holder’s MSLO Common Stock, all of such MSLO Holder’s Cash Election Shares will be converted into the MSLO Cash Consideration and all of such MSLO Holder’s Stock Election Shares will be converted into the MSLO Stock Consideration; and
(ii) then, if the aggregate remaining number of shares of MSLO Common Stock with respect to which Cash Elections shall have been made (which, for
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this purpose, shall be deemed to include the Dissenting Shares determined as of the MSLO Effective Time but exclude the shares of MSLO Common Stock converted into the right to receive the MSLO Cash Consideration pursuant to Section 2.4(b)(i)) (the “Total Cash Election Number”) exceeds the Adjusted Cash Conversion Number, then (A) all Stock Election Shares and all Non-Election Shares shall be converted into the right to receive the MSLO Stock Consideration and (B) Cash Election Shares of each holder thereof will be converted into the right to receive the MSLO Cash Consideration in respect of that number of Cash Election Shares equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) a fraction, the numerator of which is the Cash Conversion Number and the denominator of which is the Total Cash Election Number (with the Exchange Agent to determine, consistent with Section 2.4(a), whether fractions of Cash Election Shares shall be rounded up or down), with the remaining number of such holder’s Cash Election Shares being converted into the right to receive the MSLO Stock Consideration; or
(iii) if the Total Cash Election Number is less than the Adjusted Cash Conversion Number (the amount by which the Adjusted Cash Conversion Number exceeds the Total Cash Election Number being referred to herein as the “Shortfall Number”), then all remaining Cash Election Shares shall be converted into the right to receive the MSLO Cash Consideration, and the Stock Election Shares and Non-Election Shares shall be treated in the following manner:
(A) if the Shortfall Number is less than or equal to the number of Non-Election Shares, then all Stock Election Shares shall be converted into the right to receive the MSLO Stock Consideration, and the Non-Election Shares of each holder thereof shall convert into the right to receive the MSLO Cash Consideration in respect of that number of Non-Election Shares equal to the product obtained by multiplying (1) the number of Non-Election Shares held by such holder by (2) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number of Non-Election Shares (with the Exchange Agent to determine, consistent with Section 2.4(a), whether fractions of Non-Election Shares shall be rounded up or down), with the remaining number of such holder’s Non-Election Shares being converted into the right to receive the MSLO Stock Consideration; or
(B) if the Shortfall Number exceeds the number of Non-Election Shares, then (1) all Non-Election Shares shall be converted into the right to receive the MSLO Cash Consideration and (2) the Stock Election Shares of each holder thereof shall convert into the right to receive the MSLO Cash Consideration in respect of that number of Stock Election Shares equal to the product obtained by multiplying (A) the number of Stock Election Shares held by such holder by (B) a fraction, the numerator of which is the amount by which (1) the Shortfall Number exceeds (2) the total number of Non-Election Shares, and the denominator of which is the total number of Stock Election Shares (with the Exchange Agent to determine, consistent with Section 2.4(a), whether fractions of Stock Election Shares shall be rounded up or down), with the remaining number of such holder’s Stock Election Shares being converted into the right to receive the MSLO Stock Consideration.
2.5 Certain Adjustments. If between the date hereof and the Effective Time, the outstanding shares of Sequential Common Stock or MSLO Common Stock are changed into a
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different number of shares by reason of any reclassification, recapitalization, split-up, combination, exchange of shares, dividend payable in stock or other securities or other similar transaction, the Sequential Merger Consideration and related provisions or the MSLO Merger Consideration and related provisions, as applicable, shall be appropriately adjusted to provide to the holders of Sequential Common Stock and MSLO Common Stock or Sequential Equity Awards and MSLO Equity Awards the same economic effect as contemplated by this Agreement prior to such reclassification, recapitalization, split-up, combination, exchange, dividend or other similar transaction. Nothing in this Section 2.5 shall be construed to permit Sequential or MSLO to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.
2.6 Further Assurances. If, at any time MSLO or Sequential reasonably believes or is advised that any further instruments, deeds, assignments or assurances are reasonably necessary or desirable to consummate the Mergers or to carry out the purposes and intent of this Agreement at the Effective Time, then MSLO, Sequential, TopCo, the MSLO Surviving Corporation and the Sequential Surviving Corporation and their respective officers and directors shall execute and deliver all such proper instruments, deeds, assignments or assurances and do all other things reasonably necessary or desirable to consummate the Mergers and to carry out the purposes and intent of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MADELINE
Except as (x) disclosed in the MSLO SEC Documents filed with or furnished to the SEC (excluding disclosure contained in the “risk factors” section or constituting “forward-looking statements,” in each case, to the extent such disclosure is cautionary, predictive or speculative in nature) or (y) set forth in the disclosure letter delivered by MSLO to Sequential on or prior to the date of this Agreement (the “MSLO Disclosure Schedule”), MSLO represents and warrants to Sequential as set forth in this ARTICLE III. For purposes of the representations and warranties of MSLO contained herein, disclosure in any section of the MSLO Disclosure Schedule of any facts or circumstances shall be deemed to be disclosure of such facts or circumstances with respect to all representations or warranties by MSLO to which the relevance of such disclosure to the applicable representation and warranty is readily apparent on the face thereof. The inclusion of any information in the MSLO Disclosure Schedule or other document delivered by MSLO pursuant to this Agreement shall not be deemed to be an admission or evidence of the materiality of such item, nor shall it establish a standard of materiality for any purpose whatsoever.
3.1 Corporate Organization.
(a) Each of MSLO and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except in the case of clause (iii) as, individually or in the aggregate, has not had and would not reasonably be expected to have a MSLO Material Adverse Effect.
(b) True and complete copies of the certificate of incorporation of MSLO, as amended through, and as in effect as of, the date of this Agreement and the bylaws, as in effect as of, the date of this Agreement and the certificate of incorporation and bylaws (or comparable organizational documents of each of its Subsidiaries, in each case as amended to the date of this Agreement) have previously been made available to Sequential.
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3.2 Capitalization.
(a) Authorized and Issued Shares.
(i) As of the date of this Agreement, the authorized capital stock of MSLO consists solely of (A) 350,000,000 shares of MSLO Class A Common Stock; (B) 150,000,000 shares of MSLO Class B Common Stock and (C) 150,000,000 shares of preferred stock, par value $.01 per share (the “MSLO Preferred Stock”). As of June 15, 2015 (the “Measurement Date”), (i) 32,472,857 shares of MSLO Class A Common Stock; 24,984,625 shares of MSLO Class B Common Stock and no shares of MSLO Preferred Stock were issued and outstanding, (ii) 59,400 shares of MSLO Common Stock were held in treasury, (iii) 6,447,172 shares of MSLO Common Stock were reserved for issuance pursuant to MSLO Equity Awards, (iv) 3,079,325 shares of MSLO Common Stock were subject to outstanding MSLO Stock Options with a weighted average exercise price of $3.45 (of which MSLO Stock Options to purchase an aggregate of 2,525,090 shares of MSLO Common Stock were exercisable with a weighted average exercise price of $2.71), (v) 185,000 shares of MSLO Common Stock were subject to outstanding MSLO Performance Stock Options with a weighted average exercise price of $8.39 (of which MSLO Performance Stock Options to purchase an aggregate of 10,000 shares of MSLO Common Stock were exercisable with a weighted average exercise price of $5.00), (vi) 489,127 shares of MSLO Common Stock were subject to outstanding MSLO RSU Awards and (vii) 808,333 shares of MSLO Common Stock were subject to outstanding MSLO Performance RSU Awards. Section 3.2 of the MSLO Disclosure Schedule contains a complete and correct list, as of the Measurement Date, of each outstanding MSLO Stock Option, each outstanding MSLO Performance Stock Option, each outstanding MSLO RSU Award, each outstanding MSLO Performance RSU Award including, as applicable, the holder, date of grant, exercise price (to the extent applicable), vesting schedule, performance targets and number of shares of MSLO Common Stock subject thereto.
(ii) Except as described in Section 3.2(a)(i) and except for changes since the close of business on the Measurement Date resulting from the exercise of MSLO Equity Awards, there is no, and neither MSLO nor any of its Subsidiaries has issued or agreed to issue any: (a) share of capital stock or other equity or ownership interest; (b) option, warrant or interest convertible into or exchangeable or exercisable for the purchase of shares of capital stock or other equity or ownership interests; (c) stock appreciation right, phantom stock, interest in the ownership or earnings of MSLO or any of its Subsidiaries or other equity equivalent or equity-based award or right; or (d) bond, debenture or other indebtedness having the right to vote or convertible or exchangeable for securities having the right to vote. Each outstanding share of capital stock or other equity or ownership interest of MSLO and each of the MSLO Subsidiaries is duly
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authorized, validly issued, fully paid and nonassessable, and in the case of its Subsidiaries, each such share or other equity or ownership interest is owned by MSLO or another Subsidiary of MSLO, free and clear of any Lien. All of the aforesaid shares or other equity or ownership interests have been offered, sold and delivered by MSLO or a MSLO Subsidiary in compliance with all applicable federal and state securities Laws. Except for rights granted to Sequential and TopCo under this Agreement, there are no outstanding obligations of MSLO or any MSLO Subsidiary to issue, sell or transfer or repurchase, redeem or otherwise acquire, or that relate to the holding, voting or disposition of, or that restrict the transfer of, the issued or unissued capital stock or other equity or ownership interests of MSLO or any of its Subsidiaries. No shares of capital stock or other equity or ownership interests of MSLO or any of the MSLO Subsidiaries are subject to or have been issued in violation of any rights, agreements, arrangements or commitments under any provision of applicable Law, the certificate of incorporation or bylaws or equivalent organizational documents of MSLO or any of the MSLO Subsidiaries or any Contract to which MSLO or any of the MSLO Subsidiaries is a party or by which MSLO or any of the MSLO Subsidiaries is bound. There are no declared or accrued but unpaid dividends with respect to any shares of MSLO Common Stock.
(b) Except as set forth in Section 3.2(b) of the MSLO Disclosure Schedule, there are no agreements to which MSLO or any of its Subsidiaries is a party, or to which any shares of MSLO Common Stock are subject, relating to the voting of shares of MSLO Common Stock or otherwise granting, limiting or affecting the rights pertaining to shares of MSLO Common Stock.
(c) Section 3.2(c) of the MSLO Disclosure Schedule sets forth a true and complete list of each MSLO Subsidiary, including its jurisdiction of organization and authorized and outstanding equity securities. All of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of MSLO are owned by MSLO, directly or indirectly, free and clear of any material Liens other than Permitted Liens, and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity ownership interest (other than restrictions under applicable securities Laws), and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. Except for the capital stock or other MSLO ownership interests of the MSLO Subsidiaries, as of the date of this Agreement, MSLO does not beneficially own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.
3.3 Corporate Authorization. MSLO has full corporate power and authority to execute and deliver this Agreement and, subject to the approval and adoption of this Agreement by the affirmative vote at the MSLO Stockholders Meeting, or any adjournment or postponement thereof, of (i) holders of at least a majority in combined voting power of the outstanding MSLO Class A Common Stock and MSLO Class B Common Stock and (ii) holders of at least fifty percent (50%) in combined voting power of the outstanding MSLO Class A Common Stock and MSLO Class B Common Stock not owned directly or indirectly, by Martha Stewart and her Affiliates (the “MSLO Stockholder Approval”), to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by MSLO of this Agreement and the consummation by MSLO of the transactions to which it is a
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party contemplated hereby have been duly and validly authorized and approved by the board of directors of MSLO (the “MSLO Board”). The MSLO Board, acting upon the recommendation of the Special Committee, has, by resolutions duly adopted by a vote of all members of the MSLO Board other than Martha Stewart (who recused herself), (i) determined that this Agreement and the transactions contemplated hereby, including the MSLO Merger, are fair to, and in the best interests of, MSLO and its stockholders, (ii) approved and adopted this Agreement, including the MSLO Merger, (iii) approved and declared advisable the execution, delivery and performance by MSLO of this Agreement and the consummation of the transactions contemplated hereby, and (iv) recommended that the stockholders of MSLO adopt this Agreement and approve the transactions contemplated by this Agreement. Other than the MSLO Stockholder Approval, no other corporate proceedings on the part of MSLO or any other vote by the holders of any class or series of capital stock of MSLO are necessary to authorize the execution, delivery or performance of this Agreement or to consummate the transactions contemplated hereby. The MSLO Stockholder Approval is the only vote of the holders of any securities of MSLO or any of the MSLO Subsidiaries necessary to approve and adopt this Agreement, the MSLO Merger and the other transactions contemplated hereby. This Agreement has been duly executed and delivered by MSLO and, assuming due execution and delivery by each of the other parties hereto, this Agreement constitutes the legal, valid and binding obligation of MSLO, enforceable against MSLO in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).
3.4 Governmental Authorization. The execution, delivery and performance by MSLO of this Agreement and the consummation by MSLO of the transactions contemplated hereby require at or prior to the Closing no consent or approval by, or filing with, or notification to any Governmental Entity, other than (a) the filing of the MSLO Certificate of Merger and the Sequential Certificate of Merger with the Secretary of State of the State of Delaware, (b) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (c) compliance with any applicable requirements of the Securities Act, the Exchange Act, any other applicable U.S. federal or state securities Laws or “blue sky” Laws, including the filing with the SEC and effectiveness of the registration statement on Form S-4 to be filed by TopCo in connection with the issuance of shares of TopCo Common Stock in the Mergers (the “Form S-4”) which shall include (x) a proxy statement relating to the MSLO Stockholders Meeting as a prospectus (such proxy statement/prospectus, as amended or supplemented from time to time, the “Proxy Statement/Prospectus”) and (y) an information statement with respect to the Sequential Stockholder Approval (as amended or supplemented from time to time, the “Information Statement”), (d) compliance with any applicable requirements of the New York Stock Exchange (the “NYSE”), (e) those consents, approvals or filings required pursuant to Section 4.4 and (f) any other consents, approvals or filings the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to have a MSLO Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.
3.5 Non-Contravention. The execution, delivery and performance by MSLO of this Agreement do not, and the consummation of the transactions contemplated hereby will not,
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(a) violate or conflict with or result in any breach of any provision of MSLO’s certificate of incorporation, bylaws or comparable organizational documents of MSLO or any of its Subsidiaries; (b) assuming receipt of the MSLO Stockholder Approval and compliance with the matters referred to in Section 3.4 and Section 4.4, violate or conflict with any provision of any applicable Law; (c) violate or conflict with or result in any breach or constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which MSLO or any of its Subsidiaries is entitled, or require consent by any Person under, any loan or credit agreement, note, mortgage, indenture, lease, MSLO Benefit Plan, or MSLO Material Contract; or (d) result in the creation or imposition of any Lien (other than Permitted Liens) on any asset of MSLO or any of its Subsidiaries, except, in the case of clauses (b), (c) and (d), as would not, individually or in the aggregate, reasonably be expected to have a MSLO Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.
3.6 MSLO SEC Filings.
(a) MSLO has timely filed all reports, schedules, forms, registration statements and other documents required to be filed by MSLO with the Securities and Exchange Commission (the “SEC”) since December 31, 2013 (together with any documents furnished during such period by MSLO to the SEC on a voluntary basis on Current Reports on Form 8-K and any reports, schedules, forms, registration statements and other documents filed with the SEC subsequent to the date hereof, collectively, the “MSLO SEC Documents”). As of their respective filing dates (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), the MSLO SEC Documents complied or, if not yet filed, will comply, in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as the case may be, including, in each case, the rules and regulations promulgated thereunder, and none of the MSLO SEC Documents contained or, if not yet filed, will contain, any untrue statement of a material fact or omitted or, if not yet filed, will omit a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(b) The financial statements (including the related notes and schedules thereto) included (or incorporated by reference) in the MSLO SEC Documents (i) have been prepared or, if not yet filed, will be prepared, in a manner consistent with the books and records of MSLO and its Subsidiaries, (ii) have been prepared or, if not yet filed, will be prepared, in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10 Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), (iii) comply or, if not yet filed, will comply, as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto and (iv) fairly present or, if not yet filed, will fairly present, in all material respects the consolidated financial position of MSLO and its Subsidiaries as of the dates thereof and their respective consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments that were not, or are not expected to be, material in amount), all in accordance with GAAP and the applicable rules and regulations promulgated by the SEC. Since January 1, 2014, MSLO has not
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made any change in the accounting practices or policies applied in the preparation of its financial statements, except as required by GAAP, SEC rule or policy or applicable Law. The books and records of MSLO and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP (to the extent applicable) and any other applicable legal and accounting requirements and reflect only actual transactions.
(c) MSLO has established and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Such disclosure controls and procedures are designed to ensure that information relating to MSLO, including its consolidated Subsidiaries, required to be disclosed in MSLO’s periodic and current reports under the Exchange Act, is made known to MSLO’s chief executive officer and its chief financial officer by others within those entities to allow timely decisions regarding required disclosures as required under the Exchange Act. The chief executive officer and chief financial officer of MSLO have evaluated the effectiveness of MSLO’s disclosure controls and procedures and, to the extent required by applicable Law, presented in any applicable MSLO SEC Document that is a report on Form 10-K or Form 10-Q, or any amendment thereto, its conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on such evaluation.
(d) MSLO and its Subsidiaries have established and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) which is effective in providing reasonable assurance regarding the reliability of MSLO’s financial reporting and the preparation of MSLO’s financial statements for external purposes in accordance with GAAP. MSLO has disclosed, based on its most recent evaluation of MSLO’s internal control over financial reporting prior to the date hereof, to MSLO’s auditors and audit committee (i) any significant deficiencies and material weaknesses in the design or operation of MSLO’s internal control over financial reporting which are reasonably likely to adversely affect MSLO’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in MSLO’s internal control over financial reporting. A true, correct and complete summary of any such disclosures made by management to MSLO’s auditors and audit committee is set forth as Section 3.6(d) of the MSLO Disclosure Schedule.
(e) Since December 31, 2012, (i) neither MSLO nor any of its Subsidiaries nor, to the knowledge of MSLO, any director, officer, employee, auditor, accountant or representative of MSLO or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of MSLO or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that MSLO or any of its Subsidiaries has engaged in questionable accounting or auditing practices and (ii) no attorney representing MSLO or any of its Subsidiaries, whether or not employed by MSLO or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by MSLO or any of its Subsidiaries or any of their respective officers, directors, employees or agents to the MSLO Board or any committee thereof or to any director or officer of MSLO or any of its Subsidiaries.
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(f) MSLO has made available to Sequential true, correct and complete copies of all written correspondence between the SEC, on the one hand, and MSLO and any of its Subsidiaries, on the other hand, occurring since December 31, 2012.
(g) Neither MSLO nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among MSLO and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K under the Exchange Act)), where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, MSLO or any of its Subsidiaries in MSLO’s or such Subsidiary’s published financial statements or other MSLO SEC Documents.
(h) MSLO is in compliance in all material respects with (i) the provisions of the Sarbanes-Oxley Act and (ii) the rules and regulations of the NYSE, in each case, that are applicable to MSLO.
(i) No Subsidiary of MSLO is required to file any form, report, schedule, statement or other document with the SEC.
(j) Except as and to the extent adequately accrued or reserved against in the audited consolidated balance sheet of MSLO and its Subsidiaries as at December 31, 2014 (such balance sheet, the “MSLO Balance Sheet”), neither MSLO nor any of its Subsidiaries has any liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, whether known or unknown and whether or not required by GAAP to be reflected in a consolidated balance sheet of MSLO and its Subsidiaries or disclosed in the notes thereto, except for liabilities and obligations, incurred in the ordinary course of business consistent with past practice since the date of the MSLO Balance Sheet, that would not, individually or in the aggregate, reasonably be expected to have a MSLO Material Adverse Effect.
3.7 Form S-4. The information supplied or to be supplied by MSLO for inclusion in the Form S-4, including the Proxy Statement/Prospectus and Information Statement, will not, at the time that the Form S-4 is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by MSLO with respect to statements made therein based on information supplied by or on behalf of Sequential, Madeline Merger Sub, Singer Merger Sub, TopCo or any of their Affiliates specifically for inclusion or incorporation by reference in the Form S-4. The Proxy Statement/Prospectus will not, at the date the Proxy Statement/Prospectus is first mailed to the stockholders of MSLO, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that, in each case, no representation or warranty is made by MSLO with respect to statements made therein based on information supplied by or on behalf of Sequential, Madeline Merger Sub, Singer Merger Sub, TopCo or any of their Affiliates
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specifically for inclusion or incorporation by reference in the Proxy Statement/Prospectus. The Information Statement will not, at the date the Information Statement is first mailed to the stockholders of Sequential, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that, in each case, no representation or warranty is made by MSLO with respect to statements made therein based on information supplied by or on behalf of Sequential, Madeline Merger Sub, Singer Merger Sub, TopCo or any of their Affiliates specifically for inclusion or incorporation by reference in the Information Statement.
3.8 Absence of Certain Changes or Events.
(a) Since the date of the MSLO Balance Sheet and through the date of this Agreement, no event or events or development or developments have occurred that have had or would reasonably be expected to have, individually or in the aggregate, a MSLO Material Adverse Effect.
(b) Except in connection with the execution and delivery of this Agreement and the transactions contemplated by this Agreement, from December 31, 2014 through the date of this Agreement, MSLO and the MSLO Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business consistent with past practice.
3.9 Compliance with Laws; Permits.
(a) Since December 31, 2013, (i) each of MSLO and its Subsidiaries is and has been in compliance in all material respects with all Laws applicable to it and (ii) MSLO has complied with the applicable listing and corporate governance rules and regulations of the NYSE except, in each case, where the failure to so conduct such business and operations or comply with such rules and regulations would not, individually or in the aggregate, reasonably be expected to have a MSLO Material Adverse Effect. Since December 31, 2012, none of MSLO, any of the MSLO Subsidiaries or any of its or their executive officers has received, nor is there any basis for, any written notice, order, complaint or other communication from any Governmental Entity or any other Person that MSLO or any of its Subsidiaries is not in compliance in any material respect with any Law applicable to it.
(b) Section 3.9(b) of the MSLO Disclosure Schedule sets forth a true and complete list of all material permits, licenses, franchises, approvals, certificates, consents, waivers, concessions, exemptions, orders, registrations, notices or other authorizations of any Governmental Entity necessary for each of MSLO and its Subsidiaries to own, lease and operate its properties and to carry on its business in all material respects as currently conducted (the “Permits”). Each of MSLO and its Subsidiaries is and has been in compliance in all material respects with all such material Permits. No suspension, cancellation, modification, revocation or nonrenewal of any material Permit is pending or, to the knowledge of MSLO, threatened in writing. MSLO and its Subsidiaries will continue to have the use and benefit of all material Permits following consummation of the transactions contemplated hereby. No material Permit is held in the name of any employee, officer, director, stockholder, agent or otherwise on behalf of MSLO or any of its Subsidiaries.
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3.10 Litigation. As of the date hereof, there is no action pending or, to the knowledge of MSLO, threatened by or against MSLO, any of the MSLO Subsidiaries, any of their respective properties or assets, or any officer or director of MSLO or any of its Subsidiaries that, individually or in the aggregate, would reasonably be expected to have a MSLO Material Adverse Effect. As of the date hereof, none of MSLO or any of its Subsidiaries, or any of their respective properties or assets is subject to any outstanding Order of any Governmental Entity that, individually or in the aggregate, has had or would reasonably be expected to have a MSLO Material Adverse Effect.
3.11 Title to Properties; Absence of Liens. Section 3.11 of the MSLO Disclosure Schedule sets forth a true and complete description (including address, and for each lease, sublease and license, and all amendments, extensions, renewals, guaranties, modifications, supplements or other agreements, if any, with respect thereto) of all real property leased, subleased or licensed by MSLO or any of its Subsidiaries (collectively, the “MSLO Leased Real Properties”; and the leases, subleases and licenses with respect thereto, collectively, the “MSLO Real Property Leases”). MSLO has made available to Sequential true, correct and complete copies of the MSLO Real Property Leases, together with all amendments, extensions, renewals, guaranties, modifications, supplements or other agreements, if any, with respect thereto. Each of the MSLO Real Property Leases is in full force and effect. MSLO or one of its Subsidiaries has a valid, binding and enforceable leasehold or subleasehold interest (or license, as applicable) in each MSLO Leased Real Property, in each case as to such leasehold or subleasehold interest (or license, as applicable), free and clear of all Liens (other than Permitted Liens). Neither MSLO nor any of its Subsidiaries owns, or has owned in the past 10 years, any real property or any interests in real property.
3.12 Taxes.
(a) All material Tax Returns required by applicable Law to be filed with any Governmental Entity by, or on behalf of, MSLO or any of its Subsidiaries have been duly filed when due (including extensions) in accordance with all applicable Laws, and all such Tax Returns are true, correct and complete in all material respects.
(b) MSLO and each of its Subsidiaries has duly and timely paid or has duly and timely withheld and remitted to the appropriate Governmental Entity all material Taxes due and payable, or, where payment is not yet due, has established in accordance with GAAP an adequate accrual for all material Taxes in the financial statements included in the MSLO SEC Documents.
(c) There is no claim, audit, action, suit, proceeding or investigation pending or threatened in writing against or with respect to MSLO or any of its Subsidiaries in respect of any Tax or Tax Return which if determined adversely would, individually or in the aggregate, be expected to result in a material Tax deficiency. Neither MSLO nor any of its Subsidiaries has received or applied for a Tax ruling that would be binding on MSLO or any of its Subsidiaries after the Closing Date.
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(d) MSLO and each of its Subsidiaries has withheld or provided an accrual for all material amounts required to have been withheld by it in connection with amounts paid or owed to any employee, independent contractor, creditor, stockholder or any other third party; such amounts were either duly paid to the appropriate Governmental Entity or set aside in accounts for such purpose in accordance with applicable Law. MSLO and each of its Subsidiaries has reported such withheld amounts to the appropriate Governmental Entity and to each such employee, independent contractor, creditor, stockholder or any other third party, as required under applicable Law.
(e) Neither MSLO nor any of its Subsidiaries is liable for any Taxes of any Person (other than MSLO and its Subsidiaries) as a result of (i) being a transferee or successor of such Person, (ii) the application of Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law or (iii) a tax sharing, tax indemnity or tax allocation agreement or any similar agreement to indemnify such Person.
(f) Neither MSLO nor any of its Subsidiaries shall be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or portion thereof) ending after the Closing Date, as a result of (1) any elective change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481 of the Code (or any corresponding provision of state, local or foreign Law), (2) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax Law) executed on or prior to the Closing Date, (3) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign Tax Law), (4) installment sale or open transaction made on or prior to the Closing Date, or (5) prepaid amount received on or prior to the Closing Date.
(g) Neither MSLO nor any of its Subsidiaries has participated or engaged in any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4.
(h) Neither MSLO nor any of its Subsidiaries has been informed in writing by any Governmental Entity in any jurisdiction in which it does not file a Tax Return that it may be required to file a Tax Return in such jurisdiction.
(i) Neither MSLO nor any of its Subsidiaries has distributed stock of another corporation, or has had its stock distributed by another corporation, in a transaction that was governed, or purported or intended to be governed or described, in whole or in part, by Section 355 or Section 368(a)(1)(D) of the Code.
(j) Neither MSLO nor any of its Subsidiaries has taken or agreed to take any action or is aware of any fact or circumstance that would prevent or impede, or could reasonably be expected to prevent or impede, the Mergers from qualifying as a transaction described in Section 351 of the Code.
3.13 Employee Benefit Plans.
(a) Section 3.13(a) of the MSLO Disclosure Schedule sets forth as of the date of this Agreement a true and complete list of each “employee benefit plan” (within the meaning
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of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise), whether formal or informal, written, legally binding or not, under which any employee or former employee of MSLO or its Subsidiaries has any present or future right to benefits or MSLO or its Subsidiaries has any direct or contingent liability (each, a “MSLO Benefit Plan”). With respect to each such MSLO Benefit Plan, MSLO has made available to Sequential a true and complete copy of such MSLO Benefit Plan, if written, or a description of the material terms of such MSLO Benefit Plan if not written, and to the extent applicable: (i) all trust agreements, or other funding arrangements; (ii) the most recent actuarial and trust reports for both ERISA funding and financial statement purposes; (iii) the two most recent Form 5500 with all attachments required to have been filed with the Internal Revenue Service (the “IRS”) or the Department of Labor or any similar reports filed with any comparable Governmental Entity in any non-U.S. jurisdiction having jurisdiction over any MSLO Benefit Plan and all schedules thereto; (iv) the most recent IRS determination or opinion letter; and (v) all current summary plan descriptions.
(b) Each MSLO Benefit Plan has been maintained in all material respects in accordance with its terms and the requirements of applicable Law. Each of MSLO and its Subsidiaries has performed all material obligations required to be performed by it under any MSLO Benefit Plan and, to the knowledge of MSLO, is not in any material respect in default under or in violation of any MSLO Benefit Plan. No material action (other than claims for benefits in the ordinary course) is pending or, to the knowledge of MSLO, threatened with respect to any MSLO Benefit Plan.
(c) Each MSLO Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a determination or opinion letter from the IRS that it is so qualified and each related trust that is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination or opinion letter from the IRS that it is so exempt and, to the knowledge of MSLO, no fact or event has occurred since the date of such letter or letters from the IRS that could reasonably be expected to adversely affect the qualified status of any such MSLO Benefit Plan or the exempt status of any such trust.
(d) No MSLO Benefit Plan is subject to Title IV of ERISA, is a multiemployer plan (within the meaning of Section 3(37) of ERISA) or provides post-employment welfare benefits except to the extent required by Section 4980B of the Code.
(e) Any arrangement of MSLO or any of its Subsidiaries that is subject to Section 409A of the Code has complied in form and operation with the requirements of Section 409A of the Code as in effect from time to time. Neither MSLO nor any of its Subsidiaries has any obligation to provide any gross-up payment to any individual with respect to any income Tax, additional Tax, excise Tax or interest charge imposed pursuant to Section 409A or 4999 of the Code.
(f) Except as set forth in Section 3.13(f) of the MSLO Disclosure Schedule, the consummation of the transactions contemplated hereby will not, either alone or in combination with another event, (i) entitle any current or former director, officer or employee of MSLO or of any of its Subsidiaries to severance pay, unemployment compensation or any other payment; (ii) result in any payment becoming due, accelerate the time of payment or vesting, or increase the amount of compensation due to any such director, officer or employee; (iii) result in any forgiveness of indebtedness, trigger any funding obligation under any MSLO Benefit Plan or impose any restrictions or limitations on MSLO rights to administer, amend or terminate any MSLO Benefit Plan; or (iv) result in any payment (whether in cash or property or the vesting of property) to any “disqualified individual” (as such term is defined in Treasury Regulations Section 1.280G-1) that could reasonably be expected, individually or in combination with any other such payment, to constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).
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3.14 Employees, Labor Matters.
(a) Neither MSLO nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, and there are no, and during the last three years have been no, labor unions or other organizations representing, purporting to represent or, to the knowledge of MSLO, attempting to represent any employees of MSLO or any of its Subsidiaries.
(b) Since January 1, 2011, there has not occurred or, to the knowledge of MSLO, been threatened any strike, slowdown, work stoppage, concerted refusal to work overtime or other similar labor activity or union organizing campaign with respect to any employees of MSLO or any of its Subsidiaries. There are no labor disputes subject to any formal grievance procedure, arbitration or litigation and there is no representation petition pending or, to the knowledge of MSLO, threatened with respect to any employee of MSLO or any of its Subsidiaries.
(c) MSLO and its Subsidiaries have complied in all material respects with all applicable Laws relating to employment of labor, including all applicable Laws relating to wages, hours, collective bargaining, employment discrimination, civil rights, safety and health, workers’ compensation, pay equity, classification of employees, immigration, and the collection and payment of withholding and/or social security Taxes.
3.15 Environmental Matters.
(a) Except as would not, individually or in the aggregate, have a MSLO Material Adverse Effect: (i) MSLO and each of its Subsidiaries are in compliance with all applicable Environmental Laws, and possess and are in compliance with all applicable Environmental Permits necessary to operate the business as presently operated; (ii) to the knowledge of MSLO, there have been no releases of Hazardous Materials at or on any property owned or operated by MSLO or any of its Subsidiaries, except under circumstances that are not reasonably likely to result in liability of MSLO or any of its Subsidiaries under any applicable Environmental Law; (iii) neither MSLO nor any of its Subsidiaries has received from a Governmental Entity a request for information pursuant to Section 104(e) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar state statute, or any
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written notification alleging that it is liable for any release or threatened release of Hazardous Materials at any location, except with respect to any such notification or request for information concerning any such release or threatened release, to the extent such matter has been resolved with the appropriate foreign, federal, state or local regulatory authority or otherwise; and (iv) neither MSLO nor any of its Subsidiaries has received any written claim or complaint, or is presently subject to any lawsuit, proceeding or action, relating to noncompliance with Environmental Laws or any other liabilities pursuant to Environmental Laws, and to the knowledge of MSLO, no such matter has been threatened in writing.
(b) For purposes of this Agreement, the following terms shall have the meanings assigned below:
(i) “Environmental Laws” shall mean all foreign, federal, state, or local statutes, regulations, ordinances, codes, or decrees protecting the quality of the ambient air, soil, surface water or groundwater.
(ii) “Environmental Permits” shall mean all permits, licenses, registrations, approvals, and other authorizations required under applicable Environmental Laws.
(iii) “Hazardous Materials” shall mean any substance or waste defined and regulated as hazardous, acutely hazardous, or toxic under applicable Environmental Laws.
3.16 Intellectual Property.
(a) Section 3.16 of the MSLO Disclosure Schedule sets forth a true and complete list of all Registered Intellectual Property (each identified as a Mark, Patent, Copyright or domain name) owned (in whole or in part) by MSLO or any of its Subsidiaries as of the date of this Agreement, identifying for each whether it is owned by MSLO or the relevant Subsidiary (together with all Trade Secrets owned by MSLO or any of its Subsidiaries, collectively, the “MSLO Owned IP”).
(b) Since January 1, 2013, no MSLO Owned IP has been or is now involved in any opposition, cancellation, reissue, reexamination, inter-partes review, public protest, interference, arbitration, mediation, domain name dispute resolution or other proceeding and, to the knowledge of MSLO, no such proceeding is or has been threatened or asserted with respect to any MSLO Owned IP, which, in each case, if determined or resolved adversely against MSLO or any of its Subsidiaries, would reasonably be expected to have a MSLO Material Adverse Effect
(c) MSLO or its Subsidiaries own or otherwise have a valid right to use, free and clear of any and all Liens (other than Permitted Liens), all Intellectual Property used in the operation of MSLO and its Subsidiaries’ businesses as currently conducted and neither MSLO nor any of its Subsidiaries has received any written notice or claim challenging the ownership, validity or enforceability of, or asserting the misuse of, any of the Intellectual Property used in the operation of MSLO’s or any of its Subsidiaries’ businesses, nor to the knowledge of MSLO is there a reasonable basis for any such notice or claim.
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(d) Except as would not reasonably be expected to have a MSLO Material Adverse Effect, (i) each of MSLO and its Subsidiaries: (A) has taken reasonable steps in accordance with standard industry practices to protect its and their rights in the Intellectual Property used in the operation of MSLO’s and its Subsidiaries’ businesses; and (B) has maintained the confidentiality, secrecy and value of all Trade Secrets used in the operation of MSLO’s or any of its Subsidiaries’ businesses, and (ii) to the knowledge of MSLO, no unauthorized disclosure of such Trade Secrets has occurred.
(e) All material MSLO Registered Intellectual Property is subsisting and, to the knowledge of MSLO, valid and enforceable. Except as would not reasonably be expected to have a MSLO Material Adverse Effect, neither MSLO nor any of its Subsidiaries has taken any action or failed to take any action that could reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation or unenforceability of any of the MSLO Registered Intellectual Property (including the failure to pay any filing, examination, issuance, post registration and maintenance fees, or annuities, and the failure to disclose any known material prior art in connection with the prosecution of patent applications).
(f) Since January 1, 2013, to the knowledge of MSLO, (i) the development, manufacture, sale, distribution or other commercial exploitation of products, and the provision of any services, by or on behalf of MSLO or any of its Subsidiaries, and all of the other activities or operations of MSLO or any of its Subsidiaries, have not infringed upon, misappropriated, violated, diluted or constituted the unauthorized use of, any Intellectual Property of any Person, and (ii) neither MSLO nor any of its Subsidiaries has received any notice or claim, including invitations to license, asserting or suggesting that any such infringement, misappropriation, violation, dilution or unauthorized use is or may be occurring or has or may have occurred, which, in each case, under either (i) or (ii), if determined or resolved adversely against MSLO or any of its Subsidiaries, would reasonably be expected to have a MSLO Material Adverse Effect. To the knowledge of MSLO, no Person is misappropriating, infringing, diluting or violating the Intellectual Property owned by MSLO or any of its Subsidiaries, which infringement would reasonably be expected to have a MSLO Material Adverse Effect.
(g) Section 3.16(g) of the MSLO Disclosure Schedule sets forth a list of all Contracts pursuant to which MSLO or any of its Subsidiaries has granted any exclusive license with respect to any MSLO Owned IP.
(h) Except as would not reasonably be expected to have a MSLO Material Adverse Effect, MSLO or its Subsidiaries, as the case may be, owns or has rights to access and use all electronic data processing, information, record keeping, communications, telecommunications, account management, inventory management and other computer systems (including all computer programs, software, databases, firmware, hardware and related documentation) (collectively, “IT Systems”) used to process, store, maintain and operate data, information and functions used in connection with MSLO’s and its Subsidiaries’ businesses or otherwise necessary for the conduct of MSLO’s and its Subsidiaries’ businesses, including systems to operate payroll, accounting, billing and receivables, payables, inventory, asset tracking, customer service and human resources functions. MSLO and its Subsidiaries have taken reasonable steps in accordance with industry standards to secure the IT Systems from unauthorized access or use by any Person, and to ensure the continued, uninterrupted and error-free operation of the IT Systems.
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(i) The IT Systems are adequate in all material respects for their intended use and for the operation of MSLO’s and its Subsidiaries’ businesses as currently conducted, and are in good working condition (normal wear and tear excepted), and, to the knowledge of MSLO, are free of all viruses, worms, Trojan horses and other known contaminants and do not contain any bugs, errors or problems of a nature that would materially disrupt their operation or have a material adverse impact on the operation of the IT Systems. There has not been any malfunction with respect to any of the IT Systems since January 1, 2013 that has not been remedied or replaced in all material respects.
(j) MSLO is in material compliance with its privacy policies and applicable Laws relating to the use, collection and receipt of personal information and sensitive non-personally identifiable information.
3.17 MSLO Material Contracts.
(a) MSLO has made available to Sequential a true and complete copy of each Contract to which MSLO or any of its Subsidiaries is a party as of the date of this Agreement or by which MSLO, any of its Subsidiaries or any of its respective properties or assets is bound as of the date of this Agreement, which: (i) is a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the SEC; (ii) contains covenants of MSLO or any of its Subsidiaries not to compete or engage in any line of business or compete with any Person in any geographic area, including any exclusive licensing arrangements with respect to Intellectual Property; (iii) pursuant to which MSLO or any of its Subsidiaries has entered into a partnership or joint venture with any other Person (other than MSLO or any of its Subsidiaries); or (iv) relates to or evidences indebtedness for borrowed money or any guarantee of indebtedness for borrowed money by MSLO or any of its Subsidiaries in excess of $100,000 (each, a “MSLO Material Contract”).
(b) MSLO has delivered or made available to MSLO true and complete copies of all MSLO Material Contracts, including any amendments thereto. Each MSLO Material Contract is a legal, valid, binding and enforceable agreement of MSLO or its applicable Subsidiary and, to the knowledge of MSLO, any other party thereto, and is in full force and effect. None of MSLO or any of its Subsidiaries or, to the knowledge of MSLO, any other party is in breach or violation of, or (with or without notice or lapse of time or both) default under, any MSLO Material Contract, nor has MSLO or any of its Subsidiaries received any claim of any such breach, violation or default, except for such breaches and defaults which would not, individually or in the aggregate, reasonably be expected to have a MSLO Material Adverse Effect.
3.18 Licensees. Section 3.18 of the MSLO Disclosure Schedule sets forth a true and complete list of the top 10 licensees by revenue of MSLO and the MSLO Subsidiaries, taken as a whole, for each of (a) calendar year 2014 and (b) the first three months of calendar year 2015. Except as set forth in Section 3.18 of the MSLO Disclosure Schedule, since the date of the MSLO Balance Sheet, no such licensee has (i) canceled or otherwise terminated, or, to the
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knowledge of MSLO, threatened to cancel or otherwise terminate its relationship with MSLO or the MSLO Subsidiary, (ii) decreased, or to the knowledge of MSLO, threatened to decrease, amounts payable, including royalty payments, to MSLO or the MSLO Subsidiary, or (iii) increased or decreased, as applicable, or to the knowledge of MSLO, threatened to increase or decrease, as applicable, pricing terms with respect to amounts payable, including royalty payments, to MSLO or the MSLO Subsidiaries.
3.19 Affiliate Transactions.
(a) Since January 1, 2013, no Related Party of MSLO or any of its Subsidiaries: (i) owns or has owned, directly or indirectly, any equity or other financial or voting interest in any competitor, supplier, licensor, lessor, distributor, independent contractor or customer of MSLO or any of its Subsidiaries or their business; (ii) owns or has owned, directly or indirectly, or has or has had any interest in any property (real or personal, tangible or intangible) that MSLO or any of its Subsidiaries uses or has used in or pertaining to the business of MSLO or any of its Subsidiaries; (iii) has or has had any business dealings or a financial interest in any transaction with MSLO or any of its Subsidiaries or involving any assets or property of MSLO or any of its Subsidiaries, other than business dealings or transactions conducted in the ordinary course of business at prevailing market prices and on prevailing market terms; or (iv) is or has been employed by MSLO or any of its Subsidiaries.
(b) There are no Contracts by and between MSLO or any of its Subsidiaries, on the one hand, and any Related Party of MSLO or any its Subsidiaries, on the other hand, pursuant to which such Related Party provides or receives any information, assets, properties, support or other services to or from MSLO or any of its Subsidiaries (including Contracts relating to billing, financial, tax, accounting, data processing, human resources, administration, legal services, information technology and other corporate overhead matters).
(c) There are no outstanding notes payable to, accounts receivable from or advances by MSLO or any of its Subsidiaries to, and neither MSLO nor any of its Subsidiaries is otherwise a debtor or creditor of, or has any liability or other obligation of any nature to, any Related Party of MSLO or any of its Subsidiaries. Since the date of the MSLO Balance Sheet, neither MSLO nor any of its Subsidiaries has incurred any obligation or liability to, or entered into or agreed to enter into any transaction with or for the benefit of, any Related Party.
3.20 Insurance. Section 3.20 of the MSLO Disclosure Schedule sets forth a true and complete list of all casualty, directors and officers liability, general liability, product liability and all other types of material insurance policies maintained with respect to MSLO or any of its Subsidiaries, together with the carriers and liability limits for each such policy. All such policies are in full force and effect and no application therefor included a material misstatement or omission. All premiums with respect thereto have been paid to the extent due. MSLO has not received notice of, nor to the knowledge of MSLO is there threatened in writing, any cancellation, termination, reduction of coverage or material premium increases with respect to any such policy. All material insurable risks in respect of the business and assets of MSLO and its Subsidiaries are covered by such insurance policies and the types and amounts of coverage provided therein are usual and customary in the context of the business and operations in which MSLO and its Subsidiaries are engaged. The activities and operations of MSLO and its
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Subsidiaries have been conducted in a manner so as to conform in all material respects to all applicable provisions of such insurance policies. The consummation of the transactions contemplated by this Agreement will not cause a cancellation or reduction in the coverage of such policies.
3.21 Brokers’ and Finders’ Fees. Except for Moelis & Company, the fees and expenses of which will be paid by MSLO, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of MSLO or any of the MSLO Subsidiaries who is entitled to any fee or commission from MSLO or any of the MSLO Subsidiaries in connection with the transactions to which MSLO is a party contemplated hereby. MSLO has furnished to Sequential a true and complete copy of any Contract between MSLO and Moelis & Company pursuant to which Moelis & Company could be entitled to any payment from MSLO relating to the transactions contemplated hereby.
3.22 No Other Representations or Warranties. Except for the representations and warranties contained in this ARTICLE III, neither MSLO nor any other Person makes any other express or implied representation or warranty on behalf of MSLO or any of its Affiliates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SEQUENTIAL
Except as (x) disclosed in the Sequential SEC Documents filed with or furnished to the SEC (excluding disclosure contained in the “risk factors” section or constituting “forward-looking statements,” in each case, to the extent such disclosure is cautionary, predictive or speculative in nature) or (y) set forth in the disclosure letter delivered by Sequential to MSLO on or prior to the date of this Agreement (the “Sequential Disclosure Schedule”), Sequential represents and warrants to MSLO as set forth in this ARTICLE IV. For purposes of the representations and warranties of Sequential contained herein, disclosure in any section of the Sequential Disclosure Schedule of any facts or circumstances shall be deemed to be disclosure of such facts or circumstances with respect to all representations or warranties by Sequential to which the relevance of such disclosure to the applicable representation and warranty is readily apparent on the face thereof. The inclusion of any information in the Sequential Disclosure Schedule or other document delivered by Sequential pursuant to this Agreement shall not be deemed to be an admission or evidence of the materiality of such item, nor shall it establish a standard of materiality for any purpose whatsoever.
4.1 Corporate Organization.
(a) Each of Sequential and its Subsidiaries (i) is an entity, duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization, (ii) has all requisite corporate or similar power and authority to own, lease and operate its properties and to carry on its business as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except in the case of clause (iii) as, individually or in the aggregate, has not had and would not reasonably be expected to have a Sequential Material Adverse Effect.
(b) True and complete copies of the certificate of incorporation of Sequential, as amended through, and as in effect as of, the date of this Agreement and the bylaws, as in effect as of, the date of this Agreement and the certificate of incorporation and bylaws (or comparable organizational documents of each of its Subsidiaries, in each case as amended to the date of this Agreement) have previously been made available to MSLO.
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4.2 Capitalization.
(a) Authorized and Issued Shares.
(i) As of the date of this Agreement, the authorized capital stock of Sequential consists solely of 150,000,000 shares of Sequential Common Stock and 10,000,000 shares of preferred stock, par value $0.001 per share, of Sequential (the “Sequential Preferred Stock”). As of the Measurement Date, (i) 39,448,320 shares of Sequential Common Stock and no shares of Sequential Preferred Stock were issued and outstanding, (ii) 267,200 shares of Sequential Common Stock were held in treasury, (iii) 354,766 shares of Sequential Common Stock were subject to outstanding Sequential Stock Options with a weighted average exercise price of $5.213 (of which Sequential Stock Options to purchase an aggregate of 311,766 shares of Sequential Common Stock were exercisable with a weighted average exercise price of $4.391), (iv) 1,314,499 shares of Sequential Common Stock were subject to outstanding Sequential RSU Awards, (v) 524,335 shares of Sequential Common Stock were subject to Sequential Restricted Stock Awards and (vi) 630,160 shares of Sequential Common Stock were subject to outstanding Sequential Warrants.
(ii) Except as described in Section 4.2(a)(i), and except for changes since the close of business on the Measurement Date resulting from the exercise of Sequential Equity Awards, there is no, and neither Sequential nor any of its Subsidiaries has issued or agreed to issue any: (a) share of capital stock or other equity or ownership interest; (b) option, warrant or interest convertible into or exchangeable or exercisable for the purchase of shares of capital stock or other equity or ownership interests; (c) stock appreciation right, phantom stock, interest in the ownership or earnings of Sequential or any of its Subsidiaries or other equity equivalent or equity-based award or right; or (d) bond, debenture or other indebtedness having the right to vote or convertible or exchangeable for securities having the right to vote. Each outstanding share of capital stock or other equity or ownership interest of Sequential and each of the Sequential Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and in the case of its Subsidiaries, each such share or other equity or ownership interest is owned by Sequential or another Subsidiary of Sequential, free and clear of any Lien. All of the aforesaid shares or other equity or ownership interests have been offered, sold and delivered by Sequential or a Sequential Subsidiary in compliance with all applicable federal and state securities Laws. Except for rights granted to MSLO and TopCo under this Agreement, there are no outstanding obligations of Sequential or any Sequential Subsidiary to issue, sell or transfer or repurchase, redeem or otherwise acquire, or that relate to the holding, voting or disposition of, or that restrict the transfer of, the issued or unissued capital stock or other equity or ownership interests of Sequential or any of its Subsidiaries. No shares of capital stock or other equity or ownership interests of
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Sequential or any of the Sequential Subsidiaries are subject to or have been issued in violation of any rights, agreements, arrangements or commitments under any provision of applicable Law, the certificate of incorporation or bylaws or equivalent organizational documents of Sequential or any of the Sequential Subsidiaries or any Contract to which Sequential or any of the Sequential Subsidiaries is a party or by which Sequential or any of the Sequential Subsidiaries is bound. There are no declared or accrued but unpaid dividends with respect to any shares of Sequential Common Stock.
(b) Except as set forth in Section 4.2(b) of the Sequential Disclosure Schedule, there are no agreements to which Sequential or any of its Subsidiaries is a party, or to which any shares of Sequential Common Stock are subject, relating to the voting of shares of Sequential Common Stock or otherwise granting, limiting or affecting the rights pertaining to shares of Sequential Common Stock.
(c) Section 4.2(c) of the Sequential Disclosure Schedule sets forth a true and complete list of each Sequential Subsidiary, including its jurisdiction of organization. All of the issued and outstanding shares of capital stock or other equity ownership interests of each “significant subsidiary” (as such term is defined under Regulation S-X promulgated by the SEC) of Sequential are owned by Sequential, directly or indirectly, free and clear of any material Liens other than Permitted Liens, and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity ownership interest (other than restrictions under applicable securities Laws), and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. Except for the capital stock or other equity ownership interests of the Sequential Subsidiaries, as of the date of this Agreement, Sequential does not beneficially own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.
4.3 Corporate Authorization. Sequential has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby subject to obtaining the Sequential Stockholder Approval. The execution, delivery and performance by Sequential of this Agreement and the consummation by Sequential of the transactions to which it is a party contemplated hereby have been duly and validly authorized and approved by the board of directors of Sequential (the “Sequential Board”). The Sequential Board has, by resolutions duly adopted, unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Sequential Merger, are fair to, and in the best interests of Sequential and its stockholders, (ii) approved and adopted this Agreement, including the Sequential Merger, (iii) approved and declared advisable the execution, delivery and performance by Sequential of this Agreement and the consummation of the transactions contemplated hereby, and (iv) recommended approval by the stockholders of Sequential of the transactions contemplated by this Agreement. Except for the approval by the written consent of the holders of a majority of the outstanding shares of Sequential Common Stock (the “Sequential Stockholder Approval”), which approval is subject to Section 6.5, no other corporate proceedings on the part of Sequential or any other vote by the holders of any class or series of capital stock of Sequential are necessary to approve or adopt this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Sequential and, assuming due execution and delivery by each of the other
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parties hereto, this Agreement constitutes the legal, valid and binding obligation of Sequential, enforceable against Sequential in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).
4.4 Governmental Authorization. The execution, delivery and performance by Sequential of this Agreement and the consummation by Sequential of the transactions contemplated hereby require at or prior to the Closing no consent or approval by, or filing with, or notification to any Governmental Entity, other than (a) the filing of the MSLO Certificate of Merger and the Sequential Certificate of Merger with the Secretary of State of the State of Delaware, (b) compliance with any applicable requirements of the HSR Act, (c) compliance with any applicable requirements of the Securities Act, the Exchange Act, any other applicable U.S. federal or state securities Laws or “blue sky” Laws, including the filing with the SEC and effectiveness of the Form S-4 including (x) the Proxy Statement/Prospectus and (y) the Information Statement, (d) compliance with any applicable requirements of Nasdaq, (e) those consents, approvals or filings set forth in Section 3.4, and (f) any other consents, approvals or filings the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to have a Sequential Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.
4.5 Non-Contravention. The execution, delivery and performance by Sequential of this Agreement do not, and the consummation of the transactions contemplated hereby will not, (a) violate or conflict with or result in any breach of any provision of Sequential’s certificate of incorporation, bylaws or comparable organizational documents of Sequential or any of its Subsidiaries; (b) assuming receipt of the Sequential Stockholder Approval and compliance with the matters referred to in Section 3.4 and Section 4.4, violate or conflict with any provision of any applicable Law; (c) violate or conflict with or result in any breach or constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default under, or cause the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Sequential or any of its Subsidiaries is entitled, or require consent by any Person under, any loan or credit agreement, note, mortgage, indenture, lease, Sequential Benefit Plan, or Sequential Material Contract; or (d) result in the creation or imposition of any Lien (other than Permitted Liens) on any asset of Sequential or any of its Subsidiaries, except in the case of clauses (b), (c) and (d), as would not, individually or in the aggregate, reasonably be expected to have a Sequential Material Adverse Effect or prevent or materially delay the consummation of the transactions contemplated by this Agreement.
4.6 Sequential SEC Filings.
(a) Sequential has timely filed all reports, schedules, forms, registration statements and other documents required to be filed by Sequential with the SEC since December 31, 2012 (together with any documents furnished during such period by Sequential to the SEC on a voluntary basis on Current Reports on Form 8-K and any reports, schedules, forms, registration statements and other documents filed with the SEC subsequent to the date hereof, collectively, the “Sequential SEC Documents”). As of their respective filing dates (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), the
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Sequential SEC Documents complied or, if not yet filed, will comply, in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, including, in each case, the rules and regulations promulgated thereunder, and none of the Sequential SEC Documents contained or, if not yet filed, will contain, any untrue statement of a material fact or omitted or, if not yet filed, will omit a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(b) The financial statements (including the related notes and schedules thereto) included (or incorporated by reference) in the Sequential SEC Documents (i) have been prepared or, if not yet filed, will be prepared, in a manner consistent with the books and records of Sequential and its Subsidiaries, (ii) have been prepared or, if not yet filed, will be prepared, in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto), (iii) comply or, if not yet filed, will comply, as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto and (iv) fairly present or, if not yet filed, will fairly present, in all material respects the consolidated financial position of Sequential and its Subsidiaries as of the dates thereof and their respective consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments that were not, or are not expected to be, material in amount), all in accordance with GAAP and the applicable rules and regulations promulgated by the SEC. Since January 1, 2014, Sequential has not made any change in the accounting practices or policies applied in the preparation of its financial statements, except as required by GAAP, SEC rule or policy or applicable Law. The books and records of Sequential and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP (to the extent applicable) and any other applicable legal and accounting requirements and reflect only actual transactions.
(c) Sequential has established and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Such disclosure controls and procedures are designed to ensure that information relating to Sequential, including its consolidated Subsidiaries, required to be disclosed in Sequential’s periodic and current reports under the Exchange Act, is made known to Sequential’s chief executive officer and its chief financial officer by others within those entities to allow timely decisions regarding required disclosures as required under the Exchange Act. The chief executive officer and chief financial officer of Sequential have evaluated the effectiveness of Sequential’s disclosure controls and procedures and, to the extent required by applicable Law, presented in any applicable Sequential SEC Document that is a report on Form 10-K or Form 10-Q, or any amendment thereto, its conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by such report or amendment based on such evaluation.
(d) Sequential and its Subsidiaries have established and maintain a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) which is effective in providing reasonable assurance regarding the reliability of Sequential’s financial reporting and the preparation of Sequential’s financial statements for external purposes in accordance with GAAP. Sequential has disclosed, based on its most recent
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evaluation of Sequential’s internal control over financial reporting prior to the date hereof, to Sequential’s auditors and audit committee (i) any significant deficiencies and material weaknesses in the design or operation of Sequential’s internal control over financial reporting which are reasonably likely to adversely affect Sequential’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Sequential’s internal control over financial reporting. A true, correct and complete summary of any such disclosures made by management to Sequential’s auditors and audit committee is set forth as Section 4.6(d) of the Sequential Disclosure Schedule.
(e) Since December 31, 2012, (i) neither Sequential nor any of its Subsidiaries nor, to the knowledge of Sequential, any director, officer, employee, auditor, accountant or representative of Sequential or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Sequential or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Sequential or any of its Subsidiaries has engaged in questionable accounting or auditing practices and (ii) no attorney representing Sequential or any of its Subsidiaries, whether or not employed by Sequential or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by Sequential or any of its Subsidiaries or any of their respective officers, directors, employees or agents to the Sequential Board or any committee thereof or to any director or officer of Sequential or any of its Subsidiaries.
(f) Sequential has made available to MSLO true, correct and complete copies of all written correspondence between the SEC, on the one hand, and Sequential and any of its Subsidiaries, on the other hand, occurring since December 31, 2012.
(g) Neither Sequential nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among Sequential and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K under the Exchange Act)), where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, Sequential or any of its Subsidiaries in Sequential’s or such Subsidiary’s published financial statements or other Sequential SEC Documents.
(h) Sequential is in compliance in all material respects with (i) the provisions of the Sarbanes-Oxley Act and (ii) the rules and regulations of Nasdaq, in each case, that are applicable to Sequential.
(i) No Subsidiary of Sequential is required to file any form, report, schedule, statement or other document with the SEC.
(j) Except as and to the extent adequately accrued or reserved against in the audited consolidated balance sheet of Sequential and its Subsidiaries as at December 31, 2014 (such balance sheet, the “Sequential Balance Sheet”), neither Sequential nor any of its Subsidiaries has any liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, whether known or unknown and whether or not required by GAAP to be reflected in a consolidated balance sheet of Sequential and its Subsidiaries or disclosed in the notes thereto, except for liabilities and obligations, incurred in the ordinary course of business consistent with past practice since the date of the Sequential Balance Sheet, that would not, individually or in the aggregate, reasonably be expected to have a Sequential Material Adverse Effect.
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4.7 Form S-4. The information supplied or to be supplied by Sequential for inclusion in the Form S-4, including the related Proxy Statement/Prospectus and Information Statement, will not, at the time that the Form S-4 is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by Sequential with respect to statements made therein based on information supplied by or on behalf of MSLO or any of its Affiliates specifically for inclusion or incorporation by reference in the Form S-4. The Proxy Statement/Prospectus will not, at the date the Proxy Statement/Prospectus is first mailed to the stockholders of MSLO, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that, in each case, no representation or warranty is made by Sequential with respect to statements made therein based on information supplied by or on behalf of MSLO specifically for inclusion or incorporation by reference in the Proxy Statement/Prospectus. The Information Statement will not, at the date the Information Statement is first mailed to the stockholders of Sequential, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that, in each case, no representation or warranty is made by Sequential with respect to statements made therein based on information supplied by or on behalf of MSLO or any of its Affiliates specifically for inclusion or incorporation by reference in the Information Statement.
4.8 Absence of Certain Changes or Events.
(a) Since the date of the Sequential Balance Sheet and through the date of this Agreement, no event or events or development or developments have occurred that have had or would reasonably be expected to have, individually or in the aggregate, a Sequential Material Adverse Effect.
(b) Except in connection with the execution and delivery of this Agreement and the transactions contemplated by this Agreement, from December 31, 2014 through the date of this Agreement, Sequential and the Sequential Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business consistent with past practice.
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4.9 Compliance with Laws; Permits.
(a) Since December 31, 2012, (i) each of Sequential and its Subsidiaries is and has been in compliance in all material respects with all Laws applicable to it and (ii) Sequential has complied with the applicable listing and corporate governance rules and regulations of Nasdaq except, in each case, where the failure to so conduct such business and operations or comply with such rules and regulations would not, individually or in the aggregate, reasonably be expected to have a Sequential Material Adverse Effect. Since December 31, 2012, none of Sequential, any of the Sequential Subsidiaries or any of its or their executive officers has received, nor is there any basis for, any written notice, order, complaint or other communication from any Governmental Entity or any other Person that Sequential or any of its Subsidiaries is not in compliance in any material respect with any Law applicable to it.
(b) Section 4.9(b) of the Sequential Disclosure Schedule sets forth a true and complete list of all material Permits. Each of Sequential and its Subsidiaries is and has been in compliance in all material respects with all such material Permits. No suspension, cancellation, modification, revocation or nonrenewal of any material Permit is pending or, to the knowledge of Sequential, threatened in writing. Sequential and its Subsidiaries will continue to have the use and benefit of all material Permits following consummation of the transactions contemplated hereby. No material Permit is held in the name of any employee, officer, director, stockholder, agent or otherwise on behalf of Sequential or any of its Subsidiaries.
4.10 Litigation. As of the date hereof, there is no action pending or, to the knowledge of Sequential, threatened by or against Sequential, any of the Sequential Subsidiaries, any of their respective properties or assets, or any officer or director of Sequential or any of its Subsidiaries that, individually or in the aggregate, would reasonably be expected to have a Sequential Material Adverse Effect. As of the date hereof, none of Sequential or any of its Subsidiaries, or any of their respective properties or assets is subject to any outstanding Order of any Governmental Entity that, individually or in the aggregate, has had or would reasonably be expected to have a Sequential Material Adverse Effect.
4.11 Title to Properties; Absence of Liens. Section 4.11 of the Sequential Disclosure Schedule sets forth a true and complete description (including address, and for each lease, sublease and license, and all amendments, extensions, renewals, guaranties, modifications, supplements or other agreements, if any, with respect thereto) of all real property leased, subleased or licensed by Sequential or any of its Subsidiaries (collectively, the “Sequential Leased Real Properties”; and the leases, subleases and licenses with respect thereto, collectively, the “Sequential Real Property Leases”). Sequential has made available to MSLO true, correct and complete copies of the Sequential Real Property Leases, together with all amendments, extensions, renewals, guaranties, modifications, supplements or other agreements, if any, with respect thereto. Each of the Sequential Real Property Leases is in full force and effect. Sequential or one of its Subsidiaries has a valid, binding and enforceable leasehold or subleasehold interest (or license, as applicable) in each Sequential Leased Real Property, in each case as to such leasehold or subleasehold interest (or license, as applicable), free and clear of all Liens (other than Permitted Liens). Neither Sequential nor any of its Subsidiaries owns, or has owned in the past 10 years, any real property or any interests in real property.
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4.12 Taxes.
(a) All material Tax Returns required by applicable Law to be filed with any Governmental Entity by, or on behalf of, Sequential or any of its Subsidiaries have been duly filed when due (including extensions) in accordance with all applicable Laws, and all such Tax Returns are true, correct and complete in all material respects.
(b) Sequential and each of its Subsidiaries has duly and timely paid or has duly and timely withheld and remitted to the appropriate Governmental Entity all material Taxes due and payable, or, where payment is not yet due, has established in accordance with GAAP an adequate accrual for all material Taxes on the financial statements set forth in the Sequential SEC Documents.
(c) There is no claim, audit, action, suit, proceeding or investigation pending or threatened in writing against or with respect to Sequential or any of its Subsidiaries in respect of any Tax or Tax Return which if determined adversely would, individually or in the aggregate, be expected to result in a material Tax deficiency. Neither Sequential nor any of its Subsidiaries has received or applied for a Tax ruling that would be binding on Sequential or any of its Subsidiaries after the Closing Date.
(d) Sequential and each of its Subsidiaries has withheld all material amounts required to have been withheld by it in connection with amounts paid or owed to any employee, independent contractor, creditor, stockholder or any other third party; such withheld amounts were either duly paid to the appropriate Governmental Entity or set aside in accounts for such purpose in accordance with applicable Law. Sequential and each of its Subsidiaries has reported such withheld amounts to the appropriate Governmental Entity and to each such employee, independent contractor, creditor, stockholder or any other third party, as required under applicable Law.
(e) Neither Sequential nor any of its Subsidiaries is liable for any Taxes of any Person (other than Sequential and its Subsidiaries) as a result of (i) being a transferee or successor of such Person, (ii) the application of Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law or (iii) a party to a tax sharing, tax indemnity or tax allocation agreement or any similar agreement to indemnify such Person.
(f) Neither Sequential nor any of its Subsidiaries shall be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or portion thereof) ending after the Closing Date, as a result of (1) any elective change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481 of the Code (or any corresponding provision of state, local or foreign Law), (2) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax Law) executed on or prior to the Closing Date, (3) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign Tax Law), (4) installment sale or open transaction made on or prior to the Closing Date, or (5) prepaid amount received on or prior to the Closing Date.
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(g) Neither Sequential nor any of its Subsidiaries has participated or engaged in any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4.
(h) Neither Sequential nor any of its Subsidiaries has been informed in writing by any Governmental Entity in any jurisdiction in which it does not file a Tax Return that it may be required to file a Tax Return in such jurisdiction.
(i) Neither Sequential nor any of its Subsidiaries has distributed stock of another corporation, or has had its stock distributed by another corporation, in a transaction that was governed, or purported or intended to be governed or described, in whole or in part, by Section 355 or Section 368(a)(1)(D) of the Code.
(j) Neither Sequential nor any of its Subsidiaries has taken or agreed to take any action or is aware of any fact or circumstance that would prevent or impede, or could reasonably be expected to prevent or impede, the Mergers from qualifying as a transaction described in Section 351 of the Code.
4.13 Employee Benefit Plans.
(a) Section 4.13(a) of the Sequential Disclosure Schedule sets forth as of the date of this Agreement a true and complete list of each material “employee benefit plan” (within the meaning of Section 3(3) of ERISA), and all material stock purchase, stock option, severance, employment, change-in-control, fringe benefit, bonus, incentive, deferred compensation and all other material employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise), whether formal or informal, written, legally binding or not, under which any employee or former employee of Sequential or its Subsidiaries has any present or future right to benefits or Sequential or its Subsidiaries has direct or contingent liability (each, a “Sequential Benefit Plan”). With respect to each such Sequential Benefit Plan, Sequential has made available to MSLO a true and complete copy of such Sequential Benefit Plan, if written, or a description of the material terms of such Sequential Benefit Plan if not written, and to the extent applicable: (i) all trust agreements, insurance contracts or other funding arrangements; (ii) the most recent actuarial and trust reports for both ERISA funding and financial statement purposes; (iii) the most recent Form 5500 with all attachments required to have been filed with the IRS or the Department of Labor or any similar reports filed with any comparable Governmental Entity in any non-U.S. jurisdiction having jurisdiction over any Sequential Benefit Plan and all schedules thereto; (iv) the most recent IRS determination or opinion letter; and (v) all current summary plan descriptions.
(b) Each Sequential Benefit Plan has been maintained in all material respects in accordance with its terms and the requirements of applicable Law. Each of Sequential and its Subsidiaries has performed all material obligations required to be performed by it under any Sequential Benefit Plan and, to the knowledge of Sequential, is not in any material respect in default under or in violation of any Sequential Benefit Plan. No action (other than claims for benefits in the ordinary course) is pending or, to the knowledge of Sequential, threatened with respect to any Sequential Benefit Plan.
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(c) Each Sequential Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a determination or opinion letter from the IRS that it is so qualified and each related trust that is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination or opinion letter from the IRS that it is so exempt and, to the knowledge of Sequential, no fact or event has occurred since the date of such letter or letters from the IRS that could reasonably be expected to adversely affect the qualified status of any such Sequential Benefit Plan or the exempt status of any such trust.
(d) No Sequential Benefit Plan is subject to Title IV of ERISA, is a multiemployer plan (within the meaning of Section 3(37) of ERISA) or provides post-employment welfare benefits except to the extent required by Section 4980B of the Code.
(e) Any arrangement of Sequential or any of its Subsidiaries that is subject to Section 409A of the Code has complied in form and operation with the requirements of Section 409A of the Code as in effect from time to time. Neither Sequential nor any of its Subsidiaries has any obligation to provide any gross-up payment to any individual with respect to any income Tax, additional Tax, excise Tax or interest charge imposed pursuant to Section 409A or 4999 of the Code.
(f) Except as set forth in Section 4.13(f) of the Sequential Disclosure Schedule, the consummation of the transactions contemplated hereby will not, either alone or in combination with another event; (i) entitle any current or former director, officer or employee of Sequential or of any of its Subsidiaries to severance pay, unemployment compensation or any other payment; (ii) result in any payment becoming due, accelerate the time of payment or vesting, or increase the amount of compensation due to any such director, officer or employee; (iii) result in any forgiveness of indebtedness, trigger any funding obligation under any Sequential Benefit Plan or impose any restrictions or limitations on Sequential rights to administer, amend or terminate any Sequential Benefit Plan; or (iv) result in any payment (whether in cash or property or the vesting of property) to any “disqualified individual” (as such term is defined in Treasury Regulations Section 1.280G-1) that could reasonably be expected, individually or in combination with any other such payment, to constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).
4.14 Employees, Labor Matters.
(a) Neither Sequential nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, and there are no, and during the last three years have been no, labor unions or other organizations representing, purporting to represent or, to the knowledge of Sequential, attempting to represent any employees of Sequential or any of its Subsidiaries.
(b) Since January 1, 2011, there has not occurred or, to the knowledge of Sequential, been threatened any strike, slowdown, work stoppage, concerted refusal to work overtime or other similar labor activity or union organizing campaign with respect to any employees of Sequential or any of its Subsidiaries. There are no labor disputes subject to any formal grievance procedure, arbitration or litigation and there is no representation petition pending or, to the knowledge of Sequential, threatened with respect to any employee of Sequential or any of its Subsidiaries.
(c) Sequential and its Subsidiaries have complied in all material respects with all applicable Laws relating to employment of labor, including all applicable Laws relating to wages, hours, collective bargaining, employment discrimination, civil rights, safety and health, workers’ compensation, pay equity, classification of employees, immigration, and the collection and payment of withholding and/or social security Taxes.
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4.15 Environmental Matters. Except as would not, individually or in the aggregate, have a Sequential Material Adverse Effect: (i) Sequential and each of its Subsidiaries are in compliance with all applicable Environmental Laws, and possess and are in compliance with all applicable Environmental Permits necessary to operate the business as presently operated; (ii) to the knowledge of Sequential, there have been no releases of Hazardous Materials at or on any property owned or operated by Sequential or any of its Subsidiaries, except under circumstances that are not reasonably likely to result in liability of Sequential or any of its Subsidiaries under any applicable Environmental Law; (iii) neither Sequential nor any of its Subsidiaries has received from a Governmental Entity a request for information pursuant to Section 104(e) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar state statute, or any written notification alleging that it is liable for any release or threatened release of Hazardous Materials at any location, except with respect to any such notification or request for information concerning any such release or threatened release, to the extent such matter has been resolved with the appropriate foreign, federal, state or local regulatory authority or otherwise; and (iv) neither Sequential nor any of its Subsidiaries has received any written claim or complaint, or is presently subject to any lawsuit, proceeding or action, relating to noncompliance with Environmental Laws or any other liabilities pursuant to Environmental Laws, and to the knowledge of Sequential, no such matter has been threatened in writing.
4.16 Intellectual Property.
(a) Section 4.16 of the Sequential Disclosure Schedule sets forth a true and complete list of all Registered Intellectual Property (each identified as a Mark, Patent, Copyright or domain name) owned (in whole or in part) by Sequential or any of its Subsidiaries as of the date of this Agreement, identifying for each whether it is owned by Sequential or the relevant Subsidiary (together with all Trade Secrets owned by Sequential or any of its Subsidiaries, collectively, the “Sequential Owned IP”).
(b) Since January 1, 2013, no Sequential Owned IP has been or is now involved in any opposition, cancellation, reissue, reexamination, inter-partes review, public protest, interference, arbitration, mediation, domain name dispute resolution or other proceeding and, to the knowledge of Sequential, no such proceeding is or has been threatened or asserted with respect to any Sequential Owned IP, which, in each case, if determined or resolved adversely against Sequential or any of its Subsidiaries, would reasonably be expected to have a Sequential Material Adverse Effect.
(c) Sequential or its Subsidiaries own or otherwise have a valid right to use, free and clear of any and all Liens (other than Permitted Liens), all Intellectual Property used in the operation of Sequential and its Subsidiaries’ businesses as currently conducted and neither Sequential nor any of its Subsidiaries has received any written notice or claim challenging the ownership, validity or enforceability of, or asserting the misuse of, any of the Intellectual Property used in the operation of Sequential’s or any of its Subsidiaries’ businesses, nor to the knowledge of Sequential is there a reasonable basis for any such notice or claim.
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(d) Except as would not reasonably be expected to have a Sequential Material Adverse Effect, (i) each of Sequential and its Subsidiaries: (A) has taken reasonable steps in accordance with standard industry practices to protect its and their rights in the Intellectual Property used in the operation of Sequential’s and its Subsidiaries’ businesses; and (B) has maintained the confidentiality, secrecy and value of all Trade Secrets used in the operation of Sequential or any of its Subsidiaries’ businesses and (ii) to the knowledge of Sequential, no unauthorized disclosure of such Trade Secrets has occurred.
(e) All Sequential Registered Intellectual Property is subsisting and, to the knowledge of Sequential, valid and enforceable. Except as would not reasonably be expected to have a Sequential Material Adverse Effect, neither Sequential nor any of its Subsidiaries has taken any action or failed to take any action that could reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation or unenforceability of any of the Sequential Registered Intellectual Property (including the failure to pay any filing, examination, issuance, post registration and maintenance fees, or annuities, and the failure to disclose any known material prior art in connection with the prosecution of patent applications).
(f) Since January 1, 2013, (i) the development, manufacture, sale, distribution or other commercial exploitation of products, and the provision of any services, by or on behalf of Sequential or any of its Subsidiaries, and all of the other activities or operations of Sequential or any of its Subsidiaries, have not infringed upon, misappropriated, violated, diluted or constituted the unauthorized use of, any Intellectual Property of any Person, and (ii) neither Sequential nor any of its Subsidiaries has received any notice or claim, including invitations to license, asserting or suggesting that any such infringement, misappropriation, violation, dilution or unauthorized use is or may be occurring or has or may have occurred, which, in each case under either (i) or (ii), if determined or resolved adversely against Sequential or any of its Subsidiaries, would reasonably be expected to have a Sequential Material Adverse Effect. To the knowledge of Sequential, no Person is misappropriating, infringing, diluting or violating the Intellectual Property owned by Sequential or any of its Subsidiaries, which infringement would reasonably be expected to have a Sequential Material Adverse Effect.
(g) Except as would not reasonably be expected to have a Sequential Material Adverse Effect, Sequential or its Subsidiaries, as the case may be, owns or has rights to access and use IT Systems used to process, store, maintain and operate data, information and functions used in connection with Sequential’s and its Subsidiaries’ businesses or otherwise necessary for the conduct of Sequential’s and its Subsidiaries’ businesses, including systems to operate payroll, accounting, billing and receivables, payables, inventory, asset tracking, customer service and human resources functions. Sequential and its Subsidiaries have taken reasonable steps in accordance with industry standards to secure the IT Systems from unauthorized access or use by any Person, and to ensure the continued, uninterrupted and error-free operation of the IT Systems.
(h) The IT Systems (i) are adequate in all material respects for their intended use and for the operation of Sequential’s and its Subsidiaries’ businesses as currently conducted,
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(ii) are in good working condition (normal wear and tear excepted), (iii) are free of all viruses, worms, Trojan horses and other known contaminants and (iv) do not contain any bugs, errors or problems of a nature that would materially disrupt their operation or have a material adverse impact on the operation of the IT Systems. There has not been any malfunction with respect to any of the IT Systems since January 1, 2013 that has not been remedied or replaced in all material respects.
(i) Sequential is in material compliance with its privacy policies and applicable Laws relating to the use, collection and receipt of personal information and sensitive non-personally identifiable information.
4.17 Sequential Material Contracts.
(a) Sequential has made available to MSLO a true and complete copy of each Contract to which Sequential or any of its Subsidiaries is a party as of the date of this Agreement or by which Sequential, any of its Subsidiaries or any of its respective properties or assets is bound as of the date of this Agreement, which: (i) is a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K promulgated by the SEC; (ii) contains covenants of Sequential or any of its Subsidiaries not to compete or engage in any line of business or compete with any Person in any geographic area; (iii) pursuant to which Sequential or any of its Subsidiaries has entered into a partnership or joint venture with any other Person (other than Sequential or any of its Subsidiaries); or (iv) relates to or evidences indebtedness for borrowed money or any guarantee of indebtedness for borrowed money by Sequential or any of its Subsidiaries in excess of $1,000,000 (each, a “Sequential Material Contract”).
(b) Sequential has delivered or made available to MSLO true and complete copies of all Sequential Material Contracts, including any amendments thereto. Each Sequential Material Contract is a legal, valid, binding and enforceable agreement of Sequential or its applicable Subsidiary and, to the knowledge of Sequential, any other party thereto, and is in full force and effect. None of Sequential or any of its Subsidiaries or, to the knowledge of Sequential, any other party is in breach or violation of, or (with or without notice or lapse of time or both) default under, any Sequential Material Contract, nor has Sequential or any of its Subsidiaries received any claim of any such breach, violation or default, except for such breaches and defaults which would not, individually or in the aggregate, reasonably be expected to have a Sequential Material Adverse Effect.
4.18 Financing.
(a) Sequential has delivered to MSLO a true, complete and correct copy of the executed debt commitment letter, dated as of the date hereof between Sequential and GSO Capital Partners, LP (such commitment letter and all fee letters associated therewith, in each case as amended or otherwise modified only to the extent permitted by this Agreement, collectively, “Financing Commitments”), pursuant to which the lenders party thereto have committed, subject to the terms and conditions set forth therein, to lend the aggregate principal amounts set forth therein for the purposes of financing the transactions contemplated by this Agreement and related fees and expenses (the “Financing”). As of the date hereof, (a) the Financing Commitments have not been amended, restated or otherwise modified, (b) no amendment,
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restatement or other modification to the Financing Commitments is contemplated and (c) the respective commitments contained in the Financing Commitments have not been reduced, withdrawn, terminated or rescinded in any respect and, to Sequential’s knowledge, no reduction, withdrawal, termination or rescission is contemplated. Except for the fee letter referenced in the Financing Commitments (a true, complete and correct copy of which has been provided to MSLO, with only fee amounts and certain economic terms of the market flex agreed to by the parties redacted, none of which redacted provisions will adversely affect the availability of, or impose conditions on the availability of, the full amount of the Financing at Closing), there are no side letters or other agreements, Contracts or arrangements related to the funding of the Financing other than as expressly set forth in the Financing Commitments delivered to MSLO on or prior to the date hereof. As of the date hereof, the Financing Commitments are in full force and effect and constitute the legal, valid and binding obligation of Sequential, and to the knowledge of Sequential, the other parties thereto, enforceable in accordance with their terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). There are no conditions precedent or other contingencies (including pursuant to any “market flex” provisions in the related fee letter or otherwise) related to the funding of the full amount of the Financing, other than as expressly set forth in the Financing Commitments. As of the date hereof, (i) Sequential is not in default or breach under the terms and conditions of the Financing Commitments and no event has occurred which, with or without notice, lapse of time or both, would constitute a default or breach on the part of Sequential or, to the knowledge of Sequential, any other party thereto, under the terms and conditions of the Financing Commitments and (ii) Sequential has not received any written notice of such default or event. All commitment and other fees required to be paid on or prior to the date hereof under the Financing Commitments have been paid and, assuming the satisfaction of the conditions precedent to Sequential’s obligations in Section 7.1 and 7.3 hereunder, Sequential does not have any reason to believe that it will not be able to satisfy any term or condition of closing of the Financing that is required to be satisfied as a condition to availability of the Financing or that the full amount of the Financing will not be made available to Sequential on the Closing Date and, as of the date hereof, Sequential is not aware of the existence of any facts or events that would reasonably be expected to cause such conditions to the Financing not to be satisfied or the full amount of the Financing not to be available. The aggregate proceeds contemplated to be provided under the Financing Commitments, together with Sequential’s existing resources, in the aggregate, will be sufficient to make all required payments in connection with the MSLO Merger and the other transactions contemplated hereby, including payment of the MSLO Cash Consideration, any debt required to be repaid, redeemed, retired, cancelled, terminated or otherwise satisfied or discharged in connection with the Mergers (including all indebtedness of MSLO and its Subsidiaries required to be repaid, redeemed, retired, cancelled, terminated or otherwise satisfied or discharged in connection therewith) and all other amounts to be paid pursuant to this Agreement and associated fees, costs and expenses of the Mergers and the other transactions contemplated hereby, including the Financing, on the Closing Date. Sequential affirms that it is not a condition to the Closing or any of its other obligations under this Agreement that it obtain financing for, or related to, any of the transactions contemplated by this Agreement.
4.19 Licensees. Section 4.19 of the Sequential Disclosure Schedule sets forth a true and complete list of the top 10 licensees by revenue of Sequential and the Sequential
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Subsidiaries, taken as a whole, for each of (a) calendar year 2014 and (b) the first three months of calendar year 2015. Except as set forth in Section 4.19 of the Sequential Disclosure Schedule, since the date of the Sequential Balance Sheet, no such licensee has (i) canceled or otherwise terminated, or, to the knowledge of Sequential, threatened to cancel or otherwise terminate its relationship with Sequential or the Sequential Subsidiary, (ii) decreased, or to the knowledge of Sequential, threatened to decrease, amounts payable, including royalty payments, to Sequential or the Sequential Subsidiary, or (iii) increased or decreased, as applicable, or, to the knowledge of Sequential, threatened to increase or decrease, as applicable, pricing terms with respect to amounts payable, including royalty payments, to Sequential or the Sequential Subsidiaries.
4.20 Affiliate Transactions.
(a) Since January 1, 2013, no Related Party of Sequential or any of its Subsidiaries: (i) owns or has owned, directly or indirectly, any equity or other financial or voting interest in any competitor, supplier, licensor, lessor, distributor, independent contractor or customer of Sequential or any of its Subsidiaries or their business; (ii) owns or has owned, directly or indirectly, or has or has had any interest in any property (real or personal, tangible or intangible) that Sequential or any of its Subsidiaries uses or has used in or pertaining to the business of Sequential or any of its Subsidiaries; (iii) has or has had any business dealings or a financial interest in any transaction with Sequential or any of its Subsidiaries or involving any assets or property of Sequential or any of its Subsidiaries, other than business dealings or transactions conducted in the ordinary course of business at prevailing market prices and on prevailing market terms; or (iv) is or has been employed by Sequential or any of its Subsidiaries.
(b) There are no Contracts by and between Sequential or any of its Subsidiaries, on the one hand, and any Related Party of Sequential or any its Subsidiaries, on the other hand, pursuant to which such Related Party provides or receives any information, assets, properties, support or other services to or from Sequential or any of its Subsidiaries (including Contracts relating to billing, financial, tax, accounting, data processing, human resources, administration, legal services, information technology and other corporate overhead matters).
(c) There are no outstanding notes payable to, accounts receivable from or advances by Sequential or any of its Subsidiaries to, and neither Sequential nor any of its Subsidiaries is otherwise a debtor or creditor of, or has any liability or other obligation of any nature to, any Related Party of Sequential or any of its Subsidiaries. Since the date of the Sequential Balance Sheet, neither Sequential nor any of its Subsidiaries has incurred any obligation or liability to, or entered into or agreed to enter into any transaction with or for the benefit of, any Related Party.
4.21 Insurance. Section 4.21 of the Sequential Disclosure Schedule sets forth a true and complete list of all casualty, directors and officers liability, general liability, product liability and all other types of material insurance policies maintained with respect to Sequential or any of its Subsidiaries, together with the carriers and liability limits for each such policy. All such policies are in full force and effect and no application therefor included a material misstatement or omission. All premiums with respect thereto have been paid to the extent due. Sequential has not received notice of, nor to the knowledge of Sequential is there threatened in writing, any cancellation, termination, reduction of coverage or material premium increases with respect to
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any such policy. All material insurable risks in respect of the business and assets of Sequential and its Subsidiaries are covered by such insurance policies and the types and amounts of coverage provided therein are usual and customary in the context of the business and operations in which Sequential and its Subsidiaries are engaged. The activities and operations of Sequential and its Subsidiaries have been conducted in a manner so as to conform in all material respects to all applicable provisions of such insurance policies. The consummation of the transactions contemplated by this Agreement will not cause a cancellation or reduction in the coverage of such policies.
4.22 Brokers’ and Finders’ Fees. There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Sequential or any of its Subsidiaries who is entitled to any fee or commission from Sequential or any of its Subsidiaries in connection with the transactions contemplated hereby.
4.23 TopCo and Merger Subs.
(a) Each of TopCo, Singer Merger Sub and Madeline Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as now being conducted. Sequential has delivered to or made available to MSLO certified copies of the certificate of incorporation and bylaws for each of TopCo, Singer Merger Sub and Madeline Merger Sub (the “New Entity Organizational Documents”).
(b) Each of TopCo, Singer Merger Sub and Madeline Merger Sub (A) was formed solely for the purpose of entering into the transactions contemplated by this Agreement and (B) since the date of its formation, has not carried on any business, conducted any operations or incurred any liabilities or obligations other than the execution of an amendment to this Agreement, the performance of its obligations hereunder and matters ancillary thereto.
(c) Each of TopCo, Singer Merger Sub and Madeline Merger Sub has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and the execution and delivery of this Agreement by TopCo, Singer Merger Sub or Madeline Merger Sub, as applicable, and the consummation by TopCo, Singer Merger Sub or Madeline Merger Sub, as applicable, of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part thereof.
(d) The execution and delivery of this Agreement by each of TopCo, Singer Merger Sub and Madeline Merger Sub does not, and the consummation of the transactions contemplated hereby and compliance with the provisions of this Agreement by each of TopCo, Singer Merger Sub and Madeline Merger Sub shall not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of TopCo, Singer Merger Sub or Madeline Merger Sub, as applicable, under the applicable New Entity Organizational Documents.
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(e) As of the date of this Agreement and as of immediately prior to the Sequential Effective Time, TopCo shall have no shares of capital stock issued and outstanding.
(f) All outstanding shares of capital stock of each of Madeline Merger Sub and Singer Merger Sub are, and all shares of capital stock of each of Madeline Merger Sub and Singer Merger Sub that may be issued as permitted by this Agreement or otherwise shall be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights, and all outstanding shares are owned, directly or indirectly, by TopCo, free and clear of any Lien.
4.24 No Other Representations or Warranties. Except for the representations and warranties contained in this ARTICLE IV, neither Sequential nor any other Person makes any other express or implied representation or warranty on behalf of Sequential or any of its Affiliates.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective Time. During the period from the date of this Agreement until the Effective Time, except as expressly contemplated or permitted by this Agreement (including by Section 5.2 or Section 5.3 below, as applicable), except as specifically set forth in Section 5.2 of the MSLO Disclosure Schedule or Section 5.3 of the Sequential Disclosure Schedule, as applicable, or except with the prior written consent of the other party (which shall not be unreasonably withheld, conditioned or delayed), each of MSLO and Sequential shall, and shall cause each of its respective Subsidiaries to (i) conduct its business in the ordinary course consistent with past practice in all material respects, (ii) use reasonable best efforts to maintain and preserve intact its business organization and advantageous business relationships and retain the services of its officers and key employees, and (iii) take no action that would prohibit or materially impair or delay the ability of either MSLO or Sequential to obtain any necessary approvals of any regulatory agency or other Governmental Entity required for the transactions contemplated hereby or to consummate the transactions contemplated hereby. Notwithstanding the foregoing provisions of this Section 5.1, (i) neither party will take any action prohibited by Section 5.2 or Section 5.3, as applicable, in order to satisfy such party’s obligations under this Section 5.1 and (ii) each party shall be deemed not to have failed to satisfy its obligations under this Section 5.1 to the extent such failure resulted, directly or indirectly, from such party’s failure to take any action prohibited by Section 5.2 or Section 5.3, as applicable.
5.2 MSLO Forbearances. During the period from the date of this Agreement until the Effective Time, except as set forth in Section 5.2 of the MSLO Disclosure Schedule, except as required by Law or the rules and regulations of the SEC or the NYSE or as expressly contemplated by this Agreement, MSLO will not, and will not permit any of the MSLO Subsidiaries to, without the prior written consent of Sequential:
(a) amend its certificate of incorporation, bylaws or comparable organizational documents (whether by merger, consolidation or otherwise);
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(b) (i) split, combine or reclassify any shares of its capital stock, or propose to split, combine or reclassify, any of its share capital, or issue or authorize or propose the issuance or authorization of any other securities in respect of, or in lieu of or in substitution for, shares of its share capital, (ii) declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, except dividends paid by a direct or indirect wholly owned Subsidiary of MSLO to MSLO or to any of MSLO’s other direct or indirect wholly owned Subsidiaries or (iii) redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any shares of MSLO’s (or any of its Subsidiaries’) share capital or any securities convertible into or exercisable for any shares of MSLO’s (or any of its Subsidiaries’) share capital, other than repurchases, redemptions or acquisitions by MSLO or any wholly owned Subsidiary of MSLO of share capital or such other securities, as the case may be, of any other wholly owned Subsidiary of MSLO;
(c) (i) issue, deliver, pledge or sell, or authorize the issuance, delivery or sale of, any shares of MSLO Common Stock, equity equivalents or shares of capital stock of MSLO or any MSLO Subsidiary or capital stock of any MSLO Subsidiary, other than the issuance of (A) any shares of MSLO Common Stock upon the exercise of MSLO Stock Options in accordance with the terms of the applicable MSLO Benefit Plan; (B) any capital stock of any MSLO Subsidiary to MSLO or any other Subsidiary of MSLO; or (C) any shares of MSLO Common Stock in connection with any acquisition permitted by Section 5.2(e); or (ii) amend any term of any shares of MSLO Common Stock or equity equivalent (in each case, whether by merger, consolidation or otherwise) in any fashion that may have a materially adverse impact on Sequential;
(d) incur any capital expenditures or any obligations or liabilities in respect thereof, except for (i) those contemplated by the capital expenditure budget set forth in Section 5.2(d) of the MSLO Disclosure Schedule or (ii) any unbudgeted capital expenditures not to exceed $50,000 individually or $500,000 in the aggregate;
(e) acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any assets, securities, properties, interests or businesses, other than any acquisitions with consideration (comprised of cash, shares of MSLO Common Stock or other property) not in excess of $250,000 individually or $500,000 in the aggregate;
(f) sell, lease, sublease, exchange or otherwise transfer, or create or incur any Lien, other than a Permitted Lien, on, any of MSLO’s or any of its Subsidiaries’ assets, securities, properties, interests or businesses, or grant any option with respect to any of the foregoing;
(g) make any loans, advances or capital contributions to, or investments in, any other Person, other than in the ordinary course of business consistent with past practice or loans, advances or capital contributions to, or investments in, wholly owned Subsidiaries of MSLO;
(h) create, incur, assume, suffer to exist or otherwise be liable with respect to any indebtedness for borrowed money or guarantees thereof (including reimbursement obligations with respect to letters of credit);
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(i) (i) grant or increase any severance or termination pay to (or amend any existing severance pay or termination arrangement) or enter into any employment, deferred compensation or other similar agreement (or amend any such existing agreement) with respect to any employee, officer or director, (ii) increase benefits payable under any existing severance or termination pay policies, (iii) establish, adopt or amend any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, stock option, restricted stock or other benefit plan or arrangement, or (iv) increase compensation, bonus or other benefits payable to any employee or hire any new employee (other than any non-executive employee hired to fill a pre-existing vacancy or to replace any non-executive employee that terminates prior to the Effective Time, in each case, with the same salary for such position as of the date hereof), except for (x) increases in salary for non-executive employees or (y) increases to the pre-established salary level for any employee hired to fill a pre-existing non-executive vacancy or replace any non-executive employee that terminates prior to the Effective Time in an amount not to exceed $250,000 in the aggregate with respect to all such increases and hires;
(j) change MSLO’s methods of accounting, except as required by concurrent changes in GAAP, as agreed to by its independent public accountants;
(k) settle, or offer or propose to settle, any litigation, investigation, arbitration, proceeding or other claim involving or against MSLO or any of its Subsidiaries controlled or directed by MSLO or any of its Subsidiaries;
(l) (i) make or change any material Tax election, (ii) change any annual tax accounting period, (iii) adopt or change any elective method of tax accounting, (iv) materially amend any Tax Returns, (v) enter into any material closing agreement, (vi) settle any material Tax claim, audit or assessment or (vii) surrender any right to claim a material Tax refund, offset or other reduction in Tax liability;
(m) except in the ordinary course of business consistent with past practice, amend, modify or terminate (excluding terminations upon expiration of the term thereof in accordance with their terms) any MSLO Material Contract or waive, release or assign any material rights, claims or benefits of it or its Subsidiaries under any MSLO Material Contract, or enter into any Contract or agreement that would have been a MSLO Material Contract had it been entered into prior to this Agreement or which grants any third party the right to receive payments with respect to any Intellectual Property, including any royalty payments or similar;
(n) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of MSLO or any material MSLO Subsidiary (other than the Mergers);
(o) cancel any indebtedness or waive any claims or rights of substantial value, in each case other than in the ordinary course of business consistent with past practice;
(p) take any action, or knowingly fail to take any action, which action or failure to act prevents or impedes, or could reasonably be expected to impede, the Mergers from qualifying as a transaction described in Section 351 of the Code; or
(q) agree, resolve or commit to (i) do any action restricted by this Section 5.2 or (ii) accept any restriction that would prevent MSLO or any of its Subsidiaries from taking any action required by this Section 5.2.
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5.3 Sequential Forbearances. During the period from the date of this Agreement until the Effective Time, except as set forth in Section 5.3 of the Sequential Disclosure Schedule and except as required by Law or the rules and regulations of the SEC or Nasdaq or as contemplated or permitted by this Agreement, Sequential will not, and will not permit any of the Sequential Subsidiaries to, without the prior written consent of MSLO (which shall not be unreasonably withheld, conditioned or delayed):
(a) amend its certificate of incorporation, bylaws or comparable organizational documents (whether by merger, consolidation or otherwise);
(b) (i) split, combine or reclassify any shares of its capital stock, or propose to split, combine or reclassify, any of its share capital, or issue or authorize or propose the issuance or authorization of any other securities in respect of, or in lieu of or in substitution for, shares of its share capital, (ii) declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, except dividends paid by a direct or indirect wholly owned Subsidiary of Sequential to Sequential or to any of Sequential’s other direct or indirect wholly owned Subsidiaries or (iii) redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any shares of Sequential’s (or any of its Subsidiaries’) share capital or any securities convertible into or exercisable for any shares of Sequential’s (or any of its Subsidiaries’) share capital, other than repurchases, redemptions or acquisitions by Sequential or any wholly owned Subsidiary of Sequential of share capital or such other securities, as the case may be, of any other wholly owned Subsidiary of Sequential;
(c) (i) issue, deliver, pledge or sell, or authorize the issuance, delivery or sale of, any shares of Sequential Common Stock or Sequential Preferred Stock or capital stock of any Sequential Subsidiary, other than the issuance of (A) any shares of Sequential Common Stock upon the exercise of Sequential Stock Options in accordance with the terms of the applicable Sequential Benefit Plan; (B) any capital stock of any Sequential Subsidiary to Sequential or any other Subsidiary of Sequential; or (C) any shares of Sequential Common Stock in connection with any acquisition permitted by Section 5.3(e); or (ii) amend any term of the shares of Sequential Common Stock (in each case, whether by merger, consolidation or otherwise) in any fashion that may have a materially adverse impact on MSLO;
(d) incur any capital expenditures or any obligations or liabilities in respect thereof, other than capital expenditures not to exceed $1,500,000 in the aggregate;
(e) acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any material assets, securities, properties, interests or businesses, other than any acquisitions with consideration (comprised of cash, shares of Sequential Common Stock or other property) not in excess of $15,000,000 in the aggregate;
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(f) sell, lease, sublease, exchange or otherwise transfer, or create or incur any Lien, other than a Permitted Lien, on, any of Sequential’s or any of its Subsidiaries’ assets, securities, properties, interests or businesses, or grant any option with respect to any of the foregoing;
(g) make any loans, advances or capital contributions to, or investments in, any other Person, other than in the ordinary course of business consistent with past practice or loans, advances or capital contributions to, or investments in, wholly owned Subsidiaries of Sequential;
(h) create, incur, assume, suffer to exist or otherwise be liable with respect to any indebtedness for borrowed money or guarantees thereof (including reimbursement obligations with respect to letters of credit);
(i) other than with respect to non-executive employees, (i) grant or increase any severance or termination pay to (or amend any existing severance pay or termination arrangement) or enter into any employment, deferred compensation or other similar agreement (or amend any such existing agreement) with respect to any employee, officer or director, (ii) increase benefits payable under any existing severance or termination pay policies, (iii) establish, adopt or amend any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, stock option, restricted stock or other benefit plan or arrangement, or (iv) increase compensation, bonus or other benefits payable to any employee or hire any executive officer if Sequential does not provide notice to MSLO at least two Business Days prior to the hiring of any executive officer;
(j) change Sequential’s methods of accounting, except as required by concurrent changes in GAAP, as agreed to by its independent public accountants;
(k) settle, or offer or propose to settle, any litigation, investigation, arbitration, proceeding or other claim involving or against Sequential or any of its Subsidiaries controlled or directed by Sequential or any of its Subsidiaries;
(l) (i) make or change any material Tax election, (ii) change any annual tax accounting period, (iii) adopt or change any elective method of tax accounting, (iv) materially amend any Tax Returns, (v) enter into any material closing agreement, (vi) settle any material Tax claim, audit or assessment or (vii) surrender any right to claim a material Tax refund, offset or other reduction in Tax liability;
(m) except in the ordinary course of business consistent with past practice, amend, modify or terminate (excluding terminations upon expiration of the term thereof in accordance with their terms) any Sequential Material Contract or waive, release or assign any material rights, claims or benefits of it or its Subsidiaries under any Sequential Material Contract, or enter into any Contract or agreement that would have been a Sequential Material Contract had it been entered into prior to this Agreement or which grants any third party the right to receive payments with respect to any Intellectual Property, including any royalty payments or similar;
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(n) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Sequential or any material Sequential Subsidiary (other than the Mergers);
(o) cancel any indebtedness or waive any claims or rights of substantial value, in each case other than in the ordinary course of business consistent with past practice;
(p) take any action, or knowingly fail to take any action, which action or failure to act prevents or impedes, or could reasonably be expected to impede, the Mergers from qualifying as a transaction described in Section 351 of the Code; or
(q) agree, resolve or commit to (i) do any action restricted by this Section 5.3 or (ii) accept any restriction that would prevent Sequential or any of its Subsidiaries from taking any action required by this Section 5.3.
5.4 Control of Other Party’s Business. Nothing contained in this Agreement will give MSLO, directly or indirectly, the right to control Sequential or any of the Sequential Subsidiaries or direct the business or operations of Sequential or any of the Sequential Subsidiaries. Nothing contained in this Agreement will give Sequential, directly or indirectly, the right to control MSLO or any of the MSLO Subsidiaries or direct the business or operations of MSLO or any of the MSLO Subsidiaries prior to the Effective Time. Prior to the Effective Time, each of MSLO and Sequential will exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its respective operations and the operations of its respective Subsidiaries. Nothing in this Agreement, including any of the actions, rights or restrictions set forth herein, will be interpreted in such a way as to place Sequential or MSLO in violation of any applicable Law.
5.5 No Solicitation; Recommendation of the Merger.
(a) Notwithstanding anything to the contrary set forth in this Agreement, during the period beginning on the date of this Agreement and continuing until 11:59 p.m. (New York City time) on the 30th calendar day after the date of this Agreement (the “No Shop Period Start Date”), MSLO and its Subsidiaries and their respective directors, officers, employees, investment bankers, financial advisors, attorneys, accountants or other advisors, agents or representatives (collectively, “Representatives”) shall have the right to (i) initiate, solicit and encourage any inquiry or the making of any proposal or offer that constitutes an Acquisition Proposal, including by providing information (including non-public information and data) regarding, and affording access to the business, properties, assets, books, records and personnel of, MSLO and its Subsidiaries to any Person pursuant to an Acceptable Confidentiality Agreement; provided that MSLO shall promptly (and in any event within 48 hours) make available to Sequential any non-public information provided to any such Person or Persons or Representatives (other than immaterial information) that was not previously provided to Sequential, and (ii) engage in, enter into, continue or otherwise participate in any discussions or negotiations with any Persons or groups of Persons with respect to any Acquisitions Proposals and cooperate with or assist or participate in, or facilitate any such inquiries, proposals, discussions or negotiations or any effort or attempt to make any Acquisition Proposals. No later than 48 hours after the No Shop Period Start Date, MSLO shall notify Sequential in writing of the identity of any Person that submitted any Acquisition Proposal prior to the No Shop Period Start Date, and shall provide to Sequential a copy of such Acquisition Proposal.
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(b) Except as expressly permitted in this Section 5.5(b), from and after the No Shop Period Start Date until the Effective Time or, if earlier, the valid termination of this Agreement in accordance with ARTICLE VIII, MSLO shall not, and shall not permit or authorize any of its Subsidiaries or any Representative of MSLO or any of its Subsidiaries, directly or indirectly, to (i) solicit, initiate, endorse, knowingly encourage or knowingly facilitate any inquiry, proposal or offer with respect to, or the making or completion of, any Acquisition Proposal, or any inquiry, proposal or offer that is reasonably likely to lead to any Acquisition Proposal, (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any Person any information or data with respect to, or otherwise cooperate in any way with, any Acquisition Proposal or (iii) resolve, agree or propose to do any of the foregoing. Except as expressly permitted in this Section 5.5(b) (including with respect to any Excluded Party as provided in the last sentence hereof), as of the No Shop Period Start Date, MSLO shall, and shall cause each of its Subsidiaries and the Representatives of MSLO and its Subsidiaries to, (A) immediately cease and cause to be terminated all existing discussions and negotiations with any Person conducted theretofore with respect to any Acquisition Proposal or potential Acquisition Proposal and (B) request the prompt return or destruction of all confidential information previously furnished with respect to any Acquisition Proposal or potential Acquisition Proposal. Notwithstanding the foregoing, if at any time following the No Shop Period Start Date and prior to the time the MSLO Stockholder Approval is obtained, (1) MSLO receives a written Acquisition Proposal from any Person that the MSLO Board believes in good faith to be bona fide, (2) such Acquisition Proposal did not result from a breach of this Section 5.5, (3) the MSLO Board determines in good faith (after consultation with outside counsel and its financial advisor) that such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal, and (4) the MSLO Board determines in good faith (after consultation with outside counsel) that the failure to take the actions referred to in clause (x) or (y) below would reasonably be expected to result in a breach of its fiduciary duties to the stockholders of MSLO under applicable Law, then MSLO may (x) furnish information regarding, and afford access to the business, properties, assets, books, records and personnel of, MSLO and its Subsidiaries to the Person or Persons making such Acquisition Proposal and to the Representatives of such Person or Persons pursuant to a customary confidentiality agreement containing terms no less favorable to MSLO than those set forth in the Confidentiality Agreement (any such confidentiality agreement, an “Acceptable Confidentiality Agreement”); provided, that any non-public information provided to any such Person or Persons or Representatives (other than immaterial information) that was not previously provided to Sequential shall be promptly provided to Sequential and (y) participate in discussions or negotiations with the Person or Persons making such Acquisition Proposal regarding such Acquisition Proposal. Notwithstanding the passage of the No Shop Period Start Date, until 11:59 p.m. (New York City time) on the 45th calendar day after the date of this Agreement (provided such date and time shall be extended to the extent and during such period thereafter as MSLO is in active discussions with an Excluded Party), MSLO may continue to engage in the activities described in Section 5.5(a) with respect to any Excluded Party, including with respect to any amended or modified Acquisition Proposal submitted by any Excluded Party following the No Shop Period Start Date, and the restrictions in this Section 5.5(b) shall not apply with respect thereto.
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(c) Except as set forth in Section 5.5(d), neither the MSLO Board nor any committee thereof shall:
(i) (A) withdraw (or modify or qualify in any manner adverse to Sequential) the recommendation or declaration of advisability by the MSLO Board or any such committee of this Agreement, the MSLO Merger or any of the other transactions contemplated hereby, (B) recommend or otherwise declare advisable the approval by MSLO stockholders of any Acquisition Proposal, or (C) resolve, agree or propose to take any such actions (each such action set forth in this Section 5.5(c)(i) being referred to herein as an “Adverse Recommendation Change”); or
(ii) authorize, adopt or approve an Acquisition Proposal or cause or permit MSLO or any of its Subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other Contract (each, an “Alternative Acquisition Agreement”) constituting or related to, or which is intended to or is reasonably likely to lead to, any Acquisition Proposal (other than an Acceptable Confidentiality Agreement), or resolve, agree or propose to take any such actions.
(d) Notwithstanding anything in this Agreement to the contrary, at any time prior to the time the MSLO Stockholder Approval is obtained, the MSLO Board (at the recommendation of the Special Committee) may, (x) effect an Adverse Recommendation Change if the MSLO Board determines in good faith (after consultation with its outside counsel) that the failure to take such action would reasonably be expected to result in a breach of the directors’ fiduciary duties under applicable Law, either in response to a Superior Proposal or an Intervening Event or (y) solely in response to a Superior Proposal received after the date hereof that was unsolicited and did not otherwise result from a breach of this Section 5.5, cause MSLO to enter into a binding Alternative Acquisition Agreement with respect thereto and terminate this Agreement pursuant to Section 8.1(i); provided, however, that the MSLO Board may only effect an Adverse Recommendation Change or terminate this Agreement pursuant to Section 8.1(i) if (and in no other circumstances may the MSLO Board effect an Adverse Recommendation Change):
(i) MSLO notifies Sequential in writing at least three Business Days in advance that it intends to effect an Adverse Recommendation Change or terminate this Agreement pursuant to Section 8.1(i), which notice shall specify the basis for the Adverse Recommendation Change or termination and, in the case of a Superior Proposal, specifies the terms and conditions of, and the identity of the Person making, such Superior Proposal, and contemporaneously furnishes a copy (if any) of the proposed Alternative Acquisition Agreement and any other relevant transaction documents (it being understood and agreed that any material amendment to the financial terms or any other material term of such Superior Proposal or material change in the facts or circumstances relating to an Intervening Event shall require a new written notice by MSLO and a new three Business Day period);
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(ii) after providing such notice and prior to effecting such Adverse Recommendation Change or terminating this Agreement pursuant to Section 8.1(i), if Sequential makes a proposal during such the three Business Day period to adjust the terms and conditions of this Agreement, MSLO shall, and shall cause its financial and legal advisors to, negotiate with Sequential in good faith (to the extent Sequential seeks to negotiate) to make any revisions to the terms of the transactions contemplated by this Agreement as would permit the MSLO Board not to effect an Adverse Recommendation Change or terminate this Agreement pursuant to Section 8.1(i); and
(iii) the MSLO Board shall have considered in good faith any changes to this Agreement offered in writing by Sequential no later than 11:59 p.m., New York City time, on the third Business Day of such three Business Day period and shall have determined (x) in the event the MSLO Board’s determination pursuant to subparagraph (c) above is in response to a Superior Proposal, that such Superior Proposal would continue to constitute a Superior Proposal if such changes offered in writing by Sequential were to be given effect or (y) in the event the MSLO Board’s determination pursuant to subparagraph (c) above is in response to an Intervening Event, that such changes would not affect the MSLO Board’s determination of the need for an Adverse Recommendation Change in response to such Intervening Event.
For the avoidance of doubt, the terms and conditions of this Section 5.5(d) shall apply both prior to and following the No Shop Period Start Date, including with respect to any Acquisition Proposal received from any Excluded Party.
(e) Following the No Shop Period Start Date, MSLO promptly (and in any event within 48 hours of receipt) shall advise Sequential, orally or in writing, in the event MSLO or any of its Subsidiaries or Representatives receives (i) any indication by any Person that it is considering making an Acquisition Proposal (including any request by any Person to waive any standstill or similar provision applicable to such Person), (ii) any inquiry or request for information, discussion or negotiation that is reasonably likely to lead to or that contemplates an Acquisition Proposal, or (iii) any proposal or offer that is or is reasonably likely to lead to an Acquisition Proposal, in each case together with a description of the material terms and conditions of and facts surrounding any such indication, inquiry, request, proposal or offer, the identity of the Person making any such indication, inquiry, request, proposal or offer, and a copy of any written proposal, offer or draft agreement provided by such Person. MSLO (or its outside counsel) shall, orally or in writing, keep Sequential (or its outside counsel) reasonably informed on a timely basis (and in any event within 48 hours) with respect to any change to price or other material terms of such Acquisition Proposal. MSLO (or its outside counsel) shall, promptly upon receipt or delivery thereof (and in any event within 48 hours), provide Sequential (or its outside counsel) with copies of material agreements comprising such Acquisition Proposal and any amendments thereto. Without limiting any of the foregoing, MSLO shall promptly (and in any event within 48 hours) notify Sequential, orally or in writing, if it determines to begin providing information or to engage in discussions or negotiations concerning an Acquisition Proposal pursuant to this Section 5.5.
(f) MSLO agrees that any material violation of the restrictions set forth in this Section 5.5 by any Representative of MSLO or any of its Subsidiaries shall be deemed to be a material breach of this Agreement by MSLO.
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(g) Nothing contained in Section 5.5 shall prohibit MSLO, the MSLO Board or any other committee of the MSLO Board from (i) complying with its disclosure obligations under U.S. federal or state Law with regard to an Acquisition Proposal, including taking and disclosing to its stockholders a position contemplated by Rule 14e–2(a), Rule 14d–9 or Item 1012(a) of Regulation M–A promulgated under the Exchange Act (or any similar communication to stockholders) or (ii) making any “stop-look-and listen” communication to the stockholders of MSLO pursuant to Rule 14d-9(f) under the Exchange Act; provided, that neither the MSLO Board nor any committee thereof shall effect an Adverse Recommendation Change unless the applicable requirements of Section 5.5 shall have been satisfied.
(h) For purposes of this Agreement:
(i) “Acquisition Proposal” means any proposal or offer with respect to any direct or indirect acquisition or purchase, in one transaction or a series of transactions, and whether through any merger, reorganization, consolidation, tender offer, self-tender, exchange offer, stock acquisition, asset acquisition, binding share exchange, business combination, recapitalization, liquidation, dissolution, joint venture or otherwise, of (A) assets or businesses of MSLO and its Subsidiaries that generate 20% or more of the net revenues or net income or that represent 20% or more of the total assets (based on fair market value) of MSLO and its Subsidiaries, taken as a whole, immediately prior to such transaction, or (B) 20% or more of the combined voting power of the outstanding MSLO Class A Common Stock and Class B Common Stock, including any tender offer or exchange offer that if consummated would result in any Person beneficially owning twenty percent (20%) or more of the combined voting power of the outstanding MSLO Class A Common Stock and Class B Common Stock, in each case other than the MSLO Merger and other transactions contemplated by this Agreement;
(ii) “Excluded Party” means a Person or group of Persons from whom MSLO or any of its Representatives has received, after the execution of this Agreement and prior to the No Shop Period Start Date, a bona fide written Acquisition Proposal that the Madeline Board has determined in good faith constitutes a Superior Proposal or would reasonably be expected to result in a Superior Proposal;
(iii) “Intervening Event” means a material event or circumstance that was not known to the MSLO Board prior to the execution of this Agreement (or if known, the consequences of which were not known or reasonably foreseeable), which event or circumstance, or any material consequence thereof, becomes known to the MSLO Board prior to the receipt of MSLO Stockholder Approval; provided, that in no event shall the receipt, existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof constitute an Intervening Event; and
(iv) “Superior Proposal” means any bona fide binding written Acquisition Proposal that the MSLO Board determines in good faith (after consultation with outside counsel and its financial advisor), taking into account all legal, financial, regulatory and other aspects of the proposal and the Person making the proposal, including the financing terms thereof, is (A) more favorable to the stockholders of MSLO from a financial point of view than the MSLO Merger and the other transactions contemplated by this Agreement (including any adjustment to the terms and conditions proposed by Sequential in response to such proposal) and
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(B) reasonably likely to be completed on the terms proposed; provided, that, for purposes of this definition of “Superior Proposal,” references in the term “Acquisition Proposal” to “20%” shall be deemed to be references to “50%”.
5.6 Directors. Prior to the Effective Time, MSLO shall cause each member of the MSLO Board, other than any persons designated by Sequential at least two Business Days prior to the Closing Date, to execute and deliver a letter effectuating his or her resignation as a director of the MSLO Board effective as of the Effective Time.
5.7 Financing.
(a) Sequential shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to arrange and obtain the Financing on the terms and conditions described in the Financing Commitments (including the exercise of “market flex” provisions in the related fee letter) as promptly as practicable following the date hereof (taking into account the expected timing of the Closing). Sequential shall comply with its obligations, and enforce its rights, under the Financing Commitments in a timely and diligent manner. In the event that all conditions to the Financing Commitments set forth therein have been, or upon funding will be, satisfied, Sequential shall use its reasonable best efforts to cause the lenders party thereto and the other Persons providing such Financing to comply with their obligations under the Financing Commitments and the definitive financing agreements entered into in connection with the Financing and to fund the Financing required to consummate the transactions contemplated by this Agreement and to pay related fees, costs and expenses on or prior to the Closing Date. Sequential will keep MSLO reasonably informed of the status of its efforts to arrange the Financing and to satisfy the conditions thereof, including (A) promptly notifying MSLO of (1) any material breach or default by any party to the Financing Commitments or any definitive financing agreement entered into in connection with the Financing, if such breach or default would reasonably be expected to affect the timely availability of, or the amount of, the Financing and (2) the receipt by any of Sequential or any of its Representatives of any written notice or other written communication from any lender committing or providing the Financing or other Person with respect to (x) any actual, threatened or alleged breach, default, termination or repudiation by any party to the Financing Commitments or any definitive financing agreement entered into in connection with the Financing or any provision thereof (including any proposal by any lender or other Person to withdraw or terminate or make any material change in the terms of the Financing Commitment that would reasonably be expected to affect the timely availability of, or the amount of, the Financing) or (y) any material dispute or disagreement between or among any parties to any Financing Commitment or any definitive financing agreement entered into in connection with the Financing, if such dispute or disagreement would reasonably be expected to affect the timely availability of, or amount of, the Financing and (B) upon MSLO’s reasonable request, advising and updating MSLO, in a reasonable level of detail, with respect to status of the Financing. Sequential may replace or amend all or any portion of the Financing Commitments; provided, that such replacement or amendment would not (i) reduce the aggregate cash amount of proceeds of the Financing (including by changing the amount of fees to be paid or original issue discount of the Financing (except as set forth in any “market flex” provisions existing on the date hereof in the related fee letter)), (ii) impose new or additional conditions, or otherwise expand any conditions, to the receipt of the Financing from those set forth in the
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Financing Commitments on the date hereof, (iii) reasonably be expected to prevent, or materially delay or impair, the availability of the full amount of the Financing or make the funding of the Financing or the satisfaction of the conditions to obtaining the Financing less likely to occur, (iv) adversely affect the ability of Sequential to enforce its rights against any lender or any other Person providing or committing to provide the Financing or (v) adversely impact the ability of Sequential to cause TopCo to timely consummate the MSLO Merger and the other transactions contemplated hereby. For purposes of this Agreement, references to “Financing” shall include the financing contemplated by the Financing Commitments as replaced, amended or modified as permitted hereby, including, if applicable, pursuant to an alternative financing that is in compliance herewith, and references to “Financing Commitments” shall include such documents as replaced, amended or modified as permitted hereby, including, if applicable, pursuant to an alternative financing in compliance herewith. Without limiting the generality of the foregoing and subject to replacements or amendments permitted hereby, Sequential shall use its reasonable best efforts to (i) maintain in effect the Financing Commitments until the transactions contemplated by this Agreement are consummated, (ii) satisfy on a timely basis (taking into account the expected timing of the Closing) all conditions and covenants applicable to Sequential in the Financing Commitments and any definitive agreements entered into in connection therewith at or prior to Closing and otherwise comply with its obligations thereunder, (iii) negotiate and enter into definitive agreements with respect thereto on the terms and conditions consistent with those contemplated by the Financing Commitments and (iv) consummate the Financing at or prior to the Closing. If, notwithstanding the use of reasonable best efforts by Sequential to satisfy its obligations under this Section 5.7, any portion of the Financing or the Financing Commitments (or any definitive financing agreement relating thereto) expire or are terminated or otherwise become unavailable prior to the Closing, in whole or in part, for whatever reason, Sequential shall (i) promptly notify MSLO of such expiration, termination or unavailability and the reason therefor and (ii) use its reasonable best efforts to promptly arrange and obtain alternative financing from alternative sources, in an amount sufficient to consummate the transactions contemplated by this Agreement and to pay related fees, costs and expenses as promptly as practicable following the occurrence of such event and which do not include any conditions to the consummation of such alternative financing that are more onerous than the conditions set forth in the Financing Commitments. True, complete and correct copies of each commitment letter and other agreement relating to the alternative financing will be promptly provided to MSLO. Sequential acknowledges and agrees that the obtaining of the Financing is not a condition to the Closing. For the avoidance of doubt, if the Financing has not been obtained, Sequential will continue to be obligated, subject to the fulfillment or waiver of the conditions set forth in Sections 7.1 and 7.3, to complete the Mergers and consummate the other transactions contemplated hereby.
(b) Prior to the Closing, MSLO shall use reasonable best efforts to provide to Sequential, at Sequential’s sole expense, all cooperation reasonably requested by Sequential in connection with the Financing, including by using reasonable best efforts in (i) furnishing Sequential and its lenders any information and financial statements reasonably requested by such Persons as is customarily required in connection with the execution of debt financings similar to the Financing (provided, that MSLO will have no obligation to prepare pro forma financial information or post-closing financial information), (ii) participating, but only together with the executive officers of Sequential and other members of senior management and representatives of Sequential, and at a time and place acceptable to the executive officers of MSLO, in a reasonable
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number of meetings (including customary one-on-one meetings with the parties acting as lead arrangers or agents for, and prospective lenders and purchasers of, the Financing and the executive officers of MSLO and other members of senior management and representatives of MSLO), presentations, road shows, due diligence sessions and sessions with rating agencies in connection with the Financing, as reasonably requested by Sequential, (iii) assisting Sequential and its lenders in the preparation of customary bank information memoranda, rating agency presentations and lender presentations relating to the Financing, (iv) cooperating with the marketing efforts of Sequential and its lenders for all or any portion of the Financing, (v) providing information with respect to the assets of MSLO and its Subsidiaries that will serve as collateral for the Financing as is reasonably requested by Sequential and, subject to Section 6.2, providing reasonable access to Sequential and its lenders, during normal working hours and upon reasonable advance notice, to allow them to conduct audit examinations and appraisals with respect to such collateral, (vi) seeking to cause its auditors to provide assistance to Sequential consistent with their customary practice (including to provide and consent to the use of their audit reports relating to the consolidated financial statements of MSLO and its Subsidiaries), in each case on customary terms and consistent with their customary practice in connection with financings similar to the Financing, (vii) so long as such documents and other information are reasonably requested by Sequential in writing at least ten Business Days prior to the Closing Date, providing all documentation and other information required by regulatory authorities with respect to MSLO and its Subsidiaries under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act of 2001, as amended, and (viii) seeking to arrange for customary payoff letters, lien terminations and instruments of discharge to be delivered at Closing providing for the payoff, discharge and termination on the Closing Date of all indebtedness contemplated by the Financing Commitment to be paid off, discharged and terminated at Closing; provided, however, that, irrespective of the above, (A) such requested cooperation shall not unreasonably interfere with the business or the ongoing operations of MSLO and its Subsidiaries, (B) nothing in this Section 5.7(b) shall require cooperation to the extent that it would (x) cause any condition to the Closing set forth in Sections 7.1 and 7.3 to not be satisfied or otherwise cause any breach of this Agreement or (y) reasonably be expected to conflict with or violate MSLO’s or any its Subsidiaries’ organizational documents or any applicable Law, (C) prior to the Closing, none of the directors or managers of MSLO or any of its Subsidiaries, acting in such capacity, shall be required to execute, deliver or enter into or perform any agreement, certificate, document or instrument with respect to the Financing or adopt any resolutions approving the agreements, documents and instruments pursuant to which the Financing is obtained, and (D) none of MSLO’s or its Subsidiaries’ officers or employees shall be required to execute, deliver or enter into, or perform any agreement, document or instrument with respect to the Financing that is not contingent upon the Closing or that would be effective prior to the Effective Time.
(c) Notwithstanding Section 5.7(b) above, none of MSLO or any of its Subsidiaries shall be required to bear any cost or expense or to pay any commitment or other similar fee or make any other payment in connection or incur or assume any other liability or obligation with the Financing prior to the Effective Time except in the case of expenses that are reimbursed as provided in Section 8.2(b). Sequential shall, promptly upon request, reimburse MSLO for all reasonable and documented out-of-pocket costs and expenses (including reasonable attorneys’ fees) incurred by MSLO or any of its Subsidiaries in connection with fulfilling its obligations pursuant to Section 5.7(b). Sequential shall indemnify and hold
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harmless MSLO and its Subsidiaries (and their respective Representatives) from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred in connection with the arrangement of the Financing and any information utilized in connection therewith (other than historical information relating to MSLO or its Subsidiaries provided by MSLO in writing specifically for use in the Financing offering documents). MSLO hereby consents to the use of its and its Subsidiaries’ logos in connection with the Financing; provided, that such logos are used solely in a manner that is not intended to nor reasonably likely to harm or disparage MSLO or any of its Subsidiaries or the reputation or goodwill of MSLO or any of its Subsidiaries and its or their marks.
5.8 Termination of Certain Agreements. Except for any agreements or arrangements set forth in Section 5.8 of the Sequential Disclosure Schedule which shall continue in accordance with their respective terms, at or prior to the MSLO Effective Time, MSLO shall take all actions necessary to cause any and all arrangements and agreements to which it or any of its Subsidiaries is a party with Martha Stewart to be terminated as of the MSLO Effective Time without any further liability or obligation on the part of MSLO or any of its Subsidiaries, except in each case with respect to indemnification matters.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of the Form S-4 and the Proxy Statement; MSLO Stockholders Meeting.
(a) As soon as practicable following the date of this Agreement, Sequential and MSLO shall prepare, and Sequential shall cause TopCo to file with the SEC, the Form S-4, including the related Proxy Statement/Prospectus and Information Statement. Each of Sequential and MSLO shall use reasonable best efforts to have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing. Each of Sequential and MSLO shall furnish all information concerning such Person and its Affiliates to the other, and provide such other assistance, as may be reasonably requested, in connection with the preparation, filing and distribution of the Form S-4, Proxy Statement/Prospectus and Information Statement. The Form S-4 and Proxy Statement/Prospectus shall include all information reasonably requested by such other party to be included therein. Each of Sequential and MSLO shall promptly notify the other upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Form S-4 or Proxy Statement/Prospectus and shall provide the other with copies of all correspondence between it and its Representatives, on one hand, and the SEC, on the other hand. Each of Sequential and MSLO shall use its reasonable best efforts to respond as promptly as practicable to any comments from the SEC with respect to the Form S-4 or Proxy Statement/Prospectus. Notwithstanding the foregoing, prior to filing the Form S-4 (or any amendment or supplement thereto) or mailing the Proxy Statement/Prospectus (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, each of Sequential and MSLO (i) shall provide the other an opportunity to review and comment on such document or response (including the proposed final version of such document or response) and (ii) shall include in such document or response all comments reasonably proposed by the other. Each of Sequential and MSLO shall advise the other, promptly after receipt of notice thereof, of the time of effectiveness of the Form S-4, the issuance of any stop
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order relating thereto or the suspension of the qualification of shares of TopCo Common Stock for offering or sale in any jurisdiction, and each of Sequential and MSLO shall use its reasonable best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated. Sequential shall also cause TopCo to take any other action required to be taken under the Securities Act, the Exchange Act, any applicable foreign or state securities or “blue sky” laws and the rules and regulations thereunder in connection with the Mergers, the issuance of the Merger Consideration and the issuance of shares of TopCo Common Stock under the Sequential Benefit Plans. If at any time prior to the Effective Time any information relating to Sequential, MSLO, TopCo, or any of their respective Affiliates, officers or directors, should be discovered by Sequential, MSLO or TopCo that should be set forth in an amendment or supplement to any of the Form S-4 or the Proxy Statement/Prospectus, so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the stockholders of Sequential and MSLO.
(b) MSLO shall use its reasonable best efforts to, as promptly as practicable after the Form S-4 is declared effective under the Securities Act, duly give notice of, convene and hold a meeting of its stockholders (the “MSLO Stockholders Meeting”), and shall within five Business Days of the effectiveness of the Form S-4 publicly announce the date of the MSLO Stockholders Meeting, in accordance with the DGCL and MSLO’s certificate of incorporation and bylaws for the purpose of obtaining the MSLO Stockholder Approval and shall, subject to the provisions of Section 5.5, through its Board of Directors, recommend to its stockholders the adoption and approval of this Agreement. MSLO may only postpone or adjourn the MSLO Stockholders Meeting (i) to solicit additional proxies for the purpose of obtaining the MSLO Stockholder Approval, (ii) for the absence of a quorum, (iii) with the consent of Sequential or (iv) to allow reasonable additional time for the filing and/or mailing of any supplemental or amended disclosure that MSLO has determined after consultation with outside legal counsel is reasonably likely to be required under applicable Law and for such supplemental or amended disclosure to be disseminated and reviewed by stockholders of MSLO prior to the MSLO Stockholders Meeting. MSLO shall use its reasonable best efforts to (i) cause the Proxy Statement/Prospectus to be mailed to MSLO’s stockholders as promptly as practicable after the Form S-4 is declared effective under the Securities Act and to hold the MSLO Stockholders Meeting as soon as practicable after the Form S-4 becomes effective and (ii) subject to the provisions of Section 5.5, solicit the MSLO Stockholder Approval. MSLO shall, through the MSLO Board, recommend to its stockholders that they vote in favor of the MSLO Merger and shall include such recommendation in the Proxy Statement/Prospectus, except to the extent that the MSLO Board shall have made an Adverse Recommendation Change as permitted by Section 5.5. MSLO agrees, subject to Section 5.5, that its obligations pursuant to this Section 6.1 shall not be affected by the commencement, public proposal, public disclosure or communication to MSLO of any Acquisition Proposal.
6.2 Access to Information; Confidentiality. Upon reasonable notice and subject to applicable Law, each of Sequential and MSLO shall, and shall cause each of its Subsidiaries to, afford to the other and its representatives reasonable access during normal business hours during
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the period prior to the Closing Date to all of the properties, books, Contracts, commitments, personnel and records and, during such period, each of Sequential and MSLO shall, and shall cause each of its Subsidiaries to, furnish promptly to the other and its representatives such information concerning its business, properties and personnel as such other party may reasonably request, other than to the extent such information is contemplated to be provided pursuant to Section 5.5, in which case, the provisions of Section 5.5 shall apply to the sharing of such information. The foregoing notwithstanding, neither Sequential nor MSLO shall be required to afford such access if and to the extent it would (w) unreasonably disrupt its operations or any of its Subsidiaries, (x) violate any of its or its Subsidiaries’ obligations with respect to confidentiality, (y) cause a risk of a loss of privilege or trade secret protection to it or any of its Subsidiaries or (z) constitute a violation of any applicable Law; provided, however, that, in each case, Sequential or MSLO, as the case may be, uses commercially reasonable efforts to minimize the effects of such restriction or to provide a reasonable alternative to such access. All information furnished pursuant to this Section 6.2 shall be subject to the Confidentiality Agreement, dated as of April 27, 2015, between MSLO and Sequential (the “Confidentiality Agreement”). No investigation pursuant to this Section 6.2 or information provided to, made available to or delivered by either Sequential or MSLO pursuant to this Section 6.2 or otherwise shall affect any representations or warranties, conditions or rights of either Sequential or MSLO contained in this Agreement.
6.3 Required Actions.
(a) Subject to the terms and conditions of this Agreement, each of the parties shall use its reasonable best efforts to take, or cause to be taken, all actions, and do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary to consummate and make effective, as soon as reasonably possible, the Mergers and the other transactions contemplated by this Agreement in accordance with the terms hereof. Without limiting the generality of the foregoing, upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use reasonable best efforts to take, or cause to be taken, all actions that are necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Mergers and the other transactions contemplated by this Agreement, including using reasonable best efforts to accomplish the following: (i) obtain all required consents, approvals or waivers from, or participation in other discussions or negotiations with, third parties, including as required under any Contract, (ii) defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Mergers and the other transactions contemplated by this Agreement, (iii) obtain all necessary actions or nonactions, waivers, consents, approvals, orders and authorizations from Governmental Entities and (iv) make all necessary registrations, declarations and filings with any Governmental Entity, including filings required under the HSR Act with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice; provided that no party shall be required to pay (and MSLO and its Subsidiaries shall not pay or agree to pay without the prior written consent of Sequential, which consent shall not be unreasonably withheld, conditioned or delayed) any fee, penalty or other consideration to any third party for any consent or approval required for the consummation of the transactions contemplated by this Agreement under any Contract. In furtherance and not in limitation of the foregoing, Sequential and MSLO each shall, no later than ten Business Days following the execution and delivery of this Agreement, file a Notification and Report Form
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pursuant to the HSR Act with respect to the transactions contemplated hereby and use its reasonable best efforts to take, or cause to be taken, all other actions consistent with this Section 6.3 necessary to cause the expiration or termination of the applicable waiting period under the HSR Act as soon as practicable. Sequential shall be responsible for any filing and other similar fees payable in connection with the filing of the Notification and Report Form and any other submissions under the HSR Act.
(b) Sequential shall give prompt notice to MSLO, and MSLO shall give prompt notice to Sequential, of (i) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement.
6.4 Indemnification and Insurance.
(a) From and after the Effective Time, TopCo shall indemnify and hold harmless each individual who is as of the date of this Agreement, or who becomes prior to the Effective Time, a director or officer of MSLO or Sequential or any of their respective Subsidiaries or who is as of the date of this Agreement, or who thereafter commences prior to the Effective Time, serving at the request of MSLO or Sequential, as applicable, or any of their respective Subsidiaries as a director or officer of another Person (including such individual’s affiliates, the “Indemnified Parties”), against all claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including with respect to matters existing or occurring at or prior to the Effective Time (including this Agreement and the transactions and actions contemplated hereby)), arising out of or pertaining to the fact that the Indemnified Party (or such Indemnified Party’s affiliate) is or was an officer or director of MSLO or Sequential, as applicable, or any of their respective Subsidiaries is or was serving at the request of MSLO or Sequential, as applicable, or any of their respective subsidiaries as a director or officer of another person or in respect of any acts or omissions in their capacities as such directors or officers occurring prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted by applicable Law, and any indemnification agreements in existence as of the date of this Agreement. In the event of any such claim, action, suit or proceeding, (i) each Indemnified Party will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit or proceeding from TopCo to the fullest extent permitted by applicable Law; provided, that any person to whom expenses are advanced provides an undertaking, if and only to the extent required by the DGCL, to repay such advances if it is ultimately determined that such person is not entitled to indemnification, and (ii) TopCo shall, and shall cause its Subsidiaries to, cooperate in the defense of any such matter. In the event that TopCo, the Sequential Surviving Corporation or the MSLO Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii)
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transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, TopCo, the Sequential Surviving Corporation and/or the MSLO Surviving Corporation, as applicable, shall cause proper provision to be made so that the successors and assigns of TopCo, the Sequential Surviving Corporation and/or the MSLO Surviving Corporation, as applicable, assume the obligations set forth in this Section 6.4(a).
(b) For a period of six years from and after the Effective Time, TopCo shall either cause to be maintained in effect the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by MSLO or Sequential or any of their Subsidiaries or provide substitute polices of not less than the existing coverage and have other terms not less favorable to the insured persons with respect to claims arising from facts or events that occurred on or before the Effective Time, except that in no event shall TopCo be required to pay with respect to such insurance policies (or substitute insurance policies) (i) of MSLO in respect of any one policy year more than 300% of the annual premium payable by MSLO for such insurance for the year ending December 31, 2014 (the “MSLO Maximum Amount”), and if TopCo is unable to obtain the insurance required by this Section 6.4(b) it shall obtain as much comparable insurance as possible for the years within such six-year period for an annual premium equal to the MSLO Maximum Amount, in respect of each policy year within such period; provided, that in lieu of the foregoing, MSLO may obtain at or prior to the Effective Time a six-year “tail” policy under MSLO’s existing directors and officers insurance policy providing equivalent coverage to that described in the preceding sentence if and to the extent that the same may be obtained for an amount that, on an annual basis, does not exceed the MSLO Maximum Amount, or (ii) of Sequential in respect of any one policy year more than 300% of the annual premium payable by Sequential for such insurance for the year ending December 31, 2014 (the “Sequential Maximum Amount”), and if TopCo is unable to obtain the insurance required by this Section 6.4(b), it shall obtain as much comparable insurance as possible for the years within such six-year period for an annual premium equal to the Sequential Maximum Amount, in respect of each policy year within such period; provided, that in lieu of the foregoing, Sequential may obtain at or prior to the Effective Time a six-year “tail” policy under Sequential’s existing directors’ and officers’ insurance policy providing equivalent coverage to that described in the preceding sentence if and to the extent that the same may be obtained for an amount that, on an annual basis, does not exceed the Sequential Maximum Amount.
(c) The provisions of this Section 6.4 (i) shall survive consummation of the Mergers, (ii) are intended to be for the benefit of, and will be enforceable by, each indemnified or insured party (including the Indemnified Parties), his or her heirs and his or her representatives, and (iii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise.
6.5 Sequential Stockholder Approval. Sequential shall take all lawful action to deliver, immediately following (and in any event within one hour, and prior to any public announcement, of) the execution of this Agreement, to MSLO the written consents in the form attached hereto as Exhibit B signed by the holders of shares of Sequential Common Stock specified thereon and in any event sufficient to constitute the Sequential Stockholder Approval, in accordance with the DGCL and the certificate of incorporation and bylaws of Sequential (the “Sequential Written Consent”). As promptly as practicable after the Form S-4 is declared effective under the Securities Act, Sequential shall mail the Information Statement to the holders of Sequential Common Stock in accordance with the DGCL and the applicable requirements of the SEC.
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6.6 Public Announcements. The initial press release with respect to this Agreement and the transactions contemplated hereby shall be a joint release mutually agreed upon by MSLO and Sequential. Thereafter, Sequential, on the one hand, and MSLO, on the other hand, shall consult with each other before issuing, and give each other a reasonable opportunity to review and comment upon, any press release or other public statements with respect to this Agreement, the Mergers and the other transactions contemplated hereby and shall not issue any such press release or make any public announcement prior to such consultation and review, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system; provided that (i) MSLO shall not be required to provide any such review or comment to Sequential in connection with the receipt and existence of an Acquisition Proposal and matters related thereto or an Adverse Recommendation Change (other than as required pursuant to Section 5.5) and (ii) each party hereto and their respective Affiliates may make statements that are substantially similar to previous press releases, public disclosures or public statements made by MSLO and Sequential in compliance with this Section 6.6.
6.7 Takeover Laws. Neither Sequential nor MSLO shall (a) take any action to cause any “moratorium,” “fair price,” “interested shareholder,” “business combination,” “control share acquisition” or similar provision of any state anti-takeover Law (collectively, “Takeover Laws”) to become applicable to this Agreement, the Mergers or any of the other transactions contemplated hereby and (b) if any Takeover Law is or becomes applicable to this Agreement, the Mergers or any of the other transactions contemplated hereby, take all action necessary to ensure that the Mergers and the other transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such Takeover Law with respect to this Agreement, the Mergers and the other transactions contemplated hereby.
6.8 Section 16 Matters. Prior to the Effective Time, each of TopCo, the Sequential Board and the MSLO Board shall take all such steps as may be necessary or appropriate to cause the transactions contemplated by this Agreement, including any dispositions of shares of MSLO Common Stock (including derivative securities with respect to such shares) and/or shares of Sequential Common Stock (including derivative securities with respect to such shares) resulting from the transactions contemplated by this Agreement by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to MSLO and/or Sequential, as applicable, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
6.9 Stockholder Litigation. In the event that any stockholder litigation related to this Agreement, the Mergers or the other transactions contemplated by this Agreement is brought, or, to the knowledge of Sequential or MSLO, threatened in writing, against a party and/or the members of a party’s board of directors prior to the Effective Time, Sequential or MSLO, as applicable, shall promptly notify the other of any such stockholder litigation brought, or, to the knowledge of the applicable party, threatened in writing against such party and/or members of the party’s board of directors and shall keep the other reasonably informed with
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respect to the status thereof. None of Sequential, MSLO or any of their Subsidiaries or Representatives shall compromise, settle, come to an arrangement regarding, or agree to compromise, settle or come to an arrangement regarding, any such stockholder litigation or consent to the same unless Sequential or MSLO, as applicable, shall have consented in writing in its reasonable discretion.
6.10 Nasdaq Listing. Sequential shall use reasonable best efforts to cause the TopCo Common Stock issuable under ARTICLE II to be approved for listing on Nasdaq, subject to official notice of issuance, as promptly as practicable after the date hereof, and in any event prior to the Closing Date.
6.11 Employees and Employee Benefits.
(a) For a period beginning on the Closing Date and continuing thereafter for 12 months, subject to any contractual obligations that may apply, TopCo shall provide, or shall cause MSLO Surviving Corporation and its Subsidiaries to provide, employees of MSLO as of the Closing who continue employment with TopCo or any of its Subsidiaries, including MSLO Surviving Corporation, following the Closing (the “Continuing Employees”) with (i) wage or base salary levels (but not any short-term incentive compensation opportunities or other bonus plans (other than the commission sales plan set forth in Section 6.11(a) of the MSLO Disclosure Schedule)) that are not less than those in effect immediately prior to the Effective Time, and (ii) employee benefits (excluding equity-based compensation) that are comparable in the aggregate to either those in effect for such Continuing Employees immediately prior to the Effective Time or those provided to similarly-situated employees of Sequential from time-to-time, provided that, (x) until December 31, 2015, Topco and the MSLO Surviving Corporation agree to keep in effect all employee benefits (excluding equity-based compensation) that are applicable to employees of MSLO as of the date hereof and (y) notwithstanding the immediately preceding clause (x), until the one year anniversary of the Closing Date, TopCo and the MSLO Surviving Corporation agree to keep in effect all severance plans, practices and policies that are applicable to employees of MSLO as of the date hereof and set forth on Section 6.11(a) of the MSLO Disclosure Schedule. Nothing herein shall be deemed to limit the right of TopCo or any of their respective Affiliates to (A) terminate the employment of any Continuing Employee at any time, (B) change or modify the terms or conditions of employment for any Continuing Employee, or (C) change or modify any Sequential Benefit Plan, MSLO Benefit Plan or other employee benefit plan or arrangement in accordance with its terms.
(b) For all purposes under the employee benefit plans, programs and arrangements established or maintained by TopCo and its respective Affiliates in which Continuing Employees may be eligible to participate after the Closing (the “New Benefit Plans”), each Continuing Employee shall be credited with the same amount of service as was credited by MSLO as of the Closing under similar or comparable MSLO Benefit Plans in which such Continuing Employee participated immediately prior to the Closing (except (i) for purposes of benefit accrual under defined benefit plans and retiree medical arrangements or (ii) to the extent such credit would result in a duplication of benefits). In addition, and without limiting the generality of the foregoing, (i) with respect to any New Benefit Plans in which the Continuing Employees may be eligible to participate following the Closing, each Continuing Employee will immediately be eligible to participate in such New Benefit Plans, without any waiting time, to
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the extent coverage under such New Benefit Plans replaces coverage under a similar or comparable MSLO Benefit Plan in which such Continuing Employee was eligible to participate immediately before such commencement of participation and (ii) for purposes of each New Benefit Plan providing medical, dental, pharmaceutical and/or vision benefits to any Continuing Employee, TopCo shall cause all preexisting condition exclusions and actively-at-work requirements of such New Benefit Plan to be waived for such Continuing Employee and his or her covered dependents, to the extent any such exclusions or requirements were waived or were inapplicable under any similar or comparable MSLO Benefit Plan in which such Continuing Employee participated immediately prior to the Closing. TopCo shall use commercially reasonable efforts to cause any eligible expenses incurred by such Continuing Employee and his or her covered dependents during the portion of the plan year of the MSLO Benefit Plan ending on the date such Continuing Employee’s participation in the corresponding New Benefit Plan begins to be taken into account under such New Benefit Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such Continuing Employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Benefit Plan.
(c) The terms of this Section 6.11 are included for the sole benefit of the respective parties hereto and shall not confer any rights or remedies upon any Continuing Employee or former employee of MSLO, any participant or beneficiary in any MSLO Benefit Plan or any other Person or Governmental Entity (whether as a third party beneficiary or otherwise) other than the parties hereto. Nothing contained in this Agreement shall (i) constitute or be deemed to constitute an amendment to any MSLO Benefit Plan or other compensation or benefit plan, policy, program or arrangement of MSLO, Sequential or any other Person, (ii) obligate TopCo or any of its Subsidiaries to (A) maintain any particular benefit plan or arrangement or (B) retain the employment of any particular employee; or (iii) prevent the MSLO Surviving Corporation, TopCo or any of their Subsidiaries from amending or terminating any benefit plan or arrangement.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party’s Obligation to Effect the Mergers. The respective obligations of the parties to effect the Mergers shall be subject to the satisfaction, or waiver (except with respect to Section 7.1(a), which shall not be waivable) by each of the parties, at or prior to the Closing of the following conditions:
(a) MSLO Stockholder Approval. The MSLO Stockholder Approval shall have been obtained.
(b) Sequential Stockholder Approval. The Sequential Stockholder Approval shall have been obtained.
(c) Listing. The shares of TopCo issuable to the stockholders of MSLO and Sequential and as contemplated by ARTICLE II, shall have been authorized for listing on Nasdaq, subject to official notice of issuance.
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(d) HSR Act. Any applicable waiting period (and any extension thereof) under the HSR Act relating to the transactions contemplated by this Agreement shall have expired or been terminated.
(e) Form S-4. The Form S-4 shall have been declared effective by the SEC under the Securities Act prior to the mailing of the Proxy Statement/Prospectus, and no stop order suspending the effectiveness of the Form S-4 shall have been issued and no proceedings for that purpose shall have been initiated or been threatened by the SEC.
(f) No Injunctions or Restraints. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Governmental Entity, or other legal restraint or prohibition, shall be in effect preventing the consummation of the Mergers and the transactions contemplated by this Agreement.
7.2 Conditions to Obligations of MSLO. The obligation of MSLO to consummate the transactions contemplated hereby is also subject to the satisfaction, or waiver by MSLO, at or prior to the Closing of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of Sequential set forth in Section 4.2, Section 4.3 and Section 4.22 of this Agreement shall be true and correct other than in de minimis respects on the date of this Agreement and as of the Closing Date, as if made at and as of such date (except to the extent that any such representation or warranty speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date), and (ii) the other representations and warranties of Sequential set forth in this Agreement shall be true and correct on the date of this Agreement and as of the Closing Date, as if made at and as of such date (except to the extent that any such representation or warranty speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Sequential Material Adverse Effect” set forth therein, except as set forth in Section 4.8(b)), individually or in the aggregate, has not had, and would not reasonably be expected to have, a Sequential Material Adverse Effect.
(b) Performance of Obligations of Sequential. Sequential shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date.
(c) Absence of Sequential Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any change, state of facts, circumstance, occurrence, development, event or effect that, individually or in the aggregate, has had or would reasonably be expected to have a Sequential Material Adverse Effect.
(d) Officer’s Certificate. MSLO shall have received a certificate signed by an executive officer of Sequential certifying as to the matters set forth in Sections 7.2(a), 7.2(b) and 7.2(c).
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(e) MSLO Opinion. MSLO shall have received from Debevoise & Plimpton LLP, counsel to MSLO, a written opinion dated the Effective Time to the effect that for U.S. federal income tax purposes the Mergers will constitute a transaction described in Section 351 of the Code. In rendering such opinion, counsel to MSLO shall be entitled to rely upon customary assumptions and representations reasonably satisfactory to such counsel, including representations set forth in certificates of officers of MSLO and Sequential.
(f) FIRPTA Certificate. TopCo shall have received a statement from MSLO meeting the requirements of Section 1.1445-2(c) and 1.897-2(h) of the Treasury Regulations, certifying that the shares of MSLO Common Stock (and any other relevant equity interests in MSLO) are not U.S. real property interests within the meaning of Section 897 of the Code.
7.3 Conditions to Obligations of Sequential. The obligation of Sequential to consummate the transactions contemplated hereby is also subject to the satisfaction, or waiver by Sequential, at or prior to the Effective Time, of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of MSLO set forth in Sections 3.2, 3.3 and 3.21 of this Agreement shall be true and correct other than in de minimis respects on the date of this Agreement and as of the Closing Date, as if made at and as of such date (except to the extent that any such representation or warranty speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date), and (ii) the other representations and warranties of MSLO set forth in this Agreement shall be true and correct on the date of this Agreement and as of the Closing Date, as if made at and as of such date (except to the extent that any such representation or warranty speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “MSLO Material Adverse Effect” set forth therein, except as set forth in Section 3.8(b)), individually or in the aggregate, has not had, and would not reasonably be expected to have, a MSLO Material Adverse Effect.
(b) Performance of Obligations of MSLO. MSLO shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date.
(c) Absence of MSLO Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any change, state of facts, circumstance, occurrence, development, event or effect that, individually or in the aggregate, has had or would reasonably be expected to have a MSLO Material Adverse Effect.
(d) Officer’s Certificate. Sequential shall have received a certificate signed by an executive officer of MSLO certifying as to the matters set forth in Sections 7.3(a), 7.3(b) and 7.3(c).
(e) Sequential Opinion. Sequential shall have received from Gibson, Dunn & Crutcher LLP, counsel to Sequential, a written opinion dated the Effective Time to the effect that for U.S. federal income tax purposes the Mergers will constitute a transaction described in
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Section 351 of the Code. In rendering such opinion, counsel to Sequential shall be entitled to rely upon customary assumptions and representations reasonably satisfactory to such counsel, including representations set forth in certificates of officers of Sequential and MSLO.
(f) FIRPTA Certificate. TopCo shall have received a statement from Sequential meeting the requirements of Section 1.1445-2(c) and 1.897-2(h) of the Treasury Regulations, certifying that the shares of Sequential Common Stock (and any other relevant equity interests in Sequential) are not U.S. real property interests within the meaning of Section 897 of the Code.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, by action taken or authorized by the board of directors of the terminating party or parties:
(a) by mutual written consent of MSLO and Sequential;
(b) by either MSLO or Sequential, if any Governmental Entity of competent jurisdiction shall have issued a final and nonappealable Order permanently enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, except that no party may terminate this Agreement pursuant to this Section 8.1(b) if such party’s breach of its obligations under this Agreement proximately contributed to the occurrence of such Order;
(c) by either MSLO or Sequential , if the Mergers shall not have been consummated on or before December 22, 2015, subject to extension by the mutual agreement of MSLO and Sequential (the “End Date”); provided, however, that no party may terminate this Agreement pursuant to this Section 8.1(c) if such party’s breach of its obligations under this Agreement was the primary cause of the failure of the Closing to occur by the End Date;
(d) by either MSLO or Sequential, if the MSLO Stockholder Approval shall not have been obtained by reason of the failure to obtain the required vote at a MSLO Stockholders Meeting duly convened thereof or at any adjournment or postponement thereof.
(e) by MSLO if the Sequential Written Consent shall not have been delivered to Sequential in accordance with Section 228 of the DGCL and to MSLO within 24 hours after execution of this Agreement;
(f) by MSLO, if there shall have been a breach of any of the covenants or agreements or any inaccuracy of any of the representations or warranties set forth in this Agreement on the part of Sequential, which breach or inaccuracy, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of the conditions set forth in Section 7.2(a) or (b), unless such failure is reasonably capable of being cured, and Sequential is continuing to use its reasonable best efforts to cure such failure, by the End Date;
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(g) by Sequential, if there shall have been a breach of any of the covenants or agreements or any inaccuracy of any of the representations or warranties set forth in this Agreement on the part of MSLO, which breach or inaccuracy, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of the conditions set forth in Section 7.3(a) or (b), unless such failure is reasonably capable of being cured, and MSLO is continuing to use its reasonable best efforts to cure such failure, by the End Date;
(h) by Sequential if (A) an Adverse Recommendation Change shall have occurred, (B) prior to the MSLO Stockholders Meeting, following the receipt by MSLO of an Acquisition Proposal or amendment thereto, the MSLO Board shall have failed to publicly reaffirm its recommendation of the MSLO Merger within 10 Business Days after the date Sequential requests in writing that the MSLO Board so reaffirm the recommendation, or (C) MSLO shall have intentionally and materially breached its obligations set forth in Section 5.5 or 6.1; or
(i) by MSLO at any time prior to obtaining the MSLO Stockholder Approval, in order to accept a Superior Proposal in accordance with Section 5.5(d); provided, that MSLO shall have (A) simultaneously with such termination entered into the associated Alternative Acquisition Agreement and (B) paid any amounts due pursuant to Section 8.2(c).
8.2 Effect of Termination.
(a) In the event of termination of this Agreement by either MSLO or Sequential in accordance with Section 8.1, this Agreement shall forthwith become void and have no effect, and none of MSLO, Sequential, any of their respective Subsidiaries or Affiliates or any of the officers or directors of any of the foregoing shall have any liability of any nature whatsoever under this Agreement, or in connection with the transactions contemplated by this Agreement, except that Section 3.21, Section 4.22, this Section 8.2 and ARTICLE IX shall survive any termination of this Agreement; provided, that, except as otherwise provided in this Section 8.2, no party will be relieved or released from any liability or damages arising from an intentional and material breach of any provision of this Agreement prior to such termination, and in each case the aggrieved party will be entitled to all rights and remedies available at Law or in equity (which the parties acknowledge and agree will not be limited to reimbursement of expenses or out-of-pocket costs). Without limiting the foregoing, MSLO acknowledges and agrees that the payment of the Expense Reimbursement or Termination Fee pursuant to Section 8.2(b) or Section 8.2(c), respectively, will not preclude Sequential, in the case of an intentional and material breach of this Agreement by MSLO or fraud, from seeking additional damages from MSLO on account of such intentional and material breach or fraud (it being understood that the MSLO Board’s failure to reaffirm its recommendation under the circumstances set forth in Section 8.1(h)(B) will not be deemed an intentional and material breach of this Agreement if the MSLO Board has determined the failure to take such action would reasonably be expected to result in a breach of its fiduciary duties under applicable Law). For purposes of this Agreement, “intentional and material breach” means a material breach that is a consequence of an act (or failure to act) undertaken by the breaching party with the knowledge (actual or constructive) that the taking of (or the failure to take) such act would, or would be reasonably expected to, cause a breach of this Agreement. No termination of this Agreement shall affect the obligations of the parties contained in the Confidentiality Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms.
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(b) In the event that Agreement is terminated pursuant to Section 8.1(d) or (g), MSLO shall promptly, and in any event within two Business Days after termination of this Agreement, reimburse Sequential for any and all expenses incurred in connection with this Agreement, the Financing Commitments and the transactions contemplated hereby and thereby in an amount not to exceed $2,500,000 (the “Expense Reimbursement”).
(c) In the event that:
(i) (A) after the date of this Agreement but prior to the date of the MSLO Stockholders Meeting, any Person or group of Persons shall have publicly made an Acquisition Proposal (whether or not conditional), (B) this Agreement is terminated by MSLO or Sequential pursuant to Section 8.1(c) or (d) or by Sequential pursuant to Section 8.1(g) and (C) within 12 months after the date of such termination, MSLO enters into an agreement in respect of any Acquisition Proposal, or recommends or submits an Acquisition Proposal to its stockholders for adoption, and such Acquisition Proposal is later consummated, which, in each case, need not be the same Acquisition Proposal that was made, disclosed or communicated prior to termination hereof, provided that for purposes of this Section 8.2(c)(i) the references to “20%” in the definition of “Acquisition Proposal” shall be deemed to be references to “50%”;
(ii) this Agreement is terminated by Sequential pursuant to Section 8.1(h); or
(iii) this Agreement is terminated by MSLO pursuant to Section 8.1(i);
then, in any such event, MSLO shall pay to Sequential the applicable Termination Fee (less the amount of any Expense Reimbursement previously paid pursuant to Section 8.2(b)), it being understood that in no event shall MSLO be required to pay the Termination Fee on more than one occasion. Payment of the Termination Fee shall be made by wire transfer of immediately available funds to the accounts designated by Sequential (A) no later than three Business Days after the date on which MSLO consummates such Acquisition Proposal in the case of a Termination Fee payable pursuant to Section 8.2(c)(i), (B) as promptly as reasonably practicable after termination (and, in any event, within three Business Days thereof) in the case of a Termination Fee payable pursuant to Section 8.2(c)(ii), and (C) simultaneously with, and as a condition to the effectiveness of, termination, in the case of a Termination Fee payable pursuant to Section 8.2(c)(iii).
(d) Each of the parties hereto acknowledges and agrees that (i) the agreements contained in this Section 8.2 are an integral part of this Agreement and the transactions contemplated hereby and that, without these agreements, the parties would not enter into this Agreement and (ii) the Termination Fee, in the circumstances in which such fee becomes payable, constitutes liquidated damages and is not a penalty.
8.3 Amendment. Subject to compliance with applicable Law, this Agreement may be amended by MSLO and Sequential, by action taken or authorized by their respective boards
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of directors, at any time before or after the Sequential Stockholder Approval or the MSLO Stockholder Approval is obtained; provided, however, that after the Sequential Stockholder Approval and/or MSLO Stockholder Approval has been obtained, there may not be, without further approval of the stockholders of Sequential or stockholders of MSLO, as applicable, any amendment of this Agreement which by applicable Law otherwise requires the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. Notwithstanding anything to the contrary contained herein, neither this Section 8.3 nor Section 9.8, Section 9.10, Section 9.12 or Section 9.13 (and any other provision of this Agreement to the extent an amendment, supplement, waiver or other modification of such provision would modify the substance of such Sections) may be amended, supplemented, modified or waived in a manner that is adverse to the interests of the lenders party to the Financing Commitment in any respect without the written consent of such lenders.
8.4 Extension; Waiver. At any time prior to the Effective Time, MSLO and Sequential may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties contained in this Agreement, and (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver will be valid only if set forth in a written instrument signed by an authorized officer on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations and Warranties. None of the representations, warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, other than those covenants or agreements of the parties which by their terms apply, or are to be performed in whole or in part, after the Effective Time.
9.2 Fees and Expenses. Except as set forth in this Section 9.2, in Section 6.3 and in Section 8.2, all fees and expenses incurred in connection with the Mergers, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated, except that each of MSLO and Sequential shall bear and pay one-half of the costs and expenses (other than the fees and expenses of each party’s attorneys and accountants, which shall be borne by the party incurring such expenses) incurred by the parties hereto in connection with the filing, printing and mailing of the Form S-4 and the Proxy Statement/Prospectus (including SEC filing fees).
9.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by email, upon the date such email is sent, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
| (a) | if to MSLO, to: |
Martha Stewart Living Omnimedia, Inc.
601 W. 26th Street, 9th Floor
New York, NY 10001
Phone: (212) 827-8394
Email: ahoffman@marthastewart.com
Attention: Allison Hoffman
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with a copy (which shall not constitute notice) to:
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Phone: (212) 909-6226
Email: rdbohm@debevoise.com
Attention: Richard D. Bohm
| (b) | if to Sequential, TopCo, Singer Merger Sub or Madeline Merger Sub, to: |
Sequential Brands Group, Inc.
5 Bryant Park, 30th Floor
New York, NY 10018
Phone: (646) 564-2577
Email: yshmidman@sbg-ny.com
Attention: Yehuda Shmidman
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166-0193
Phone: (212) 351-4062
Email: bbecker@gibsondunn.com
Attention: Barbara L. Becker
9.4 Definitions. Capitalized terms used in this Agreement shall have the respective meanings ascribed thereto in the sections of this Agreement set forth next to such terms on Annex A hereto. For purposes of this Agreement:
“Adjusted Cash Conversion Number” shall mean the Cash Conversion Number less the aggregate MSLO Cash Consideration payable pursuant to Section 2.4(b)(i).
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“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.
“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking and savings and loan institutions are authorized or required by Law to be closed in New York City.
“Contract” means any binding written or oral contract (other than immaterial oral contracts), agreement, instrument, lease, license, understanding, undertaking, commitment or obligation to which any Person is a party.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“GAAP” means United States generally accepted accounting principles, consistently applied.
“Governmental Entity” means any nation or government, any state, agency, commission, or other political subdivision thereof, any insurance regulatory authority, any self-regulatory authority, or any entity (including a court) of competent jurisdiction properly exercising executive, legislative, judicial or administrative functions of the government.
“Intellectual Property” means all U.S. and non-U.S. (a) trademarks, service marks, logos, symbols, brand names, trade names, trade dress, domain names and other indicia of origin, all registrations and applications for all of the foregoing, including all extensions, modifications and renewals thereof, and all goodwill associated with the foregoing (collectively, “Marks”), (b) published works of authorship (including software and computer programs), copyrights therein and thereto, and all registrations and applications for all of the foregoing, including all renewals, extensions, restorations and reversions thereof (collectively, “Copyrights”), (c) patents and patent applications, including divisionals, continuations, continuations-in-part, renewals, provisionals, extensions, reexaminations and reissues thereof (collectively, “Patents”), (d) inventions, discoveries, proprietary methods, processes, trade secrets, know-how, proprietary information, schematics, databases, formulae, drawings, prototypes, models, designs and customer lists (collectively, “Trade Secrets”), and (e) all other similar intellectual property or proprietary rights.
“knowledge of MSLO” or “knowledge” when used in reference to MSLO means the actual knowledge of those individuals listed in Section 9.4 of the MSLO Disclosure Schedule, after due inquiry.
“knowledge of Sequential” or “knowledge” when used in reference to Sequential means the actual knowledge of those individuals listed in Section 9.4 of the Sequential Disclosure Schedule, after due inquiry.
“Law” means any statute, law, ordinance, rule or regulation (domestic or foreign) issued, promulgated or entered into by or with any Governmental Entity.
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“Lien” means any charge, claim, limitation, condition, equitable interest, mortgage, lien, option, pledge, security interest, easement, encroachment, right of first refusal, adverse claim or restriction of any kind, including any restriction on or transfer or other assignment, as security or otherwise, of or relating to use, quiet enjoyment, voting, transfer, receipt of income or exercise of any other attribute of ownership.
“MSLO Material Adverse Effect” means any change, state of facts, circumstance, occurrence, development, event or effect that, individually or in the aggregate, is materially adverse to (A) the financial condition, properties, assets, liabilities, businesses or results of operations of MSLO and the MSLO Subsidiaries, taken as a whole, excluding any such change, state of facts, circumstance, event or effect to the extent caused by or resulting from (i) the execution, delivery and announcement of this Agreement and the transactions contemplated hereby, including litigation resulting therefrom or with respect thereto, and any adverse change in business relationships resulting therefrom or with respect thereto, including as a result of the identity of the other party to the Mergers, (ii) changes in economic, market, business, regulatory or political conditions generally or global financial markets, (iii) changes, circumstances or events generally affecting the industries in which MSLO and the MSLO Subsidiaries operate, (iv) changes in any Law or GAAP following the date hereof, (v) the mere failure of MSLO or any of its Subsidiaries to meet, with respect to any period or periods, any internal or industry analyst projections, forecasts, estimates of earnings or revenues, or business plans (it being agreed that the facts or circumstances giving rise to such failure that are not otherwise excluded from the definition of MSLO Material Adverse Effect may be taken into account in determining whether a MSLO Material Adverse Effect has occurred), (vi) any change, in and of itself, in the market price or trading volume of the MSLO Common Stock (it being agreed that the facts or circumstances giving rise to such change that are not otherwise excluded from the definition of MSLO Material Adverse Effect may be taken into account in determining whether a MSLO Material Adverse Effect has occurred), or (vii) the taking of any action expressly required by this Agreement, except in the case of the foregoing clauses (ii), (iii) and (iv) to the extent those changes, state of facts, circumstances, events, or effects have a materially disproportionate effect on MSLO and the MSLO Subsidiaries taken as a whole relative to other companies operating in industries in which MSLO and the MSLO Subsidiaries operate, and/or (B) the ability of MSLO to perform its obligations under this Agreement.
“MSLO Registered Intellectual Property” means any Registered Intellectual Property owned by MSLO or any of its Subsidiaries.
“Order” means any order, writ, injunction, decree, judgment or stipulation issued, promulgated or entered into by or with any Governmental Entity.
“Permitted Liens” means (a) any Liens for Taxes or other governmental charges not yet due and payable or the amount of which is being contested in good faith by appropriate proceedings and for which adequate accruals or reserves have been established in accordance with GAAP, (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, workmen’s, landlords’ or other similar Liens, (c) pledges or deposits in the ordinary course of business and on a basis consistent with past practice in connection with workers’ compensation, unemployment insurance or other social security legislation, (d) non-monetary Liens that do not, individually or in the aggregate, materially impair the continued or contemplated use or
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operation of the property to which they relate, (e) statutory Liens arising by operation of Law with respect to a liability incurred in the ordinary course of business on a basis consistent with past practice which is not yet due or payable or which is being contested in good faith by appropriate proceedings and for which adequate accruals or reserves have been established in accordance with GAAP, (f) immaterial easements, rights of way or other similar matters or restrictions or exclusions that would be shown by a current title report or other similar report and that do not, individually or in the aggregate, materially impair the continued or contemplated use or operation of the property to which they relate, (g) transfer restrictions imposed by applicable securities laws, (h) Liens that are disclosed on the MSLO Balance Sheet or the Sequential Balance Sheet, as applicable and (i) Liens listed in Section 10.2 of the MSLO Disclosure Schedule or Section 10.2 of the Sequential Disclosure Schedule, as applicable.
“Person” means any natural person, firm, corporation, partnership, company, limited liability company, trust, joint venture, association, Governmental Entity or other entity.
“Registered” shall mean issued, registered, renewed or the subject of a pending application.
“Related Party” has the meaning set forth in Item 404 of Regulation S-K under the Exchange Act.
“Securities Act” means the Securities Act of 1933, as amended.
“Sequential Material Adverse Effect” means any change, state of facts, circumstance, occurrence, development, event or effect that, individually or in the aggregate, is materially adverse to (A) the financial condition, properties, assets, liabilities, businesses or results of operations of Sequential and the Sequential Subsidiaries, taken as a whole, excluding any such change, state of facts, circumstance, event or effect to the extent caused by or resulting from (i) the execution, delivery and announcement of this Agreement and the transactions contemplated hereby, including litigation resulting therefrom or with respect thereto, and any adverse change in business relationships resulting therefrom or with respect thereto, including as a result of the identity of the other party to the Mergers, (ii) changes in economic, market, business, regulatory or political conditions generally or global financial markets, (iii) changes, circumstances or events generally affecting the industries in which Sequential and the Sequential Subsidiaries operate, (iv) changes in any Law or GAAP following the date hereof, (v) the mere failure of Sequential or any of its Subsidiaries to meet, with respect to any period or periods, any internal or industry analyst projections, forecasts, estimates of earnings or revenues, or business plans (it being agreed that the facts or circumstances giving rise to such failure that are not otherwise excluded from the definition of Sequential Material Adverse Effect may be taken into account in determining whether a Sequential Material Adverse Effect has occurred), (vi) any change, in and of itself, in the market price or trading volume of the Sequential Common Stock (it being agreed that the facts or circumstances giving rise to such change that are not otherwise excluded from the definition of Sequential Material Adverse Effect may be taken into account in determining whether a Sequential Material Adverse Effect has occurred), or (vii) the taking of any action expressly required by this Agreement, except in the case of the foregoing clauses (ii), (iii), and (iv) to the extent those changes, state of facts, circumstances, events, or effects have a materially disproportionate effect on Sequential and the Sequential Subsidiaries taken as a whole
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relative to other companies operating in industries in which Sequential and the Sequential Subsidiaries operate, and/or (B) the ability of Sequential to perform its obligations under this Agreement.
“Sequential Registered Intellectual Property” means any Registered Intellectual Property owned by Sequential or any of its Subsidiaries.
“Subsidiary” means, with respect to any Person, another Person in which such first Person owns, directly or indirectly, an amount of the voting securities, other voting ownership or voting partnership interests 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 such Person).
“Tax” means all income, gross receipts, franchise, sales, use, ad valorem, property, payroll, withholding, excise, severance, transfer, employment, estimated, alternative or add-on minimum, value added, stamp, occupation, premium, environmental and windfall profits taxes, and other taxes, charges, fees, levies, imposts, customs, duties, licenses or other assessments, together with any interest, additions to tax and any penalties.
“Tax Return” means any statement, report, return, information return or claim for refund relating to Taxes (including any elections, declarations, schedules or attachments thereto and any amendment to any of the foregoing).
“Termination Fee” means (a) if payable in connection with the termination of this Agreement on or prior to the 45th calendar day following the date of this Agreement either (x) by MSLO pursuant to Section 8.1(i) in order to enter into an Alternative Acquisition Agreement with an Excluded Party or (y) by Sequential pursuant to Section 8.1(h) and the event giving rise to such termination is the submission of an Acquisition Proposal by an Excluded Party, then, in either case, an amount equal to $7,500,000 and (b) if payable in any other circumstance, an amount equal to $12,800,000.
“Treasury Regulations” means the regulations (including temporary regulations) of the United States Treasury Department pertaining to the Internal Revenue Code.
9.5 Interpretation. When a reference is made in this Agreement to a Section, Article or Exhibit, such reference shall be to a Section, Article or Exhibit of this Agreement, unless otherwise indicated. The table of contents and headings contained in this Agreement or in any Exhibit are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Exhibit but not otherwise defined therein shall have the meaning set forth in this Agreement. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified. All references to “dollars” or “$” or “US$” in this Agreement refer to the lawful currency of the United States. The words “made available” shall include, without limitation, those documents or information made available in an electronic dataroom or website or in a physical dataroom, in each case, to which the intended recipient or its representatives had access, or such item was otherwise available on the SEC’s public website (www.sec.gov).
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9.6 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
9.7 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. This Agreement may be executed by facsimile or electronic transmission signature and a facsimile or electronic transmission signature shall constitute an original for all purposes.
9.8 Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the Exhibits and Annexes hereto), taken together with the Sequential Disclosure Schedule and the MSLO Disclosure Schedule, and the Confidentiality Agreement, (a) constitute the entire agreement, and supersede all prior agreements (other than the Confidentiality Agreement) and understandings, both written and oral, among the parties with respect to the Mergers and the other transactions contemplated by this Agreement and (b) are not intended to confer upon any Person other than the parties any rights or remedies, except for (i) after the Effective Time, the rights of the holders of MSLO Common Stock to receive the MSLO Merger Consideration and the holders of Sequential Common Stock to receive the Sequential Merger Consideration in accordance with the terms and conditions of ARTICLE II and, after the Effective Time, the right of the holders of MSLO Equity Awards, Sequential Equity Awards and Sequential Warrants to receive the amounts set forth in ARTICLE II, (ii) Section 6.4 (which shall be for the benefit of the Persons set forth therein, and any such Person will have the rights provided for therein), (iii) the rights granted to the lenders party to the Financing Commitment and other Persons providing the Financing under this Section 9.8 and Section 8.3, Section 9.8, Section 9.10, Section 9.12 and Section 9.13 (and each such Section shall expressly inure to the benefit of such lenders and Persons and such lenders and Persons shall be entitled to rely on and enforce the provisions of such Sections) and (iv) this ARTICLE IX in respect of the Sections set forth under the foregoing clauses (i), (ii) and (iii).
9.9 Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Delaware.
9.10 Assignment; Successors. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any party without the prior written consent of the other parties,
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and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
9.11 Specific Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Court of Chancery of the State of Delaware; provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then in any federal court located in the State of Delaware, this being in addition to any other remedy to which such party is entitled at law or in equity. The parties further agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, nor to object to a remedy of specific performance on the basis that a remedy of monetary damages would provide an adequate remedy for any such breach. Each party further agrees that no other party hereto or any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 9.11, and each party hereto irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument. The equitable remedies described in this Section 9.11 shall be in addition to, and not in lieu of, any other remedies at law or in equity that the parties to this Agreement may elect to pursue consistent with the terms of this Agreement.
9.12 Submission to Jurisdiction. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any party or its Affiliates against any other party or its Affiliates shall be brought and determined in the Court of Chancery of the State of Delaware; provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware. Each of the parties hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the
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subject matter hereof, may not be enforced in or by such courts. Notwithstanding the foregoing, each party hereto hereby (v) agrees that it will not bring or support any action, clause of action, claim, cross-claim or third-party claim of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the lenders party to the Financing Commitment and any other Person providing Financing in any way relating to this Agreement, the Financing Commitments or any of the transactions contemplated hereby or thereby, including without limitation any dispute arising out of or relating in any way to the Financing or the performance thereof or the transactions contemplated thereby, in any forum other than exclusively in the Supreme Court of the State of New York, County of New York, or, if under applicable Law exclusive jurisdiction is vested in the federal courts, the United States District Court for the Southern District of New York (and appellate courts thereof), (w) submits for itself and its property with respect to any such action to the exclusive jurisdiction of such courts, (x) agrees that service of process, summons, notice or document by registered mail addressed to it at its address provided in Section 9.3 shall be effective service of process against it for any such action brought in any such court, (y) waives and hereby irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of venue of, and the defense of an inconvenient forum to the maintenance of, any such action in any such court and (z) agrees that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
9.13 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE FINANCING COMMITMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
9.14 No Presumption Against Drafting Party. Each of MSLO and Sequential acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.
[Remainder of page left intentionally blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.
| MARTHA STEWART LIVING OMNIMEDIA, INC. | ||
| By: | /s/ Daniel W. Dienst | |
| Name: | Daniel W. Dienst | |
| Title: | Chief Executive Officer | |
| MADELINE MERGER SUB, INC. | ||
| By: | /s/ Yehuda Shmidman | |
| Name: | Yehuda Shmidman | |
| Title: | CEO | |
| SEQUENTIAL BRANDS GROUP, INC. | ||
| By: | /s/ Yehuda Shmidman | |
| Name: | Yehuda Shmidman | |
| Title: | CEO | |
| SINGER MERGER SUB, INC. | ||
| By: | /s/ Yehuda Shmidman | |
| Name: | Yehuda Shmidman | |
| Title: | CEO | |
| SINGER MADELINE HOLDINGS, INC. | ||
| By: | /s/ Yehuda Shmidman | |
| Name: | Yehuda Shmidman | |
| Title: | CEO | |
[Signature page to Merger Agreement]
ANNEX A
DEFINED TERMS
| Defined Term |
Section Number | |
| Acceptable Confidentiality Agreement |
5.5(b) | |
| Acquisition Proposal |
5.5(h)(i) | |
| Adjusted Cash Conversion Number |
9.4 | |
| Adverse Recommendation Change |
5.5(c)(i) | |
| Affiliate |
9.4 | |
| Agreement |
Preamble | |
| Alternative Acquisition Agreement |
5.5(c)(ii) | |
| Book-Entry Shares |
2.2(b) | |
| Business Day |
9.4 | |
| Cash Conversion Number |
2.4(a) | |
| Cash Election |
2.1(a)(i) | |
| Cash Election Share |
2.1(a)(i) | |
| Certificate |
2.2(b) | |
| Closing |
1.2 | |
| Closing Date |
1.2 | |
| Code |
Recitals | |
| Confidentiality Agreement |
6.2 | |
| Continuing Employees |
6.11(a) | |
| Contract |
9.4 | |
| Copyrights |
9.4 | |
| DGCL |
1.1(a) | |
| Dissenting Shares |
2.1(f) | |
| Effective Time |
1.3 | |
| Election |
2.3(a) | |
| Election Deadline |
2.3(d) | |
| End Date |
8.1(c) | |
| Environmental Laws |
3.15(b)(i) | |
| Environmental Permits |
3.15(b)(ii) | |
| ERISA |
3.13(a) | |
| Excess Shares |
2.2(e) | |
| Exchange Act |
9.4 | |
| Exchange Agent |
2.2(a) | |
| Exchange Fund |
2.2(a) | |
| Excluded Party |
5.5(h)(ii) | |
| Expense Reimbursement |
8.2(b) | |
| Financing |
4.18 | |
| Financing Commitments |
4.18 | |
| Form of Election |
2.3(b) | |
| Form S-4 |
3.4 | |
| GAAP |
9.4 | |
Annex A
| Governmental Entity |
9.4 | |
| Hazardous Materials |
3.15(b)(iii) | |
| HSR Act |
3.4 | |
| Indemnified Parties |
6.4(a) | |
| Information Statement |
3.4 | |
| Intellectual Property |
9.4 | |
| Intervening Event |
5.5(h)(iii) | |
| IRS |
3.13(a) | |
| IT Systems |
3.16(h) | |
| knowledge of MSLO |
9.4 | |
| knowledge of Sequential |
9.4 | |
| Law |
9.4 | |
| Lien |
9.4 | |
| Madeline Merger Sub |
Preamble | |
| Marks |
9.4 | |
| Measurement Date |
3.2(a) | |
| Merger Consideration |
2.1(b)(i) | |
| Merger Subs |
Preamble | |
| Mergers |
Recitals | |
| MSLO |
Preamble | |
| MSLO Balance Sheet |
3.6(j) | |
| MSLO Benefit Plan |
3.13(a) | |
| MSLO Board |
3.3 | |
| MSLO Book-Entry Shares |
2.2(b) | |
| MSLO Cash Consideration |
2.1(a)(i) | |
| MSLO Certificate |
2.2(b) | |
| MSLO Certificate of Merger |
1.3 | |
| MSLO Class A Common Stock |
Recitals | |
| MSLO Class B Common Stock |
Recitals | |
| MSLO Common Stock |
Recitals | |
| MSLO Disclosure Schedule |
Article III | |
| MSLO Effective Time |
1.3 | |
| MSLO Equity Awards |
2.1(d)(v) | |
| MSLO Holder |
2.3 | |
| MSLO Leased Real Properties |
3.11 | |
| MSLO Material Adverse Effect |
9.4 | |
| MSLO Material Contract |
3.17(a) | |
| MSLO Maximum Amount |
6.4(b) | |
| MSLO Merger |
Recitals | |
| MSLO Merger Consideration |
2.1(a)(i) | |
| MSLO Owned IP |
3.16(a) | |
| MSLO Performance RSU Award |
2.1(d)(iv) | |
| MSLO Performance Stock Option |
2.1(d)(ii) | |
| MSLO Preferred Stock |
3.2(a) | |
| MSLO Real Property Leases |
3.11 | |
| MSLO Registered Intellectual Property |
9.4 |
Annex A
| MSLO RSU Award |
2.1(d)(iii) | |
| MSLO SEC Documents |
3.6(a) | |
| MSLO Stock Consideration |
2.1(a)(i) | |
| MSLO Stock Option |
2.1(d)(i) | |
| MSLO Stockholder Approval |
3.3 | |
| MSLO Stockholders Meeting |
6.1(b) | |
| MSLO Support Agreement |
Recitals | |
| MSLO Supporting Stockholders |
Recitals | |
| MSLO Surviving Corporation |
Recitals | |
| Nasdaq |
2.1(a)(iii) | |
| New Benefit Plans |
6.11(b) | |
| New Entity Organizational Documents |
4.23(a) | |
| No Shop Period Start Date |
5.5(a) | |
| Non-Election Share |
2.1(a)(i) | |
| NYSE |
3.4 | |
| Order |
9.4 | |
| Patents |
9.4 | |
| Permits |
3.9(b) | |
| Permitted Liens |
9.4 | |
| Person |
9.4 | |
| Proxy Statement/Prospectus |
3.4 | |
| Registered |
9.4 | |
| Related Party |
9.4 | |
| Representatives |
5.5(a) | |
| Sarbanes-Oxley Act |
3.6(a) | |
| SEC |
3.6(a) | |
| Securities Act |
9.4 | |
| Sequential |
Preamble | |
| Sequential Balance Sheet |
4.6(j) | |
| Sequential Benefit Plan |
4.13(a) | |
| Sequential Board |
4.3 | |
| Sequential Book-Entry Shares |
2.2(b) | |
| Sequential Certificate |
2.2(b) | |
| Sequential Certificate of Merger |
1.3 | |
| Sequential Common Stock |
Recitals | |
| Sequential Disclosure Schedule |
Article IV | |
| Sequential Effective Time |
1.3 | |
| Sequential Equity Awards |
2.1(e)(v) | |
| Sequential Exchange Ratio |
2.1(b)(i) | |
| Sequential Leased Real Properties |
4.11 | |
| Sequential Material Adverse Effect |
9.4 | |
| Sequential Material Contract |
4.17(a) | |
| Sequential Maximum Amount |
6.4(b) | |
| Sequential Merger |
Recitals | |
| Sequential Merger Consideration |
2.1(b)(i) | |
| Sequential Owned IP |
4.16(a) |
Annex A
| Sequential Preferred Stock |
4.2(a)(i) | |
| Sequential Real Property Leases |
4.11 | |
| Sequential Registered Intellectual Property |
9.4 | |
| Sequential Restricted Stock Award |
2.1(e)(iii) | |
| Sequential RSU Award |
2.1(e)(ii) | |
| Sequential SEC Documents |
4.6(a) | |
| Sequential Stock Option |
2.1(e)(i) | |
| Sequential Stockholder Approval |
4.3 | |
| Sequential Surviving Corporation |
Recitals | |
| Sequential Trading Price |
2.1(a)(iii) | |
| Sequential Warrant |
2.1(e)(iv) | |
| Sequential Written Consent |
6.5 | |
| Shortfall Number |
2.4(b)(ii) | |
| Singer Merger Sub |
Preamble | |
| Special Committee |
Recitals | |
| Stock Election |
2.1(a)(i) | |
| Stock Election Share |
2.1(a)(i) | |
| Subsidiary |
9.4 | |
| Superior Proposal |
5.5(h)(iv) | |
| Takeover Laws |
6.7 | |
| Tax |
9.4 | |
| Tax Return |
9.4 | |
| Termination Fee |
9.4 | |
| TopCo |
Preamble | |
| TopCo Common Stock |
Recitals | |
| Total Cash Election Number |
2.4(b)(i) | |
| Trade Secrets |
9.4 | |
| Treasury Regulations |
9.4 |
Annex A
Exhibit 3.1
The By-Laws of Martha Stewart Living Omnimedia are hereby amended by adding a new Section 8 to Article VI as follows:
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of the Corporation, (ii) action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s shareholders, (iii) action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the Certificate of Incorporation or Bylaws (as either may be amended from time to time) of the Corporation or (iv) any action asserting a claim governed by the internal affairs doctrine. If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (b) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
Exhibit 10.1
EMPLOYMENT AGREEMENT
BETWEEN
SINGER MADELINE HOLDINGS, INC.
AND
MARTHA STEWART
DATED AS OF JUNE 22, 2015
AGREEMENT, dated as of June 22, 2015 (the “Effective Date”), by and between Singer Madeline Holdings, Inc. (the “Company”), and Martha Stewart (the “Founder”).
WHEREAS, the Founder is a party to an employment agreement, dated April 1, 2009, as amended, with Martha Stewart Living Omnimedia, Inc., a Delaware corporation (“Martha Stewart Living”) (the “Prior Employment Agreement); and
WHEREAS, pursuant to that Agreement and Plan of Merger by and among Martha Stewart Living, Madeline Merger Sub, Inc., Sequential Brands Group, Inc., Singer Merger Sub, Inc. and the Company, dated as of June 22, 2015 (the “Merger Agreement”), Martha Stewart Living will become a wholly-owned subsidiary of the Company;
WHEREAS, the Company recognizes that the Founder’s talents and abilities are unique and have been integral to the success of Martha Stewart Living;
WHEREAS, the Company wishes to secure the ongoing services of the Founder pursuant to the terms and conditions set forth herein, and therefore the Founder and the Company intend hereby to enter into a new amended and restated employment agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth below, the parties hereby agree as follows:
1. Employment. From and after the Closing Date (as defined in the Merger Agreement) (the “Closing Date”), the Company hereby agrees to employ the Founder as Founder and Chief Creative Officer of the Company, and the Founder hereby accepts such employment, on the terms and conditions set forth below. In addition, effective as of the Closing Date, Employee shall receive an interim appointment to serve as a member of the Company’s board of directors (the “Board”) and shall continue to be nominated to serve as a member of the Board during (i) the Employment Period (and, as applicable, the Consulting Period), and (ii) during any period in which the Founder (whether through affiliates or otherwise) beneficially own at least (a) six percent (6%) of the total outstanding equity in the Company, or (b) two-thirds (2/3) of the total shares of the Company which are beneficially owned by the Founder (whether through affiliates or otherwise) on the Closing Date. This Agreement is contingent upon the occurrence of the Closing (as defined in the Merger Agreement) and shall be null and void if the Closing does not occur.
2. Term. The Founder’s employment by the Company hereunder shall begin on the Closing Date and shall end on December 31, 2020 (the “Initial Employment Period”), but subject to earlier termination as provided herein; provided that the Initial Employment Period
shall be automatically renewed for five additional calendar years ending December 31, 2025 (subject to earlier termination as provided herein) if either the aggregate Gross Licensing Revenues (as defined below) for calendar years 2018 through 2020 exceed $195 million or the Gross Licensing Revenues for calendar year 2020 equal or exceed $65 million (the “Extended Employment Period”). For purposes hereof, the “Employment Period” shall mean the Initial Employment Period, and upon the occurrence of an Extended Employment Period, both the Initial Employment Period and the Extended Employment Period. If the Employment Period is not extended past the Initial Employment Period pursuant to the first sentence of this Section 2, the Founder shall become a part-time consultant/brand ambassador for the Company for five (5) calendar years following the end of the Initial Employment Period (the “Consulting Period”) on terms reasonably acceptable to the Founder and the Company, and will receive only the compensation for such service specified in Section 8(d) (which compensation, for the avoidance of doubt, shall be due and payable to the Founder regardless of whether an agreement regarding the Founder’s part-time consulting/brand ambassadorship is entered into on terms reasonably acceptable to the Founder and the Company).
3. Position and Duties. During the Employment Period, the Founder shall serve as Founder and Chief Creative Officer of the Company. The Founder will have the power, responsibility, duties and authority customary for a Chief Creative Officer of corporations of the size, type and nature of the Company and which are substantially consistent with her creative duties and authority with respect to her current services with Martha Stewart Living (including those duties and authority with respect to the Company’s business not involving Martha Stewart Living as are reasonable, to be mutually agreed upon between the Founder and the CEO of the Company (the “CEO”) from time to time).
The Founder shall report directly to the CEO. Unless otherwise authorized by the CEO, during the Employment Period, the Founder shall devote substantially all of her working time, attention and energies during normal business hours (other than absences due to illness or vacation) to the performance of her duties for the Company and Martha Stewart Living. Without limitation, during the Employment Period, the Founder will make herself reasonably available, subject to her prior personal and professional commitments, for all appearances, events and related activities specified or agreed to under the Company’s and Martha Stewart Living’s licensing agreements in effect as of the Closing Date (but, for the avoidance, any extensions or modifications of such licensing agreements which provide for additional appearances, events or similar activities shall require the consent of the Founder). During the Employment Period, subject at all times to her prior personal and professional commitments, the Founder shall be reasonably available for promotional activities and shall also provide endorsement services to promote the Company’s products and services from time-to-time during the Employment Period consistent with her past practices with Martha Stewart Living (collectively, “Promotional Services”).
Notwithstanding the above, the Founder shall be permitted, to the extent such activities do not violate, or substantially interfere with her performance of her duties and responsibilities under this Agreement during the Employment Period, or any other agreement to which she and the Company are parties, in all cases except for (iii), as determined by the CEO and the Board, to (i) engage in motion picture, television, public speaking and publishing activities, (ii) appear from time to time in commercials and/or advertisements that do not present a conflict with the
2
Company’s or Martha Stewart Living’s interests with respect to its products or significant business relationships, in all cases subject to the approval of the Board, (iii) manage her personal, financial and legal affairs (including writing her autobiography), (iv) serve on civic or charitable boards or committees (it being expressly understood and agreed that the Founder’s continuing to serve on any such board and/or committees on which she is serving, or with which she is otherwise associated, as of the Closing Date, shall be deemed not to interfere with her performance of her duties and responsibilities under this Agreement), (v) serve on boards of other companies and (vi) make personal appearances and lectures, and the Founder shall be entitled to receive and retain all remuneration received by her from the items listed in clauses (i) through (vi) of this paragraph (including, without limitation, appearance and speaking fees, book advances, royalties, residuals and other fees and compensation (including guild and union payments) payable therewith) outside the performance of her duties hereunder. In addition, the Founder is entitled to engage in motion picture and television activities on behalf of third parties and to receive and retain all remuneration therefrom, so long as such activities do not substantially interfere with the performance of her duties and responsibilities hereunder. The Founder and the Company agree that, to the extent that any such third party production would require the Founder to provide recurring services, she may provide such services so long as the Company receives one-third of any talent fee that would be payable in respect of her services as a performer. The Founder will be entitled to retain the remainder of such talent fees. For the avoidance of doubt, where the Founder’s services do not require recurring services that could interfere with her duties and responsibilities hereunder, she shall continue to have the right to receive and retain all of the fees payable.
4. Place of Performance. During the Employment Period, the locations of employment of the Founder shall be in New York City, New York (which office location shall remain the headquarters of Martha Stewart Living) and Bedford, New York, in the Founder’s reasonable discretion, and the Founder shall not be required to relocate her employment to any other location. During the Employment Period (and during any period the Founder is entitled to the Existing Expense Reimbursements pursuant to Section 8), the Company shall not terminate, other than for “cause” (as such term is defined in the Company’s severance plan applicable to all of its employees), any of the employees (or replacements of such employees) listed on Exhibit A attached hereto and such individuals shall continue to receive no less than their current compensation and level of benefits as provided for on the date hereof; provided that the Company shall not be required to pay compensation or benefits to any such person in excess of such individual’s compensation and benefits on the date hereof. In addition, the Company shall provide the Founder with the same offices in New York, New York that were provided by Martha Stewart Living through at least the expiration of the current lease on January 31, 2018.
5. Compensation and Related Matters.
(a) Base Compensation. In consideration of her performance of her duties hereunder, during the Employment Period the Company shall pay the Founder base compensation at the rate of Five Hundred Thousand Dollars ($500,000) per year (the “Base Compensation”). The Base Compensation shall be paid in approximately equal installments in accordance with the Company’s customary payroll practices and subject to all applicable income and employment tax withholdings. The Base Compensation may be increased by the Board in its sole discretion. If the Base Compensation is increased by the Board, such increased Base Compensation shall then constitute the Base Compensation for all purposes under this Agreement.
3
(b) Annual Bonus. For each year during the Employment Period, to the extent that the Company pays bonuses to other senior executives in addition to contractually-committed amounts, the CEO and the Board will consider an appropriate discretionary bonus for the Founder.
(c) Guaranteed Payment. In addition, for each calendar year during the Employment Period commencing with 2015, the Founder shall receive a guaranteed annual payment of One Million Three Hundred Thousand Dollars ($1,300,000) (the “Guaranteed Payment”), pro rated for partial years of employment during the Employment Period. The Guaranteed Payment shall be paid at the same time as Base Compensation is paid and shall be subject to all applicable income and employment tax withholding.
(d) Incentive Payments. For each calendar year during the Employment Period commencing on or after January 1, 2016, the Company shall pay the Founder an amount equal to ten percent (10%) of Gross Licensing Revenues earned by the Company during such calendar year in excess of Forty Six Million Dollars ($46,000,000). Any such amount shall be paid no later than March 15 of the year following the calendar year to which it relates. For purposes hereof, “Gross Licensing Revenues” means total revenues (including, without limitation, licensing royalties (and, for the avoidance of doubt minimum royalties, and other measurable consideration which can be reduced to monetary value)) earned and received by the Company from the licensing of the Martha Stewart brand (including, all associated and related marks, but excluding publishing and media).
(e) Vacation. During the Employment Period, the Founder shall be entitled to six weeks of vacation per year. Vacation not taken during the applicable fiscal year (but not in excess of three weeks) shall be carried over to the next following fiscal year.
(f) Welfare, Pension and Incentive Benefit Plans. During the Employment Period, the Founder (and her eligible spouse and dependents) shall be entitled to participate in all welfare benefit plans and programs maintained by the Company from time to time for the benefit of its senior executives, including, without limitation, all medical, hospitalization, dental, disability, accidental death and dismemberment, travel accident and life insurance plans, programs and arrangements. In addition, during the Employment Period, the Founder shall be eligible to participate in all pension, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company for the benefit of its senior executives, other than any equity-based incentive plans, severance plans, retention plans and any annual cash incentive plan.
(g) Equity Awards. The Founder shall participate in any equity incentive program approved by the Compensation Committee of the Board on the same basis as senior executives of the Company.
(h) Expenses. The Company shall directly pay or reimburse the Founder for customary and reasonable expenses incurred in connection with her performance of duties for the
4
Company in accordance with the Company’s expense reimbursement policy for its senior executives and for other reasonable and customary expenses (not to exceed $100,000 per year) as are approved in advance by the CEO. In addition, the Company shall directly pay or reimburse the Founder for all reasonable expenses she incurs in connection with any service days spent providing Promotional Services (including first class travel, hotel accommodations, and hair and make-up services); for the avoidance of doubt, such payments shall not be subject to or taken into account with respect to the $100,000 cap referred to in the immediately-preceding sentence. In addition, the Company will continue to pay for and reimburse the Founder for her expenses in accordance with the Prior Employment Agreement and the expense policy in place for Martha Stewart Living on the Effective Date as specified in Exhibit B, provided that in no event shall the aggregate budget for years after 2015 be increased or decreased except by mutual agreement of the CEO and the Founder (the “Existing Expense Reimbursements”).
(i) Legacy Payments. Beginning with calendar years commencing on or after January 1, 2026, the Company shall pay the Founder three and one-half percent (3.5%) of Gross Licensing Revenues for each such calendar year for the remainder of the Founder’s life (with a minimum of five (5) years of payments, to be made to the Founder’s estate for the period from January 1, 2026 (or, if later, the Founder’s death) through December 31, 2030 if the Founder dies before December 31, 2030) (the “Legacy Payments” and, the period with respect to which the Legacy Payments are made, the “Legacy Payment Period”). The Legacy Payments shall be paid on a calendar quarter basis and shall be accompanied by a detailed statement setting forth each licensee, the gross sales by each such licensee and the revenues received from each such licensee. The Legacy Payments described in this Section 5(i) shall be made regardless of the time or reason for the Founder’s termination of employment.
(j) Audit. The Founder’s representatives may, during regular business hours and upon reasonable advance notice to the Company, during the period for which the Founder (or her estate) is entitled to any payments hereunder and for one year thereafter, audit the Company’s books of account and records and examine and copy all documents and materials relating to the this Agreement and activities hereunder, including the books of account and records, invoices, credits and shipping documents and all information related to the determination of Gross Licensing Revenues. If any such audit finds that any of the Company’s payments hereunder were less than the amount that should have been paid and the Company agrees with such finding, the payment required to be made to eliminate the discrepancy, plus interest at the rate of five percent (5%) per annum, shall be made promptly, and, if the discrepancy is ten percent (10%) or more of the amount actually paid for the subject period, the Company promptly shall reimburse the Founder for the actual cost and expenses of the audit.
6. Termination. The Founder’s employment hereunder may be terminated during the Employment Period under the following circumstances:
(a) Death. The Founder’s employment hereunder shall terminate upon her death.
(b) Disability. The Company shall have the right to terminate the Founder’s employment as a result of the Founder’s Disability (as defined below) as determined by a physician selected by the Founder, and reasonably acceptable to the Company. “Disability”
5
shall mean (i) the Founder’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; (ii) the Founder is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering the Founder; or (iii) the Founder is determined to be totally disabled by the Social Security Administration.
(c) Cause. The Company shall have the right to terminate the Founder’s employment for “Cause.” For purposes of this Agreement, the Company shall have “Cause” to terminate the Founder’s employment only upon the Founder’s:
(i) willful gross misconduct or conviction of a felony after the Effective Date that, in either case, results in material and demonstrable damage to the business or reputation of the Company; or
(ii) willful and continued failure to perform her duties hereunder (other than such failure resulting from legal necessity or after the issuance of a Notice of Termination by the Founder for Good Reason) within ten business days after the Company delivers to her a written demand for performance that specifically identifies the actions to be performed.
For purposes of this Section 6(c), no act or failure to act by the Founder shall be considered “willful” if such act is done by the Founder in the good faith belief that such act is or was to be beneficial to the Company or one or more of its businesses, or such failure to act is due to the Founder’s good faith belief that such action would be materially harmful to the Company or one of its businesses. Cause shall not exist unless and until the Company has delivered to the Founder a copy of a resolution duly adopted by a majority of the Board (excluding the Founder for purposes of determining such majority) at a meeting of the Board called and held for such purpose after reasonable (but in no event less than thirty days’) notice to the Founder and an opportunity for the Founder, together with her counsel, to be heard before the Board, finding that in the good faith opinion of the Board that “Cause” exists, and specifying the particulars thereof in detail. This Section 6(c) shall not prevent the Founder from challenging in any court of competent jurisdiction the Board’s determination that Cause exists or that the Founder has failed to cure any act (or failure to act) that purportedly formed the basis for the Board’s determination.
(d) Good Reason. The Founder may terminate her employment for “Good Reason” after giving the Company detailed written notice thereof, if the Company shall have failed to cure the event or circumstance constituting “Good Reason” within ten business days after receiving such notice. Good Reason shall mean the occurrence of any of the following without the written consent of the Founder:
(i) the assignment to the Founder of duties materially inconsistent with this Agreement or a material adverse change in her titles or responsibilities (and, for the avoidance of doubt, Employee no longer serving as a member of the Board shall not constitute Good Reason unless the Company has not nominated the Founder for the Board);
6
(ii) the Company’s failure to nominate the Founder for the Board in accordance with the provisions of Section 1;
(iii) any failure by the Company to comply with Section 5 hereof in any material way;
(iv) the requirement by the Company that the Founder relocate her primary offices outside of New York, New York;
(v) the failure of the Company to comply with and satisfy Section 12(a) of this Agreement; or
(vi) any material breach of this Agreement by the Company.
The Founder’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.
(e) Without Cause. The Company shall have the right to terminate the Founder’s employment hereunder without Cause by providing the Founder with a Notice of Termination.
(f) Without Good Reason. The Founder shall have the right to terminate her employment hereunder without Good Reason by providing the Company with a Notice of Termination.
7. Termination Procedure.
(a) Notice of Termination. Any termination of the Founder’s employment by the Company or by the Founder during the Employment Period (other than pursuant to Section 6(a)) shall be communicated by written Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” shall mean a notice indicating the specific termination provision in this Agreement relied upon and setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Founder’s employment under that provision.
(b) Date of Termination. “Date of Termination” shall mean (i) if the Founder’s employment is terminated by her death, the date of her death, (ii) if the Founder’s employment is terminated pursuant to Section 6(b), thirty (30) days after the date of receipt of the Notice of Termination (provided that the Founder does not return to the substantial performance of her duties on a full-time basis during such thirty (30) day period), and (iii) if the Founder’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such notice) set forth in such Notice of Termination.
8. Compensation upon Termination or During Disability. In the event the Founder is disabled or her employment terminates during the Employment Period, the Company shall provide the Founder with the payments and benefits set forth below. The Founder acknowledges and agrees that the payments set forth in this Section 8 constitute liquidated
7
damages for termination of her employment during the Employment Period. For the avoidance of doubt, the termination of the Founder’s employment for any reason after the Employment Period ends shall not entitle the Founder to any payments pursuant to this Section 8 (other than the Accrued Obligations to the extent provided below).
(a) Termination by Company without Cause or by the Founder for Good Reason. If the Founder’s employment is terminated by the Company without Cause (other than Disability) or by the Founder for Good Reason, subject in all respects to the application of Section 21(b) below, and (except with respect to the payments to be provided pursuant to section 8(a)(i)) subject to the Founder executing (and not revoking) a release of claims in the form attached hereto as Exhibit C (the “Release”) within twenty-one (21) days following the Date of Termination:
(i) the Company shall pay to the Founder (A) a lump sum payment equal to the sum of accrued Base Compensation and accrued vacation pay through the Date of Termination, (B) the Guaranteed Payment, payable for each year remaining in the then-current Employment Period (as if no Date of Termination had occurred) at the time(s) payable pursuant to Section 5(c), (C) the Legacy Payments, payable at the time(s) payable during the Legacy Payment Period pursuant to Section 5(i) and (D) accrued expenses incurred before the Date of Termination and payable pursuant to Section 5(h);
(ii) in addition to the amounts set forth in clause (i) above, if the Date of Termination occurs during the Initial Employment Period, the Company shall continue to pay the Base Compensation and the Existing Expense Reimbursements and make the payments specified in Section 5(d) through the end of the Initial Employment Period (in each such case as if no Date of Termination had occurred during such period), and, unless the Founder becomes entitled to continue to receive the payments set forth in clause (iii)(B) below, the Founder also will receive the payments pursuant to Section 8(d) below, in accordance with and during the five-year period set forth therein;
(iii) in addition to the amounts set forth in clause (i) above, if (A) the Date of Termination occurs during the Extended Employment Period, or (B) the Date of Termination occurs during the Initial Employment Period but the Employment Period would have been extended for another five years pursuant to Section 2 (based on achievement of the criteria specified therein) had the Founder otherwise remained employed through the end of the Initial Employment Period, the Company shall continue to pay the Base Compensation, the Guaranteed Payment, the Existing Expense Reimbursements and the payments specified in Section 5(d), in each case through the end of the Extended Employment Period as if no Date of Termination had occurred during such period (without duplication of any amount payable pursuant to clause (ii) immediately above);
(iv) the Company shall continue to provide the Founder and her eligible spouse and dependents for a period equal to the greater of (A) the remaining term of the Employment Period (as if no Date of Termination had occurred), or (B) three years following the Date of Termination, the medical, hospitalization, dental and life insurance programs provided for in Section 5(f), as if she had remained employed; provided, that if the Founder, her spouse or her eligible dependents cannot continue to participate in the Company programs providing such
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benefits, the Company shall arrange to provide the Founder and her spouse and dependents with the economic equivalent of the benefits they otherwise would have been entitled to receive under such plans and programs; and provided, further, that such benefits shall terminate on the date or dates the Founder becomes eligible to receive equivalent coverage and benefits under the plans and programs of a subsequent employer at an equivalent cost to the Founder (such coverage and benefits to be determined on a coverage-by-coverage, or benefit-by-benefit, basis);
(v) until the third anniversary of the Date of Termination, the Company shall continue to provide the Founder with an office and an assistant (of the Founder’s choice) in New York, New York and Bedford, NY; and
(vi) the Founder shall be entitled to any other rights, compensation and/or benefits as may be due to the Founder in accordance with the terms and provisions of any agreements, plans or programs of the Company (other than any severance-based plan or program).
The payments and benefits provided for in clause (i) above are hereinafter referred to as the “Accrued Obligations.” To the extent any of the benefits provided for in clauses (ii) – (vi) above are taxable to the Founder, and except as permitted by Section 409A (as defined in Section 21(a) below), any right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit, the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year it will not affect the expenses eligible for reimbursement in a later taxable year, and any payments for reimbursements will be paid on or before the last day of the taxable year following the taxable year in which the expense was incurred.
(b) Cause or by Founder without Good Reason. If the Founder’s employment is terminated by the Company for Cause or by the Founder other than for Good Reason, then the Company shall provide the Founder with her Accrued Obligations. The Company shall have no further obligation to the Founder hereunder (other than, for the avoidance of doubt, the Legacy Payments).
(c) Death or Disability. Upon the Founder’s death or Disability (including, death or Disability which occurs prior to Closing) (i) on or before the end of the Initial Employment Period, the Company will continue to pay the Base Compensation, the Guaranteed Payment, and the payments described in Section 5(d) through December 31, 2020 and, for calendar years 2021 through 2025, the Company will pay the Founder (or, as applicable, her estate) four percent (4%) of Gross Licensing Revenues for each such year; or (ii) after the fifth year following Closing, the Company will pay the Founder (or, as applicable, her estate) four percent (4%) of Gross Licensing Revenues for each year commencing with the year in which such death or Disability occurs through December 31, 2025. For the avoidance of doubt, the Legacy Payments shall also be paid at the time(s) payable during the Legacy Payment Period pursuant to Section 5(i).
(d) Non-Extension of Employment Period. If the Employment Period is not extended pursuant to the last sentence of Section 2, the Founder shall be entitled to (i) the Accrued Obligations and (ii) the following amounts for each of the five (5) calendar years in the
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Consulting Period: (A) if both Gross Licensing Revenues are less than $51 million for calendar year 2020 and aggregate Gross Licensing Revenues for calendar years 2018 through 2020 are less than $153 million, $1,500,000 per year; (B) if Gross Licensing Revenues are between $51 million and $55,999,999 for calendar year 2020 and aggregate Gross Licensing Revenues for calendar years 2018 through 2020 were equal to or greater than $153 million (but were less than $168 million), $3 million per year; or (C) if Gross Licensing Revenues equal or exceed $56 million for calendar 2020 (but are less than $61 million) or Gross Licensing Revenues for calendar years 2018 through 2020 equaled or exceeded $168 million (but were less than $183 million), $4.5 million per year. Such amounts shall be paid quarterly and in no event no later than March 15 of the calendar year following the calendar year to which they relate. For the avoidance of doubt, the Legacy Payments shall also be paid at the time(s) payable during the Legacy Payment Period pursuant to Section 5(i).
(e) Mitigation. The Founder shall not be required to mitigate damages with respect to the termination of her employment under this Agreement by seeking other employment or otherwise and there shall be no offset against amounts due the Founder under this Agreement on account of subsequent employment except as specifically provided in this Section 8. Additionally, amounts owed to the Founder under this Agreement shall not be offset by any claims the Company may have against the Founder, and the Company’s obligation to make the payments provided for in this Agreement, and otherwise to perform its obligations hereunder, shall not be affected by any other circumstances, including, without limitation, any counterclaim, recoupment, defense or other right which the Company may have against the Founder or others.
9. Confidential Information; Noncompetition; Nonsolicitation; Nondisparagement.
(a) Confidential Information. Except as may be required or appropriate in connection with her carrying out her duties under this Agreement, the Founder shall not, without the prior written consent of the Company or as may otherwise be required by law or any legal process, or as is necessary in connection with any adversarial proceeding against the Company (in which case the Founder shall cooperate with the Company in obtaining a protective order at the Company’s expense against disclosure by a court of competent jurisdiction), communicate, to anyone other than the Company and those designated by the Company or on behalf of the Company in the furtherance of its business or to perform her duties hereunder, any trade secrets, confidential information, knowledge or data relating to the Company, its affiliates or any businesses or investments of the Company or its affiliates, obtained by the Founder during the Founder’s employment by the Company and MSLO LLC that is not generally available public knowledge (other than by acts by the Founder in violation of this Agreement.)
(b) Noncompetition. During the Employment Period and until the 12-month anniversary of the Founder’s Date of Termination if the Founder’s employment is terminated by the Company for Cause or the Founder terminates employment without Good Reason, the Founder shall not engage in or become associated with any Competitive Activity. For purposes of this Section 9(b), a “Competitive Activity” shall mean any business or other endeavor that engages in any country in which the Company has significant business operations to a significant degree in a business that directly competes with all or any substantial part of any of the Company’s businesses of (i) producing television and other video programs, (ii) designing,
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developing, licensing, promoting and selling merchandise through catalogs, direct marketing, Internet commerce and retail stores of the product categories in which the Company so participates using the Founder’s name, likeness, image, or voice to promote or market any such product or service, (iii) the creation, publication or distribution of regular or special issues of magazines, and (iv) any other business in which the Company or Martha Stewart Living is engaged during the last twelve (12) months of the Employment Period (the activities described in clauses (i) through (iv), in each case determined as of the date of the action alleged to be Competitive Activity, (the “Businesses”); provided, that, a Competitive Activity shall not include (i) any speaking engagement to the extent such speaking engagement does not promote or endorse a product or service which is competitive with any product or service of the Company, (ii) the writing of any book or article relating to subjects other than the Businesses (e.g., nonfiction relating to the Founder’s career or general business advice) or (iii) the television, video or music business so long as such activity does not relate to the Businesses. The Founder shall be considered to have become “associated with a Competitive Activity” if she becomes involved as an owner, employee, officer, director, independent contractor, agent, partner, advisor, or in any other capacity calling for the rendition of the Founder’s personal services, with any individual, partnership, corporation or other organization that is engaged in a Competitive Activity and her involvement relates to a significant extent to the Competitive Activity of such entity; provided, however, that the Founder shall not be prohibited from (a) owning less than one percent (1%) of any publicly traded corporation, whether or not such corporation is in competition with the Company, or investing in any mutual fund or other investment fund over which the Founder has no investment discretion or (b) serving as a director of a corporation or other entity the primary business of which is not a Competitive Activity. If, at any time, the provisions of this Section 9(b) shall be determined to be invalid or unenforceable, by reason of being vague or unreasonable as to area, duration or scope of activity, this Section 9(b) shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter; and the Founder agrees that this Section 9(b) as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.
(c) Nonsolicitation. During the Employment Period, and for 12 months after the Founder’s Date of Termination if the Founder’s employment is terminated by the Company for Cause or the Founder terminates employment without Good Reason, the Founder will not, directly or indirectly, (1) solicit for employment by other than the Company any person (other than any personal secretary or assistant hired to work directly for the Founder) employed by the Company or its affiliated companies as of the Date of Termination, (2) solicit for employment by other than the Company any person known by the Founder (after reasonable inquiry) to be employed at the time by the Company or its affiliated companies as of the date of the solicitation or (3) solicit any customer or other person with a business relationship with the Company or any of its affiliated companies to terminate, curtail or otherwise limit such business relationship.
(d) Non-disparagement. During the Employment Period and for two (2) years thereafter, (i) neither the Founder, nor anyone acting on behalf of the Founder, shall make or publish any disparaging or derogatory statement (whether written or oral) regarding the Company or any of its affiliated companies or businesses that are known to the Founder to be so affiliated, the individuals who serve as members of the Board during such period or those
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individuals who serve in positions of executive vice president or more senior positions at the Company during the Employment Period and, during the two-year period thereafter, only such individuals whose titles are publicly available, based on the Company’s website, in each such case in any public communication, or in any non-public communication with any member of the media or with any other person which may be reasonably expected to be publicly disseminated to the press or the media, and (ii) neither the Company nor any of its affiliated companies or businesses or their affiliates, individuals who serve as members of the Board during such period, or those individuals who serve in positions of executive vice president or more senior positions at the Company, nor anyone authorized by the Company to speak on behalf of the Company, shall make or publish any disparaging or derogatory statement (whether written or oral) regarding the Founder in any public communication, or in any non-public communication with any member of the media or with any other person which may be reasonably expected to be publicly disseminated to the press or the media.
(e) Injunctive Relief. In the event of a breach or threatened breach of this Section 9, the Founder agrees that the Company shall be entitled to injunctive relief in a court of appropriate jurisdiction to remedy any such breach or threatened breach, the Founder acknowledging that damages would be inadequate and insufficient.
10. Indemnification.
(a) General. The Company agrees that if the Founder is made a party or is threatened to be made a party to any audit, action, suit or proceeding, whether civil, criminal, regulatory, administrative or investigative (a “Proceeding”), by reason of the fact that the Founder is or was a trustee, director, officer or employee of the Company, MSLO LLC, or any predecessor to MSLO LLC (including any sole proprietorship owned by the Founder) or any of their affiliates or is or was serving at the request of the Company, MSLO LLC, any predecessor to MSLO LLC (including any proprietorship owned by the Founder), or any of their affiliates as a trustee, director, officer, member, employee or agent of another corporation or a partnership, joint venture, limited liability company, trust or other enterprise, including, without limitation, service with respect to employee benefit plans, whether or not the basis of such Proceeding is alleged action in an official capacity as a trustee, director, officer, member, employee or agent while serving as a trustee, director, officer, member, employee or agent, the Founder shall be indemnified and held harmless by the Company to the fullest extent authorized by Delaware law, as the same exists or may hereafter be amended, against all Expenses incurred or suffered by the Founder in connection therewith. Such indemnification and this Section 10(a) shall continue as to the Founder even if the Founder has ceased to be an officer, director, trustee or agent, or is no longer employed by the Company and shall inure to the benefit of her heirs (including trusts and trustees), executors and administrators or upon any termination of this Agreement. In addition, the Company shall indemnify and hold harmless the Founder in connection with any claim for indemnification under clause (bb) of paragraph 11(a) of the Production Agreement (as defined in the Prior Employment Agreement).
(b) Expenses. As used in this Agreement, the term “Expenses” shall include, without limitation, damages (whether punitive or otherwise), losses, judgments, liabilities, fines, penalties, excise and other penalty taxes, compensation and benefits payable to employees, consultants and independent contractors, settlements, and costs (including out-of-pocket
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expenses), attorneys’ fees, accountants’ fees, and disbursements and costs of attachment or similar bonds, investigations, and any expenses of establishing a defense in any Proceeding and any right to indemnification under this Agreement.
(c) Enforcement. If a claim or request under this Section 10 is not paid by the Company or on its behalf, within thirty (30) days after a written claim or request has been received by the Company, the Founder may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim or request and if successful in whole or in part, the Founder shall be entitled to be paid also the expenses of prosecuting such suit. All obligations for indemnification hereunder shall be subject to, and paid in accordance with, applicable Delaware law.
(d) Partial Indemnification. If the Founder is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Founder for the portion of such Expenses to which the Founder is entitled.
(e) Advance of Expenses. Expenses incurred by the Founder in connection with any Proceeding shall be paid by the Company in advance upon request of the Founder that the Company pay such Expenses, but only in the event that the Founder shall have delivered in writing to the Company (i) an undertaking to reimburse the Company for Expenses with respect to which the Founder is not entitled to indemnification and (ii) a statement of her good faith belief that the standard of conduct necessary for indemnification by the Company has been met.
(f) Notice of Claim. The Founder shall give to the Company notice of any claim made against her for which indemnification will or could be sought under this Agreement. In addition, the Founder shall give the Company such information and cooperation as it may reasonably require and as shall be within the Founder’s power and at such times and places as are convenient for the Founder.
(g) Defense of Claim. With respect to any Proceeding as to which the Founder notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its own expense;
(ii) Except as otherwise provided below, to the extent that it may wish, the Company will be entitled to assume the defense thereof, with counsel reasonably satisfactory to the Founder, which in the Company’s sole discretion may be regular counsel to the Company and may be counsel to other officers and directors of the Company or any subsidiary. The Founder also shall have the right to employ her own counsel in such action, suit or proceeding if she reasonably concludes that failure to do so would involve a conflict of interest between the Company and the Founder, and under such circumstances the fees and expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify the Founder under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would
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impose any penalty that would not be paid directly or indirectly by the Company or limitation on the Founder without the Founder’s written consent. Neither the Company nor the Founder will unreasonably withhold or delay their consent to any proposed settlement.
(h) Non-Exclusivity. The right to indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this Section 10 shall not be exclusive of any other right which the Founder may have or hereafter may acquire under any statute or certificate of incorporation or by-laws of the Company or any subsidiary, agreement, vote of shareholders or disinterested directors or trustees or otherwise.
(i) Timing of Reimbursements or Expenses. To the extent required under Section 409A (as defined in Section 21(a) below), any reimbursements or expenses provided under this Section 10 shall be subject to the limitations on payment and reimbursement of taxable expenses set forth in Section 8(a).
11. Legal Fees and Expenses. If any contest or dispute shall arise between the Company and the Founder regarding any provision of this Agreement, the Company shall reimburse the Founder for all legal fees and expenses reasonably incurred by the Founder in connection with such contest or dispute, but only if the Founder prevails to a substantial extent with respect to the Founder’s claims brought and pursued in connection with such contest or dispute. Such reimbursement shall be made as soon as practicable following the resolution of such contest or dispute (whether or not appealed) to the extent the Company receives written evidence of such fees and expenses. In addition to the foregoing, the Company shall reimburse the Founder for all legal and other advisor fees incurred by her in connection with the negotiation and execution of this Agreement and the agreements relating to the Merger Agreement, up to a maximum reimbursement of Four Million Dollars ($4,000,000). To the extent required under Section 409A (as defined in Section 21(a) below), any reimbursements or expenses provided under this Section 11 shall be subject to the limitations on payment and reimbursement of taxable expenses set forth in Section 8(a).
12. Successors; Binding Agreement.
(a) Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred, except that the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall include any successor to its business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.
(b) Founder’s Successors. No rights or obligations of the Founder under this Agreement may be assigned or transferred by the Founder other than her rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution. Upon the Founder’s death, this Agreement and all rights of the Founder hereunder shall inure to the benefit of and be enforceable by the Founder’s beneficiary or beneficiaries, personal or legal
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representatives, or estate, to the extent any such person succeeds to the Founder’s interests under this Agreement. If the Founder should die following her Date of Termination while any amounts would still be payable to her hereunder if she had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by the Founder, or otherwise to her legal representatives or estate.
13. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:
If to the Founder:
At her residence address most recently filed with the Company.
with a copy (which shall not constitute notice) to:
Grubman Shire & Meiselas, P.C.
152 West 57th Street
New York, NY 10019
Attention: Allen J. Grubman; Lawrence Shire; Eric Sacks
Email: AGrubman@gispc.com; lshire@gispc.com; esacks@gispc.com
If to the Company:
Martha Stewart Living Omnimedia, Inc.
601 West 26th Street
New York, New York 10001
Attention: General Counsel
or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
14. Miscellaneous. No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing signed by the Founder and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged. No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The respective rights and obligations of the parties hereunder of this Agreement (including, without limitation, the Founder’s right to be nominated for a Board seat under Section 1 above) shall survive the Founder’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations. Except as otherwise provided in Section 10 hereof with respect to indemnification under Delaware law, the validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles.
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15. Key Person Insurance. The Company may, at its discretion and expense, apply for and procure in its own name and for its own benefit “key person” or other life insurance and/or disability insurance on the Founder in any amount or amounts considered advisable. The Founder agrees to submit to any reasonably requested physical examination in connection with the Company’s purchase of such insurance. The results of any such physical examination will be kept confidential by the Company and will only be disclosed to the extent required to obtain such insurance. The Founder agrees to cooperate fully and supply any information and execute and deliver any applications or other instruments in writing as may be reasonably necessary in connection with the underwriting, purchase and/or retention of any insurance policy by the Company.
16. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
18. Entire Agreement. This Agreement and the Amended and Restated Intellectual Property License and Preservation Agreement of even date herewith, and the Amended and Restated Intangible Asset License Agreement of even date herewith set forth the entire agreement of the parties hereto in respect of the subject matter contained herein and, upon the commencement of the Employment Period, supersede all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter including, without limitation, the Prior Employment Agreement. The parties agree that the Prior Employment Agreement will terminate effective as of 11.59 PM on the day immediately preceding the Closing Date.
19. Withholding. All payments hereunder shall be subject to any required withholding of Federal, state and local taxes pursuant to any applicable law or regulation.
20. Section Headings. The section headings in this Employment Agreement are for convenience of reference only, and they form no part of this Agreement and shall not affect its interpretation.
21. Section 409A.
(a) The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the guidance issued thereunder (“Section 409A”) and, accordingly, to the maximum extent permitted, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. Founder is hereby advised to seek independent advice from her tax advisor(s) with respect to any payments or benefits under
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this Agreement. Notwithstanding the foregoing, the Company does not guarantee the tax treatment of any payments or benefits provided under this Agreement, whether pursuant to the Code, federal, state, local or foreign tax laws and regulations.
(b) If the Founder is deemed on the date of termination of her “separation from service” with the Company to be a “specified employee”, each within the meaning of Section 409A(a)(2)(B) of the Code, then with regard to any payment or the providing of any benefit under this Agreement, and any other payment or the provision of any other benefit, in any such case that is required to be delayed in compliance with Section 409A(a)(2)(B) of the Code, such payment or benefit shall not be made or provided prior to the earlier of (i) the expiration of the six-month period measured from the date of the Founder’s separation from service, or (ii) the date of the Founder’s death, if and to the extent such six-month delay is required to comply with Section 409A(a)(2)(B) of the Code. In such event, on or promptly after the first business day following the six-month-delay period, all payments delayed pursuant to this Section 21 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Founder in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. To the extent applicable, if payment of an amount under this Agreement could be paid in one of two calendar years subject to the delivery of the Release in accordance with Section 8(a), and it is determined that payment of such amount in the earlier of such two years could constitute noncompliance with Section 409A, then such amount shall be paid in the later of such two years and otherwise in accordance with the applicable payment schedule provided for under this Agreement (subject to earlier payment upon the Founder’s death in accordance with the first sentence of this Section 21(b)).
(c) If under this Agreement, an amount is to be paid in installments, each installment shall be treated as a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii).
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on this day of June, 2015.
| SINGER MADELINE HOLDINGS, INC. | ||
| By: | /s/ Yehuda Shmidman | |
| Name: | Yehuda Shmidman | |
| Title: | CEO | |
| /s/ Martha Stewart | ||
| Martha Stewart | ||
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Exhibit 10.2
AMENDED AND RESTATED INTELLECTUAL PROPERTY LICENSE AND PRESERVATION AGREEMENT
This AMENDED AND RESTATED INTELLECTUAL PROPERTY LICENSE AND PRESERVATION AGREEMENT (the “Agreement”), is entered into as of June 22, 2015 (“Effective Date”), by and between Martha Stewart, an individual residing in Katonah, New York (“Licensor”), and Martha Stewart Living Omnimedia, Inc., a Delaware corporation with offices in New York, New York (the “Company”).
WHEREAS, Licensor is the exclusive owner of all right, title and interest in and to (i) her image, signature, voice and likeness and the goodwill appurtenant thereto, (ii) certain rights in and to her image, likeness, voice, signature and other elements of her persona and identity, including rights of publicity and rights of privacy, (iii) all rights in and to her name, other than the trademarks, domain names and other rights (including all registrations thereof) owned by the Company as of the Effective Date (collectively, along with the New Marks (as defined herein), the “Marks”) (without any right of reversion to Licensor or her legal representatives, heirs (including trusts and trustees) or estate), and (iv) all common law and statutory rights in the foregoing (collectively, the “Property”);
WHEREAS, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 22, 2015, by and among Madeline Merger Sub, Inc., a Delaware corporation and wholly owned Subsidiary of TopCo, Sequential Brands Group, Inc., a Delaware corporation, Singer Merger Sub, Inc., a Delaware corporation and wholly owned Subsidiary of TopCo, and Singer Madeline Holdings, Inc., a Delaware corporation (“TopCo”); and
WHEREAS, pursuant to the Merger Agreement, Licensor and the Company wish to amend and restate the Intellectual Property License and Preservation Agreement, dated as of October 22, 1999 (“Prior Agreement”), between the parties hereto, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual premises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. The Company’s Acknowledgment of Licensor’s Rights. The Company hereby acknowledges that (a) Licensor exclusively owns all right, title and interest throughout the world (the “Territory”) in and to the Property, which Property has intrinsic value, and (b) Licensor otherwise reserves all rights to the Property except those rights specifically granted to the Company herein (provided, however, that this reservation of rights shall not alter in any manner the Company’s rights under that certain Amended and Restated Intangible Asset License Agreement dated as of even date herewith between Martha Stewart and the Company (the “Intangible Asset Agreement”)). Licensor represents and warrants to the Company that, as of the date hereof, Licensor has the power and authority to license the Property on the terms and conditions of this Agreement.
2. Use of the Property.
(a) Subject to the terms and conditions of this Agreement, Licensor hereby licenses to the Company the exclusive right to use, and to authorize others to use, through sublicense or otherwise, the Property, or any portion thereof, throughout the Territory (i) on or in connection with any products and services of the Company or its affiliates or their respective licensees, developed, manufactured and sold (or previously developed, manufactured and sold) as of the Effective Date or following the Effective Date in accordance with the terms of this Agreement, other than those products or services which are New Uses (all such products and services, which include the Property or the Marks and including the magazine Martha Stewart Living, are referred to herein as the “Licensed Products” and the “Licensed Services”), and (ii) for New Uses (as defined herein), which in all cases are branded under the “Martha Stewart” Mark or other Marks, during the term of this Agreement. During the term of any sublicense pursuant to this Agreement (the “Company License Agreements”), the Company shall include requirements that its licensees preserve the goodwill of the Property, the Licensed Products, Licensed Services and New Uses (provided that the Company shall not be required to amend the terms of any Company License Agreements signed prior to the Effective Date) and shall use commercially reasonable efforts to cause the licensees thereof to comply with the terms of the Company License Agreements relating thereto. The use of the Property by, and Licensed Products and Licensed Services of, the Company or any licensee (or sublicensee) shall be at least substantially consistent with the Historical Standard (as defined below). The “Historical Standard,” as of any date, shall mean substantially the same quality and positioning, including for the applicable products and services themselves and any packaging and related material, and any marketing (the “Historical Criteria”), as any corresponding Licensed Products and/or Licensed Services offered by the Company or sold under any Company License Agreements at any time after February 3, 1997 and before the Effective Date, including, without limitation, with respect to those Licensed Products sold under the Company’s prior license agreement with Kmart Corporation. Licensor and the Company hereby acknowledge and agree that the sale of Licensed Products and Licensed Services shall only be permitted through the Mass Tier Channel of Distribution (as defined below) if the applicable Licensed Products and Licensed Services were, prior to the date hereof, sold through the Mass Tier Channel of Distribution. Except as set forth in the immediately preceding sentence, Licensed Products and Licensed Services may only be sold through the Mass Tier Channel of Distribution or any channel below the Mass Tier Channel of Distribution with the Licensor’s (or her legal representatives’, heirs’ (including trusts and trustees) or estate’s) written consent, such consent not to be unreasonably withheld, conditioned or delayed. With respect to channels of distribution not in existence on the Effective Date, Licensed Products and Licensed Services, to the extent that such Licensed Products or Licensed Services are permitted to be sold in the Mass Tier Channel of Distribution pursuant to the terms hereof, may be sold through new channels of distributions not in existence on the Effective Date if such new channel is of equal or greater prestige to the Mass Tier Channel of Distribution. With respect to any New Uses (as defined below), (i) those products and services set forth on Exhibit B are pre-approved for sale in the Mass Tier Channel of Distribution or above, (ii) such New Uses may at all times be sold in channels of distribution above the Mass Tier of Distribution, and (iii) the sale of any other products or services (i.e., other than those set forth on Exhibit B) which are New Uses through the Mass Tier Channel of Distribution or below shall require the written consent of Licensor (or her legal representatives, heirs (including trusts
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and trustees) or estate), such consent not to be unreasonably withheld, conditioned or delayed. As used herein, the term “Mass Tier Channel of Distribution” shall mean general merchandise or specialty retailers selling primarily first-quality, in-season merchandise to the mass consumer market (such as, by way of example, the following stores: Kmart, Wal-Mart, Target, J.C. Penney, Bed Bath & Beyond, DSW, Old Navy and Amazon.com and its subsidiary Zappos.com), but, for clarity, does not include any Off-Price Retailers (defined below), budget, discount, variety or so-called “dollar” retailers or comparable retailers (such as Five Below, Shopko, National Stores, Family Dollar Stores or Big Lots stores). As used herein, the term “Off-Price Retailers” shall mean retailers that are known for selling nationally-recognized branded products at discounted prices (such as TJX Companies’ TJ Maxx, Marshall’s and Home Goods). Notwithstanding the foregoing or anything to the contrary in this Agreement, the Company or its licensees (or sublicensees) (y) shall be entitled to sell Licensed Products and products which are New Uses which, in either case, are not of first quality (including “seconds” and “irregulars”) or which are end-of-season closeouts through Off-Price Retailers, and (z) may undertake special cut-up programs for Licensed Products and other products which are New Uses with Off-Price Retailers in accordance with industry practice for comparable products. In determining whether Licensed Products or Licensed Services comply with the Historical Standard, with respect to particular Licensed Products or Licensed Services, the parties will look to the Historical Criteria with respect to such Licensed Products or Licensed Services in comparison with the same Licensed Products and Licensed Services previously offered by the Company or under the Company License Agreements. Subject to and without in any way limiting the foregoing requirements regarding Licensed Products and/or Licensed Services, the parties hereby acknowledge and agree that the Historical Standard shall not otherwise restrict the Company from contracting with, or using services or deliverables from, outside service providers (including the Company’s licensees) to provide design, production and other services (including creative services) relating to the Licensed Products or Licensed Services or require the Company to adhere to any particular spending requirements or budgets, historical or otherwise, with respect to such functions. All uses of the Property by the Company and its affiliates and their respective licensees prior to the Effective Date are hereby approved for use by the Company in connection with Licensed Products and Services; provided, that, such use is (i) consistent with the terms of this Agreement, and (ii) substantially similar to the use prior to the Effective Date. Subject to the rights reserved for Licensor hereunder, including the Reserved Rights (as defined below), Licensor shall not (I) grant any rights to the Property to any other person or entity following the Effective Date that conflict or compete with, or would reasonably be expected to conflict or compete with, those granted to the Company under this Agreement, including granting a third party the right to use the Property in connection Licensed Products, Licensed Services and New Uses or (II) use the Property in a manner that could reasonably be expected to infringe or otherwise conflict with the Marks.
(b) The Company and its affiliates and their respective licensees may use the Property and the Marks in connection with new businesses, products or services not planned, launched or developed prior to the Effective Date (such new businesses, products, and services, collectively, “New Uses”), in each case, so long such New Uses, (i) are (A) substantially consistent with the uses of the Property prior to the Effective Date, (B) substantially consistent with or exceed the Historical Standard for the most similar Licensed Products or Licensed Services in existence prior to the Effective Date, (C) substantially the same quality and
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positioning, including for products and services themselves and any packaging and related material, and any marketing as the better licensed brands sold in the applicable channel of distribution for the applicable product or service (as permitted hereunder), and (D) not contained within any of the categories attached hereto as Exhibit C, or (ii) have been consented to in writing by Licensor (or her legal representatives, heirs (including trusts and trustees) or estate). For clarity, New Uses shall not include, and Licensor’s consent shall not be required for, reasonable extensions of the lines of business in which the Company or its affiliates or their respective licensees are engaged or planned to be engaged at the Effective Date (including the Licensed Products or Licensed Services), which extensions (and their related products and services) shall be included in the license contained herein and subject to the Historical Standard and other use requirements contained herein. The Company shall keep Licensor (or her legal representatives, heirs (including trusts and trustees) or estate) advised of any New Uses in a timely manner, so that such entity may confirm the Company’s compliance with the terms hereof.
(c) Subject to the terms and conditions of this Agreement, Licensor hereby grants to the Company the exclusive right to use and exploit in any and all media the Property as it appears in any and all television programs, digital media and/or videos (including content developed for the Company’s on line/digital businesses) produced by or for the Company (or its predecessor) (collectively, “Programs”), whether such Programs were produced, aired, marketed or sold prior to, on, or after, the date of this Agreement, provided that the grant in this sentence shall be limited to the use of such Programs (i) substantially as a whole (it being acknowledged and understood that the Company shall have the right to edit such Programs for time and commercials and to add bumpers and introductions), (ii) as part of a collection or similar compilation (such as “Best of” programs or videos) of Licensor appearances relating to the business colloquially known as of the date hereof as “Martha Stewart Living Television”, (iii) in any other manner used by the Company prior the Effective Date, including, without limitation, under the Company’s agreements with AOL, Yahoo and other Internet Service Providers or (iv) as excerpts (which, for the avoidance of doubt, shall not include “outtakes” or “bloopers”) of such Programs, for use on streaming services and the advertising, promotion and/or marketing of any of the foregoing. For the avoidance of doubt, with respect to new Programs produced after the Effective Date, Licensor will have a reasonable right of approval over the Property, and the use thereof, in the Programs at its various stages (e.g., storyboard, script, rough cut, etc.) prior to Company’s exploitation thereof, such approval not to be unreasonably withheld, conditioned or delayed.
(d) The use of the Property by the Company pursuant to this Agreement shall be on a royalty-free basis.
(e) Notwithstanding any other provision of this Agreement, but subject to any employment or other agreement that Licensor may have from time to time with the Company, the license provided herein shall not prohibit Licensor from using or exploiting the Property in connection with (collectively, the “Reserved Rights”): (i) writing books (including biographies or memoirs), articles, movies, plays, scripts or other literary products in areas other than businesses of the Company covered by this Agreement (including, without limitation, with respect to the Licensed Products, Licensed Services and New Uses); (ii) making speeches or
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public appearances (including on radio, television, in films or over the Internet or similar media) for any purpose other than the promotion of a product or service that competes in any material respect with the Licensed Products, Licensed Services or New Uses at that time; (iii) endorsing products or services which are not competitive in any material respect, at the time of the commencement of such endorsement, with the Licensed Products, Licensed Services or New Uses; (iv) becoming a director, employee, partner, advisor, member, consultant or shareholder of, investor in or otherwise being engaged with any other company, corporation, partnership or other entity which is not competitive with the Company at the time Licensor assumes such position; and (v) activities which are incidental and do not significantly infringe on the Marks or the Company’s rights hereunder.
(f) The Company may, in its sole discretion, freely sublicense the Property and the rights granted herein to any person or entity. Any sublicense by the Company of the Property shall contain protections with respect to the Property consistent with the terms hereof and shall acknowledge that such sublicensee does not obtain any ownership rights in, or goodwill to, the Property.
(g) Notwithstanding anything to the contrary contained herein, any uses of the image or likeness of the Licensor, whether by the Company or any licensee or sub-licensee of the Company shall require the prior written approval of Licensor (or her legal representatives, heirs (including trusts and trustees) or estate), such consent not to be unreasonably withheld, conditioned or delayed, unless (i) the Company (or licensee or sublicensee) has used the same image or likeness in substantially the same manner prior to the Effective Date, or (ii) Licensor approved such image and likeness after the Effective Date with respect to a certain use and the Company (or licensee or sublicensee) uses such image and likeness in substantially the same manner as such previously approved use. Any objection by Licensor (or her legal representatives, heirs (including trusts and trustees) or estate) to such use by the Company (or its licensee or sublicensee) shall be communicated to the Company no later than 30 days after receipt of the Company’s request for such written approval; provided, however, that if the Licensor (or her legal representatives, heirs (including trusts and trustees) or estate) fail to respond to the Company within such 30 day period, then, after such 30-day period, the Company may provide Licensor (or her legal representatives, heirs (including trusts and trustees) or estate) with a second notice with such request. If Licensor (or her legal representatives, heirs (including trusts and trustees) or estate) fails to respond to such second notice within 10 days after receipt of such notice, then the Company’s proposed use of the image or likeness of the Licensor shall be deemed approved by Licensor (and her estate).
3. Term. The term of this Agreement shall commence upon the Effective Time (as defined in the Merger Agreement) and shall be perpetual. In the event the Merger Agreement is terminated, this Agreement shall automatically terminate (in which case the Prior Agreement will remain in full force and effect). In the event of any breach of this Agreement by the Company, Licensor may not terminate this Agreement but shall have all remedies at law and in equity, including seeking the Company’s specific performance of the terms of this Agreement. The parties acknowledge and agree that this Agreement, and all rights and licenses granted under or pursuant to this Agreement by Licensor to the Company are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the “Code”) and
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comparable bankruptcy or insolvency laws and regulations, licenses to rights to “intellectual property” as defined under the Code. The parties agree that the Company, as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Code. The parties further agree that, in the event of the commencement of bankruptcy proceedings by or against Licensor under the Code, the Company shall be entitled to retain all of its rights under this Agreement.
4. Quality of Products and Services Provided in Connection with Property. Following the expiration or termination of the Employment Period as defined and under Licensor’s Employment Agreement with Topco of even date herewith, upon Licensor’s (or her designee, successor or assignee’s) reasonable request and to the extent Licensor (or her designee, successor or assignee) reasonably deems it to be necessary to protect Licensor’s rights under this Agreement, Licensor or her designee, successor or assignee shall have the right to request and receive, at no cost to the recipient, representative samples of each Licensed Product and Licensed Service, and any New Uses, as well as a prototype of each type of all promotional, advertising and marketing material used in connection therewith, for the purpose of evaluating the compliance with the terms contained herein of the same. In the event that in Licensor’s (or her designee, successor or assignee’s) reasonable and good faith judgment, any Licensed Product or Licensed Service fails (other than in an immaterial manner) to satisfy the Historical Standard, or any New Use fails to comply with paragraph 2(b) above, then promptly upon written notice by Licensor (or her designee, successor or assignee) to the Company, the Company and Licensor (or he designee, successor or assignee) shall cooperate in good faith to make necessary and appropriate changes (if any) in the quality of such Licensed Product or Licensed Service or New Use to comply with the standard and other applicable terms provided for herein; provided that nothing in this sentence shall be deemed to affect the substantive rights and obligations of the parties hereunder.
5. The Properties. (a) Subject to the terms hereof, including Section 2(a) and Section 2(b), the Company may combine any designation with the Property (other than with respect to the image and/or likeness of Licensor) or Marks so as to form a new trademark, service mark, trade name or company name (such Marks or names, the “New Marks”) to be utilized in connection with the Licensed Products, Licensed Services or New Uses. Subject to the terms of this Agreement, the Company shall be the owner of the New Marks and may register such rights with any applicable government agency in any jurisdiction in the Territory.
(b) The Company acknowledges that it is not, and will not become by virtue of this Agreement, the owner of any right, title or interest in and to the Property. The Company shall not at any time knowingly commit any act anywhere in the world which would reasonably be expected to have a material adverse effect on Licensor’s rights in and to the Property, or any registrations therefor or any applications for registration thereof. The Company shall not use, authorize of permit the use of the Property in an obscene, lewd or derogatory manner. Unless the other party’s conduct violates the terms of this Agreement or applicable law, neither party shall challenge or knowingly assist or cause any third party to challenge or assist, whether directly or indirectly, anywhere in the world, (i) the other party’s ownership of or the validity of the other party’s intellectual property (including with respect to the Company, the Marks), (ii) any application for registration therefor, or (iii) any rights therein or thereto, in each
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case, before any court, agency, or other tribunal, or in defending any claim of infringement. The term “assist” shall include providing any third party, whether directly or indirectly, with an analysis of any intellectual property in furtherance of an actual or contemplated validity challenge.
(c) The Company, at its expense, shall (i) file appropriate registrations in its own name or in the name of a Company subsidiary or affiliate of any Marks so as to preserve the goodwill thereof and Licensor’s rights in the Property, (ii) prosecute and defend such registrations and all common law rights in the Marks and Property consistent with good commercial practices, and (iii) use reasonable commercial efforts to defend and otherwise protect the Marks and the Property, provided that following the Effective Date, Licensor shall have the right to reasonably direct and control such actions with respect to the Property, in each case at the Company’s expense. At the request of Licensor, her legal representatives, heirs (including trusts and trustees) or estate, and at the Company’s expense, the Company shall prosecute, including by filing lawsuits or other actions, any potential infringement, dilution, libel, slander or other diminution in the goodwill or other denigration of the Property by any third party, unless in the opinion of the Company’s outside intellectual property counsel there is no basis for such action or such action could reasonably be expected to have a material adverse impact on one or more of the Marks. The Company shall be entitled to the proceeds, or other legal remedies, of any such action. The Company may also institute such actions where not requested by Licensor, her legal representatives, heirs (including trusts and trustees) or estate, in the event the Company determines that the protection of the Property or the Marks reasonably requires such action. In the event that the Company learns of any infringement or other violation of rights in or to the Property, it shall promptly notify Licensor thereof. At Licensor’s request, the Company shall execute all documents reasonably requested by Licensor to confirm Licensor’s ownership of rights in and to the Property. The Company shall cooperate at Licensor’s reasonable request in connection with the filing and prosecution of applications to register the Property and in connection with the maintenance and renewal of such registrations as may issue. Licensor and the Company shall cooperate in good faith, taking into account their respective interests in and rights to the Property, to determine whether or not such applications are filed and prosecuted and registrations are maintained. The Company shall pay all costs and expenses of any such filings or proceedings. Notwithstanding the foregoing, the Company shall be under no obligation to defend or otherwise protect the Property in connection with personal injury claims of Licensor (including claims of invasion of privacy, libel, slander, defamation, harassment or abuse), unless the Company reasonably believes that such claim or the circumstances underlying such claim could have a significant adverse impact on the Company’s business.
(d) In connection with the right to adopt New Marks (as permitted hereunder) or to maintain, defend or renew the Marks, Licensor (or her legal representatives, heirs (including trusts and trustees) or estate) shall sign and deliver to Company the consent attached hereto as Exhibit A as and when reasonably requested by the Company with respect to any Mark. At the Company’s request and expense, Licensor shall execute all documents reasonably requested by the Company to confirm the Company’s ownership of the Marks and to assist the Company to obtain registrations for, enforce and protect the Marks. Neither Licensor nor any person or entity working on behalf of or in concert with Licensor shall seek to register or
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claim ownership of any Marks. Licensor shall cooperate at the Company’s reasonable request and expense in connection with the filing and prosecution of applications to register, renew and enforce the Marks and in connection with the maintenance and renewal of such registrations as may issue. Licensor and the Company shall cooperate in good faith, taking into account their respective interests in and rights to the Property and the Marks. The Company shall bear all costs and expenses of any such filings or proceedings.
(e) If one party hereto reasonably requests of the other to take an action in connection with the foregoing, the other party shall cooperate in connection with any such action, including, without limitation, by being a plaintiff or co-plaintiff and by causing its officers, directors, and employees to execute documents and to testify. If the Company desires to take action with respect to a violation or infringement of the Property, it shall consult with Licensor, and shall not take any actions which Licensor reasonably requests not to be taken. All costs and expenses of the actions described in this paragraph shall be borne by the Company.
(f) The Company shall take commercially reasonable actions to protect the Marks and the goodwill related thereto consistent with the provisions of this Section.
6. Indemnity. (a) The Company hereby saves and holds Licensor, her heirs (including trusts and trustees), estate, successors and assigns (the “Indemnified Parties”) harmless of and from, and indemnifies and agrees to defend the Indemnified Parties against any and all losses, liability, damages and expenses (including, without limitation, reasonable attorney’s fees and expenses) which the Indemnified Parties may incur or be compelled to pay, or for which the Indemnified Parties may become liable or be compelled to pay in any action, claim or proceeding against the Indemnified Parties, for or by reason of any acts, whether of omission or commission, that may be committed or suffered by the Company or any of its officers, directors, employees, agents or servants (other than the Indemnified Parties) in connection with the Company’s performance of its obligations under this Agreement, the use (including sublicensing) of the Property and the Marks (including, any claims asserting product liability or breach of any express or implied warranty), or the breach by the Company of any covenant contained herein, in each case, except to the extent such action, claim or proceeding is primarily due to the gross negligence or willful misconduct of an Indemnified Party. The indemnification rights provided for herein shall also apply to any use by the Company of the Property or any Marks prior to the date hereof.
(b) In the event that an Indemnified Party receives notice of a claim as to which indemnification is sought, such party shall reasonably promptly notify the Company thereof, except that the failure to so notify shall not exempt the Company from its obligations hereunder, except to the extent that such failure has actually prejudiced the Company’s legal position with respect to the claim. Upon receipt of notice, the Company shall advise the Indemnified Party that it has assumed the defense thereof. The Indemnified Party shall have the right, at the expense of the Company, to retain legal counsel to participate in and monitor the defense of the claim, provided that the Company shall have the right to direct and control such defense. The Company shall not, without Licensor’s written consent, settle or compromise any claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all
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liability in respect of such claim, nor shall the Company settle or compromise any claim relating to the Property or the Marks which would limit the use by Licensor of the Property in any manner whatsoever without Licensor’s consent.
(c) In connection with any action by the Company to enforce, protect or defend the Property or the Marks, Licensor may elect to retain counsel of her own choosing, in addition to Company counsel, in order to monitor and participate in such action. The Company agrees to consider in good faith the views of such counsel and to keep Licensor and such counsel reasonably informed of the progress of any such action, subject to the preceding sentence. The fees and expenses of such counsel shall be paid for by the Company.
(d) The Company shall maintain in effect at all times commercial general liability and errors and omissions insurance, in customary amounts taking into account the size of the Company, the value of the Property and the obligations of the Company hereunder, and shall name Licensor and the other Indemnified Parties hereunder as beneficiaries thereof for purposes of this Agreement.
7. Certain Remedies. The parties agree that the remedies at law for any material breach or threatened material breach of this Agreement, including monetary damages, are inadequate compensation for any loss and that the non-breaching party shall be entitled to seek specific performance of this Agreement. The parties hereto waive any defense to such claim that a remedy at law would be adequate. In the event of any actual or threatened material default in, or material breach of, any of the terms hereof, the party aggrieved thereby shall have the right to seeks specific performance and injunctive or other equitable relief with respect to its rights hereunder, in addition to any remedies available at law.
8. Miscellaneous. (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b) This Agreement is assignable by the Company to any of its affiliates or to any successor of the Company (or its affiliates) which acquires all or substantially all of the assets or businesses of the Company or to an acquirer, whether by sale, merger, recapitalization or other business combination, of all or substantially all of the equity, assets or businesses of the Company without Licensor’s consent, provided that (i) any such successor or assignee shall provide Licensor with a written agreement that it shall be bound by all the terms of this Agreement, and (ii) with respect to an assignment to an affiliate, the Company or Topco guarantees the obligations of such affiliate hereunder. This Agreement shall be assignable by Licensor to any entity controlled by her, and inure to the benefit of and be binding upon the successors, legal representatives, heirs (including trusts and trustees) and assigns of Licensor, provided that any such successor or other assignee shall provide the Company with a written agreement that it shall be bound by all the terms of this Agreement and the Licensor agrees in writing to continue to be bound by the Agreement’s terms. Except as specified in this Section 8(b), this Agreement is not assignable.
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(c) All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Licensor:
Martha Stewart
Address on file with the Company
with a copy (which shall not constitute notice) to:
Grubman Shire & Meiselas, P.C.
152 West 57th Street
New York, NY 10019
Attention: Allen J. Grubman; Lawrence Shire; Eric Sacks
Email: AGrubman@gispc.com; lshire@gispc.com; esacks@gispc.com
If to the Company:
Martha Stewart Living Omnimedia, Inc.
601 West 26th Street
New York, New York 10001
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in accordance with this Section. Notices and communications shall be effective when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.
(e) Licensor and the Company acknowledge that this Agreement, at the Effective Time, will supersede any other agreement between them concerning the subject matter hereof, including the Prior Agreement.
(f) This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.
Remainder of page intentionally left blank; signature page follows.
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.
| /s/ Martha Stewart | ||||
| Martha Stewart | ||||
| MARTHA STEWART LIVING OMNIMEDIA, INC. | ||||
| By: | /s/ Daniel W. Dienst | |||
| Name: | Daniel W. Dienst | |||
| Title: | Chief Executive Officer | |||
Exhibit 10.3
AMENDED AND RESTATED INTANGIBLE ASSET LICENSE AGREEMENT
This AMENDED AND RESTATED INTANGIBLE ASSET LICENSE AGREEMENT (this “Agreement”), dated as of June 22, 2015, is by and between MS Real Estate Management Company (“Licensor”) and Martha Stewart Living Omnimedia, Inc., a Delaware corporation with offices in New York, New York (the “Company”).
WHEREAS, Licensor has the right to license the intangible asset consisting of Martha Stewart’s lifestyle. Licensor’s lifestyle intangible asset encompasses Martha Stewart’s lifestyle and the public perception of Martha Stewart’s lifestyle. It includes, but is not limited to: real property that Martha Stewart owns directly or indirectly as of the date hereof (the “Real Property” or “Real Properties,” including without limitation the addresses on file with the Company for the properties in each of (a) Katonah, New York, (b) East Hampton, New York, and (c) Seal Harbor, Maine, but excluding any Subsequently-Acquired Real Property (as defined below) that is not an Elective Real Property (as defined below)); the design of and the furnishings and finishings contained in the structures located on the Real Properties; the manner in which Martha Stewart selects, designs and arranges the finishings and furnishings contained in the structures located on the Real Properties; the inventory of home furnishings Martha Stewart has acquired and maintains for use in the structures located on the Real Properties; the color schemes, fabrics, art, linens, glassware, appliances in the kitchens in the structures located on, and the gardens located on, the Real Properties, which Martha Stewart designs and maintains; the outdoor furniture located on the Real Properties; and any other items that contribute to the visible appearance and impression of the Real Properties (collectively, the “Lifestyle Intangible Asset”);
WHEREAS, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of June 22, 2015, by and among Madeline Merger Sub, Inc., a Delaware corporation and wholly owned Subsidiary of TopCo, Sequential Brands Group, Inc., a Delaware corporation, Singer Merger Sub, Inc., a Delaware corporation and wholly owned Subsidiary of TopCo, and Singer Madeline Holdings, Inc., a Delaware corporation (“TopCo”); and
WHEREAS, pursuant to the Merger Agreement, Licensor and the Company wish to further amend and restate the Intangible Asset License Agreement, dated as of June 13, 2008, as such agreement was amended in December 2008, on June 8, 2010, July 9, 2012 and July 2, 2013 (“Prior Agreement”), between the parties hereto, on the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual premises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. The Company’s Acknowledgment of Licensor’s Rights. The Company hereby acknowledges that (a) Martha Stewart exclusively owns all right, title and interest throughout the world (the “Territory”) in and to the Lifestyle Intangible Asset, which Lifestyle Intangible Asset has intrinsic value, and (b) Licensor and Martha Stewart otherwise reserve all rights to the Lifestyle Intangible Asset except those specifically granted to the Company herein (provided, however, that this reservation of rights shall not alter in any manner the Company’s rights under that certain Amended and Restated Intellectual Property License and Preservation Agreement
dated as of even date herewith between Martha Stewart and the Company (the “IP License Agreement”)). Licensor represents and warrants to the Company that, as of the date hereof, Licensor has the power and authority to license the Lifestyle Intangible Asset on the terms and conditions of this Agreement.
2. Term. The initial term of this Agreement shall commence upon the Effective Time (as defined in the Merger Agreement) and shall expire on December 31, 2020 (the “Initial Term”). The Initial Term will automatically renew for one additional five (5) year period if either the aggregate Gross Licensing Revenues (as defined in the Employment Agreement, between TopCo and Martha Stewart, dated as of even date herewith) for calendar years 2018 through 2020 exceed $195 million or the Gross Licensing Revenues for calendar year 2020 equal or exceed $65 million (the “Renewal Term” and, together with the Initial Term, the “Term”). In the event the Merger Agreement is terminated, this Agreement shall automatically terminate (and the Prior Agreement shall remain in full force and effect).
3. Consideration. During each year of the Term, the Company shall pay Licensor, or an entity designated by Licensor in writing, a guaranteed fee of $1,700,000, payable in a lump sum, payable in each year upon the Effective Time and on each anniversary thereof. For the avoidance of doubt, the payments described in this Section 3 shall continue to be made without regard to any termination of this Agreement for any reason.
4. Use of the Lifestyle Intangible Asset.
(a) Subject to the terms and conditions of this Agreement, Licensor hereby licenses to the Company the perpetual, exclusive right to use, and to authorize others to use (subject to Licensor’s consent right set forth in Section 4(e)), pursuant to the terms hereof, throughout the Territory, the Lifestyle Intangible Asset (i) on or in connection with any products and services of the Company or its affiliates or their respective licensees, developed, manufactured and sold (or previously developed, manufactured and sold) as of the Effective Date or following the Effective Date in accordance with the terms of this Agreement, other than those products or services which are New Uses (as defined herein) (all such products and services, which include the Lifestyle Intangible Asset , are referred to herein as the “Licensed Products” and the “Licensed Services”), and (ii) for New Uses, which in all cases are branded under the “Martha Stewart” mark or the other Marks (as defined in the IP License Agreement), during the term of this Agreement. All uses approved prior to the date hereof are included in the foregoing license grant if used in substantially the same manner as used prior to the date hereof. For avoidance of doubt, after the expiration of the Term, the Company shall not have any right to utilize any elements of the Lifestyle Intangible Asset that did not exist as of the date of such expiration or termination (“Post-Term Elements”), but shall have the perpetual license to use, and to authorize others to use, the Lifestyle Intangible Asset exclusive of Post-Term Elements, in accordance with the foregoing sentence.
(b) During the term of any sublicense pursuant to this Agreement (the “Company License Agreements”), the Company shall include requirements that its licensees preserve the goodwill of the Lifestyle Intangible Asset and New Uses (provided that the Company shall not be required to amend the terms of any Company License Agreements signed prior to the Effective Date) and shall use commercially reasonable efforts to cause the licensees
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thereof to comply with the terms of the Company License Agreements relating thereto. The use of the Lifestyle Intangible Asset by, and Licensed Products and Licensed Services of, the Company or any licensee (or sublicensee) shall be at least substantially consistent with the Historical Standard (as defined below). The “Historical Standard,” as of any date, shall mean the substantially the same quality and positioning, including for products and services themselves and any packaging and related material, and any marketing (the “Historical Criteria”) as any Licensed Products and/or Licensed Services offered by the Company or sold under any Company License Agreements at any time after February 3, 1997 and before the Effective Date, including, without limitation, with respect to those Licensed Products sold under the Company’s prior license agreement with Kmart Corporation. Licensor and the Company hereby acknowledge and agree that the sale of Licensed Products and Licensed Services shall only be permitted through the Mass Tier Channel of Distribution (as defined below) if the applicable Licensed Products and Licensed Services were, prior to the date hereof, sold through the Mass Tier Channel of Distribution. Except as set forth in the immediately preceding sentence, Licensed Products and Licensed Services may only be sold through the Mass Tier Channel of Distribution or any channel below the Mass Tier Channel of Distribution with the Licensor’s (or her legal representatives’, heirs’ (including trusts and trustees) or estates’) written consent, such consent not to be unreasonably withheld, conditioned or delayed. With respect to channels of distribution not in existence on the Effective Date, Licensed Products and Licensed Services, to the extent such Licensed Products or Licensed Services are permitted to be sold in the Mass Tier Channel of Distribution pursuant to the terms hereof, may be sold through new channels of distributions not in existence on the Effective Date if such new channel is of equal or greater prestige to the Mass Tier Channel of Distribution. With respect to any New Uses (as defined below), (i) those products and services set forth on Schedule B are pre-approved for sale in the Mass Tier Channel of Distribution or above, (ii) such New Uses may at all times be sold in channels of distribution above the Mass Tier of Distribution, and (iii) the sale of any other products or services (i.e., other than those set forth on Schedule B) which are New Uses through the Mass Tier Channel of Distribution or below shall require the written consent of Licensor (or her legal representatives, heirs (including trusts and trustees) or estates)), such consent not to be unreasonably withheld, conditioned or delayed. As used herein, the term “Mass Tier Channel of Distribution” shall mean general merchandise or specialty retailers selling primarily first-quality, in-season merchandise to the mass consumer market (such as, by way of example, the following stores: Kmart, Wal-Mart, Target, J.C. Penney, Bed Bath & Beyond, DSW, Old Navy and Amazon.com and its subsidiary Zappos.com), but, for clarity, does not include any Off-Price Retailers (defined below), budget, discount, variety or so-called “dollar” retailers or comparable retailers (such as Five Below, Shopko, National Stores, Family Dollar Stores or Big Lots stores). As used herein, the term “Off-Price Retailers” shall mean retailers that are known for selling nationally-recognized branded products at discounted prices (such as TJX Companies’ TJ Maxx, Marshall’s and Home Goods). Notwithstanding the foregoing or anything to the contrary in this Agreement, the Company or its licensees (or sublicensees) (y) shall be entitled to sell Licensed Products and products which are New Uses which, in either case, are not of first quality (including “seconds” and “irregulars”) or which are end-of-season closeouts through Off-Price Retailers, and (z) may undertake special cut-up programs for Licensed Products and other products which are New Uses with Off-Price Retailers in accordance with industry practice for comparable products. In determining whether Licensed Products or Licensed Services comply with the Historical Standard, with respect to particular Licensed Products or Licensed Services,
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the parties will look to the Historical Criteria with respect to such Licensed Products or Licensed Services in comparison with the same Licensed Products and Licensed Services previously offered by the Company or under the Company License Agreements. Subject to and without in any way limiting the foregoing requirements regarding Licensed Products and/or Licensed Services, the parties hereby acknowledge and agree that the Historical Standard shall not otherwise restrict the Company from contracting with, or using services or deliverables from, outside service providers (including the Company’s licensees) to provide design, production and other services (including creative services) relating to the Licensed Products or Licensed Services or require the Company to adhere to any particular spending requirements or budgets, historical or otherwise, with respect to such functions. All uses of the Lifestyle Intangible Asset by the Company and its affiliates and their respective licensees prior to the Effective Date are hereby approved for use by the Company and in connection with Licensed Products and Services; provided, that, such use is (i) consistent with the terms of this Agreement, and (ii) substantially similar to the use prior to the Effective Date. Subject to the rights reserved for Licensor hereunder, including the Reserved Rights (as defined below), Licensor shall not (I) grant any rights to the Lifestyle Intangible Asset to any other person or entity following the Effective Date that conflict or compete with, or would reasonably be expected to conflict or compete with, those granted to the Company under this Agreement, including granting a third party the right to use the Lifestyle Intangible Asset in connection Licensed Products, Licensed Services and New Uses or (II) use the Lifestyle Intangible Asset in a manner that could reasonably be expected to infringe or otherwise conflict with the Marks.
(c) The Company and its affiliates and their respective licensees may use the Lifestyle Intangible Asset in connection with new businesses, products or services not planned, launched or developed prior to the Effective Date (such new businesses, products, and services, collectively, “New Uses”), in each case, so long such New Uses, (i) are (A) substantially consistent with the uses of the Lifestyle Intangible Asset prior to the Effective Date, (B) substantially consistent with or exceed the Historical Standard for the most similar Licensed Products or Licensed Services in existence prior to the Effective Date, (C) the same general quality and positioning, including for products and services themselves and any packaging and related material, and any marketing as the better licensed brands sold in the applicable channel of distribution for the applicable product or service (as permitted hereunder), and (D) not contained within any of the categories attached hereto as Schedule C, or (ii) have been consented to in writing by Licensor. For clarity, New Uses shall not include, and Licensor’s consent shall not be required for, reasonable extensions of the lines of business in which the Company or its affiliates or their respective licensees are engaged or planned to be engaged at the Effective Date (including the Licensed Products or Licensed Services), which extensions (and their related products and services) shall be included in the license contained herein and subject to the Historical Standard and other use requirements contained herein. The Company shall keep Licensor advised of any New Uses in a timely manner, so that such entity may confirm the Company’s compliance with the terms hereof.
(d) Subject to the terms and conditions of this Agreement, Licensor hereby grants to the Company the exclusive right to use and exploit in any and all media the Lifestyle Intangible Asset as it appears in any and all television programs, digital media and/or videos (including content developed for the Company’s on line/digital businesses) produced by or for the Company (or its predecessor) (collectively, the “Programs”), whether such Programs were
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produced, aired, marketed or sold prior to, on, or after, the date of this Agreement, provided that the grant in this sentence shall be limited to the use of such Programs (i) substantially as a whole (it being acknowledged and understood that the Company shall have the right to edit such Programs for time and commercials and to add bumpers and introductions), (ii) as part of a collection or similar compilation (such as “Best of” programs or videos) of Licensor appearances relating to the business colloquially known as of the date hereof as “Martha Stewart Living Television”, (iii) in any other manner used by the Company prior the Effective Date, including, without limitation, under the Company’s agreements with AOL, Yahoo and other Internet Service Providers or (iv) as excerpts (which, for the avoidance of doubt, shall not include “outtakes” or “bloopers”) of such Programs, for use on streaming services and the advertising, promotion and/or marketing of any of the foregoing. For the avoidance of doubt, with respect to new Programs produced after the Effective Date, Licensor will have a reasonable right of approval over the Lifestyle Intangible Asset, and the use thereof, in the Programs at its various stages (e.g., storyboard, script, rough cut, etc.) prior to Company’s exploitation thereof, such approval not to be unreasonably withheld, conditioned or delayed.
(e) To the extent that, during the term hereof, the Company desires access to the Real Properties in order to utilize the Lifestyle Intangible Asset, the Company shall provide reasonable notice of the intended dates and manner of use and the parties shall cooperate therewith; provided that Licensor shall provide the Company with any such requested access to the Real Properties in a manner consistent with past practice pursuant that certain Location Rental Agreement dated as of September 17, 2004 between Martha Stewart and the Company (the “Location Rental Agreement”), which Location Rental Agreement was extended by a letter agreement on September 18, 2007; and provided further that Licensor may deny access to the Real Properties to Company’s sublicensees other than those entities with which the Company has a bona fide business relationship involving matters other than the Real Properties at its sole discretion, and further provided that Licensor maintains a reasonable right to review and object to an excessive number of staff proposed for any such use. In addition, the Company and Licensor will negotiate in good faith an arms-length fee in connection with any use of the Real Properties in an amount not to exceed $75,000 per year.
(f) Subject to the Company’s indemnity obligations under paragraph 7 below, to the extent that the Licensor incurs any expenses in connection with the Company’s use of the Lifestyle Intangible Asset or any element of the Lifestyle Intangible Asset (including without limitation any costs associated with cleaning, arranging and maintenance of any items within the Lifestyle Intangible Asset), Licensor shall bear such costs; provided that the Company shall be responsible for (i) all film, video, photography and other production costs it incurs or authorizes in writing related to its use of the Lifestyle Intangible Asset and (ii) such other costs as may be approved in advance by the Company in writing, within any budget limitations that may be specified in such approval.
(g) Subject to the terms of this Agreement, during the term of this Agreement, Licensor shall, at its expense, cause the Real Properties to be maintained, landscaped, gardened and developed in a manner generally consistent with past practice; provided that the Company (i) shall be responsible for Company-approved costs associated with those business expenses set forth on Schedule A hereto, and (ii) shall reimburse Licensor for up to $100,000 in approved and documented household expenses associated with the Real Properties.
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(h) Notwithstanding any other provision of this Agreement, but subject to any employment or other agreement that Licensor may have from time to time with the Company, the license provided herein shall not prohibit Licensor (or Martha Stewart personally) from using or exploiting the Lifestyle Intangible Asset in connection with (collectively, the “Reserved Rights”): (i) writing books (including biographies or memoirs), articles, movies, plays, scripts or other literary products in areas other than businesses of the Company covered by this Agreement (including, without limitation, with respect to the Licensed Products, Licensed Services and New Uses); (ii) making speeches or public appearances (including on radio, television, in films or over the Internet or similar media) for any purpose other than the promotion of a product or service that competes in any material respect with the Licensed Products and Licensed Services at that time; (iii) endorsing products or services which are not competitive in any material respect, at the time of the commencement of such endorsement, with the Licensed Products, Licensed Services or New Uses; (iv) becoming a director, employee, partner, advisor, member, consultant or shareholder of, investor in or otherwise being engaged with any other company, corporation, partnership or other entity which is not competitive with the Company at the time Licensor assumes such position; and (v) activities which are incidental and do not significantly infringe on the Marks or the Company’s rights hereunder
(i) Any sublicense by the Company of the Lifestyle Intangible Asset shall contain protections with respect to the Lifestyle Intangible Asset consistent with the terms hereof and shall acknowledge that such sublicensee does not obtain any ownership rights in, or goodwill to, the Lifestyle Intangible Asset.
5. Quality of Products and Services Provided in Connection with Lifestyle Intangible Asset. Following the expiration or termination of the Employment Period as defined and under Licensor’s Employment Agreement with Topco of even date herewith, upon Licensor’s reasonable request and to the extent Licensor (or her designee, successor or assignee) reasonably deems it to be necessary to protect Licensor’s rights under this Agreement, Licensor or her designee, successor or assignee shall have the right to request and receive, at no cost to the recipient, representative samples of each Licensed Product and Licensed Service, and any New Uses, as well as a prototype of each type of all promotional, advertising and marketing material used in connection therewith, for the purpose of evaluating the compliance with the terms contained herein of the same. In the event that in Licensor’s (or her designee, successor or assignee) reasonable and good faith judgment, any Licensed Product or Licensed Service fails (other than in an immaterial manner) to satisfy the Historical Standard, or any New Use fails to comply with paragraph 4(c) above, then promptly upon written notice by Licensor to the Company, the Company and Licensor (or her designee, successor or assignee) shall cooperate in good faith to make necessary and appropriate changes (if any) in the quality of such Licensed Product or Licensed Service or New Use to comply with the standard and other applicable terms provided for herein; provided that nothing in this sentence shall be deemed to affect the substantive rights and obligations of the parties hereunder.
6. Lifestyle Intangible Asset.
(a) The Company acknowledges that it is not, and will not become by virtue of this Agreement, the owner of any right, title or interest in and to the Lifestyle Intangible Asset in any form or embodiment. The Company shall not at any time knowingly commit any act
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anywhere in the world which would reasonably be expected to have a material adverse effect on Licensor’s rights in and to the Lifestyle Intangible Asset, or any registrations therefor or any applications for registration thereof, including use of the Lifestyle Intangible Asset in an obscene or lewd or derogatory manner. Unless the other party’s conduct violates the terms of this Agreement or applicable law, neither party shall challenge or knowingly assist or cause any third party to challenge or assist, whether directly or indirectly, anywhere in the world the other party’s ownership of or the validity of the other party’s intellectual property (including any rights to intellectual property held by the Company), any application for registration therefor or any rights therein or thereto, in each case, before any court, agency, or other tribunal, or in defending any claim of infringement. The term “assist” shall include providing any third party, whether directly or indirectly, with an analysis of any intellectual property in furtherance of an actual or contemplated validity challenge.
(b) The Company, at its expense, shall file appropriate registrations in its own name or in the name of a Company subsidiary or affiliate so as to preserve the goodwill and Licensor’s rights in the Lifestyle Intangible Asset, shall prosecute and defend such registrations and all common law rights in the Lifestyle Intangible Asset consistent with good commercial practices, and shall use all reasonable commercial efforts to defend and otherwise protect the Lifestyle Intangible Asset, provided that following the Effective Date, Licensor shall have the right to reasonably direct and control such actions, in each case at the Company’s expense. At the request of Licensor, and at the Company’s expense, the Company shall prosecute, including by filing lawsuits or other actions, any potential infringement, dilution, libel, slander or other diminution in the goodwill or other denigration of the Lifestyle Intangible Asset by any third party, to the extent that, unless in the opinion of the Company’s outside intellectual property counsel there is no basis for such action or such action could reasonably be expected to have a material adverse impact on the Lifestyle Intangible Asset. The Company shall be entitled to the proceeds, or other legal remedies, of any such action. The Company may also institute such actions where not requested by Licensor in the event the Company determines that the protection of the Lifestyle Intangible Asset reasonably requires such action. In the event that the Company learns of any infringement or other violation of rights in or to the Lifestyle Intangible Asset, it shall promptly notify Licensor thereof.
(c) At Licensor’s request, the Company shall execute all documents reasonably requested by Licensor to confirm Martha Stewart’s ownership of rights in and to the Lifestyle Intangible Asset. The Company shall cooperate at Licensor’s reasonable request in connection with the filing and prosecution of applications to register intellectual property rights in the Lifestyle Intangible Asset and in connection with the maintenance and renewal of such registrations as may issue. Licensor and the Company shall cooperate in good faith, taking into account their respective interests in and rights to the Lifestyle Intangible Asset, to determine whether or not such applications are filed and prosecuted and registrations are maintained. The Company shall bear all costs and expenses of any such filings or proceedings.
(d) If one party hereto reasonably requests of the other to take an action in connection with the foregoing, the other party shall cooperate in connection with any such action, including, without limitation, by being a plaintiff or co-plaintiff and by causing its officers, directors, and employees to execute documents and to testify. If the Company desires to take action with respect to a violation or infringement of the Lifestyle Intangible Asset, it shall
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consult with Licensor, and shall not take any actions which Licensor reasonably requests not to be taken. All costs and expenses of the actions described in this Section 6(d) shall be borne by the Company.
7. Indemnity.
(a) The Company hereby saves and holds Licensor, its successors and assigns, and Martha Stewart, her heirs (including trusts and trustees), estate, successors and assigns (the “Indemnified Parties”) harmless of and from, and indemnifies and agrees to defend them against any and all losses, liability, damages and expenses (including, without limitation, reasonable attorney’s fees and expenses) which the Indemnified Parties may incur or be compelled to pay, or for which the Indemnified Parties may become liable or be compelled to pay in any action, claim or proceeding against any of the Indemnified Parties, in each case, for or by reason of any acts, whether of omission or commission, that may be committed or suffered by the Company or any of its officers, directors, employees, agents or servants (other than the Indemnified Parties) in connection with the Company’s performance of its obligations under this Agreement, the use (including sublicensing) of the Lifestyle Intangible Asset (including any claims asserting personal injury, property damage, product liability or breach of any express or implied warranty), or the breach by the Company of any covenant contained herein in each case, except to the extent such loss, liability, damage or expense or action, claim or proceeding is primarily due to the gross negligence or willful misconduct of an Indemnified Party. The indemnification rights provided for herein shall also apply to any use by the Company of the Lifestyle Intangible Asset prior to the date hereof.
(b) In the event that an Indemnified Party receives notice of a claim as to which indemnification is sought, such party shall reasonably promptly notify the Company thereof, except that the failure to so notify shall not exempt the Company from its obligations hereunder, except to the extent that such failure has actually prejudiced the Company’s legal position with respect to the claim. Upon receipt of notice, the Company shall advise the Indemnified Party that it has assumed the defense thereof. The Indemnified Party shall have the right, at the expense of the Company, to retain legal counsel to participate in and monitor the defense of the claim, provided that the Company shall have the right to direct and control such defense. The Company shall not, without Licensor’s written consent, settle or compromise any claim or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such claim, nor shall the Company settle or compromise any claim relating to the Lifestyle Intangible Asset which would limit the use by Licensor of the Lifestyle Intangible Asset in any manner whatsoever without Licensor’s consent.
(c) The Company shall maintain in effect at all times a general liability policy and errors and omissions insurance, in customary amounts taking into account the size of the Company, the value of the Lifestyle Intangible Asset and the obligations of the Company hereunder, and shall name Martha Stewart, Licensor and the other Indemnified Parties hereunder as beneficiaries thereof for purposes of this Agreement.
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8. Sale or Purchase of Real Properties.
(a) At any time during the term of this Agreement, Licensor, Martha Stewart and any entity she directly or indirectly controls may sell any or all of the Real Properties without the consent of the Company. Such sale shall not affect the obligations of the Company under Section 3 of this Agreement.
(b) If at any time during the term of this Agreement, Martha Stewart directly or indirectly, including through Licensor, acquires any real property (each a “Subsequently-Acquired Real Property”), Licensor may in its sole discretion offer the Company the right to include such Subsequently-Acquired Real Property within the Lifestyle Intangible Asset by giving the Company written notice of such offer. Upon receipt of such notice, the Company shall have the right in its sole discretion to accept the offer to include such Subsequently-Acquired Real Property within the Lifestyle Intangible Asset by giving Licensor written notice of such acceptance (in the event of such an offer and acceptance, such Subsequently-Acquired Real Property shall be referred to herein as an “Elective Real Property”). It is expressly understood and agreed that Martha Stewart is under no obligation to either directly or indirectly, including through Licensor, acquire any additional real property or to offer to include any Subsequently-Acquired Real Property within the Lifestyle Intangible Asset if acquired and the Company is under no obligation to accept an offer by Licensor to include any Subsequently-Acquired Real Property within the Lifestyle Intangible Asset.
9. Certain Remedies. The parties agree that the remedies at law for any material breach or threatened material breach of this Agreement, including monetary damages, are inadequate compensation for any loss and that the non-breaching party shall be entitled to seek specific performance of this Agreement. The parties hereto waive any defense to such claim that a remedy at law would be adequate. In the event of any actual or threatened material default in, or material breach of, any of the terms hereof, the party aggrieved thereby shall have the right to seek specific performance and injunctive or other equitable relief with respect to its rights hereunder, in addition to any remedies available at law.
10. Miscellaneous.
(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b) This Agreement is assignable by the Company to any of its affiliates or to any successor of the Company which acquires all or substantially all of the assets or businesses of the Company (or its affiliates) or to an acquirer, whether by sale, merger, recapitalization or other business combination, of all or substantially all of the equity, assets or businesses of the Company without Licensor’s consent, provided that (i) any such successor or assignee shall provide Licensor with a written agreement that it shall be bound by all the terms of this Agreement and (ii) with respect to an assignment to an affiliate, the Company or Topco guarantees the obligations of such affiliate hereunder. This Agreement shall be assignable by Licensor to any entity controlled by Martha Stewart and inure to the benefit of and be binding upon the successors, legal representatives, and assigns of Licensor, provided that any such
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successor or other assignee shall provide the Company with a written agreement that it shall be bound by all the terms of this Agreement and the Licensor agrees in writing to continue to be bound by the Agreement’s terms. Except as specified in this Section 10(b), this Agreement is not assignable.
(c) All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Licensor:
MS Real Estate Management Company, at the address on file with the Company
with a copy (which shall not constitute notice) to:
Grubman Shire & Meiselas, P.C.
152 West 57th Street
New York, NY 10019
| Attention: | Allen J. Grubman; Lawrence Shire; Eric Sacks | |
| Email: | AGrubman@gispc.com; lshire@gispc.com; esacks@gispc.com |
If to the Company:
Martha Stewart Living Omnimedia, Inc.
601 West 26th Street
New York, New York 10001
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in accordance with this Section. Notices and communications shall be effective when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law.
(e) Licensor and the Company acknowledge that this Agreement, at the Effective Time, will supersede any other agreement between them concerning the subject matter hereof; provided that this Agreement does not amend or modify in any respect any terms of the Employment Agreement or the IP License Agreement, and to the extent of any conflict between this Agreement and the IP License Agreement, the IP License Agreement will control.
(f) This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.
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11. Section 409A.
(a) The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the guidance issued thereunder (“Section 409A”) and, accordingly, to the maximum extent permitted, all provisions of this Agreement shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. Licensor is hereby advised to seek independent advice from Licensor’s tax advisor(s) with respect to any payments or benefits under this Agreement. Notwithstanding the foregoing, the Company does not guarantee the tax treatment of any payments or benefits provided under this Agreement, whether pursuant to the Code, federal, state, local or foreign tax laws and regulations.
(b) If Martha Stewart is deemed to have “separation from service” with the Company and she is deemed to be a “specified employee”, each within the meaning of Section 409A(a)(2)(B) of the Code, then with regard to any payment or the providing of any benefit under this Agreement, including without limitation the payments pursuant to paragraph 3 above, that is required to be delayed in compliance with Section 409A(a)(2)(B) of the Code, such payment or benefit shall not be made or provided prior to the earlier of (i) the expiration of the six-month period measured from the date of Martha Stewart’s separation from service, or (ii) the date of her death, if and to the extent such six-month delay is required to comply with Section 409A(a)(2)(B) of the Code. In such event, on or promptly after the first business day following the six-month-delay period, all payments delayed pursuant to this Section 12 (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(c) If under this Agreement, an amount is to be paid in installments, each installment shall be treated as a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii).
Remainder of page intentionally left blank; signature page follows.
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.
| MS REAL ESTATE MANAGEMENT COMPANY | ||
| By: | /s/ Martha Stewart | |
| Name: | ||
| Title: | ||
| MARTHA STEWART LIVING OMNIMEDIA, INC. | ||
| By: | /s/ Daniel W. Dienst | |
| Name: Daniel W. Dienst | ||
| Title:Chief Executive Officer | ||
Signature Page to Amended and Restated Intangible Asset License Agreement
Exhibit 10.4
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (the “Amendment”), dated as of June 22, 2015 (the “Effective Date”), is entered into between Martha Stewart Living Omnimedia, Inc., a Delaware corporation (the “Company”) and Allison C. Hoffman (the “Executive”).
RECITALS
WHEREAS, the Company and the Executive previously entered an Employment Agreement, dated as of October 16, 2014 (the “Employment Agreement”);
WHEREAS, Section 17 of the Employment Agreement permits the parties to amend the Employment Agreement by written agreement;
WHEREAS, to reward the Executive for the extraordinary efforts and achievements that have been, and will be, required of her in the performance of her duties during 2015, the Company is making available to the Executive the opportunity to receive a special bonus on the terms and conditions set forth below; and
WHEREAS, the Executive and the Company intend hereby to amend the Employment Agreement to provide the Executive the right to receive a special bonus on the terms and conditions set for below.
NOW, THEREFORE, in consideration of the mutual promises, agreements, and consideration set forth below, the parties agree to the following terms:
TERMS
1. Guaranteed Bonus. As of the Effective Date, the following is hereby added as Section 3(c) of the Employment Agreement:
“(c) Special Bonus
(i) With respect to calendar year 2015, the Executive shall receive a one-time, non-recurring, guaranteed bonus in the amount of $150,000 (the “Special Bonus”), that shall be separate and distinct from, and in addition to, any payment that may be payable to Executive under the Company’s annual incentive plan, if (i) the Executive is still employed by the Company on December 31, 2015 or (ii) the Executive’s employment is terminated prior to such date by the Company without Cause.
(ii) Payment in respect of any Special Bonus shall be made in a single lump sum on, or within five (5) business days, following December 31, 2015. Notwithstanding the immediately preceding sentence, if the Executive’s employment is terminated by the Company without Cause prior to the time at which such Special Bonus is paid, the Executive shall be paid her Special Bonus not later than 10 business days following the termination of her employment. If, prior to the date such Special Bonus is otherwise paid, the Executive’s employment with the Company is terminated by the Company for Cause or by the Executive for any reason other than her death or Disability, (i) the Executive shall forfeit her Special Bonus without consideration and (ii) the Company shall have no further obligation to the Executive under the Agreement in respect of such Special Bonus.
(iii) Notwithstanding anything in Section 3(c)(i) or (c)(ii) to the contrary, if the Executive’s employment terminates prior to December 31, 2015 on account of the Executive’s death or Disability, the Executive shall receive payment of a pro-rated Special Bonus, based on the Executive’s service through the date of termination, to be paid at the same time and manner as though the Executive remained employed through December 31, 2015.
2. General.
(a) Except as specifically provided in this Amendment, the Employment Agreement will remain in full force and effect and is hereby ratified and confirmed. To the extent a conflict arises between the terms of the Employment Agreement and this Amendment, the terms of this Amendment shall prevail.
(b) This Amendment shall be construed under and enforced in accordance with the laws of the State of New York without regard to the conflicts of law provisions thereof. This Amendment constitutes the sole and entire agreement of the parties with respect to amendment of the Employment Agreement and supersedes all prior verbal and written understandings and agreements between the parties relating to its subject matter. This Amendment may not be modified except in a writing signed by both parties.
(c) This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and shall have the same effect as if the signatures hereto and thereto were on the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.
| MARTHA STEWART LIVING OMNIMEDIA, INC. | ||||
| By: | /s/ Daniel W. Dienst | |||
| Title: | Chief Executive Officer | |||
| EXECUTIVE | ||||
| By: | /s/ Allison Hoffman | |||
| Title: | EVP – General Counsel & Secretary | |||
Exhibit 99.1
VOTING AND SUPPORT AGREEMENT
VOTING AND SUPPORT AGREEMENT, dated as of June 22, 2015 (this “Agreement”), by and among Sequential Brands Group, Inc., a Delaware corporation (“Sequential”), Singer Madeline Holdings, Inc., a Delaware corporation (“TopCo”) and certain stockholders of Martha Stewart Living Omnimedia, Inc., a Delaware corporation (“MSLO”), listed on Schedule A hereto (each, a “Stockholder” and collectively, the “Stockholders”).
W I T N E S S E T H:
WHEREAS, MSLO, Madeline Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of TopCo (“Madeline Merger Sub”), Sequential, Singer Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of TopCo (“Singer Merger Sub”), and TopCo, are concurrently herewith entering into an Agreement and Plan of Merger (as in effect on the date hereof or as may be amended, supplemented or otherwise modified from time to time, but solely as consented to by such Stockholder, in its discretion, in the case of a Fundamental Amendment, the “Merger Agreement”), pursuant to which, among other things, at the effective time under the Merger Agreement (the “Effective Time”), Madeline Merger Sub will merge with and into MSLO, with MSLO continuing as the surviving corporation and a wholly owned subsidiary of TopCo (the “MSLO Merger”), and Singer Merger Sub will merge with and into Sequential, with Sequential continuing as the surviving corporation and a wholly owned subsidiary of TopCo (the “Sequential Merger” and, together with the MSLO Merger, the “Mergers”);
WHEREAS, each Stockholder is the record and/or beneficial owner of the Existing Shares (as defined below);
WHEREAS, as a condition and material inducement to Sequential’s willingness to enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Sequential Merger, each Stockholder has agreed to enter into this Agreement, pursuant to which such Stockholder is agreeing, among other things, to vote all of its Covered Shares (as defined below) in accordance with the terms of this Agreement; and
WHEREAS, TopCo, Sequential and the Stockholders wish to agree to certain matters as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
GENERAL
Section 1.1 Defined Terms. The following capitalized terms, as used in this Agreement, shall have the meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement.
(a) “Beneficial Ownership” has the meaning ascribed to such term in Rule 13d-3 under the Securities Exchange Act of 1934, as amended. The terms “Beneficially Own”, “Beneficially Owned” and “Beneficial Owner” shall each have a correlative meaning.
(b) “Covered Shares” means, with respect to each Stockholder, such Stockholder’s Existing Shares, together with any shares of MSLO Common Stock and any shares of MSLO Common Stock issuable upon the conversion, exercise or exchange of securities that are convertible into or exercisable or exchangeable for shares of MSLO Common Stock, in each case that such specified Stockholder has or acquires Beneficial Ownership of on or after the date hereof.
(c) “DGCL” means the General Corporation Law of the State of Delaware.
(d) “Encumbrance” means any security interest, pledge, mortgage, lien (statutory or other), charge, option to purchase, lease or other right to acquire any interest or any claim, restriction, covenant, title defect, hypothecation, assignment, deposit arrangement or other encumbrance of any kind or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement), excluding restrictions under securities laws.
(e) “Existing Shares” means, with respect to each Stockholder, the number of shares of MSLO Common Stock Beneficially Owned by such Stockholder, as of the date hereof, as set forth in Schedule A hereto.
(f) “Expiration Date” means any date upon which the Merger Agreement is validly terminated in accordance with its terms.
(g) “Governmental Entity” means any nation or government, any state, agency, commission, or other political subdivision thereof, any insurance regulatory authority, any self-regulatory authority, or any entity (including a court) of competent jurisdiction properly exercising executive, legislative, judicial or administrative functions of the government.
(h) “Law” means any statute, law ordinance, rule or regulation (domestic or foreign) issued, promulgated or entered into by or with any Governmental Entity.
(i) “Permitted Transfer” means (i) a Transfer of Covered Shares by a Stockholder by will or by operation of law or other Transfers to an Affiliate, immediate family members, trusts for the benefit of such Stockholder, any immediate family member of such Stockholder, charity or other Transfers for estate planning purposes, or upon the death of such Stockholder, provided, that prior to the effectiveness of such Transfer, such transferee executes and delivers to TopCo and Sequential a written agreement, in form and substance reasonably acceptable to TopCo and Sequential, to assume all of such Stockholder’s obligations hereunder in respect of the securities subject to such Transfer and to be bound by the terms of this Agreement, with respect to the securities subject to such Transfer, to the same extent as such Stockholder is bound hereunder and to make each of the representations and warranties hereunder in respect of the securities transferred as such Stockholder shall have made hereunder; (ii) a Transfer of Covered Shares by a Stockholder to another Stockholder; or (iii) with respect to a Stockholder’s MSLO Stock Options and/or MSLO Performance Stock Option which expire by
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their terms or would otherwise be terminated on or prior to the Expiration Date and MSLO RSU Awards and/or MSLO Performance RSU Awards that vest and/or are settled on or prior to the Expiration Date, Transfers of MSLO Common Stock to MSLO or into the public market (but not through the tender of any such shares into a tender or exchange offer) (A) in order to pay the exercise price due in respect of any such expiring MSLO Stock Options and/or MSLO Performance Stock Options, and/or (B) in order to satisfy required withholding and other payroll taxes due upon the exercise of any such expiring MSLO Stock Options and MSLO Performance Stock Options and/or upon the vesting and/or settlement of any such MSLO RSU Awards and/or MSLO Performance RSU Awards.
(j) “Transfer” means, directly or indirectly, to sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of (by merger (including by conversion into securities or other consideration), by tendering into any tender or exchange offer, by operation of law or otherwise), either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the voting of or sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of (by merger, by tendering into any tender or exchange offer, by testamentary disposition, by operation of law or otherwise).
ARTICLE II
VOTING
Section 2.1 Agreement to Vote.
(a) Each of the Stockholders hereby irrevocably and unconditionally agrees, as to itself only, that during the period beginning on the date hereof and ending on the earliest of (x) the Closing Date, (y) the Expiration Date or (z) the termination of this Agreement in accordance with its terms, at any meeting of the stockholders of MSLO, however called, including any adjournment or postponement thereof, and in connection with any action proposed to be taken by written consent of the stockholders of MSLO, the Stockholders shall, in each case, to the fullest extent that such matters are submitted for the vote or written consent of the Stockholders and that the Covered Shares are entitled to vote thereon or consent thereto:
(i) appear at each such meeting or otherwise cause the Covered Shares as to which the Stockholders control the right to vote to be counted as present thereat for purposes of calculating a quorum; and
(ii) vote (or cause to be voted), in person or by proxy, or deliver (or cause to be delivered) a written consent covering, all of the Covered Shares as to which the Stockholders control the right to vote (A) in favor of the adoption of the Merger Agreement and any related proposal in furtherance thereof, as reasonably requested by Sequential and contemplated by the Merger Agreement, submitted for the vote or written consent of stockholders, including, without limiting any of the foregoing obligations, in each case to the extent MSLO is permitted pursuant to the Merger Agreement to take such actions, in favor of any proposal to adjourn or postpone to a later date any meeting of the stockholders of MSLO at which any of the foregoing matters are submitted for consideration and vote of the stockholders of MSLO (B) against any action or agreement submitted for the vote or written consent of stockholders that is in opposition to the
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Merger or that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of MSLO contained in the Merger Agreement, or of the Stockholders contained in this Agreement, and (C) against any Acquisition Proposal or other action, agreement or transaction submitted for the vote or written consent of stockholders that would reasonably be expected to impede, delay, postpone, frustrate the purposes of, adversely affect or prevent the consummation of the Mergers or the other transactions contemplated by the Merger Agreement or the performance by MSLO of its obligations under the Merger Agreement or by the Stockholders of their obligations under this Agreement.
(b) Any vote required to be cast or consent required to be executed pursuant to this Section 2.1 shall be cast (or consent shall be given) by the Stockholders in accordance with such procedures relating thereto so as to ensure that it is duly counted, including for purposes of determining whether a quorum is present.
(c) A Stockholder shall not be bound to take the actions described in this Section 2.1 in the event of a Fundamental Amendment of the Merger Agreement, unless such Stockholder, in its sole discretion, has consented thereto prior to the date of such Fundamental Amendment.
(d) Nothing in this Agreement, including this Section 2.1, shall limit or restrict any affiliate or designee of the Stockholder who serves as a member of MSLO Board in acting in his or her capacity as a director or officer of MSLO and exercising his or her fiduciary duties and responsibilities, it being understood that this Agreement shall apply to the Stockholders solely in their capacity as stockholders of MSLO and shall not apply to any such affiliate or designee’s actions, judgments or decisions as a director or officer of MSLO.
Section 2.2 No Inconsistent Agreements. Each of the Stockholders hereby covenants and agrees, as to itself only, that, except for this Agreement or as set forth on Schedule A, and except as may be permitted by Section 4.3(b), it (a) has not entered into, and shall not enter into at any time while this Agreement remains in effect, any voting agreement or voting trust with respect to the Covered Shares with respect to any of the matters described in Section 2.1(a)(ii) (the “Section 2.1(a) Matters”), (b) has not granted, and shall not grant at any time while this Agreement remains in effect (except to the extent permitted by Section 2.1(c)), a proxy, consent or power of attorney with respect to the Covered Shares with respect to any of the Section 2.1(a) Matters and (c) has not taken and shall not take any action that would have the effect of preventing or disabling such Stockholder from performing any of its obligations under this Agreement. Each of the Stockholders, as to itself only, hereby represents that all proxies or powers of attorney given by such Stockholder prior to the execution of this Agreement in respect of the voting of each such Stockholder’s Covered Shares with respect to the Section 2.1(a) Matters, if any, are not irrevocable and each Stockholder hereby revokes (and shall cause to be revoked) any and all previous proxies or powers of attorney with respect to each such Stockholder’s Covered Shares with respect to the Section 2.1(a) Matters.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Stockholders. Each Stockholder, as to itself only, hereby represents and warrants to Sequential as follows:
(a) Authorization. The Stockholder has the legal capacity, full power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by the Stockholder of this Agreement, the performance by it of its obligations hereunder and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by the Stockholder and no other actions or proceedings on the part of the Stockholder or any manager or partner thereof are necessary to authorize the execution and delivery by it of this Agreement, the performance by it of its obligations hereunder or the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Stockholder and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes a legal, valid and binding obligation of the Stockholder, enforceable against it in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity).
(b) Ownership. The Stockholder’s Existing Shares are, and all of the Covered Shares owned by the Stockholder from the date hereof through the date of the MSLO Stockholder Meeting (including any permitted postponement or adjournment thereof, the “Meeting Date”) will be, Beneficially Owned by the Stockholder, in each case as reflected on Schedule A hereto. As of the date hereof, the Stockholder’s Existing Shares constitute all of the shares of MSLO Common Stock Beneficially Owned by the Stockholder. Except for the rights granted to TopCo and Sequential hereby and except as set forth on Schedule A, the Stockholder has and will have at all times through the Meeting Date sole (or shared with another Stockholder) voting power to control the vote and consent as contemplated herein, sole (or shared with another Stockholder) power of disposition, sole (or shared with another Stockholder) power to issue instructions with respect to the matters set forth in Article II, and sole (or shared with another Stockholder) power to agree to all of the matters set forth in this Agreement, in each case, with respect to all of the Stockholder’s Existing Shares and with respect to all of the Covered Shares owned by the Stockholder at all times through the Meeting Date.
(c) No Violation. The execution, delivery and performance of this Agreement by the Stockholder does not and will not (whether with or without notice or lapse of time, or both) (i) violate any provision of the certificate of formation or other comparable governing documents, as applicable, of the Stockholder, (ii) violate, conflict with or result in the breach of any of the terms or conditions of, result in any (or the right to make any) modification of or the cancellation or loss of a benefit under, require any notice, consent or action under, or otherwise give any Person the right to terminate, accelerate obligations under or receive payment or additional rights under, or constitute a default under, any Contract to which the Stockholder is a party or by which it is bound or (iii) violate any Law applicable to the Stockholder or by which any of the Stockholder’s assets or properties is bound, except for any of the foregoing as would not, either individually or in the aggregate, impair the ability of the Stockholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
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(d) Consents and Approvals. The execution and delivery of this Agreement by the Stockholder does not, and the performance by each Stockholder of its obligations under this Agreement and the consummation by it of the transactions contemplated hereby will not, require such Stockholder to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any Governmental Entity, other than the filings of any reports with the SEC and except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings and notifications, would not, either individually or in the aggregate, prevent or delay the performance by the Stockholder of any of its obligations hereunder.
(e) Absence of Litigation. As of the date hereof, there is no Action pending or, to the knowledge of the Stockholder, threatened against or affecting the Stockholder or any of its Affiliates before or by any Governmental Entity that would reasonably be expected to impair the ability of the Stockholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
(f) Finder’s Fees. Except as disclosed pursuant to the Merger Agreement, no investment banker, broker, finder or other intermediary is entitled to a fee or commission from Sequential, Singer Merger Sub, MSLO, Madeline Merger Sub or TopCo in respect of this Agreement based upon any arrangement or agreement made by the Stockholder (in such Stockholder’s capacity as a stockholder of MSLO).
(g) Reliance by Sequential. The Stockholder understands and acknowledges that Sequential is entering into the Merger Agreement in reliance upon the Stockholder’s execution and delivery of this Agreement and the representations and warranties of the Stockholder contained herein.
Section 3.2 Representations and Warranties of Sequential.
(a) Authorization. Sequential has the power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by Sequential of this Agreement, the performance by it of its obligations hereunder and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by Sequential and no other actions or proceedings on the part of Sequential are necessary to authorize the execution and delivery by it of this Agreement, the performance by it of its obligations hereunder or the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Sequential and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes a legal, valid and binding obligation of Sequential, enforceable against it in accordance with its terms (except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity).
(b) No Beneficial Ownership. Sequential hereby represents and warrants to the Stockholders that nothing contained in this Agreement has caused or shall cause Sequential to acquire Beneficial Ownership of the Covered Shares.
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ARTICLE IV
OTHER COVENANTS
Section 4.1 Prohibition on Transfers, Other Actions. From the date hereof through the Meeting Date, each Stockholder hereby agrees not to (i) Transfer any of the Covered Shares, Beneficial Ownership thereof or any other interest therein (including by tendering into a tender or exchange offer), unless such Transfer is a Permitted Transfer, (ii) enter into any agreement, arrangement or understanding with any Person (other than TopCo and Sequential), or take any other action, that violates or conflicts with the Stockholder’s representations, warranties, covenants and obligations under this Agreement, or (iii) take any action that would reasonably be expected to restrict or otherwise adversely affect the Stockholder’s legal power, authority and right to comply with and perform its covenants and obligations under this Agreement. Any Transfer in violation of this provision shall be void ab initio.
Section 4.2 Stock Dividends, etc. In the event of a stock split, stock dividend or distribution, or any change in the shares of MSLO Common Stock by reason of any split-up, reverse stock split, recapitalization, combination, reclassification, reincorporation, exchange of shares or the like, the terms “Existing Shares” and “Covered Shares” shall be deemed to refer to and include such shares as well as all such stock dividends and distributions and any securities into which or for which any or all of such shares may be changed or exchanged or which are received in such transaction.
Section 4.3 No Solicitation.
(a) Each Stockholder hereby acknowledges that it has reviewed and understands the obligations of a Representative as set forth in Section 5.5 of the Merger Agreement. Each Stockholder hereby agrees that it shall, and shall direct its Representatives to, immediately cease and cause to be terminated all existing discussions and negotiations with any Person conducted heretofore with respect to any Acquisition Proposal.
(b) Notwithstanding anything to the contrary in this Agreement, solely to the extent MSLO is permitted to take the actions set forth in Section 5.5(a) or 5.5(b) of the Merger Agreement with respect to an Acquisition Proposal, each Stockholder and its Affiliates and Representatives will be free to participate in any discussions or negotiations regarding such Acquisition Proposal with the Person making such Acquisition Proposal, provided such action by such Stockholder and its Affiliates and Representatives would be permitted to be taken by MSLO pursuant to Section 5.5(a) or 5.5(b) of the Merger Agreement.
(c) For the avoidance of doubt, nothing in this Section 4.3 shall affect in any way the obligations of any Person (including MSLO) under Section 5.5 of the Merger Agreement.
Section 4.4 Notice of Acquisitions. Each Stockholder hereby agrees to notify Sequential in writing as promptly as practicable (and in any event within 48 hours following
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such acquisition by the Stockholder) of the number of any additional shares of MSLO Common Stock or other securities of MSLO of which the Stockholder acquires Beneficial Ownership on or after the date hereof.
Section 4.5 Waiver of Appraisal Rights. Each Stockholder agrees not to exercise any rights of appraisal or any dissenters’ rights (including under Section 262 of the DGCL) that the Stockholder may have (whether under applicable Law or otherwise) or could potentially have or acquire in connection with the Mergers.
Section 4.6 Disclosure. Subject to reasonable prior notice and approval (not to be unreasonably withheld, conditioned or delayed) of the Stockholders, each Stockholder hereby authorizes MSLO and Sequential to publish and disclose in any announcement or disclosure required by the SEC, including in the Proxy Statement/Prospectus the Stockholder’s identity and ownership of such Stockholder’s Covered Shares and the nature of the Stockholder’s obligations under this Agreement.
Section 4.7 Notices under the Merger Agreement. Sequential shall use commercially reasonable efforts to cause a copy of all notices delivered to MSLO pursuant to the Merger Agreement to be delivered to the Stockholders within two Business Days of delivery to MSLO.
Section 4.8 Public Announcement and S-4. TopCo and Sequential shall provide Martha Stewart and her counsel a reasonable opportunity to review and comment upon, (i) any press release or other widely-disseminated public statements with respect to the Merger Agreement, this Agreement or the other agreements to be entered in connection with the transactions contemplated by the Merger Agreement to which any Stockholder is a party and (ii) the S-4 and Proxy Statement/Prospectus and any response to material SEC comments in connection therewith, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system; and provided that TopCo, Sequential and their respective Affiliates may make statements that are substantially similar to previous press releases, public disclosures or public statements made in compliance with the Merger Agreement and this Agreement.
Section 4.9 Expenses. At Closing, TopCo and Sequential hereby consent to the reimbursement by MSLO prior to Closing to each Stockholder for the fees and out-of-pocket expenses, including fees of attorneys and financial advisors, incurred by such Stockholder in connection with the negotiation, execution and delivery of this Agreement, the Merger Agreement, or the other agreements to be entered into in connection with the transactions contemplated by the Merger Agreement to which such Stockholder is a party, which amount will be notified in writing to TopCo and Sequential at least two Business Days prior to the Closing; provided that the aggregate amount of such fees and expenses required shall not exceed $4,000,000; provided, further that, if MSLO does not reimburse the Stockholders for such expenses at or prior to the Effective Time, Sequential and TopCo hereby agree to reimburse, or cause MSLO to reimburse, the Stockholders for such expenses promptly following the Effective Time.
Section 4.10 Indemnification. From and after closing, TopCo shall indemnify and hold harmless each trust or similar entity affiliated with a Stockholder and which is not a party to this
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agreement and such trust or similar entity’s officers, directors and trustees (the “Indemnified Parties”), against all claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, arising out of or pertaining to the Merger Agreement and this Agreement, and the transactions contemplated thereby and hereby, to the fullest extent permitted by applicable Law. In the event of any such claim, action, suit or proceeding, (i) each Stockholder will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit or proceeding from TopCo to the fullest extent permitted by applicable Law; provided, that any person to whom expenses are advanced provides an undertaking, if and only to the extent required by the DGCL, to repay such advances if it is ultimately determined that such person is not entitled to indemnification, and (ii) TopCo shall, and shall cause its subsidiaries to, cooperate in the defense of any such matter.
ARTICLE V
MISCELLANEOUS
Section 5.1 Termination. This Agreement shall remain in effect until the earliest to occur of (i) the Expiration Date, (ii) the Closing Date, (iii) an Adverse Recommendation Change, (iv) the MSLO Stockholder Approval has been obtained, (v) the delivery of written notice by Sequential to the Stockholders of termination of this Agreement, and (vi) the delivery of written notice of termination by the Stockholders to Sequential following any Fundamental Amendment effected without the prior consent of the Stockholder, and upon the occurrence of the earliest of such events this Agreement shall terminate and be of no further force; provided, however, that the provisions of Section 4.10, this Section 5.1, Section 5.2 and Sections 5.4 through 5.13 shall survive any termination of this Agreement indefinitely and (ii) Sections 4.6, 4.7 and 4.8 shall remain in effect until the Expiration Date. Nothing in this Section 5.1 and no termination of this Agreement shall relieve or otherwise limit any party of liability for willful and material breach of this Agreement. For the avoidance of doubt, in the event the Merger Agreement is validly terminated prior to the Effective Time, this Agreement and any consent executed pursuant hereto shall be deemed null and void and shall have no further effect. “Fundamental Amendment” means the execution by MSLO, Madeline Merger Sub, Sequential, Singer Merger Sub and TopCo of a written amendment to, or written waiver by MSLO, Madeline Merger Sub, Sequential, Singer Merger Sub and TopCo of any provision of, the Merger Agreement that reduces the amount of the Merger Consideration or changes the form of the Merger Consideration to include or substitute therefor a form other than cash and shares of TopCo Common Stock in the proportion reflected in the Merger Agreement, amends the conditions precedent set forth in Section 7.1 or 7.3 of the Merger Agreement (except in the case of a waiver of a condition by Sequential or TopCo) or would result in additional monetary liability to such Stockholder.
Section 5.2 Stop Transfer Order. In furtherance of this Agreement, each Stockholder hereby authorizes and instructs MSLO to instruct its transfer agent to enter a stop transfer order with respect to all of the Covered Shares held of record by such Stockholder and (i) if this Agreement is terminated in accordance with Section 5.1, then, promptly following the termination of this Agreement, or (ii) immediately following the Closing (and in any event within such time as would not delay receipt by the Stockholder of the Merger Consideration), to cause any stop transfer instructions imposed pursuant to this Section 5.2 to be lifted.
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Section 5.3 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in Sequential any direct or indirect ownership or incidence of ownership (whether beneficial ownership or otherwise) of or with respect to any Covered Shares, except as otherwise provided herein. All rights, ownership and economic benefits of and relating to the Covered Shares shall remain vested in and belong to the applicable Stockholder, and Sequential shall have no authority to direct the Stockholders in the voting or disposition of any of the Covered Shares, except as otherwise provided herein.
Section 5.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by e-mail, upon written confirmation of receipt by e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
(a) if to Sequential to:
Sequential Brands Group, Inc.
5 Bryant Park, 30th Floor
New York, NY 10018
Attention: Yehuda Shmidman
E-mail: yshmidman@sbg-ny.com
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166-0193
Attention: Barbara L. Becker
E-mail: bbecker@gibsondunn.com
(b) if to a Stockholder, to the address set forth opposite such Stockholder’s name in Schedule A hereto, with a copies (which shall not constitute notice) to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Andrew J. Nussbaum
Email: AJNussbaum@wlrk.com
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and
Grubman Shire & Meiselas, P.C.
152 West 57th Street
New York, NY 10019
Attention: Allen J. Grubman; Lawrence Shire; Eric Sacks
Email: AGrubman@gispc.com; lshire@gispc.com; esacks@gispc.com
Section 5.5 Interpretation. When a reference is made in this Agreement to a Section, Article, Exhibit or Schedule such reference shall be to a Section, Article, Exhibit or Schedule of this Agreement unless otherwise indicated. The headings contained in this Agreement or in any Exhibit or Schedule are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to the Agreement as a whole and not to any particular provision in this Agreement. The term “or” is not exclusive. The word “will” shall be construed to have the same meaning and effect as the word “shall.” References to days mean calendar days unless otherwise specified.
Section 5.6 Counterparts; Facsimile or .pdf Signatures. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.
Section 5.7 Entire Agreement. This Agreement and, to the extent referenced herein, the Merger Agreement, together with the several agreements and other documents and instruments referred to herein or therein or annexed hereto or thereto, constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings among the parties with respect to the subject matter hereof and thereof.
Section 5.8 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Delaware.
(b) Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any party or its Affiliates against any other party or its Affiliates shall be brought and determined in the Court of Chancery of the State
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of Delaware; provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware or any other Delaware state court. Each of the parties hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 5.9 Specific Performance. Each of the parties to this Agreement hereby acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or if the Agreement was otherwise breached and that money damages, even if available, would not be an adequate remedy therefor. Accordingly, each party agrees that the other parties shall be entitled to specific performance, an injunction, restraining order and/or such other equitable relief, in addition to any other rights and remedies existing in its favor at law or in equity, as a court of competent jurisdiction may deem necessary or appropriate to enforce its rights and each of the obligations hereunder (without posting of bond or other security). Anything in this Agreement to the contrary notwithstanding, each party hereby agrees that specific performance or injunctive relief pursuant to this Section 5.9 shall be its sole and exclusive remedy with respect to breaches or threatened breaches by any other party to this Agreement, and no such party shall pursue any other form of relief (including monetary damages) that may be available for a breach of this Agreement.
Section 5.10 Amendment; Waiver. This Agreement may be amended, modified or supplemented by a writing executed by each of the parties hereto. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each of the parties in interest at the time of the amendment.
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Section 5.11 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
Section 5.12 Assignment; Successors; No Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any party without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement; provided, however, that MSLO is hereby made a third party beneficiary of Article II herein only for the purpose of seeking specific performance of each Stockholder’s obligations thereunder; and provided, further, however, that the Indemnified Parties shall be third party beneficiaries of Section 4.10.
Section 5.13 Stockholder Capacity. The restrictions and covenants of each Stockholder hereunder shall not be binding, and shall have no effect, in any way with respect to any director or officer of MSLO or any of its Subsidiaries in such Person’s capacity as such a director or officer, nor shall any action taken by any such director or officer in his or her capacity as such be deemed a breach by a Stockholder of this Agreement.
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IN WITNESS WHEREOF, Sequential, TopCo and the Stockholders have caused to be executed or executed this Agreement as of the date first written above.
| SEQUENTIAL BRANDS GROUP, INC., | ||
| By: | /s/ Yehuda Shmidman | |
| Name: | Yehuda Shmidman | |
| Title: | CEO | |
| SINGER MADELINE HOLDINGS, INC. | ||
| By: | /s/ Yehuda Shmidman | |
| Name: | Yehuda Shmidman | |
| Title: | CEO | |
SIGNATURE PAGE TO VOTING AND SUPPORT AGREEMENT
| STOCKHOLDERS: |
| /s/ Martha Stewart |
| MARTHA STEWART |
SIGNATURE PAGE TO VOTING AND SUPPORT AGREEMENT
| MARTHA STEWART FAMILY LIMITED PARTNERSHIP | ||
| By: | /s/ Martha Stewart | |
| Name: | Martha Stewart | |
| Title: | General Partner, in her capacity as trustee of | |
| the Martha Stewart 2012 Revocable Trust | ||
SIGNATURE PAGE TO VOTING AND SUPPORT AGREEMENT
SCHEDULE A
| Stockholder |
Class A Common Stock |
Class B Common Stock |
||||||
| Martha Stewart |
27,087,571 | (1) | 24,984,625 | |||||
| Martha Stewart Family Limited Partnership |
24,984,625 | (2) | 24,984,625 | |||||
| (1) | Includes (i) 14,748 shares of the Class A Common Stock held by Martha Stewart, (ii) 1,300,000 shares of the Class A Common Stock that are subject to exercisable options and (iii) 29,816 shares of Class A Common Stock held by the Martha Stewart 1999 Family Trust, of which Martha Stewart is a co-trustee and as to which she shares voting and dispositive power. These shares also include (a) 24,984,625 shares of Class B Common Stock held by the Martha Stewart Family Limited Partnership (“MSFLP”), of which Martha Stewart, as the sole trustee of the Martha Stewart 2012 Revocable Trust, is the sole general partner, each of which is convertible at the option of the holder into one share of the Class A Common Stock and (b) 37,270 shares of Class A Common Stock held by the Martha Stewart 2000 Family Trust, of which Martha Stewart is a co-trustee. In addition, Martha Stewart may be deemed to beneficially own 721,112 shares of Class A Common Stock held by the Martha and Alexis Stewart Charitable Foundation, for which Martha Stewart is a co-trustee and as to which she shares voting and dispositive power. Martha Stewart executed a revocable proxy, dated as of October 6, 2004, whereby Martha Stewart appointed Alexis Stewart as her true and lawful proxy, attorney-in-fact and agent with respect to all of the securities of the Company that are owned by Martha Stewart from time to time. This proxy is hereby revoked. |
| (2) | Consists of 24,984,625 shares of the Class B Common Stock, each of which is convertible at the option of the holder into one share of the Class A Common Stock, all of which are owned by MSFLP and indirectly owned by Martha Stewart as the sole general partner of MSFLP in her capacity as the sole trustee of the Martha Stewart 2012 Revocable Trust and as to which MSFLP is deemed to share voting and dispositive power. Pursuant to a power of attorney, dated as of October 6, 2004, MSFLP appointed Alexis Stewart as its true and lawful proxy, attorney-in-fact and agent with respect to all of the securities of the Company that are owned by MSFLP from time to time. This power of attorney is hereby revoked. |
Exhibit 99.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of June 22, 2015, by and between Singer Madeline Holdings, Inc., a Delaware corporation (the “Company”), and the stockholders of the Company set forth on Schedule A (the “Stockholders”) and such other Persons, if any, from time to time that become party hereto as holders of Registrable Securities (as defined below) pursuant to Section 4.8.
RECITALS
WHEREAS, the Company and certain other parties have entered into that certain Agreement and Plan of Merger, dated as of June 22, 2015 (the “Merger Agreement”), pursuant to which the Stockholders received, among other consideration, TopCo Common Stock (as defined in the Merger Agreement); and
WHEREAS, in connection with the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby, the Company has agreed to grant the Stockholders certain registration rights as set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:
AGREEMENT
ARTICLE I
DEFINITIONS
Section 1.1 Certain Definitions. As used in this Agreement, capitalized terms not otherwise defined herein shall have the meanings ascribed to them below:
“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York.
“Common Stock” means the common stock, par value $0.01 per share, of the Company, and any equity securities issued or issuable in exchange for or with respect to the Common Stock by way of a stock dividend, stock split or combination of shares or in connection with a reclassification, recapitalization, merger, consolidation or other reorganization or otherwise.
“Common Stock Equivalent” means all options, warrants and other securities convertible into, or exchangeable or exercisable for (at any time or upon the occurrence of any event or contingency and without regard to any vesting or other conditions to which such securities may be subject) Common Stock.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“FINRA” means the Financial Industry Regulatory Authority, Inc.
“Holder” or “Holders” means the Stockholders and any Person who shall acquire and hold Registrable Securities in accordance with the terms of this Agreement.
“Issuer Free Writing Prospectus” means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act, relating to an offer of Registrable Securities.
“Person” means any individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or other entity or any governmental or regulatory body or other agency or authority or political subdivision thereof, including any successor, by merger or otherwise, of any of the foregoing.
“Registrable Securities” means the shares of Common Stock issued by the Company as consideration to the Stockholders pursuant to the Merger Agreement, or acquired by the Stockholders and their Affiliates on or after the Effective Time (as defined in the Merger Agreement). Any particular Registrable Securities shall cease to be Registrable Securities (A) when a registration statement with respect to the sale of such securities shall have been declared effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (B) during the period that such securities shall be eligible to be resold to the public without any volume or manner of sale restrictions pursuant to Rule 144 (or any successor provision) under the Securities Act or (C) when such securities shall cease to be outstanding.
“Registration Expenses” means all fees and expenses incurred in connection with the Company’s performance of or compliance with the provisions of Article II, including: (i) all registration, listing, qualification and filing fees (including FINRA filing fees); (ii) fees and expenses of compliance with state securities or “blue sky” laws (including counsel fees in connection with the preparation of a blue sky and legal investment survey and FINRA filings); (iii) printing and copying expenses; (iv) messenger and delivery expenses; (v) expenses incurred in connection with any road show; (vi) fees and disbursements of counsel for the Company; (vii) with respect to each registration, the fees and disbursements of one counsel for the selling Holder(s) selected by (A) the Participating Holder(s), in the case of a registration pursuant to Section 2.1, (B) the Holder(s) selling Registrable Securities pursuant to Section 2.2, and (C) selected by the underwriter, in the case of a registration pursuant to Section 2.3; (viii) fees and disbursements of independent public accountants, including the expenses of any audit or “cold comfort” letter, and fees and expenses of other persons, including special experts, retained by the Company; (ix) underwriter fees, excluding discounts and commissions, and any other expenses which are customarily borne by the issuer or seller of securities in a public equity offering; and (x) all internal expenses of the Company (including all salaries and expenses of officers and employees performing legal or accounting duties).
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
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ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Demand Registrations.
(a) (i) Subject to Section 2.1(c), at any time or from time to time after the Effective Time (as defined in the Merger Agreement), a group of Holders owning at least 50% of the remaining Registrable Securities (a “Majority of Holders”), shall have the right to require the Company to file a registration statement under the Securities Act covering such aggregate number of Registrable Securities that have an aggregate anticipated offering price of at least $15,000,000 (based on the market price of the Common Stock as of the date of the Demand Registration Request), by delivering a written request therefor to the Company specifying the number of Registrable Securities to be included in such registration by such Holders and the intended method of distribution thereof. Any such request by the Holders pursuant to this Section 2.1(a)(i) is referred to as a “Demand Registration Request,” the registration so requested is referred to as a “Demand Registration.”
(ii) As promptly as practicable, but no later than 10 days after receipt of a Demand Registration Request, the Company shall give written notice (a “Demand Exercise Notice”) of such Demand Registration Request to all Holders of record of Registrable Securities. The Company, subject to Sections 2.3 and 2.6, shall include in a Demand Registration the Registrable Securities of any Holder of Registrable Securities that shall have made a written request to the Company within the time limits specified below for inclusion in such registration (the “Participating Holders”). Any such request from the Holders must be delivered to the Company within 10 Business Days after the receipt of the Demand Exercise Notice and must specify the maximum number of Registrable Securities intended to be disposed of by such Holders.
(iii) The Company, as expeditiously as possible but subject to Section 2.1(c), shall use its reasonable best efforts to effect such registration under the Securities Act of the Registrable Securities that the Company has been so requested to register for distribution in accordance with such intended method of distribution.
(b) Registrations under this Section 2.1 shall be on such appropriate registration form of the SEC for the disposition of such Registrable Securities in accordance with the intended method of disposition thereof, which form shall be selected by the Company and shall be reasonably acceptable to the Participating Holders.
(c) The Demand Registration rights granted in Section 2.1(a) to the Holders are subject to the following limitations:
(i) the Company shall not be required to cause a registration pursuant to Section 2.1(a) to be filed within 45 days or to be declared effective within a period of 90 days after the effective date of any other registration statement of the Company filed pursuant to the Securities Act for which piggyback rights were available pursuant to Section 2.3 and for which a majority of the Registrable Securities requested to be included in such registration have been included;
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(ii) if, in the opinion of counsel to the Company, any registration of Registrable Securities would require disclosure of information not otherwise then required by law to be publicly disclosed and, in the good faith judgment of the board of directors of the Company, such disclosure is reasonably likely to adversely affect any material financing, acquisition, corporate reorganization or merger or other material transaction or event involving the Company or otherwise have a material adverse effect on the Company (a “Valid Business Reason”), the Company may postpone or withdraw a filing of a registration statement relating to a Demand Registration Request until such Valid Business Reason no longer exists, but in no event shall the Company avail itself of such right for more than (A) 45 days after receipt of a Demand Registration Request or (B) 90 days, in the aggregate, in any period of 365 consecutive days (such period of postponement or withdrawal under this clause (ii), the “Postponement Period”); and the Company shall give written notice of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof; and
(iii) the Company shall not be obligated to effect more than two Demand Registrations under Section 2.1(a) for the Holders.
If the Company shall give any notice of postponement or withdrawal of any registration statement pursuant to clause (ii) above, the Company shall not register any equity security of the Company during the period of postponement or withdrawal. Each Holder of Registrable Securities agrees that, upon receipt of any written notice from the Company that the Company has determined to withdraw any registration statement pursuant to clause (ii) above, such Holder will discontinue its disposition of Registrable Securities pursuant to such registration statement. If the Company shall have withdrawn or prematurely terminated a registration statement filed under Section 2.1(a)(i), the Company shall not be considered to have effected an effective registration for the purposes of this Agreement until the Company shall have filed a new registration statement covering the Registrable Securities covered by the withdrawn registration statement and such registration statement shall have been declared effective and shall not have been withdrawn. If the Company shall give any notice of withdrawal or postponement of a registration statement, at such time as the Valid Business Reason that caused such withdrawal or postponement no longer exists (but in no event more than 45 days after the date of the postponement or withdrawal), the Company shall use its reasonable best efforts to effect the registration under the Securities Act of the Registrable Securities covered by the withdrawn or postponed registration statement in accordance with this Section 2.1.
(d) The Company, subject to Sections 2.4 and 2.7, may elect to include in any registration statement and offering made pursuant to Section 2.1(a)(i), (i) authorized but unissued shares of Common Stock or shares of Common Stock held by the Company as treasury shares and (ii) any other shares of Common Stock that are requested to be included in such registration pursuant to the exercise of piggyback rights granted by the Company (“Additional Piggyback Rights”); provided, however, that such inclusion shall be permitted only to the extent that it is pursuant to and subject to the terms of the underwriting agreement or arrangements, if any, entered into by the Participating Holders (subject to Section 2.4).
(e) A Holder may withdraw its Registrable Securities from a Demand Registration at any time. If all such Holders do so, the Company shall cease all efforts to secure
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registration and such registration nonetheless shall be deemed a Demand Registration for purposes of this Section 2.1 unless (i) the withdrawal is made following withdrawal or postponement of such registration by the Company pursuant to a Valid Business Reason as contemplated by Section 2.1(c), (ii) the withdrawal is based on the reasonable determination of the Holders who requested such registration that there has been, since the date of the Demand Registration Request, a material adverse change in the business or prospects of the Company, or (iii) the Holders who requested such registration shall have paid or reimbursed the Company for all of the reasonable out-of-pocket fees and expenses incurred by the Company in connection with the withdrawn registration.
(f) A Demand Registration shall not be deemed to have been effected and shall not count as such (i) unless a registration statement with respect thereto has become effective and has remained effective for a period of at least 180 days or such shorter period during which all Registrable Securities covered by such Registration Statement have been sold or withdrawn, or, if such Registration Statement relates to an underwritten offering, such longer period as, in the opinion of counsel for the underwriter(s), is required by law for delivery of a prospectus in connection with the sale of Registrable Securities by an underwriter or dealer, (ii) if, after the registration statement with respect thereto has become effective, it becomes subject to any stop order, injunction or other order or requirement of the SEC or other governmental agency or court for any reason, (iii) if it is withdrawn by the Company pursuant to a Valid Business Reason as contemplated by Section 2.1(c) or (iv) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such Demand Registration are not satisfied, other than solely by reason of some act or omission of the Participating Holders.
(g) In connection with any Demand Registration, the Company may designate the lead managing underwriter in connection with such registration and each other managing underwriter for such registration, provided, that, in each case, each such underwriter is reasonably satisfactory to the Participating Holders.
Section 2.2 Registration on Form S-3.
(a) Filing. The Company shall use its reasonable best efforts to qualify and continue to be qualified for registration on Form S-3 or any comparable or successor form or forms. After the Company has qualified for the use of Form S-3, in addition to the rights contained in the foregoing provisions of this Article II and subject to the conditions set forth herein, including in this Section 2.2, if the Company receives from a Holder or Holders of Registrable Securities a written request that the Company effect any registration on Form S-3 or any similar short form registration statement with respect to the resale of all or part of the Registrable Securities (such request shall state the number of shares of Registrable Securities to be disposed of and the intended methods of disposition of such shares by such Holder or Holders), the Company will take all such action with respect to such Registrable Securities as set forth in Section 2.1(a)(ii) and Section 2.1(a)(iii).
(b) Limitation on S-3 Registration. The registration rights granted in Section 2.2(a) to the Holders are subject to the following limitations and the Company shall not be obligated to effect, or take any action to effect, any such registration pursuant to this Section 2.2:
(i) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) on Form S-3 at an aggregate price to the public of less than $5,000,000;
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(ii) if, in a given twelve (12)-month period, the Company has effected two registrations in such period pursuant to Section 2.1 or 2.2;
(iii) the Company shall not be required to cause a registration pursuant to Section 2.2(a) to be filed within 45 days or to be declared effective within a period of 90 days after the effective date of any other registration statement of the Company filed pursuant to the Securities Act for which piggyback rights were available pursuant to Section 2.3 and for which a majority of the Registration Securities requested to be included in such registration have been included;
(iv) in the event of a Valid Business Reason, the Company may postpone or withdraw a filing of a registration statement pursuant to this Section 2.2 until such Valid Business Reason no longer exists, but in no event shall the Company avail itself of such right for more than the Postponement Period; and the Company shall give written notice of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof; and
(v) the Company shall not be obligated to effect more than three registrations under Section 2.2(a) for the Holders.
(c) Underwriting. If the Holders of Registrable Securities requesting registration under this Section 2.2 intend to distribute the Registrable Securities covered by their request by means of an underwriting, the provisions of Section 2.7 shall apply to such registration. Notwithstanding anything contained herein to the contrary, registrations effected pursuant to this Section 2.3 shall not be counted as requests for registration or registrations effected pursuant to Section 2.1.
Section 2.3 Piggyback Registrations.
(a) If, at any time, the Company proposes or is required to register any of its equity securities under the Securities Act (other than pursuant to (i) registrations on Form S-8 or any similar form(s) solely for registration of securities in connection with an employee benefit plan or dividend reinvestment plan, (ii) registrations on Form S-4 or any similar form(s) solely for registration of securities in connection with any business combination transaction, or (iii) a registration under Section 2.1 or 2.2) on a registration statement on Form S-1 or Form S-3 or an equivalent general registration form then in effect, whether or not for its own account, the Company shall give prompt written notice of its intention to do so to each Holder. Upon the written request of any Holder, made within 10 Business Days following the receipt of any such written notice (which request shall specify the maximum number of Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof), the Company, subject to Sections 2.3(b), 2.4 and 2.7, shall use reasonable best efforts to cause all
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such Registrable Securities to be included in the registration statement with the securities that the Company at the time proposes to register to permit the sale or other disposition by the Holders in accordance with the intended method of distribution thereof of the Registrable Securities to be so registered. Except as otherwise set forth herein, no registration of Registrable Securities effected under this Section 2.3(a) shall relieve the Company of its obligations to effect registrations under Section 2.1 or 2.2.
(b) If, at any time after giving written notice of its intention to register any equity securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such equity securities, the Company will give written notice of such determination to each Holder and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration, without prejudice, however, to the rights of Holders under Section 2.1 or 2.2, and (ii) in the case of a determination to delay such registration of its equity securities, shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other equity securities.
(c) Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 2.3 by giving written notice to the Company of its request to withdraw. Such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration. Such withdrawal shall be irrevocable and, after making such withdrawal, a Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made.
Section 2.4 Priority in Registrations.
(a) If any requested registration made pursuant to Section 2.1 or 2.2 involves an underwritten offering and the lead managing underwriter of such offering (the “Manager”) shall advise the Company that, in its view, the number of securities requested to be included in such registration by the Holders of Registrable Securities or any other persons, including those shares of Common Stock requested by the Company to be included in such registration, exceeds the largest number (the “Section 2.4(a) Sale Number”) that can be sold in an orderly manner in such offering within a price range acceptable to the Participating Holders, the Company shall use reasonable best efforts to include in such registration:
(i) first, all Registrable Securities requested to be included in such registration by the Holders thereof; provided, however, that, if the number of such Registrable Securities exceeds the Section 2.4(a) Sale Number, the number of such Registrable Securities (not to exceed the Section 2.4(a) Sale Number) to be included in such registration shall be allocated on a pro rata basis among all Holders requesting that Registrable Securities be included in such registration, based on the number of Registrable Securities then owned by each such Holder requesting inclusion in relation to the number of Registrable Securities owned by all Holders requesting inclusion;
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(ii) second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.4(a) is less than the Section 2.4(a) Sale Number, the remaining shares to be included in such registration shall be allocated on a pro rata basis among all Holders requesting that securities be included in such registration pursuant to the exercise of Additional Piggyback Rights (“Piggyback Shares”), based on the aggregate number of Piggyback Shares then owned by each holder requesting inclusion in relation to the aggregate number of Piggyback Shares owned by all holders requesting inclusion, up to the Section 2.4(a) Sale Number; and
(iii) third, to the extent that the number of securities to be included pursuant to clauses (i) and (ii) of this Section 2.4(a) is less than the Section 2.4(a) Sale Number, any securities that the Company proposes to register, up to the Section 2.4(a) Sale Number.
If, as a result of the proration provisions of this Section 2.4(a), any Holder shall not be entitled to include all Registrable Securities in a registration that such Holder has requested be included, such Holder may elect to withdraw its request to include Registrable Securities in such registration or may reduce the number requested to be included; provided, however, that (A) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (B) such withdrawal shall be irrevocable and, after making such withdrawal, such Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made.
(b) If any registration pursuant to Section 2.3 involves an underwritten offering that was proposed by the Company and the Manager shall advise the Company that, in its view, the number of securities requested to be included in such registration exceeds the number (the “Section 2.4(b) Sale Number”) that can be sold in an orderly manner in such registration within a price range acceptable to the Company, the Company shall include in such registration:
(i) first, all Common Stock that the Company proposes to register for its own account; and
(ii) second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.4(b) is less than the Section 2.4(b) Sale Number, the remaining shares to be included in such registration shall be allocated on a pro rata basis among all holders requesting that Registrable Securities or Piggyback Shares be included in such registration pursuant to the exercise of piggyback rights pursuant to Section 2.3 of this Agreement or Additional Piggyback Rights, based on the aggregate number of Registrable Securities and Piggyback Shares then owned by each holder requesting inclusion in relation to the aggregate number of Registrable Securities and Piggyback Shares owned by all holders requesting inclusion, up to the Section 2.4(b) Sale Number.
(c) If any registration pursuant to Section 2.3 involves an underwritten offering that was proposed by holders of securities of the Company that have the right to require such registration pursuant to an agreement entered into by the Company (“Additional Demand Rights”) and the Manager shall advise the Company that, in its view, the number of securities
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requested to be included in such registration exceeds the number (the “Section 2.4(c) Sale Number”) that can be sold in an orderly manner in such registration within a price range acceptable to the Company or holders of Additional Demand Rights, as applicable, the Company shall include in such registration:
(i) first, all securities requested to be included in such registration by the holders of Additional Demand Rights (“Additional Registrable Securities”); provided, however, that, if the number of such Additional Registrable Securities exceeds the Section 2.4(c) Sale Number, the number of such Additional Registrable Securities (not to exceed the Section 2.4(c) Sale Number) to be included in such registration shall be allocated on a pro rata basis among all holders of Additional Registrable Securities requesting that Additional Registrable Securities be included in such registration, based on the number of Additional Registrable Securities then owned by each such holder requesting inclusion in relation to the number of Additional Registrable Securities owned by all of such holders requesting inclusion;
(ii) second, to the extent that the number of securities to be included pursuant to clause (i) of this Section 2.4(c) is less than the Section 2.4(c) Sale Number, any Common Stock that the Company proposes to register for its own account, up to the Section 2.4(c) Sale Number; and
(iii) third, to the extent that the number of securities to be included pursuant to clauses (i) and (ii) of this Section 2.4(c) is less than the Section 2.4(c) Sale Number, the remaining shares to be included in such registration shall be allocated on a pro rata basis among all holders requesting that Registrable Securities or Piggyback Shares be included in such registration pursuant to the exercise of piggyback rights pursuant to Section 2.1 or Additional Piggyback Rights, based on the aggregate number of Registrable Securities and Piggyback Shares then owned by each holder requesting inclusion in relation to the aggregate number of Registrable Securities and Piggyback Shares owned by all holders requesting inclusion, up to the Section 2.4(c) Sale Number.
Section 2.5 Registration Procedures. Whenever the Company is required by the provisions of this Agreement to use reasonable best efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company as expeditiously as possible, at the Company’s reasonable expense:
(a) shall prepare and file with the SEC the requisite registration statement, which shall comply as to form in all material respects with the requirements of the applicable form and shall include all financial statements required by the SEC to be filed therewith, and use reasonable best efforts to cause such registration statement to become and remain effective (provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, or comparable statements under securities or blue sky laws of any jurisdiction, or any Issuer Free Writing Prospectus related thereto, the Company will furnish to counsel for the Participating Holders and the lead managing underwriter, if any, copies of all such documents proposed to be filed (including all exhibits thereto), which documents will be subject to the reasonable review and reasonable comment of such counsel, and the Company shall not file any registration statement or amendment thereto, any prospectus or supplement thereto or any Issuer Free Writing Prospectus related thereto to which the holders of a majority of the Registrable Securities covered by such registration, the Participating Holders or the underwriters, if any, shall reasonably object);
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(b) shall prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for such period as any seller of Registrable Securities pursuant to such registration statement shall request and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such registration statement in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement;
(c) shall furnish, without charge, to each seller of such Registrable Securities and each underwriter, if any, of the securities covered by such registration statement such number of copies of such registration statement, each amendment thereto, the prospectus included in such registration statement, each preliminary prospectus and each Issuer Free Writing Prospectus utilized in connection therewith, all in conformity with the requirements of the Securities Act, and such other documents as such seller and underwriter reasonably may request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such seller, and shall consent to the use in accordance with all applicable law of each such registration statement, each amendment thereto, each such prospectus, preliminary prospectus or Issuer Free Writing Prospectus by each such seller of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such registration statement or prospectus;
(d) shall use reasonable best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions as any sellers of Registrable Securities or any managing underwriter, if any, reasonably shall request, and do any and all other acts and things that may be reasonably necessary or advisable to enable such sellers or underwriter, if any, to consummate the disposition of the Registrable Securities in such jurisdictions, except that in no event shall the Company be required to qualify to do business as a foreign corporation in any jurisdiction where, but for the requirements of this Section 2.5(d), it would not be required to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction;
(e) shall promptly notify each Holder selling Registrable Securities covered by such registration statement and each managing underwriter, if any:
(i) when the registration statement, any pre-effective amendment, the prospectus or any prospectus supplement related thereto, any post-effective amendment to the registration statement or any Issuer Free Writing Prospectus has been filed and, with respect to the registration statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or state securities authority for amendments or supplements to the registration statement or the prospectus related thereto or for additional information;
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(iii) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation of any proceeding for such purpose;
(v) of the existence of any fact of which the Company becomes aware which results in the registration statement, the prospectus related thereto, any document incorporated therein by reference, any Issuer Free Writing Prospectus or the information conveyed to any purchaser at the time of sale to such purchaser containing an untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make any statement therein not misleading; and
(vi) if at any time the representations and warranties contemplated by any underwriting agreement, securities sale agreement, or other similar agreement, relating to the offering shall cease to be true and correct in all material respects; and, if the notification relates to an event described in clause (v), the Company, subject to the provisions of Section 2.1(c), promptly shall prepare and file with the SEC, and furnish to each seller and each underwriter, if any, a reasonable number of copies of, a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading;
(f) shall comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, as soon as reasonably practicable after the effective date of the registration statement (and in any event within 90 days after the end of such 12 month period described hereafter), an earnings statement, which need not be audited, covering the period of at least 12 consecutive months beginning with the first day of the Company’s first calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(g) shall use reasonable best efforts to cause all Registrable Securities covered by such registration statement to be authorized to be listed on a national securities exchange if shares of the particular class of Registrable Securities are at that time, or will be immediately following the offering, listed on such exchange;
(h) shall provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement;
(i) shall enter into such customary agreements (including, if applicable, an underwriting agreement), deliver such certificates and take such other actions as the Participating Holders shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (it being understood that the Holders of the Registrable Securities that are
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to be distributed by any underwriters shall be parties to any such underwriting agreement and may, at their option, require that the Company make to and for the benefit of such Holders the representations, warranties and covenants of the Company which are being made to and for the benefit of such underwriters);
(j) shall use reasonable best efforts to obtain an opinion from the Company’s counsel and a “cold comfort” letter from the Company’s independent public accountants in customary form and covering such matters as are customarily covered by such opinions and “cold comfort” letters delivered to underwriters in underwritten public offerings, which opinion and letter shall be reasonably satisfactory to the underwriter, if any;
(k) shall use reasonable best efforts to prevent the issuance of or to obtain the withdrawal of any order suspending the effectiveness of the registration statement;
(l) shall provide a CUSIP number for all Registrable Securities, not later than the effective date of the registration statement and use reasonable best efforts to cause all Registrable Securities covered by the applicable registration statement to be listed on The NASDAQ Stock Market;
(m) shall make reasonably available its employees and personnel for participation in “road shows” and other marketing efforts and otherwise provide reasonable assistance to the underwriters (including participating in and making all relevant financial and other records and pertinent corporate documents and information of the Company available for the due diligence review the Participating Holders and the underwriters, if any, and their legal counsel and accountants), taking into account the needs of the Company’s businesses and the requirements of the marketing process so as not to unreasonably interfere with the conduct of the Company’s business, in the marketing of Registrable Securities in any underwritten offering;
(n) shall promptly prior to the filing of any document that is to be incorporated by reference into the registration statement or the prospectus, and prior to the filing of any Issuer Free Writing Prospectus, provide copies of such document to counsel for the selling holders of Registrable Securities and to each managing underwriter, if any, and make the Company’s representatives reasonably available for discussion of such document and make such changes in such document concerning the selling holders prior to the filing thereof as counsel for such selling holders or underwriters may reasonably request;
(o) shall cooperate with the sellers of Registrable Securities and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the instructions of the sellers of Registrable Securities at least three Business Days prior to any sale of Registrable Securities and instruct any transfer agent and registrar of Registrable Securities to release any stop transfer orders in respect thereof;
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(p) shall take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities;
(q) shall not take any direct or indirect action prohibited by Regulation M under the Exchange Act; provided, however, that to the extent that any prohibition is applicable to the Company, the Company will take such action as is necessary to make any such prohibition inapplicable;
(r) shall cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA; and
(s) shall take all reasonable action to ensure that any Issuer Free Writing Prospectus utilized in connection with any registration covered by Section 2.1, 2.2 or 2.3 complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
To the extent the Company is a well-known seasoned issuer as defined in Rule 405 under the Securities Act (a “WKSI”) at the time any Demand Registration Request is submitted to the Company, and such Demand Registration Request requests that the Company file an automatic shelf registration statement as defined in Rule 405 under the Securities Act (an “automatic shelf registration statement”) on Form S-3, the Company shall file an automatic shelf registration statement that covers those Registrable Securities that are requested to be registered. The Company shall use reasonable best efforts to remain a WKSI and not become an ineligible issuer (as defined in Rule 405 under the Securities Act) during the period during which such automatic shelf registration statement is required to remain effective. If the Company does not pay the filing fee covering the Registrable Securities at the time the automatic shelf registration statement is filed, the Company shall pay such fee at such time or times as the Registrable Securities are to be sold. If the automatic shelf registration statement has been outstanding for at least three years, at the end of the third year the Company shall refile a new automatic shelf registration statement covering the Registrable Securities. If at any time when the Company is required to re-evaluate its WKSI status, the Company determines that it is not a WKSI, the Company shall use reasonable best efforts to refile the shelf registration statement on Form S-3 and, if such form is not available, Form S-1 and keep such registration statement effective during the period during which such registration statement is required to be kept effective.
If the Company files any shelf registration statement for the benefit of the holders of any of its securities other than the Holders, the Company shall include in such registration statement such disclosures as may be required by Rule 430B under the Securities Act, referring to the unnamed selling security holders in a generic manner by identifying the initial offering of the securities to the Holders, in order to ensure that the Holders may be added to such shelf registration statement at a later time through the filing of a prospectus supplement rather than a post-effective amendment.
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The Company may require as a condition precedent to the Company’s obligations under this Section 2.5 that each seller of Registrable Securities as to which any registration is being effected furnish the Company such information in writing regarding such seller and the distribution of such Registrable Securities as the Company from time to time reasonably may request; provided, that such information is necessary for the Company to consummate such registration and shall be used only in connection with such registration.
Each seller of Registrable Securities agrees that upon receipt of any notice from the Company under Section 2.5(e)(v), such seller will discontinue such seller’s disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such seller’s receipt of the copies of the supplemented or amended prospectus. In the event the Company shall give any such notice, the applicable period set forth in Section 2.5(b) shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus. The Company shall use reasonable best efforts to ensure no such discontinuation remains in effect in any 12-month period for a total number of days greater than 90.
If any such registration statement or comparable statement under “blue sky” laws refers to any Holder by name or otherwise as the Holder of any securities of the Company, such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder and the Company, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company’s securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company or (ii) in the event that such reference to such Holder by name or otherwise is not in the judgment of the Company, as advised by counsel, required by the Securities Act or any similar federal statute or any state “blue sky” or securities law then in force, the deletion of the reference to such Holder.
Section 2.6 Registration Expenses.
(a) The Company shall pay (i) all reasonable Registration Expenses with respect to any registration effected under Section 2.1 or 2.2 whether or not it becomes effective or remains effective for the period contemplated by Section 2.5(b) and (ii) all Registration Expenses with respect to any registration effected under Section 2.3.
(b) Notwithstanding the foregoing, (i) the provisions of this Section 2.6 shall be deemed amended to the extent necessary to cause these expense provisions to comply with “blue sky” laws of each state in which the offering is made, (ii) in connection with any registration hereunder, each Holder of Registrable Securities being registered shall pay all underwriting discounts and commissions and any transfer taxes, if any, attributable to the sale of such Registrable Securities, pro rata with respect to payments of discounts and commissions in accordance with the number of shares sold in the offering by such Holder and (iii) the Company shall, in the case of all registrations under this Article II, be responsible for all its internal expenses.
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Section 2.7 Underwritten Offerings.
(a) If requested by the underwriters for any underwritten offering by the Holders pursuant to a registration requested under Section 2.1 or 2.2, the Company shall enter into a customary underwriting agreement with the underwriters. Such underwriting agreement shall be satisfactory in form and substance to the Participating Holders and shall contain such representations and warranties by, and such other agreements on the part of, the Company and such other terms as are generally prevailing in agreements of that type. Any Holder participating in the offering shall be a party to such underwriting agreement and, at its option, may require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters also shall be made to and for the benefit of such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder; provided, however, that the Company shall not be required to make any representations or warranties with respect to written information specifically provided by a selling Holder for inclusion in the registration statement. No Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, its ownership of and title to the Registrable Securities and its intended method of distribution; and any liability of such Holder to any underwriter or other Person under such underwriting agreement shall be limited to liability arising from breach of its representations and warranties and shall be limited to an amount equal to the proceeds (net of expenses and underwriting discounts and commissions) that it derives from such registration.
(b) In the case of a registration pursuant to Section 2.3, if the Company shall have determined to enter into an underwriting agreement in connection therewith, any Registrable Securities to be included in such registration shall be subject to such underwriting agreement. Any Holder participating in such registration may, at its option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder. No Holder shall be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such Holder, its ownership of and title to the Registrable Securities and its intended method of distribution; and any liability of such Holder to any underwriter or other Person under such underwriting agreement shall be limited to liability arising from breach of its representations and warranties and shall be limited to an amount equal to the proceeds (net of expenses and underwriting discounts and commissions) that it derives from such registration.
(c) In the case of any registration under Section 2.1 or 2.2 pursuant to an underwritten offering, or, in the case of a registration under Section 2.3, if the Company has determined to enter into an underwriting agreement in connection therewith, all securities to be included in such registration shall be subject to an underwriting agreement and no Person may participate in such registration unless such Person agrees to sell such Person’s securities on the basis provided therein and, subject to the provisions of this Section 2.7, completes and executes all reasonable questionnaires, and other documents, including custody agreements and powers of attorney, that must be executed in connection therewith, and provides such other information to the Company or the underwriter as may be necessary to register such Person’s securities.
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Section 2.8 No Required Sale. Nothing in this Agreement shall be deemed to create an independent obligation on the part of any Holder to sell any Registrable Securities pursuant to any effective registration statement.
Section 2.9 Indemnification.
(a) In the event of any registration of any securities of the Company under the Securities Act pursuant to this Article II, the Company will, and hereby agrees to, indemnify and hold harmless, to the fullest extent permitted by law, each Holder of Registrable Securities, its directors, officers, fiduciaries, employees, agents, affiliates, consultants, representatives, general and limited partners, stockholders, successors, assigns (and the directors, officers, employees and stockholders thereof), and each other Person, if any, who controls such Holder within the meaning of the Securities Act, from and against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) and expenses (including reasonable fees of counsel and, with respect to any settlement, any amounts paid in such settlement effected with the Company’s consent, which consent shall not be unreasonably denied, withheld, conditioned or delayed to which each such indemnified party may become subject under the Securities Act or otherwise (collectively, “Losses”), insofar as such Losses arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, in each case, together with the documents incorporated by reference therein, or any Issuer Free Writing Prospectus utilized in connection therewith, or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and the Company will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Loss as such expenses are incurred; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Loss arises out of or is based upon any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such registration statement or amendment thereof or supplement thereto or in any such prospectus or any preliminary, final or summary prospectus or Issuer Free Writing Prospectus in reliance upon and in conformity with written information prepared and furnished to the Company by or on behalf of such indemnified party expressly for use therein. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such Holder.
(b) Each Holder of Registrable Securities that are included in the securities as to which any registration under Section 2.1, 2.2 or 2.3 is being effected shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 2.9) to the extent permitted by law the Company, its officers and
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directors, each Person controlling the Company within the meaning of the Securities Act and all other prospective sellers and their respective directors, officers, fiduciaries, employees, agents, affiliates, consultants, representatives, general and limited partners, stockholders, successors, assigns and respective controlling Persons from and against any Loss with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus utilized in connection therewith, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company or its representatives by or on behalf of such Holder specifically for use therein, and reimburse such indemnified party for any legal or other expenses reasonably incurred in connection with investigating or defending any such Loss as such expenses are incurred; provided, however, that the aggregate amount that any such Holder shall be required to pay pursuant to this Section 2.9(b) and Sections 2.9(c), (e) and (f) shall in no case be greater than the amount of the net proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the registration statement giving rise to such claim. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified party and shall survive the transfer of such securities by such Holder.
(c) Any Person entitled to indemnification under this Agreement promptly shall notify the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 2.9, but the failure of any such Person to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 2.9, except to the extent the indemnifying party is actually and materially prejudiced thereby and shall not relieve the indemnifying party from any liability that it may have to any such Person otherwise than under this Article II. In case any action or proceeding is brought against an indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within 20 days after receiving notice from such indemnified party, (ii) if such indemnified party who is a defendant in any action or proceeding that is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party that are not available to the indemnifying party or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have concluded that there may be
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legal defenses available to such party or parties that are not available to the other indemnified parties or to the extent representation of all indemnified parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct) and the indemnifying party shall be liable for any expenses therefor. Without the written consent of the indemnified party, which consent shall not be unreasonably withheld, no indemnifying party shall effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder, whether or not the indemnified party is an actual or potential party to such action or claim, unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.
(d) If for any reason the foregoing indemnity is held by a court of competent jurisdiction to be unavailable with respect to any Loss hereunder, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of any Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, with respect to the statement or omissions that resulted in such Loss as well as any other equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults but also the relative benefits of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 2.9(d) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 2.9(d). The amount paid or payable in respect of any Loss shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Loss. No Person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 2.9(d) to the contrary, no indemnifying party other than the Company shall be required pursuant to this section 2.9(d) to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of Registrable Securities in the offering to which the Losses of the indemnified parties relate, less the amount of any indemnification payment made by such indemnifying party pursuant to Sections 2.9(b) and (c). No Person guilty of or liable for fraudulent misrepresentation shall be entitled to contribution from any other Person.
(e) The indemnity and contribution agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the transfer of the Registrable Securities by any such party.
(f) The indemnification and contribution required by this Section 2.9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred.
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ARTICLE III
GENERAL
Section 3.1 Adjustments Affecting Registrable Securities. The Company shall not effect or permit to occur any combination or subdivision of shares of Common Stock that would adversely affect the ability of any Holder of any Registrable Securities to include such Registrable Securities in any registration contemplated by this Agreement or the marketability of such Registrable Securities in any such registration. The Company will take all reasonable steps necessary to effect a subdivision of shares if in the reasonable judgment of (a) the Participating Holders or (b) the managing underwriter for the offering in respect of such Demand Registration Request, such subdivision would enhance the marketability of the Registrable Securities. Each Holder shall vote all of its shares of Common Stock in a manner, and take all other actions reasonably necessary, to permit the Company to carry out the intent of the preceding sentence including, without limitation, voting in favor of an amendment to the Company’s certificate of incorporation in order to increase the number of authorized shares of capital stock of the Company.
Section 3.2 Rule 144. The Company covenants that (a) upon such time as it becomes, and so long as it remains, subject to the reporting provisions of the Exchange Act, it will timely file the reports required to be filed by it under the Securities Act or the Exchange Act or, if it is not required to file such reports, upon the request of any Holder it shall make publicly available other information so long as necessary to permit sales of such Registrable Securities in compliance with Rule 144 under the Securities Act and (b) it will take such further action as any Holder of Registrable Securities reasonably may request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.
Section 3.3 Nominees for Beneficial Owners. If Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its option, be treated as the Holder of such Registrable Securities for purposes of any request or other action by any Holder or Holders of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares constituting Registrable Securities held by any Holder or Holders of Registrable Securities contemplated by this Agreement; provided, that the Company shall have received assurances reasonably satisfactory to it of such beneficial ownership.
Section 3.4 No Inconsistent Agreements. The Company shall not hereafter enter into or permit to continue in effect any agreement with respect to its securities that conflicts with or violates the rights granted to the holders of Registrable Securities in this Agreement.
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ARTICLE IV
MISCELLANEOUS
Section 4.1 Amendment and Waiver.
(a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by the Company and Majority of Holders, or, in the case of a waiver, by the party or parties against whom the waiver is to be effective, in an instrument specifically designated as an amendment or waiver hereto.
(b) No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder.
Section 4.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by e-mail, upon written confirmation of receipt by e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
(a) if to a Stockholder, to the address set forth opposite such Stockholder’s name in Schedule A hereto, with a copy (which shall not constitute notice) to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Phone: 212-403-1000
E-mail: AJNussbaum@wlrk.com
Attention: Andrew J. Nussbaum
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(b) if to the Company, to:
Singer Madeline Holdings, Inc.
c/o Sequential Brands Group, Inc.
5 Bryant Park
New York, NY 10018
Phone: (646) 564-2577
Email: yshmidman@sbg-ny.com
Attention: Yehuda Shmidman
with a copy (which shall not constitute notice) to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166-0193
Phone: (212) 351-4000
Email: bbecker@gibsondunn.com
Attention: Barbara L. Becker
or such other address as the Company shall have specified in writing in accordance with this Section 4.2. Any notice or other document required or permitted to be given or delivered to a Holder shall be delivered to the last address shown on the books of the Company or at any more recent address of which the Holder shall have notified the Company in writing.
Section 4.3 Interpretation. When a reference is made in this Agreement to a Section, Article, Exhibit or Schedule such reference shall be to a Section, Article, Exhibit or Schedule of this Agreement unless otherwise indicated. The headings contained in this Agreement or in any Exhibit or Schedule are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to the Agreement as a whole and not to any particular provision in this Agreement. The term “or” is not exclusive. The word “will” shall be construed to have the same meaning and effect as the word “shall.” References to days mean calendar days unless otherwise specified.
Section 4.4 Entire Agreement. This Agreement and the Merger Agreement constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings between the parties with respect to the subject matter hereof and thereof.
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Section 4.5 No Third-Party Beneficiaries. Except as provided in Section 2.7, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement.
Section 4.6 Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Delaware.
Section 4.7 Submission to Jurisdiction. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any other party or its successors or assigns shall be brought and determined in the Court of Chancery of the State of Delaware, provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
Section 4.8 Assignment; Successors. This Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. If any Person shall acquire Registrable Securities from any Holder in any manner, whether by operation of law or otherwise, such Person shall promptly notify the Company and such Registrable Securities acquired from such Holder shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be entitled to receive the benefits of and be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement. Any such successor or assign shall agree in writing to acquire and hold the Registrable Securities acquired from such Holder subject to all of the terms hereof. If any Holder shall acquire additional Registrable Securities, such Registrable Securities shall be subject to all of the terms, and entitled to all of the benefits, of this Agreement.
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Section 4.9 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Court of Chancery of the State of Delaware, provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware, this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.
Section 4.10 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
Section 4.11 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 4.12 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. This Agreement may be executed by facsimile or .pdf signature and a facsimile or .pdf signature shall constitute an original for all purposes.
Section 4.13 Time of Essence. Time is of the essence with regard to all dates and time periods set forth or referred to in this Agreement.
Section 4.14 No Presumption Against Drafting Party. Each of the parties hereto acknowledges that it has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.
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Section 4.15 Early Termination. This Agreement shall become effective upon the Effective Time (as defined in the Merger Agreement). In the event the Merger Agreement is terminated, this Agreement shall automatically terminate.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| SINGER MADELINE HOLDINGS, INC. | ||
| By: | /s/ Yehuda Shmidman | |
| Name: Yehuda Shmidman | ||
| Title: CEO | ||
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
| STOCKHOLDERS: | ||||
| /s/ Martha Stewart | ||||
| Martha Stewart | ||||
| /s/ Alexis Stewart | ||||
| Alexis Stewart | ||||
| Martha Stewart Family Limited Partnership | ||||
| By: | /s/ Martha Stewart | |||
| Name: | Martha Stewart | |||
| Title: | General Partner, in her capacity as trustee of the Martha Stewart 2012 Revocable Trust | |||
| Martha and Alexis Stewart Charitable Foundation | ||||
| By: | /s/ Martha Stewart | |||
| Name: | Martha Stewart | |||
| Title: | Trustee | |||
| By: | /s/ Alexis Stewart | |||
| Name: | Alexis Stewart | |||
| Title: | Trustee | |||
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
| Martha Stewart 2000 Family Trust | ||||
| By: | /s/ Martha Stewart | |||
| Name: | Martha Stewart | |||
| Title: | Trustee | |||
| By: | /s/ Lawrence Shire | |||
| Name: | Lawrence Shire | |||
| Title: | Trustee | |||
| Martha Stewart 1999 Family Trust | ||||
| By: | /s/ Martha Stewart | |||
| Name: | Martha Stewart | |||
| Title: | Trustee | |||
| By: | /s/ John Cuti | |||
| Name: | John Cuti | |||
| Title: | Trustee | |||
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT