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A unit purchase agreement is a legal document that business owners can use to buy goods and services. The seller can offer significant discounts on products or services for bulk purchases. The buyer may then choose not to use all of their allotted units if they do not need them at the time of sale.
The unit purchase agreement can buy goods and services from an individual or a company. However, it includes specific terms and conditions agreed upon before negotiations between parties.
Below is a list of common sections included in Unit Purchase Agreements. These sections are linked to the below sample agreement for you to explore.
MEMBERSHIP UNIT PURCHASE AGREEMENT
THE BOSTON BEER COMPANY, INC.,
DOGFISH EAST OF THE MISSISSIPPI LP
AND, SOLELY WITH RESPECT TO SECTION 6.01,
SAMUEL A. CALAGIONE III
MARIAH D. CALAGIONE
DATED MAY 8, 2019
THIS IS A DRAFT AGREEMENT ONLY AND DELIVERY OR DISCUSSION OF THIS DRAFT AGREEMENT SHOULD NOT BE CONSTRUED AS AN OFFER OR COMMITMENT WITH RESPECT TO THE PROPOSED TRANSACTIONS TO WHICH THIS DRAFT AGREEMENT RELATES. THIS DRAFT AGREEMENT IS BEING DELIVERED PRIOR TO PURCHASER HAVING COMPLETED ITS DUE DILIGENCE. PURCHASER THEREFORE RESERVES THE RIGHT TO REVISE THIS DRAFT AGREEMENT IN ALL RESPECTS PENDING THE RESULTS OF ITS DUE DILIGENCE INVESTIGATION. NO PARTY TO THE PROPOSED TRANSACTION (AND NO PERSON OR ENTITY RELATED TO ANY SUCH PARTY) WILL BE UNDER ANY LEGAL OBLIGATION WITH RESPECT TO THE PROPOSED TRANSACTION OF ANY NATURE WHATSOEVER UNLESS AND UNTIL A DEFINITIVE AGREEMENT PROVIDING FOR THE TRANSACTION HAS BEEN EXECUTED AND DELIVERED BY ALL PARTIES THERETO.
MEMBERSHIP UNIT PURCHASE AGREEMENT
This MEMBERSHIP UNIT PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of May 8, 2019 (the “ Effective Date ”) by and among The Boston Beer Company, Inc., a Massachusetts corporation (the “ Purchaser ”), Dogfish East of the Mississippi LP, a Delaware limited partnership (the “ Seller ”), and, solely with respect to Section 6.01 , Samuel A. Calagione III (“ Mr. Calagione ”) and Mariah D. Calagione (together with Mr. Calagione, the “ Founders ”). Purchaser and Seller and the Founders are sometimes collectively referred to herein as the “ Parties ” and individually referred to herein as a “ Party .” Capitalized terms used and not otherwise defined herein have the meanings set forth in Article VIII below.
WHEREAS , as of the Effective Date, Seller owns 1,655,737 common units (the “ Membership Units ”) in Off-Centered Way LLC, a Delaware limited liability company (“ OCW ” or the “ Company ”), and prior to Closing (as defined herein), Seller will own 1,462,637 common units (the “ Membership Units ”) in OCW;
WHEREAS , Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, the Membership Units, subject to the terms and conditions set forth herein; and
WHEREAS , simultaneously with the execution of this Agreement, Purchaser is entering into a Unit Purchase Agreement with DFH Investors, LLC, a Delaware limited liability company (the “ DFH Investors Agreement ”), and a Merger Agreement with Dogfish Head Holding Company, a Delaware corporation, the Founders and Canoe Acquisition Corp. (the “ Merger Agreement ”).
NOW, THEREFORE , in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
PURCHASE AND SALE
Section 1.01 Purchase and Sale . Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, all of Seller’s rights, title, and interest in and to the Membership Units, free and clear of all Encumbrances, for the consideration specified in Section 1.02 .
Section 1.02 Purchase Price . The aggregate purchase price for the Membership Units shall be $39,079,129 (the “ Purchase Price ”). Purchaser shall pay the Purchase Price to Seller by (a) an amount in cash as calculated pursuant to Section 1.5 (the “ Purchase Price Cash Amount ”), and (b) issuing to Seller such number of shares of Purchaser’s Class A Common Stock (“ Class A Shares ”) as calculated pursuant to Section 1.5 (the “ Purchase Price Share Amount ”).
Section 1.03 The Closing .
(a) The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place remotely simultaneously with the closing of the transactions contemplated by the Merger Agreement or on such other date as is mutually agreeable to Purchaser and Seller. The date of the Closing is referred to herein as the “ Closing Date. ”
(b) At the Closing, Seller shall deliver to Purchaser the deliverables set forth in Section 2.01 and Purchaser shall deliver to Seller the deliverables set forth in Section 2.02 .
Section 1.04 Withholding . Purchaser shall be entitled to reduce the number of Class A Shares that would otherwise be deliverable at Closing by the number of Class A Shares that correspond in dollar value to the amount of Taxes that Purchaser may be required to deduct and withhold from the Purchase Price under any provision of Tax Law. To the extent that amounts are so withheld, deducted and paid over to the Governmental Entity by Purchaser, such withheld amounts shall be treated for all purposes as a cash payment to Seller hereunder in satisfaction of the obligation to deliver the Purchase Price. Notwithstanding the foregoing, Purchaser shall (i) promptly provide Seller with written notice of any amounts that any Person intends to deduct or withhold from the Closing reasonably in advance of (but in any event at least three (3) Business Days before) the payment thereof, (ii) cooperate in good faith with Seller to eliminate or reduce any such withholding or deduction, and (iii) provide Seller a reasonable opportunity to provide any applicable certificates, forms or other documentation that would eliminate or reduce the requirement to deduct or withhold under applicable Law.
Section 1.05 Calculation of Purchase Price .
(a) Not less than three (3) days prior to the Closing Date, the Company shall deliver to Purchaser the following by way of a Funds Flow Memorandum in substantially the form attached hereto as Schedule I:
(i) Seller’s reasonable estimate of the amount of Tax to be owed by Seller as a result of the transactions contemplated by this Agreement, such estimate not to exceed $10,000,000 (the “ Seller Tax Liability Estimate ”);
(ii) Seller’s portion of Seller’s reasonable good faith estimate of the amount Cash of OCW and its Subsidiaries as of the Closing Date (the “ Estimated Closing Cash”);
(iii) Seller’s portion of the outstanding balance of any Indebtedness of OCW and its Subsidiaries as of the Closing Date, as calculated pursuant to appropriate payoff letters from the holders of such Indebtedness, such payoff letters to be provided to Purchaser (the “ Closing Indebtedness ”); and
(iv) Seller’s portion of any and all Transaction Expenses incurred by OCW and its Subsidiaries that remain outstanding as of the Closing Date, as calculated pursuant to proper invoices representing such Transaction Expenses, such invoices to be provided to Purchaser (the “ Closing Transaction Expenses ”).
(b) On the Closing Date, the Purchase Price Cash Amount to be paid by Purchaser to Seller by wire transfer of immediately available funds in accordance with Section 2.02 shall be equal to the Seller Tax Liability Estimate. On the Closing Date, the Purchase Price Share Amount to be delivered by Purchaser to Seller in accordance with Section 2.02 shall be a
number of Class A Shares equal to the quotient of (A) the sum of the Purchase Price plus the Estimated Closing Cash minus the amount of each of the Seller Tax Liability Estimate, the Closing Indebtedness and the Closing Transaction Expenses and (B) a price per share equal to the ten (10) day volume-weighted average price of Purchaser’s shares as traded on the New York Stock Exchange determined as of the Effective Date ($314.60) (the “ Signing Date Share Price ”).
(c) Within fifteen (15) days after the Closing Date, Seller shall deliver to Purchaser a final amount of Cash of OCW and its Subsidiaries as of the Closing Date (the “ Final Closing Cash ”). Such representative shall also provide to Purchaser such data and information as Purchaser may reasonably request in connection with the determination of the Final Closing Cash. Purchaser shall notify such representative of Purchaser’s acceptance or dispute of such statement within five (5) days after Purchaser’s receipt of such statement. In the event of a dispute with respect to the determination of the Final Closing Cash, Purchaser and Seller shall attempt to reconcile their difference and any written agreement by them as to any disputed amounts shall be final, binding, and conclusive on the parties.
(d) If the Final Closing Cash exceeds the Estimated Closing Cash (the Excess Closing Cash ”), Purchaser shall deliver to Seller a number of Class A Shares equal to the quotient of the (A) Excess Closing Cash and (B) the Signing Date Share Price. If the Estimated Closing Cash exceeds the Final Closing Cash (the “ Deficit Closing Cash ”), Purchaser shall cancel a number of Class A Shares of Seller equal to the quotient of (A) the Deficit Closing Cash and (B) the Signing Date Share Price.
CONDITIONS TO CLOSING
Section 2.01 Seller Deliveries . The obligations of Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions as of the Closing Date (any or all of which may be waived in whole or in part by Purchaser in writing):
(a) the representations and warranties of Seller (on behalf of itself, OCW and OCW’s Subsidiaries) set forth in Article III and Article IV below, shall be true and correct in all respects as of the date hereof and as of the Closing Date (except for those representations and warranties which address matters only as of a particular date, which shall remain true and correct as of such date), except that the failure of any such representation or warranty to be so true and correct will be disregarded if the circumstances giving rise to all such failures of all representations and warranties to be so true and correct (considered individually or collectively) do not constitute a Material Adverse Effect;
(b) no action or proceeding before any Governmental Entity shall be pending wherein an unfavorable judgment, decree or order would prevent the performance of this Agreement or the consummation of any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause such transactions to be rescinded;
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(d) Seller shall have performed in all material respects all of their obligations required to be performed under this Agreement at or prior to the Closing; and
(e) Seller will have delivered (or to the extent applicable shall have caused OCW to have delivered) to Purchaser each of the following, in each case in form and substance satisfactory to Purchaser:
(i) a certificate of Seller dated the Closing Date stating that the conditions specified in subsections (a) and (b) of this Section 2.01 have been satisfied;
(ii) a duly executed and delivered assignment of the Membership Units by Seller to Purchaser in the form of Exhibit A hereto;
(iii) a certificate of good standing of Seller certified by the Secretary of State of the State of Delaware as of a reasonably current date;
(iv) a copy of the Certificate of Limited Partnership of Seller, certified by the Secretary of State of the State of Delaware as of a reasonably current date;
(v) a certificate of Mr. Calagione, as General Partner of Seller, dated the Closing Date, attaching the current Agreement of Limited Partnership of Seller;
(vi) a certificate of good standing of OCW certified by the Secretary of State of the State of Delaware as of a reasonably current date;
(vii) a copy of the Certificate of Formation of OCW, certified by the Secretary of State of the State of Delaware as of a reasonably current date;
(viii) a certificate of Mr. Calagione, as a Manager of OCW, dated the Closing Date attaching the Limited Liability Company Agreement of OCW, as currently in effect;
(ix) the written consent of the Board of Managers of OCW to the purchase and sale of the Membership Units contemplated hereby, in accordance with the Limited Liability Company Agreement of OCW;
(x) the written consent of the General Partner to the purchase and sale of the Membership Units contemplated hereby, in accordance with the Limited Partnership Agreement of Seller;
(xi) the written waiver by all of the members of OCW of their respective rights set forth in the Limited Liability Company Agreement of OCW;
(xii) the Founders’ counterpart signatures to that certain Indemnification Agreement by and among Purchaser and the Founders in the form of Exhibit B hereto (the “ Indemnification Agreement ”).
(xiii) the Founders’ and remaining Partners’ counterpart signatures to that certain Registration Rights Agreement by and among Purchaser, the Founders and the remaining Partners in the form of Exhibit C hereto (the “ Registration Rights Agreement ”);
(xiv) an investor questionnaire in the form attached hereto as Exhibit D (the “ Investor Questionnaire ”) which contains standard accredited investor and other customary representations relating to Section 4(a)(2)/Regulation D of the Securities Act from each Partner (as defined below);
(xv) a certificate from Seller, in form and substance required under the Treasury Regulations issued pursuant to Section 1445 of the Code and IRS Notice 2018-29, stating that OCW is not a “foreign person” for purposes of Sections 1445 and 1446(f) of the Code and the Treasury Regulations promulgated thereunder;
(xvi) an IRS form W-9 properly executed by Seller;
(xvii) a certificate of Seller dated as of the Closing Date stating that the conditions specified in subsections (a) and (b) of Section 2.01 have been satisfied; and
(xviii) any other document or certificate as reasonably requested by Purchaser.
Section 2.02 Purchaser Deliveries . The obligation of Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions as of the Closing Date (any or all of which may be waived in whole or in part by Seller in writing):
(a) the representations and warranties of Purchaser contained in Article V below shall be true and correct in all material respects as of the date hereof and as of the Closing Date (except for those representations and warranties which address matters only as of a particular date, which shall remain true and correct in all material respects as of such date);
(b) Purchaser shall have performed in all material respects all of their obligations required to be performed under this Agreement at or prior to the Closing;
(c) Purchaser will have delivered to Seller the following, in each case in form and substance satisfactory to Seller:
(i) the Purchase Price Cash Amount;
(ii) the Purchase Price Share Amount;
(iii) a certificate of Purchaser dated the Closing Date stating that the conditions specified in subsections (a) and (b) of this Section 2.02 have been satisfied;
(iv) a certificate of the Secretary of Purchaser, dated the Closing Date, (i) attaching the current articles of incorporation of Purchaser, certified by the appropriate authority in the jurisdiction of its formation; (ii) certifying the written consent of the Board of Directors of Purchaser approving, adopting, and consenting to (A) the Transaction Documents, and (B) all transactions contemplated thereby, specifically including those to which Mr. Calagione or any of his Affiliates will be a party with Purchaser or any of its Affiliates after Closing, including, but not limited to the International Brand License, the Red Wagon Leases, and the Founders’ Buyback Option, in each case as defined in the Merger Agreement; (iii) attesting to the incumbency and signatures of the officers of Purchaser; and (iv) attaching a copy of the bylaws of Purchaser and any amendments related thereto (or certifying to the absence of any amendments thereto);
(v) Purchaser’s counterpart signature to the Indemnification Agreement; and
(vi) Purchaser’s counterpart signature to the Registration Rights Agreement.
Section 2.03 Parallel Transactions . The respective obligations of the Parties hereunder are conditioned on the simultaneous closing of (a) the transactions contemplated by the Merger Agreement; and (b) the transactions contemplated by the DFH Investors Agreement ((a) and (b) collectively referred to herein as the “ Parallel Transactions ”).
REPRESENTATIONS AND WARRANTIES OF SELLER AS TO SELLER
Seller represents and warrants to Purchaser, that the statements contained in this Article III are true and correct, except as otherwise set forth in the indicated Schedule of the Disclosure Schedule (the “ Disclosure Schedule ”) corresponding thereto, as the Disclosure Schedule is interpreted in accordance with Section 7.01 .
Section 3.01 Organization of Seller . Seller is a limited partnership, duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller has all requisite power and authority to own, lease and operate its properties, rights, and assets and to carry on its business as now being conducted. Seller is not qualified to transact business as a foreign limited partnership in any other jurisdiction. Mr. Calagione is Seller’s sole General Partner.
Section 3.02 Seller Capitalization . Schedule 3.02 of the Disclosure Schedule sets forth the issued and outstanding respective partnership interests of the limited partners and the general partner of Seller. Except as disclosed on Schedule 3.02 of the Disclosure Schedule, there are no outstanding (a) securities of Seller; (b) securities of Seller convertible into or exchangeable for partnership interests or other ownership interests in Seller, or (c) subscriptions, options, warrants, or other rights or other Contracts to acquire partnership interests from Seller, and no obligation of Seller to issue, any (i) partnership interest of Seller, or (ii) securities convertible into or exchangeable for partnership interest or other ownership interests of Seller, and no obligation of Seller to grant, extend or enter into any subscription, warrant, option, right, convertible or exchangeable security or other similar Contract.
Section 3.03 Authority of Seller . Seller has all requisite power and authority to execute and deliver this Agreement and each of the other Transaction Documents to which Seller is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Seller of this Agreement and the other Transaction Documents to which Seller is a party, and the performance of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized in accordance with Seller’s Certificate of Limited Partnership and Agreement of Limited Partnership. Seller has full authority and power to sell the Membership Units to Purchaser and there are no restrictions of any kind including, without limitation, in Seller’s Certificate of Limited Partnership and Agreement of Limited Partnership, that prohibit, restrict or prevent Seller from transferring the Membership Units. No further actions or approvals of Seller or the Partners (as defined below) are necessary to authorize each of the Transaction Documents to which Seller is a party, the performance of such obligations or the consummation of such transactions.
Section 3.04 Enforceability . Each of the Transaction Documents to which Seller is a party has been duly and validly executed and delivered by Seller and constitutes the legal, valid and binding agreement of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency and similar Laws affecting creditors’ rights generally and general principles of equity (whether considered in a proceeding in equity or at law) (such exceptions, collectively, the “ Enforceability Exceptions ”).
Section 3.05 Absence of Restrictions and Conflicts . Except as set forth on Schedule 3.05 of the Disclosure Schedule, the execution and delivery by Seller of the Transaction Documents to which it is a party does not and will not, and the performance of its obligations hereunder and thereunder will not, (i) conflict with or violate, in any material respect, any Law applicable to Seller, or by which any property or asset of Seller, is bound, (ii) require any consent or result in any violation or breach of or constitute (with or without notice or lapse of time or both) a default (or give to others any right of termination, amendment, acceleration or cancellation) under, or result in the triggering of any payments or result in the creation of an Encumbrance (other than Permitted Liens) on any property or asset of Seller, in all cases, pursuant to any of the terms, conditions or provisions of any Material Contract; or (iii) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity.
Section 3.06 Seller ’ s Title to Membership Units . Seller has good and marketable title to and is the lawful, legal, record and beneficial owner of the Membership Units, free and clear of all Encumbrances and Purchaser, at the Closing and upon payment of the Purchase Price, will receive good title to the Membership Units, free and clear of all Encumbrances.
Section 3.07 Investment Representations . Set forth on Schedule 3.07 of the Disclosure Schedule is a true, correct and complete listing of the General Partner and Limited Partners of Seller (each a “ Partner ”). As of Closing, each Partner listed on Schedule 3.07 of the Disclosure Schedule will have completed, executed and delivered to Seller an Investor Questionnaire, dated as of a recent date, and Seller will have made copies of all such executed Investor Questionnaires available to Purchaser. The Company has no reason to believe that the statements set forth in each Investor Questionnaire, when made by the Stockholders, will not be true.
Section 3.08 Operations . The Membership Units are the only assets of Seller, and the operations of Seller since January 1, 2016 have been limited to ownership of the Membership Units. Seller does not have any other operations or business activities and does not employ or engage any individuals to provide services to Seller. Except as set forth on Schedule 3.08 of the Disclosure Schedule, as of the date of this Agreement and on the Closing Date, Seller does not and will not (i) have any other operations or business activities; (ii) employ or engage any individuals to provide services to Seller, or (iii) have any liability to any Person.
Section 3.09 Status as a Partnership . At all times since the date of its organization Seller has been, and on the Closing Date Seller will be, classified for federal and applicable state income Tax purposes as a “partnership” as defined in Section 761(a)(1) of the Code. Seller has timely filed all income Tax and all other material Tax Returns which it was required to file prior to the Closing Date (taking into account any extensions of time to file which have been duly filed), and all such Tax Returns are true, correct and complete in all material respects. All Taxes due and payable by Seller (whether or not shown on a Tax Return) or for which it could be held liable have been fully paid.
REPRESENTATIONS AND WARRANTIES OF SELLER AS TO OCW
Seller represents and warrants to Purchaser, that the statements contained in this Article IV are true and correct, except as otherwise set forth in the indicated Schedule of the Disclosure Schedule corresponding thereto, as the Disclosure Schedule is interpreted in accordance with Section 7.01 .
Section 4.01 Section 4.01 Organization of OCW . OCW is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware. OCW has all requisite limited liability company power and authority to own, lease and operate its properties, rights, and assets and to carry on its business as now being conducted. OCW is duly qualified to transact business as a foreign limited liability company or other applicable business entity and is in good standing in each other jurisdiction in which the ownership or leasing of its properties or assets or the conduct of its business requires such qualification, except where the failure to so qualify or to be in good standing has not had and would not reasonably be expected to result in a Material Adverse Effect. A list of the jurisdictions in which OCW is qualified to conduct business as a foreign limited liability company as of the date hereof is set forth on Schedule 4.01 of the Disclosure Schedule. Schedule 4.01 of the Disclosure Schedule lists all of the current managers and officers of OCW.
Section 4.02 Capitalization . Schedule 4.02 of the Disclosure Schedule sets forth the authorized, issued and outstanding membership or other equity interests in OCW (the “ OCW Units ”). Except as disclosed on Schedule 4.02 of the Disclosure Schedule, there are no outstanding (a) units of membership interest, voting or non-voting equity securities or other ownership interests of OCW or any of its Subsidiaries; (b) securities of OCW or its Subsidiaries convertible into or exchangeable for units of membership interest, voting or non-voting equity securities or other ownership interests of OCW or any of its Subsidiaries; or (c) subscriptions, options, warrants, rights or other Contracts to acquire from OCW, or any of its Subsidiaries, and no obligation of OCW or any of its Subsidiaries to issue, any (i) units of membership interest,
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Section 4.03 Subsidiaries . Schedule 4.03 of the Disclosure Schedule sets forth all of the Subsidiaries of OCW. All of the Subsidiaries are wholly-owned Subsidiaries of OCW. Except as set forth on Schedule 4.03 of the Disclosure Schedule, OCW does not own, nor does it have the right or obligation to acquire, directly or indirectly, any interest in or control over any Person. Each Subsidiary set forth in Schedule 4.03 of the Disclosure Schedule: (i) is duly organized, validly existing and in good standing under the laws of jurisdiction of such Subsidiary’s formation, (ii) has all requisite limited liability company or corporate power and authority to own, lease and operate its properties, rights, and assets, and to carry on its business as now being conducted, (iii) is duly qualified to transact business as a foreign limited liability company, corporation or other applicable business entity and is in good standing in each other jurisdiction in which the ownership or leasing of its properties or assets or the conduct of its business requires such qualification, except where the failure to so qualify or to be in good standing has not had and would not reasonably be expected to result in a Material Adverse Effect.
Section 4.04 Absence of Restrictions and Conflicts . Except as set forth on Schedule 4.04 of the Disclosure Schedule, the execution and delivery by Seller of the Transaction Documents to which it is a party does not and will not, and the performance of Seller’s obligations thereunder will not, and the transactions contemplated by this Agreement will not, (i) conflict with or violate the Organizational Documents of OCW, or (ii) conflict with or violate, in any material respect, any Law applicable to OCW, or by which any property or asset of OCW, is bound, or (iii) require any consent or result in any violation or breach of or constitute (with or without notice or lapse of time or both) a default (or give to others any right of termination, amendment, acceleration or cancellation) under, or result in the triggering of any payments or result in the creation of an Encumbrance (other than Permitted Liens) on any property or asset of OCW, in all cases, pursuant to any of the terms, conditions or provisions of any Material Contract; or (iv) require any consent, approval, authorization or permit of, or filing with, or notification to, any Governmental Entity.
Section 4.05 Real Property .
(a) Schedule 4.05(a) of the Disclosure Schedule sets forth (i) the addresses of all real property leased, subleased or occupied by OCW and/or its Subsidiaries (collectively with any improvements thereon, the “ Leased Real Property ”) (provided that the Leased Real Property excludes any real property leased or subleased by OCW and/or one of its Subsidiaries, on the one hand, from OCW and/or another of its Subsidiaries, on the other hand), and (ii) a true, accurate and complete list of all leases, subleases, or other occupancy agreements, and any amendments, guaranties or addendums thereto, with respect to the Leased Real Property
(each a “ Lease ” and collectively, the “ Leases ”). Each of the Leases is in full force and effect, the applicable lessees hold valid and existing leasehold interests thereunder for the term thereof and neither the applicable lessee has received written notice of any breach or default thereunder that has not been cured nor, to Seller’s Knowledge, as to Leases other than with Affiliates, is the applicable lessor in breach or default thereunder in any material respect. Neither OCW nor any of its Subsidiaries has leased or sublet, as a lessor, sublessor, licensor or the like, any of the Leased Real Property to any Person. The possession and quiet enjoyment of the Leased Real Property has not been disturbed. There are no pending disputes with any Person with respect to the Leases. Any sublease between OCW and any/or of its Subsidiaries was entered into, and remains, in full compliance with all of the terms of the applicable Lease.
(b) Neither OCW nor any of its Subsidiaries owns (nor has ever owned) any interest in any parcel of real property located at the addresses other than the real property as set forth in Schedule 4.05(b) of the Disclosure Schedule (the “ Purchased Real Property ”) and is not a party to any agreement or option to purchase any real property or interest therein other than as set forth in Schedule 4.05(b) of the Disclosure Schedule or pursuant to the Transaction Documents.
(c) The Leased Real Property and the Purchased Real Property constitute all of the interests in real property used or held for use in connection with the business of OCW and/or its Subsidiaries as presently conducted.
Section 4.06 Title to Assets; Related Matters . OCW and each of its Subsidiaries has good and marketable title to, a valid leasehold interest in, or a valid license to use, all of its tangible properties and assets free and clear of all Encumbrances, except Permitted Liens. All material equipment and other items of tangible property and assets of OCW and each of its Subsidiaries are (a) in good operating condition and capable of being used for their intended purposes, ordinary wear and tear excepted and (b) usable in the ordinary course.
Section 4.07 Financial Statements; Bank Accounts .
(a) Complete copies of the OCW’s audited financial statements consisting of the balance sheet of OCW as of December 31 in each of the years 2018, 2017 and 2016 and the related statements of income, members’ equity and cash flows for the years then ended (the “ Annual Financial Statements ”), and unaudited financial statements consisting of the balance sheet of OCW as of March 31, 2019 and the related statements of income, members’ equity and cash flows for the three month period then ended (the “ Interim Financial Statements ” and together with the Annual Financial Statements, the “ Financial Statements ”) have been delivered to Purchaser. The Financial Statements are based on the books and records of OCW, and fairly present in all material respects the financial condition of OCW as of the respective dates they were prepared and the results of the operations of OCW for the periods indicated. The balance sheet of OCW as of December 31, 2018 is referred to herein as the “ Balance Sheet ” and the date thereof as the “ Balance Sheet Date .”
(b) The Receivables: (i) represent valid obligations arising in the ordinary course of business from sales made or services actually performed by OCW (and, to the extent applicable, OCW’s Subsidiaries) in the ordinary course of business; (ii) have been recorded in the full aggregate amounts thereof less the reserves for doubtful accounts shown on the Financial Statements (which reserves are adequate and have been calculated consistent with past practice); and (iii) are not subject to any defense, counterclaim or right of set-off.
(c) Schedule 4.07(c) of the Disclosure Schedule sets forth (i) the names and locations of all banks, trusts, companies, savings and loan associations and other financial institutions at which OCW and its Subsidiaries maintain safe deposit boxes, checking accounts, saving accounts, money market accounts, or lock box accounts with respect to its business and (ii) the names of all Persons authorized to draw thereon, make withdrawals therefrom or have access thereto.
Section 4.08 No Undisclosed Liabilities . Except as set forth in the Financial Statements (including, for the avoidance of doubt, the related notes and schedules thereto), neither OCW nor any of its Subsidiaries has any liabilities of a type required to be set forth on the Financial Statements in accordance with GAAP, except for: (i) liabilities adequately reflected in or reserved against on the Balance Sheet, (ii) liabilities that have arisen since the Balance Sheet Date in the ordinary course of business and consistent with past practices, and (iii) liabilities incurred in connection with the transactions contemplated hereby.
Section 4.09 Absence of Certain Changes . Since December 31, 2018, except as expressly contemplated by this Agreement: (a) there has not been any Material Adverse Effect, (b) OCW and each of OCW’s Subsidiaries has conducted its business in the ordinary course in all material respects, and (c) except as set forth on Schedule 4.09 of the Disclosure Schedule, neither Seller, OCW nor any of OCW’s Subsidiaries has:
(a) issued, sold or redeemed of the equity interests in OCW or any Subsidiary;
(b) issued or sold any securities convertible into, or options with respect to, warrants to purchase or rights to subscribe for any units of membership interest in OCW or any ownership interest of any Subsidiary;
(c) effected any recapitalization, reclassification, dividend, split or like change in OCW’s capitalization or the capitalization of any of its Subsidiaries;
(d) amended the Organizational Documents of OCW or any OCW Subsidiary;
(e) (i) materially increased the compensation or materially expanded the benefits of any employees of OCW and/or any of its Subsidiaries; (ii) granted any material bonus, benefit, severance or termination pay, or other direct or indirect compensation to any employee of OCW and/or any of its Subsidiaries; (iii) loaned or advanced any money or other property to any employee of OCW and/or any of its Subsidiaries other than employee advances for expenses in the ordinary course of business; or (iv) materially increased the coverage or benefits available under, establish, adopt, enter into, materially amend or terminate any employee benefit plan;
(f) acquired any material properties or assets or sold, assigned, licensed, transferred, conveyed, leased or otherwise disposed of any of the material properties or assets of OCW or any of its Subsidiaries, separate from any capital expenditure of OCW or any of its Subsidiaries made in the ordinary course of business;
(g) invested in, made a loan, advanced or capital contribution to, or otherwise acquired the securities or a substantial portion of the assets, of any other Person;
(h) materially changed or modified OCW’s or any of its Subsidiaries’ cash management customs and practices (including the collection of receivables and payment of payables), and billing, marketing, sales and discount practices;
(i) issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any Indebtedness for borrowed money or capitalized lease obligation, in each case involving more than $20,000 in the aggregate;
(j) entered into, amended, modified, extended, renewed or terminated any Lease;
(k) changed the fiscal year of OCW or of any Subsidiary;
(l) made any capital expenditure outside the ordinary course of business or in excess of $100,000 in the aggregate;
(m) entered into any Material Contract;
(n) accelerated, terminated or canceled, or materially modified, any Material Contract, other than in the ordinary course of business;
(o) instituted, settled, canceled or compromised any material action, claim or lawsuit of or affecting OCW or any Subsidiary, or intentionally waive or release rights to any material action, claim or lawsuit, other than with respect to pending disputes with Material Customers on the Effective Date;
(p) made a material change in OCW’s or any Subsidiary’s accounting or Tax election principles, methods or policies; or
(q) to Seller’s Knowledge, received notice that any Material Customer intends to discontinue or change the terms of its relationship with OCW or any of its Subsidiaries or initiate any significant dispute with respect to any Contract.
Section 4.10 Legal Proceedings . Schedule 4.10 of the Disclosure Schedule sets forth all Litigation, including the name of the claimant and a general description of the nature of the alleged act or omission (to the extent known) involving OCW or any of its Subsidiaries that has arisen in the past five (5) years. Neither OCW nor any of its Subsidiaries is subject to any material order or other determination or Governmental Entity. Neither OCW nor any of its Subsidiaries has been denied insurance coverage with respect to any Litigation set forth on Schedule 4.10 of the Disclosure Schedule. There is no Litigation pending or threatened against OCW or any of its Subsidiaries which seeks to prevent consummation of the transactions contemplated hereby or which seeks damages in connection with the transactions contemplated hereby.
Section 4.11 Compliance with Laws .
(a) For the past five (5) years, OCW and each of its Subsidiaries has materially complied and is in material compliance with all Laws applicable to OCW and/or any of its Subsidiaries, as applicable. No written notices have been received by either OCW or any of its Subsidiaries alleging a material violation of any Laws and no written claims have been filed against OCW or any of its Subsidiaries which are currently pending alleging a material violation of any Laws.
(b) Each of OCW and its Subsidiaries holds all Permits material to the operation of its applicable business as now being conducted. All such Permits are valid and in full force and effect, and there is no Litigation or, to Seller’s Knowledge, investigation by a Governmental Entity that would reasonably be expected to result in the termination thereof.
Section 4.12 Tax Matters . Except as set forth on Schedule 4.12 of the Disclosure Schedule:
(a) OCW (on behalf of itself and each of its Subsidiaries) has timely filed all income Tax and all other material Tax Returns which they were required to file prior to the Closing Date (taking into account any extensions of time to file which have been duly filed), and all such Tax Returns are true, correct and complete in all material respects. All Taxes due and payable by or with respect to OCW or any of its Subsidiaries (whether or not shown as owing by OCW or a Subsidiary on a Tax Return) have been fully paid. The provision for Taxes on the Balance Sheet is sufficient for all accrued and unpaid Taxes as of the date thereof. From and after the date of the Balance Sheet and through close of business on the Closing Date, neither OCW nor any of its Subsidiaries will incur any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, or outside the ordinary course of business, consistent with past custom and practice. All material Taxes which OCW (including its Subsidiaries) had an obligation to withhold, deduct, collect or pay in connection with amounts owing to any employee, creditor, stockholder, customer, client or other third party have been fully withheld, deducted, collected and timely deposited with or otherwise paid over to the appropriate Governmental Entity, and OCW (including its Subsidiaries) has complied in all material respects with all applicable reporting and recordkeeping requirements under applicable Law. Neither OCW nor any of its Subsidiaries is currently, or at any time after December 31, 2013 has been, the subject of or party to any audit, examination, action, investigation, claim or other proceeding with respect to Taxes or Tax Returns and, to Seller’s Knowledge, no such audit or other such proceeding is pending with any Governmental Entity. There are no Encumbrances for Taxes (other than Encumbrances described in clause (a) of the definition of Permitted Liens) upon any of the assets of OCW or any of its Subsidiaries. OCW (on behalf of itself of any of its Subsidiaries) has not waived any statute of limitations in respect of Taxes for Tax periods for which the applicable statute of limitations remains open, and has not agreed to and is not a beneficiary of an extension of time with respect to any material Tax deficiency or any material adjustment to any Tax Return that may be subsequently made. No claim has been made in writing in the last three (3) years by a Governmental Entity in a jurisdiction where OCW (or any of its Subsidiaries) does not file Tax
Returns or pay Taxes that OCW (or any of its Subsidiaries) is or may be subject to taxation by or required to file Tax Returns in that jurisdiction. Neither OCW nor any of its Subsidiaries has ever been a member of an affiliated, consolidated, combined or unitary group. Neither OCW nor any of its Subsidiaries has any liability for the Taxes of any Person other than OCW under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, or by Contract (other than commercial Contracts entered into in the ordinary course of business that do not relate primarily to Taxes). Neither OCW nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code within the past two (2) years. Neither OCW nor any of its Subsidiaries has ever been a party to any “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b). OCW (including for purposes hereof its Subsidiaries) is not a party to, or bound by, any Tax sharing or Tax allocation agreement (other than commercial contracts or agreements entered into in the ordinary course of business that do not relate primarily to Taxes). Neither OCW nor any of its Subsidiaries will be required to include any material amount in taxable income or exclude any material item of deduction or loss from taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of (i) any adjustment pursuant to Section 481 of the Code (or any predecessor provision) or any similar provision of state, local or foreign Law by reason of any change in any accounting methods made or applied for on or prior to the Closing Date, (ii) any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Law) executed on or prior to the Closing Date, (iii) any deferred intercompany gain or excess loss account described in U.S. Treasury Regulations under Code section 1502 (or any corresponding or similar provision or administrative rule of federal, state, local or foreign Law), (iv) any installment sale or open transaction disposition made on or prior to the Closing Date, (v) any prepaid amount received on or prior to the Closing Date, (vi) any election under Section 108(i) of the Code made on or before the Closing Date, or (vii) Section 965 of the Code. OCW and each of its Subsidiaries has collected, reported and remitted all applicable sales, use and excise Taxes in compliance with the requirements of applicable Laws.
(b) Neither OCW nor any of its Subsidiaries has ever maintained a permanent establishment (within the meaning of an applicable Tax treaty or applicable non-U.S. Tax law) or otherwise has an office or fixed place of business in any jurisdiction located outside of the United States. Neither OCW nor any of its Subsidiaries has ever been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code. Neither OCW nor any of its Subsidiaries has ever owned an interest in, (i) a “passive foreign investment company” within the meaning of Code Section 1297, or (ii) a “controlled foreign corporation” within the meaning of Code Section 957.
(c) Since December 31, 2013, neither OCW nor or any of its Subsidiaries has (A) made, changed or revoked any material Tax elections or methods of accounting for Tax purposes, (B) settled or compromised any material claim or action in respect of Taxes, (C) filed a material amended Tax Return, or (D) entered into any material Contract in respect of Taxes with any Governmental Entity.
(d) At all times since the date of its organization OCW has been classified for federal and applicable state income Tax purposes as a “partnership” as defined in Section 761(a)(1) of the Code, and on the Closing Date OCW will be classified for federal and applicable state income Tax purposes as a “partnership” as defined in Section 761(a)(1) of the Code.
(e) At all times since the date of its organization, each of OCW’s Subsidiaries has been classified for federal and applicable state income Tax purposes as a “qualified subchapter S subsidiary” within the meaning of Section 1361(b)(3)(B) of the Code or a “disregarded entity” as defined in Treasury Regulations Section 301.7701-2(c)(2), and on the Closing Date each of the Subsidiaries will be classified for federal and applicable state income Tax purposes as a “disregarded entity” as defined in Treasury Regulations Section 301.7701-2(c)(2).
Section 4.13 Employee Benefit Plans .
(a) Schedule 4.13(a) of the Disclosure Schedule lists each (i) “pension plan” (as defined under Section 3(2) of ERISA, whether-or-not subject to ERISA) (the “ Pension Plans ”), (ii) “welfare benefit plan” (as such term is defined under Section 3(1) of ERISA, whether-or-not subject to ERISA) or other insurance (including health and life), sick or disability pay, or death benefit plan, program, policy or arrangement (the “ Welfare Plans ”), (iii) any other employee benefit, plans, programs, policies or arrangements (including any equity, equity option, phantom equity, or other equity-based, bonus, retention, incentive compensation, deferred compensation vacation pay, material fringe benefit, cafeteria benefit, change of control or severance pay arrangements) (the “ Other Plans ”) and (iv) any employment, consulting, independent contractor, severance or other individual agreement or arrangement (the “ Employment Arrangements ”), that, in the case of the preceding clauses (i), (ii), (iii) and (iv) is sponsored or maintained by OCW or its Subsidiaries or which OCW or any of its Subsidiaries has any material obligation or liability, contingent or otherwise. The Pension Plans, Welfare Plans, Other Plans and Employment Arrangements are referred to each as a “ Plan ,” and collectively as “ Plans .”
(b) Each Pension Plan that is intended to be tax-qualified under Section 401(a) of the Code has received a favorable determination or opinion letter from the Internal Revenue Service as to its qualification in form and is currently so qualified in form. To Seller’s Knowledge, each such Pension Plan has been administered and operated in material compliance with, and has been amended to comply with all applicable Law, including without limitation, ERISA and the Code, and no event has occurred and no condition exists which could reasonably be expected to result in the revocation of any such determination or opinion letter.
(c) Each Plan (and each related trust, insurance contract, or fund) has been established and administered in accordance with its terms and applicable Laws in all material respects. To Seller’s Knowledge, there has been no non-exempt “prohibited transaction” (within the meaning of Section 406 and 407 of ERISA and Section 4975 of the Code and that would not be exempt under Section 408 of ERISA and the regulatory guidance thereunder) with respect to any Plan. All contributions required to be made to any Plan by applicable Law or by any Plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Plan, for any period through the date hereof have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been reflected on the Financial Statements consistent with past practice.
(d) Neither OCW nor any of its Subsidiaries provides, or has any obligation to provide, any Welfare Plan benefits following a termination of employment, other than health continuation coverage mandated under Code Section 4980B or Part 6 of Subtitle B of Title I of ERISA or applicable state insurance Law, at the sole expense of the participant. Schedule 4.13(d) of the Disclosure Schedule lists any individual currently receiving any such mandated health continuation coverage.
(e) Neither OCW, any of its Subsidiaries, nor any Person that is, or at any relevant time was, required to be treated as a single employer with OCW under Section 4001(b)(1) of ERISA or Section 414 of the Code maintains or maintained contributes or has contributed to, or has or has had any material liability with respect to any defined benefit pension plan or any plan, program or arrangement subject to Title IV of ERISA, including but not limited to, any multiemployer plan (as defined in Section 4001(a)(3) of ERISA), or any multiple employer plan sponsored by more than one employer (within the meaning of Sections 4063 or 4064 of ERISA).
(f) Each Plan can be amended, terminated or otherwise discontinued on January 1, 2020 (to the extent requested by Purchaser), without material liability to Seller, OCW, OCW’s Subsidiaries or Purchaser (other than for ordinary administration expenses typically incurred in a termination event), including but not limited to, liability for additional contributions, and without any penalty or market value adjustment to the assets thereof.
(g) All required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports, and Summary Plan Descriptions) have been filed or distributed in material compliance with the applicable requirements of ERISA and the Code with respect to each Plan.
(h) No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any Plan (other than routine claims for benefits) is pending or, to Seller’s Knowledge, threatened in writing.
(i) Except as set forth on Schedule 4.13(i) of the Disclosure Schedule, none of the execution and delivery of this Agreement or the consummation of the transaction contemplated by this Agreement will, individually or together with the occurrence of some other event, (i) result in any payment (including severance, bonus or other similar payment) becoming OCW or any of its Subsidiaries, (ii) result in the acceleration of the time of payment or vesting of any such benefits, (iii) increase the amount of compensation due to any Person or (iv) result in the forgiveness in whole or in part of any outstanding loans made by OCW or any of its Subsidiaries to any Person.
(j) Section 4.13(j) of the Disclosure Schedule lists each Plan which is a “nonqualified deferred compensation plan” (within the meaning of Section 409A of the Code). Each nonqualified deferred compensation plan has been operated and administered in material compliance with Section 409A of the Code and any proposed and final guidance under Section 409A of the Code. Neither OCW nor any of its Subsidiaries has any obligation to gross-up, indemnify or otherwise reimburse any current or former employee, director, consultant or other service provider for any tax incurred by such service provider.
Section 4.14 Employment Matters .
(a) There is not currently, nor has there been in the past five (5) years, any unfair labor practice, charge or any other action pending against OCW or any of its Subsidiaries before the National Labor Relations Board or any other Governmental Entity relating to any employee or employment practices and, to Seller’s Knowledge, no such complaint is or has been threatened. In the past five (5) years, neither OCW nor any of its Subsidiaries has received any written notice concerning, and, to Seller’s Knowledge, there is not currently any activity or proceedings of any labor union (or representatives thereof) to organize any employees, or of any strikes, slowdowns, work stoppages, lockouts or threats thereof, by or with respect to any employees and, to Seller’s Knowledge, within the prior five (5) years, no such activities or proceedings are or were underway nor has OCW’s or any of its Subsidiaries’ business been the subject of any strikes, slowdowns, work stoppages, lockouts or threats thereof. There are no union, labor or collective bargaining agreements to which OCW or any of its Subsidiaries is a party or otherwise bound relating to any employee or employment practices, wages, hours or terms or conditions of employment; to Seller’s Knowledge, there are no labor organizations representing, purporting to represent, or, to Seller’s Knowledge, seeking to represent any employees of OCW or any of its Subsidiaries. For the past five (5) years, neither OCW nor any of its Subsidiaries has been a party to or otherwise bound by any consent decree or order with, or citation by, any Governmental Entity relating to any employee or employment practices, wages, hours or terms or conditions of employment.
(b) Schedule 4.14(b) of the Disclosure Schedule sets forth the name, date of hire, employer, job title, work location, full-time/part-time status, exempt/non-exempt status, bonus eligibility, equity holdings in OCW and/or its Subsidiaries, severance entitlement, current compensation paid or payable and status of all employees of OCW and/or its Subsidiaries. Each of OCW and/or its Subsidiaries has paid in full or accrued in the Financial Statements all wages, salaries, commissions, incentives, bonuses and other compensation due to any employee and accrued prior to the Closing.
(c) Except as set forth on Schedule 4.14(c) of the Disclosure Schedule, there are no material written personnel policies or employment agreements applicable to any of the employees listed on Schedule 4.14(b) of the Disclosure Schedule.
(d) To Seller’s Knowledge, all Persons with whom OCW and/or any Subsidiary has engaged, directly or indirectly, to provide services for OCW and/or any Subsidiary is properly classified as employees, independent contractors, and/or employees of another entity, as applicable, in all material respects, in accordance with applicable Laws and for employee benefits purposes. To Seller’s Knowledge, OCW and each of its Subsidiaries is, and has been for the past five (5) years in material compliance with all Laws relating to employment practices, and terms and conditions of employment, including but not limited to all Laws related to leaves of absence, equal employment opportunity, non-harassment, non-discrimination, immigration (including immigration related hiring practices and benefits), wages, hours, benefits, collective bargaining, the payment of social security and similar Taxes and occupational health and safety. Neither OCW nor any of its Subsidiaries is liable for the payment of any Taxes, fines, penalties or other amounts for the failure to comply with any of the foregoing requirements of Law, during the past five (5) years.
(e) There are no pending or, to Seller’s Knowledge, threatened, audits, investigations, claims, suits, demands or charges against OCW and/or any of its Subsidiaries or any of their respective employees regarding any Laws relating to employment practices, terms and conditions of employment, leaves of absence, equal employment opportunity, non-harassment, non-discrimination, immigration (including but not limited to immigration related hiring practices and benefits), wages, hours, benefits, collective bargaining, the payment of social security and similar Taxes and occupational health and safety, including but not limited to any actions before any Governmental Entity, including but not limited to the Equal Employment Opportunity Commission and the United States Department of Labor.
(f) In the past three (3) years, neither OCW nor any of its Subsidiaries has failed to provide advance notice of layoffs or terminations as required by, or incurred any material liability under, the Worker Adjustment and Retraining Notification (“ WARN ”) Act or any similar Law, and no such action is planned or anticipated as of the date hereof.
Section 4.15 Insurance .
(a) Schedule 4.15(a) of the Disclosure Schedule sets forth a list of all insurance policies in force with respect to Seller, OCW or any of OCW’s Subsidiaries as of the Effective Date (specifying the insurer, amount of coverage, type of insurance and applicable deductibles). With respect to each insurance policy identified on Schedule 4.15(a) of the Disclosure Schedule: (a) such policy is legal, valid, binding, enforceable and in full force and effect; (b) neither OCW, its Subsidiaries nor, to Seller’s Knowledge, any other party to the policy is in material breach or material default (including with respect to the payment of premiums or the giving of notices); (c) neither OCW, its Subsidiaries nor, to Seller’s Knowledge, any other party to such policy has repudiated any provision of such policy; (d) none of the policy limits applicable to such policy have been exhausted and (e) no claim has been denied by the underwriters under such policy.
(b) Schedule 4.15(b) of the Disclosure Schedule contains a list of all pending claims and all claims submitted during the past three (3) years under any insurance policy maintained by OCW and/or any of OCW’s Subsidiaries, the amount accrued for which is in excess of $1,000. No claim has been made under any professional liability insurance policy of OCW and/or any of OCW’s Subsidiaries within the past three (3) years, nor is any claim under any professional liability insurance policy of OCW and/or any of OCW’s Subsidiaries pending.
Section 4.16 Environmental Matters . Except as otherwise set forth in Schedule 4.16 of the Disclosure Schedule:
(a) OCW and each of its Subsidiaries is and has been for the past five (5) years in compliance in all material respects with all applicable Environmental Laws.
(b) Neither OCW nor any of its Subsidiaries has received any written notice that remains unresolved regarding alleged, actual or potential responsibility for, or any investigation regarding, and to Seller’s Knowledge, there has not been, (i) any Release of any Hazardous Substance at or affecting OCW, its Subsidiaries, the Leased Real Property or the Purchased Real Property of OCW or any of its Subsidiaries that would reasonably be expected to
give rise to material liability pursuant to Environmental Law or (ii) any alleged material violation of or material non-compliance with any Environmental Law or the conditions of any Permit required under any Environmental Law affecting OCW, its Subsidiaries, the Leased Real Property or Purchased Real Property of OCW or any of its Subsidiaries.
(c) There are no pending or, to Seller’s Knowledge, threatened suits, proceedings or claims by any third parties against OCW or any of its Subsidiaries pursuant to Environmental Laws in connection with the operation of its business or against OCW or any of its Subsidiaries for damages, costs or injunctive relief arising out of the presence of any Hazardous Substances on or off the Leased Real Property or the Purchased Real Property of OCW or any of its Subsidiaries.
Section 4.17 Intellectual Property .
(a) Schedule 4.17(a) of the Disclosure Schedule contains (i) a complete and correct list of all registrations and pending applications for Intellectual Property owned by OCW and each of its Subsidiaries, and (ii) the serial or application number, registration number, jurisdiction, expiration date, renewal date, and the status thereof. OCW and/or each of its Subsidiaries has the exclusive right to file, prosecute and maintain all applications and registrations with respect to the Intellectual Property listed on Schedule 4.17(a) of the Disclosure Schedule. Title and ownership of all Intellectual Property described on Schedule 4.17(a) of the Disclosure Schedule (or required to be described on Schedule 4.17(a) of the Disclosure Schedule) is presently in the name of OCW and/or each of its Subsidiaries and OCW and/or its Subsidiaries is the sole and exclusive owners of such Intellectual Property, free and clear of any royalty or other payment obligation or Encumbrance (other than Permitted Liens).
(b) Schedule 4.17(b) of the Disclosure Schedule contains a complete and correct list of all Software (other than Off-the-Shelf Software) and other material Intellectual Property that is not owned by either OCW and/or its Subsidiaries, but is used by either OCW or any of its Subsidiaries as part of their products or services made available to third parties, and any license agreements governing the use of such Software or Intellectual Property. Each of OCW and its Subsidiaries have all rights to use such Software and is in material compliance with any license agreement governing such use. Except for these license agreements and licenses of Off-The-Shelf Software, there are no Contracts which restrict or limit the use by OCW or any of its Subsidiaries of any Intellectual Property, or which require the payment of any money or giving of other consideration for the use of such Intellectual Property by OCW or any of its Subsidiaries.
(c) Neither OCW nor any of its Subsidiaries owns any material Intellectual Property jointly with any other Person, nor has OCW or any of its Subsidiaries commenced development jointly with any Person of any material Intellectual Property.
(d) The Intellectual Property described or required to be described on Schedules 4.17(a) and 4.17(b) of the Disclosure Schedule or otherwise used or held by OCW or any of its Subsidiaries (collectively, the “ OCW Intellectual Property ”) constitutes all of the Intellectual Property used in, or necessary for, the conduct of the business as it is currently conducted. The OCW Intellectual Property is valid and enforceable. No right, license, lease, consent or other agreement is required to transfer any of the OCW Intellectual Property to Purchaser.
(e) Neither OCW nor any of its Subsidiaries has ever granted a covenant not to sue to any Person with respect to any Intellectual Property. The operations of the business of OCW and/or its Subsidiaries are not restricted under any non-competition or similar agreement in any manner.
(f) None of the Intellectual Property owned by OCW or any of its Subsidiaries, or any of any OCW’s or a Subsidiary’s use thereof, nor the operation of their respective business, is subject to any pending or, to Seller’s Knowledge, threatened, Litigation, nor does, to Seller’s Knowledge, any basis for any Litigation exist. No Intellectual Property described on Schedule 4.17(a) of the Disclosure Schedule conflicts with, infringes upon, misappropriates or otherwise violates, the Intellectual Property rights of any other Person. To Seller’s Knowledge, no other Person is infringing, misappropriating, misusing or otherwise violating any of the Intellectual Property described on Schedule 4.17(a) of the Disclosure Schedule. Neither OCW nor any of its Subsidiaries has ever received any written notice to such effect or otherwise suggesting that any Intellectual Property described in Schedule 4.17(a) of the Disclosure Schedule is invalid.
(g) Neither OCW nor any of its Subsidiaries has made any claim of a violation, infringement, misuse or misappropriation by any third party (including any employee or former employee of OCW or any Subsidiary of OCW) of their rights to, or in connection with, any Intellectual Property, which claim is pending or was pending in the prior five (5) years. To Seller’s Knowledge, no fact or circumstance exists that could give rise to OCW’s or any of its Subsidiaries’ right to make any claim of a violation, infringement, misuse or misappropriation by any third party (including any employee or former employee of OCW or any of its Subsidiaries) of their rights to, or in connection with, any Intellectual Property.
(h) Each current employee, consultant and contractor of OCW and each of its Subsidiaries has executed a written agreement obligating such employee, consultant or contractor to maintain the confidentiality of all of the OCW Intellectual Property and to assign to OCW and/or its Subsidiaries any and all rights in any Intellectual Property that is or has been developed by such employee, consultant or contractor during the duration of such employee, consultant or contractor’s service with or for OCW or any Subsidiary of OCW.
(i) Neither OCW nor any of its Subsidiaries own any Software in connection with the business of OCW or any of its Subsidiaries.
(j) OCW and each of its Subsidiaries (to the extent applicable) has taken commercially reasonable steps in accordance with normal industry practice to maintain the confidentiality of the OCW Intellectual Property owned by OCW or any of its Subsidiaries and, to Seller’s Knowledge, no such OCW Intellectual Property have been disclosed other than to actual or prospective customers, third-party partners, employees, representatives and agents of either OCW or any of its Subsidiaries, all of whom are bound by written confidentiality agreements.
(k) OCW and each of its Subsidiaries (to the extent applicable) has taken commercially reasonable steps in accordance with normal industry practice necessary to ensure that any Personal Information gathered, accessed, collected, shared, used, disclosed or processed in the course of the operations of the business of OCW and/or any of its Subsidiaries (collectively, “ Data Activities ”) is protected against unauthorized access, use, modification, disclosure or other misuse. To Seller’s Knowledge, there has been no unauthorized access, use, or disclosure of Personal Information in the possession or control of OCW or any of its Subsidiaries, and any of its contractors with regard to any Personal Information obtained from or on behalf of OCW or any of its Subsidiaries.
(l) OCW and each of its Subsidiaries (to the extent applicable) has implemented written policies relating to Data Activities, including, without limitation, a publicly posted website privacy policy, mobile app privacy policy, and a comprehensive information security program that includes appropriate written information security policies (“ Privacy and Data Security Policies ”). At all times, OCW and each of its Subsidiaries (to the extent applicable) has been and is in compliance in all material respects with all such Privacy and Data Security Policies. Neither the execution, delivery, or performance of this Agreement, nor the consummation of any of the transactions contemplated under this Agreement will violate any of the Privacy Agreements, Privacy and Data Security Policies or any applicable Information Privacy and Security Laws. To Seller’s Knowledge, each of the current and former employees of OCW and each of its Subsidiaries has, at all times during the period of their employment with OCW or any of its Subsidiaries, complied with all rules, policies and procedures established by OCW and/or each of its Subsidiaries in connection with the Privacy and Data Security Policies.
(m) Except as set forth in Schedule 4.17(m) of the Disclosure Schedule, there is no pending, nor has there been in the last five (5) years any, complaint, audit, proceeding, investigation, or claim against either OCW or any of its Subsidiaries initiated by any Person, any Governmental Entity (foreign or domestic), or any regulatory or self-regulatory entity, alleging that any Data Activity of OCW and each of its Subsidiaries: (i) is in violation of any Information Privacy and Security Laws, or (ii) is in violation of any Privacy and Data Security Policies.
Section 4.18 Transactions with Affiliates . Other than for (i) compensation received as employees in the ordinary course, or (ii) as set forth on Schedule 4.18 of the Disclosure Schedule, to Seller’s Knowledge, no member, employee, director or officer of OCW or any of its Subsidiaries, has any interest in: (a) any Contract, commitment or transaction with, or relating to, the properties or assets of OCW or any of its Subsidiaries; (b) any loan relating to the properties or assets of OCW or any of its Subsidiaries, or (c) any property (real, personal or mixed), tangible or intangible, used by the OCW or any of its Subsidiaries.
Section 4.19 Material Contracts .
(a) Schedule 4.19 of the Disclosure Schedule sets forth the following Contracts to which OCW or any of its Subsidiaries is party (the “ Material Contracts ”):
(i) any Contract relating to any completed material business acquisition by OCW or any of its Subsidiaries within the last thirty-six (36) months or any pending material business acquisition by OCW or by any of its Subsidiaries;
(ii) any Contract with any Member or any current officer, manager, or director of OCW or any of its Subsidiaries (other than the Organizational Documents of OCW), or any other related party;
(iii) any collective bargaining agreement or other Contract with any labor union or other association or organization representing any employee of OCW or any of its Subsidiaries;
(iv) any Contract relating to (A) Indebtedness of OCW or any of its Subsidiaries, or (B) mortgaging, pledging or otherwise placing an Encumbrance on any material portion of any assets of OCW and/or any of its Subsidiaries;
(v) any Contract under which OCW or any of its Subsidiaries is lessee of, or holds or operates, any personal property owned by any other party;
(vi) any Contract under which OCW or any of its Subsidiaries is lessor of or permits any third party to hold or operate any personal property;
(vii) any software licenses that are material to the operation of the respective businesses of OCW or any of its Subsidiaries (other than in respect of Off-the-Shelf Software);
(viii) any Contract with a Material Customer;
(ix) any Contract of OCW or any of its Subsidiaries involving aggregate consideration payable by OCW or any of its Subsidiaries in excess of $200,000 or which, in each case, cannot be cancelled by OCW or the respective Subsidiary without penalty or without more than 90 days’ notice (excluding in either case any Leases);
(x) any Contract which prohibits OCW or any of its Subsidiaries from freely engaging in business anywhere in the world;
(xi) any Contract granting to any Person (other than OCW or any of its Subsidiaries) an option or a first refusal, first offer or similar preferential right to purchase or acquire any assets (including any capital stock or other equity interests in any Person or any joint venture interests) which are material to OCW or any of its Subsidiaries;
(xii) any material Contracts with any Governmental Entity other than participation agreements and other related agreements with federal or state healthcare programs; and
(xiii) any agreement relating to OCW’s or any of its Subsidiaries’ ownership of or investments in any business or enterprise, including investments in joint ventures and minority equity investments.
(b) Neither OCW, any of its Subsidiaries, nor to Seller’s Knowledge, any other counterparty thereto, is in material default (a “default” being defined for purposes hereof as an actual default or event of default or the existence of any fact or circumstance which would,
upon receipt of notice or passage of time, constitute a default or right of termination) under any Material Contract. No party to any of the Material Contracts has exercised any termination rights with respect thereto, and no party has given written notice of any significant dispute with respect to any Material Contract. Each Material Contract is valid, binding and in full force and effect and is enforceable by OCW, any of its Subsidiaries (as applicable) or any party thereto in accordance with its terms, subject to the Enforceability Exceptions. Seller or OCW, to the extent applicable, has made copies of each Material Contract available to Purchaser.
Section 4.20 Customer and Supplier Relations .
(a) Schedule 4.20(a) of the Disclosure Schedule sets forth a list of (i) the twenty (20) largest distributors of OCW and/or any of its Subsidiaries, based on the revenues generated by such distributors (each a “ Material Customer ”), and the dollar amount of revenues generated by each such distributor during the fiscal year ended December 31, 2018, and (ii) the ten (10) largest external suppliers of OCW and/or any of its Subsidiaries, based on the combined amounts paid to such suppliers in connection with OCW’s or the applicable Subsidiary’s business (each a “ Material Supplier ”), and the dollar amount of such payments made to each such supplier during the fiscal year ended December 31, 2018.
(b) Except as set forth on Schedule 4.20(b) of the Disclosure Schedule, to Seller’s Knowledge, (a) no Material Customer or Material Supplier is in breach of any obligation to OCW or any of its Subsidiaries and (b) there exists no condition or event which, after notice or lapse of time or both, would reasonably be expected to constitute such a breach, and in past six (6) months no Material Customer or Material Supplier has indicated that it intends to discontinue or materially change the terms of any relationship with OCW or any of its Subsidiaries (as applicable).
Section 4.21 Brokerage . Except as set forth on Schedule 4.21 of the Disclosure Schedule, there are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Seller or OCW or for which Seller or OCW may otherwise be liable.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that the statements contained in this Article V are true and correct except as otherwise set forth in the indicated Schedule of the Disclosure Schedule corresponding thereto, as the Disclosure Schedule is interpreted in accordance with Section 7.01 .
Section 5.01 Organization and Power . Purchaser is a corporation validly existing and in good standing under the laws of the Commonwealth of Massachusetts, with all requisite corporate power and authority to enter into this Agreement and any other Transaction Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.