= CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH (1) NOT MATERIAL AND (2) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED AND/OR IS THE TYPE OF INFORMATION THE REGISTRANT TREATS AS...
Exhibit 2.1
[***] = CERTAIN IDENTIFIED INFORMATION HAS BEEN OMITTED FROM THIS EXHIBIT BECAUSE IT IS BOTH (1) NOT MATERIAL AND (2) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED AND/OR IS THE TYPE OF INFORMATION THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL, AND HAS BEEN MARKED WITH “[***]” TO INDICATE WHERE OMISSIONS HAVE BEEN MADE.
EXECUTION VERSION
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and among
VILLAGE FARMS INTERNATIONAL, INC., BALANCED HEALTH BOTANICALS, LLC AND
THE MEMBERS OF BALANCED HEALTH BOTANICALS, LLC AS SET FORTH ON SCHEDULE A
Dated August 16, 2021
Exhibit 2.1
TABLE OF CONTENTS
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MEMBERSHIP INTEREST PURCHASE AGREEMENT1
ARTICLE 1 PURCHASE AND SALE OF TARGET SECURITIES1
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ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS AND BUYER5
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES |
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Exhibit 2.1
TABLE OF CONTENTS
(continued)
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3.29 |
ARTICLE 4 POST-CLOSING COVENANTS35
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4.4 |
ARTICLE 5 CLOSING DELIVERIES40
ARTICLE 6 REMEDIES FOR BREACHES OF THIS AGREEMENT43
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6.10 |
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Exhibit 2.1
TABLE OF CONTENTS
(continued)
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Schedule A Schedule B Schedule C Schedule D Schedule 5.1(g)
Schedule 6.1(a)(v) Special Indemnity Matters Schedule 9 Pro Rata Shares
Disclosure Schedules
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Exhibit 2.1
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Membership Interest Purchase Agreement (this “Agreement”) is entered into on August 16, 2021, by and among Village Farms International, Inc. a Canadian federal corporation (“Buyer”), Balanced Health Botanicals, LLC, a Colorado limited liability company (the “BHB”), and the members of BHB as set forth on Schedule A hereto (each a “Seller” and, collectively, the “Sellers”). Buyer, BHB, and each Seller are referred to collectively herein as the “Parties” and individually as a “Party”. Unless otherwise expressly set forth herein, the capitalized terms used herein shall have the definitions set forth in ARTICLE 9.
Sellers collectively own all of the outstanding equity interests of BHB (collectively, the “Target Securities”). BHB owns all of the outstanding equity interests in each of the Subsidiaries of BHB as set forth on Schedule B (each a “Company”, collectively the “Companies” or the “Company Group”). Sellers desire to sell to Buyer the Target Securities and Buyer desires to purchase from Sellers all (but not less than all) of the Target Securities, upon the terms and subject to the conditions set forth in this Agreement. The acquisition of the Target Securities shall be effected through the purchase thereof by Buyer, with cash funded by Buyer and Buyer Shares issued by Buyer.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows.
PURCHASE AND SALE OF TARGET SECURITIES
1.1Basic Transaction. In accordance with the terms and upon the conditions of this Agreement, at the Closing, Sellers shall (a) sell to Buyer and transfer, assign, convey and deliver to Buyer all right, title and interest in and to all of the Target Securities, free and clear of all Liens, and (b) Buyer shall purchase, and shall accept delivery of and acquire from Sellers, all right, title and interest in and to all of the Target Securities, free and clear of all Liens.
1.2Purchase Price. The purchase price (the “Purchase Price”) for the Target Securities shall consist of:
(a)Cash in an amount equal to (i) Thirty Million Dollars ($30,000,000.00 USD), minus (iv) the Debt Amount, minus (v) the Transaction Expenses Balance, minus (vi) the Working Capital Deficit, if any, and minus (viii) the Representative Expense Fund Amount (collectively, the “Cash Payment”), all as subject to adjustment as provided in this ARTICLE 1; and
(b)4,707,113 Buyer Shares (the “Equity Consideration”), which the Parties acknowledge to be an amount of Buyer Shares equal to Forty-Five Million Dollars
33127892.2
Exhibit 2.1
($45,000,000.00 USD) divided by the price per Buyer Share calculated based on the volume weighted average trading price of the Buyer Shares on Nasdaq for the ten (10) trading days ending one Business Day prior to the Closing Date.
1.3Estimated Cash Payment. Seller Representative has delivered to Buyer (a) a certificate signed by the Seller Representative setting forth Sellers’ best estimate of the Debt Amount, Transaction Expenses Balance, Working Capital as of the Closing Date, the Working Capital Deficit, if any, the Representative Expense Fund Amount in each case as of the Closing Date and, based on such estimates, a calculation of the Cash Payment (the “Estimated Cash Payment”) and (b) all records and work papers necessary to compute and verify the information set forth in such certificate.
(i)pay the Estimated Cash Payment to Sellers pursuant to Section 1.4(d), less the Indemnity Holdback and the Adjustment Holdback.
(ii)pay the Debt Amount, if any, pursuant to the payoff letters delivered by Seller Representative to Buyer pursuant to Section 5.1(i);
(iii)pay the Transaction Expenses Balance pursuant to the direction of Seller Representative;
(iv)deposit the Indemnity Holdback by wire transfer of immediately available funds into an account designated by the Escrow Agent (the “Escrow Account”);
(v)deposit the Representative Expense Fund Amount by wire transfer of immediately available funds into the Representative Expense Fund; and
(b)Payment of Equity Consideration. At the Closing, Buyer shall issue the Equity Consideration to Sellers according to their respective Pro Rata Shares evidenced by restricted DRS advice statements from Buyer’s transfer agent (or Buyer shall alternatively provide evidence to Sellers of a signed and delivered irrevocable treasury direction of Buyer to its transfer agent to promptly issue such restricted DRS advice statements to Sellers) and such Buyer Shares shall remain Restricted Shares with the applicable legend(s) (as specified in Sections 2.1(g) and 2.1(h)) and a stop order placed thereon until the later of the date on which (i) the legend(s) thereon have been removed (or have expired) in accordance with the terms thereof (including, for the avoidance of doubt, in connection with an effective Registration Statement) and (ii) they are no longer Restricted Shares.
(c)Cash Payment Adjustment. Within five (5) Business Days after the Cash Payment becomes final and binding in accordance with Section 1.5:
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Exhibit 2.1
(i)if the Cash Payment exceeds the Estimated Cash Payment, then such excess shall be paid by Buyer to Sellers in cash, and the Adjustment Holdback shall be released to Sellers pursuant to Section 1.4(d); or
(ii)if the Estimated Cash Payment exceeds the Cash Payment, then such excess shall be paid by Sellers, first from the Adjustment Holdback and then, if the Adjustment Holdback is not sufficient to cover such difference, then directly from Sellers to Buyer in cash pursuant to their respective Pro Rata Shares. In the event that a portion of the Adjustment Holdback remains subsequent to an adjustment pursuant to this Section 1.4(c)(ii), then any remaining amounts of the Adjustment Holdback shall be paid in cash to Sellers pursuant to Section 1.4(d).
(d)Payments. All payments to Sellers pursuant to this Section 1.4 shall be made by wire transfer of immediately available funds to an account or accounts designated by Seller Representative in writing in accordance with such Seller’s Pro Rata Share. Seller Representative shall be responsible for ensuring the accuracy of all applicable Pro Rata Shares and wire instructions for the Members. All payments, if any, to Buyer pursuant to this Section 1.4 shall be made by wire transfer of immediately available funds to an account designated by Buyer in writing.
1.5Cash Payment Determination. Within sixty (60) days after the Closing Date, Buyer may, but shall not be required to, prepare and deliver to Seller Representative (a) a statement setting forth Buyer’s calculation of the Working Capital as of the Closing Date, the Working Capital Deficit, if any, and Debt Amount, Transaction Expenses Balance, the Representative Expense Fund Amount, and the Cash Payment (the “Closing Statement”), and (b) all records and work papers reasonably necessary, in the determination of Buyer, to compute and verify the information set forth in the Closing Statement to the extent such records and work papers differ from the ones previously delivered to Buyer. If Seller Representative, on behalf of Sellers, has any objections to the Closing Statement prepared by Buyer, then Seller Representative will deliver a detailed written statement (the “Objections Statement”) describing (a) which items on the Closing Statement have not been prepared in accordance with this Agreement, (b) the basis for Sellers’ disagreement with the calculation of such items, and (c) Sellers’ proposed dollar amount for each item in dispute, to Buyer within thirty (30) days after delivery of the Closing Statement. If Seller Representative fails to deliver an Objections Statement within such thirty (30) day period, then the Closing Statement shall become final and binding on all Parties. Sellers shall be deemed to have agreed with all amounts and items contained or reflected in the Closing Statement to the extent such amounts or items are not disputed in the Objections Statement. If Seller Representative delivers an Objections Statement within such thirty (30) day period, then Sellers and Buyer will use commercially reasonable efforts to resolve any such disputes, but if a final resolution is not obtained within thirty (30) days after Seller Representative has submitted any Objections Statements, any remaining matters which are in dispute will be resolved by RSM US LLP (the “Accountants”). The Accountants will prepare and deliver a written report to Buyer and Seller Representative and will submit a proposed resolution of such unresolved disputes promptly, but in any event within thirty (30) days after the dispute is submitted to the Accountants. The Accountants’ determination of such unresolved disputes will be final and binding upon all Parties; provided, however, that no such determination shall be any more favorable to Buyer than is set forth in the Closing Statement or any more favorable to Sellers than is proposed in the Objections
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Exhibit 2.1
Statement. The costs, expenses and fees of the Accountants shall be borne by the Party whose calculation of the Cash Payment has the greatest difference from the final Cash Payment as determined by the Accountants under this Section 1.5; otherwise, such costs, fees and expenses shall be borne equally by Buyer, on the one hand, and Sellers, pursuant to their Pro Rata Shares, on the other hand. The final Closing Statement, however determined pursuant to this Section 1.5, will produce the Working Capital Deficit, if any, Debt Amount, and Transaction Expenses Balance to be used to determine the final Cash Payment. If Buyer does not prepare a Closing Statement within sixty (60) days of the Closing Date, then the certificate provided by the Seller Representative pursuant to Section 1.3 shall be determinative of the final Cash Payment calculation.
1.6Calculations. All calculations of Working Capital under this Agreement, whether estimates or otherwise, shall be determined in accordance with GAAP, consistently applied, specifically including any calculations or adjustments required by ASC 842 for a “public business entity” as defined therein.
1.7Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur via electronic exchange of executed documents on the date hereof (the “Closing Date”). All transactions contemplated herein to occur on and as of the Closing Date shall be deemed to have occurred simultaneously and to be effective as of 12:00 a.m. eastern time on such date (the “Effective Time”). At the Closing, the Parties shall make all of the deliveries set forth in ARTICLE 5.
1.8Withholding. The Parties and any other applicable withholding agent will be entitled to deduct and withhold from any amounts payable pursuant to or as contemplated by this Agreement any Taxes or other amounts required under the Code or any applicable Law to be deducted and withheld, and, to the extent that any amounts are so deducted or withheld, such amounts will be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
1.9Allocation. The Parties agree that the Purchase Price (as adjusted herein), as increased by the liabilities of the Companies as of the Closing Date (to the extent properly taken into account pursuant to the provisions of Section 1060 of the Code, and any other items constituting consideration (to the extent known at such time) for applicable income Tax purposes pursuant to the provisions of Section 1060 of the Code), shall be allocated for income Tax purposes among the assets of the Companies in accordance with the methodology set forth on Schedule 1.9 (the “Allocation”). Each of Buyer and each Seller shall prepare and file all of their respective Tax Returns in a manner consistent with the Allocation and shall not agree to any proposed settlement or adjustment with respect thereto with any taxing authority unless required to do so by applicable Law.
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Exhibit 2.1
REPRESENTATIONS AND WARRANTIES OF SELLERS AND BUYER
2.1Representations and Warranties of Seller. Each Seller, severally, and not jointly, represents and warrants to Buyer that the statements contained in this Section 2.1 are correct and complete as of the Closing Date as to such Seller (each, as applicable, a “Seller Party”):
(a)Organization, Qualification, and Power. Seller is a limited liability company, duly incorporated or organized, validly existing, and in good standing under the Laws of jurisdiction of its formation. Seller has full limited liability company power and authority and all Permits necessary to carry on the business in which Seller is engaged and to own, lease and use the properties owned, leased and used by Seller. Seller has delivered to Buyer correct and complete copies of Seller’s Organizational Documents. Seller is not in default under or in violation of any provision of its Organizational Documents.
(b)Authorization of Contemplated Transactions. Seller Party, has full power, authority and legal capacity to execute and deliver this Agreement and each Ancillary Agreement to which such Seller Party is a party and to perform such Seller Party’s obligations hereunder and thereunder. This Agreement constitutes the valid and legally binding obligation of such Seller Party, enforceable against it in accordance with the terms of this Agreement, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally and the availability of equitable remedies. Upon the execution and delivery by Seller Party of each Ancillary Agreement to which such Seller Party is a party, such Ancillary Agreement will constitute the valid and legally binding obligation of such Seller Party, enforceable against such Seller Party in accordance with the terms of such Ancillary Agreement, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally and the availability of equitable remedies. Seller Party is not required to give any notice to, make any filing with, or obtain any Consent of any Governmental Body or any other Person in order to consummate the transactions contemplated by this Agreement or the Ancillary Agreements to which such Seller Party is a party.
(c)Non-contravention. Neither the execution and the delivery of this Agreement nor the Ancillary Agreements to which Seller Party is a party, nor the consummation of the transactions contemplated hereby and thereby, will (i) violate any provision of the Organizational Documents of Seller, (ii) violate or conflict with any Law or Order to which Seller Party is subject, (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contract to which Seller Party is a party or by which he is bound or to which any of his assets is subject, or (iv) result in the imposition or creation of a Lien upon or with respect to the Target Securities.
(d)Brokers’ Fees. Except as listed in Section 3.5 of the Disclosure Schedule, Seller Party has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement or any Ancillary Agreement.
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Exhibit 2.1
(e)Target Securities. Seller holds of record and owns beneficially all of the Target Securities set forth next to such Seller’s name on Schedule A free and clear of any Liens. Seller is not a party to any option, warrant, purchase right, or other Contract or commitment that could require Seller to sell, transfer, or otherwise dispose of any Target Securities (other than this Agreement). Seller is not a party to any voting trust, proxy, or other Contract with respect to the voting of any Target Securities. On the Closing Date, upon payment of the Estimated Cash Payment (less the Indemnity Holdback and the Adjustment Holdback) and delivery of the Equity Consideration in accordance with Section 1.4(a) and Section 1.4(b), the Target Securities of such Seller will be acquired by Buyer free and clear of all Liens, and Buyer will have good, valid and marketable title to the Target Securities of such Seller.
(f)Ancillary Agreements. Seller Party has reviewed all Ancillary Agreements and had the opportunity to ask questions and receive answers concerning the terms, conditions and provisions of such Ancillary Agreements. Seller Party has had full access to such information and materials concerning Buyer as Seller Party has requested. Buyer has answered all inquiries that Seller Party has made to Buyer relating to Buyer, or the sale of the Buyer Shares under this Agreement and the Ancillary Agreements.
(g)U.S. Securities Regulation. Seller Party is acquiring the Buyer Shares to be issued to Seller Party in connection with this Agreement for Seller Party’s own account, and such Buyer Shares are being and will be acquired by Seller Party for the purpose of investment and not with a view to resale in connection with a distribution thereof in violation of the Securities Act. Seller Party has had an opportunity to ask questions of and receive answers from the authorized representatives of Buyer and to review relevant documents and records concerning the business of Buyer and the terms and conditions of this investment in the Buyer Shares. Seller Party acknowledges that it has been called to Seller Party’s attention that this investment may involve a high degree of risk. Seller Party acknowledges that Seller Party can bear the economic risks of Seller Party’s investment in the Buyer Shares and that Seller Party has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the Buyer Shares and protecting Seller Party’s own interests in connection with this investment. Seller Party hereby represents and warrants to Buyer that Seller Party is an “accredited investor” as such term is defined under Section 501(a) of Regulation D promulgated under the Securities Act. Seller Party understands that the Buyer Shares to be issued in connection with the transactions contemplated hereby may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom. All certificates issued in respect of or exchange for the Buyer Shares that may be issued hereunder shall bear a legend (and Buyer will make a notation on its transfer books to such effect) prominently stamped or printed thereon reading substantially as follows, or the substance of which will otherwise be reflected on the books and records of the transfer agent of the Buyer Shares with respect to book-entry shares:
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR ANY U.S. STATE SECURITIES LAWS. THE HOLDER HEREOF AGREES FOR THE BENEFIT OF VILLAGE FARMS INTERNATIONAL, INC. (THE
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Exhibit 2.1
“CORPORATION”) THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, (B) IN ACCORDANCE WITH (1) RULE 144A OR
(2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, OR (C) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT, AND IN EACH CASE, IN COMPLIANCE WITH ANY APPLICABLE U.S. STATE SECURITIES LAWS; PROVIDED THAT TRANSFERS UNDER CLAUSE (B)(2) OR (C) SHALL BE PERMITTED ONLY AFTER THE HOLDER HAS FURNISHED TO THE CORPORATION (AND IF APPLICABLE, THE CORPORATION’S TRANSFER AGENT) AN OPINION OF COUNSEL OF RECOGNIZED STANDING OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH EXEMPTION(S) FROM REGISTRATION ARE AVAILABLE.”
(i)Seller Party (A) acknowledges that the Equity Consideration has not been qualified for distribution to the public in Canada, (B) represents and warrants that it is not a resident of Canada nor acting for the account or benefit of a Canadian resident or Person in Canada, (C) acknowledges that the Equity Consideration was not offered to Seller Party in Canada, (D) represents and warrants that Seller Party was, at the time of agreeing to purchase the Equity Consideration, and will be at Closing, located outside of Canada, and (E) represents and warrants that Seller Party is purchasing the Equity Consideration hereunder as principal;
(ii)During the Canadian Restricted Period, all certificates issued in respect of or exchange for the Equity Consideration that may be issued hereunder shall bear a legend (and Buyer will make a notation on its transfer books to such effect) prominently stamped or printed thereon reading substantially as follows, or the substance of which will otherwise be reflected on the books and records of the transfer agent of the Buyer Shares with respect to book-entry shares:
“UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE
December 17, 2021.”;
(iii)Seller Party acknowledges, agrees and covenants with the Buyer and also in favor of Buyer that once the resale of the Equity Consideration is registered with the SEC and the related registration statement of Buyer (including, but not limited to, the Registration Statement as contemplated in Section 4.5) has become effective with the SEC, Seller Party will only distribute the Equity Consideration during the period that is four months from the Closing Date either (i) to a purchaser that is not resident in Canada, or (ii)
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Exhibit 2.1
on or through the facilities of an exchange or market outside Canada where the Seller Party has no reason to believe that the purchaser is resident in Canada; and
(iv)Seller Party acknowledges that Buyer will be required to file a report of exempt distribution with applicable Canadian securities regulatory authorities in respect of the issuance of the Equity Consideration and that Seller Party’s name, address, telephone number and other specified information, including the aggregate price per share, may be shared and disclosed among all Canadian securities regulatory authorities and may become available to the public in accordance with the requirements of applicable legislation and Seller Party consents to the disclosure of such information.
2.2Representations and Warranties of Buyer. Buyer represents and warrants to each Seller that the statements contained in this Section 2.2 are correct and complete as of the Closing Date.
(a)Organization of Buyer. Buyer is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation, and has all requisite power and authority to own, lease and operate its assets, properties and business and to carry on its business as now being conducted. Buyer is duly qualified or otherwise authorized as a foreign entity to transact business in each jurisdiction in which its ownership of property or the conduct of business as now conducted therein requires it to so qualify, except where the failure to be so qualified would not materially impact its business. Complete and correct copies of the Organizational Documents of Buyer and all amendments thereto have been made available to the Sellers. Buyer is not in material violation of any of the provisions of its Organizational Documents.
(b)Authorization of Contemplated Transactions. Buyer has full power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations hereunder and thereunder. This Agreement constitutes the valid and legally binding obligation of Buyer, enforceable against it in accordance with the terms of this Agreement, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally and the availability of equitable remedies. Upon the execution and delivery by Buyer of each Ancillary Agreement to which it is a party, such Ancillary Agreement will constitute the valid and legally binding obligation of Buyer, enforceable against it in accordance with the terms of such Ancillary Agreement, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally and the availability of equitable remedies. Except as required to comply with applicable federal and state securities Laws and as set forth in this Agreement, Buyer is not required to give any notice to, make any filing with, or obtain any Consent of any Governmental Body in order to consummate the transactions contemplated by this Agreement or the Ancillary Agreements to which Buyer is a party. The execution, delivery and performance of this Agreement and each Ancillary Agreement to which Buyer is a party have been duly authorized by Buyer.
(c)Non-contravention. Neither the execution and the delivery of this Agreement nor the Ancillary Agreements to which Buyer is a party, nor the consummation of the transactions contemplated hereby and thereby, will (i) violate any provision of the Organizational Documents of Buyer, (ii) violate or conflict with any Law or Order to which Buyer is subject, or
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Exhibit 2.1
(iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contract to which Buyer is a party or by which it is bound or to which any of its assets is subject.
(d)SEC Reports. Buyer has timely filed all forms, reports, schedules, statements and other documents required to be filed by Buyer with the SEC since January 1, 2021 (collectively, the “Buyer SEC Reports”) under the Securities Exchange Act, together with any amendments, restatements or supplements thereto. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), each of the Buyer SEC Reports complied in all material respects with the applicable requirements of the Securities Exchange Act, including the rules and regulations promulgated thereunder, and none of the Buyer SEC Reports at the time they were filed, or if amended or superseded by a filing prior to the date of this Agreement, on the date of the last such amendment or superseding filing prior to the date of this Agreement, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The certifications and statements required by (A) Rule 13a-14 or 15d-14 promulgated under the Securities Exchange Act and (B) 18 U.S.C. §1350 (Section 906 of the Xxxxxxxx-Xxxxx Act) relating to any Buyer SEC Reports (collectively, the “Certifications”) are accurate and complete and comply as to form and content with all applicable legal requirements, and no current or former executive officer of Buyer has failed to make the Certifications required of him or her. Buyer has made available to the Company true and complete copies of all correspondence, other than transmittal correspondence, between the SEC, on the one hand, and Buyer, on the other, since January 1, 2021, including all SEC comment letters and responses to such comment letters and responses to such comment letters by or on behalf of Buyer. As of the date of this Agreement, there are no outstanding or unresolved comments in comment letters received from the SEC or Nasdaq with respect to Buyer SEC Reports. To the Knowledge of Buyer, none of Buyer SEC Reports are the subject of ongoing SEC review and there are no inquiries or investigations by the SEC or any internal investigations pending or threatened, including with regards to any accounting practices of Buyer. As used in this Section 2.2(d), the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.
(e)Financial Statements. The financial statements (including any related notes) contained or incorporated by reference in the Buyer SEC Reports: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP (except as may be indicated in the notes to such financial statements or, in the case of unaudited financial statements, as permitted by Form 10-Q of the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments that are not reasonably expected to be material in amount) applied on a consistent basis unless otherwise noted therein throughout the periods indicated; and (iii) fairly present the consolidated financial position of Buyer and the Buyer’s Subsidiaries as of the respective dates thereof and the results of operations and cash flows of Buyer for the periods covered thereby. Other than as expressly disclosed in the Buyer SEC Reports filed prior to the date hereof, there has been no material change in Buyer’s accounting methods or principles that would be required to be disclosed in Buyer’s financial statements in accordance
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Exhibit 2.1
with GAAP. The books of account and other financial records of Buyer and Buyer’s Subsidiaries are true and complete in all material respects. Buyer has designed and maintains a system of internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act, sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
(f)Accounting Practices. Since January 1, 2018, neither Buyer nor, to the Knowledge of Buyer, any manager, director, officer or employee of Buyer has received any written complaint, allegation, assertion or claim from any Governmental Body regarding the accounting or auditing practices, procedures, methodologies or methods of Buyer or its internal accounting controls, including any complaint, allegation, assertion or claim that Buyer has engaged in questionable accounting or auditing practices.
(g)Absence of Undisclosed Liabilities. Except as and to the extent reflected or reserved against in the Buyer Financials, to the Knowledge of Buyer, Buyer has not incurred any material liabilities or obligations of the type required to be reflected on a balance sheet in accordance with GAAP that is not adequately reflected or reserved on or provided for in the Buyer Financials, other than liabilities of the type required to be reflected on a balance sheet in accordance with GAAP that have been incurred in the ordinary course of business consistent with past practice.
(h)Litigation. There is no Proceeding pending, or, to the Knowledge of Buyer, threatened against Buyer or any of its subsidiaries or any of their respective properties, rights or assets or, any of their respective officers, directors, partners, managers or members (in their capacities as such) that could adversely affect Buyer’s business or results of operation in a material manner. There is no Order binding against Buyer, any of its subsidiaries or any of their respective properties, rights or assets or any of their respective officers, directors, partners, managers or members (in their capacities as such) that would prohibit, prevent, enjoin, restrict or alter or delay any of the transactions contemplated by this Agreement or could adversely affect Buyer’s business or results of operation in a material manner.
(i)Legal Compliance. Buyer and each of its Subsidiaries, predecessors and other Affiliates, and each of their respective current and former directors, officers, managers, and employees, in the course of their respective duties, have at all times materially complied and are in material compliance with all applicable Laws and Orders as are applicable to Buyer and each such entities’ business, affairs and operations, including Laws and Orders applicable to the cultivation of hemp and cannabis, the extraction of CBD and tetrahydrocannabinol, and the manufacturing, transportation, distribution, advertisement, and sale of CBD Products and products containing any tetrahydrocannabinol, and no Proceeding has been filed or commenced and remains pending or, to the Knowledge of Buyer, is threatened alleging any failure so to comply. To the Knowledge of Buyer, neither Buyer nor any of its Subsidiaries, predecessors and other Affiliates has received any notice or communication from any Governmental Body alleging any non- compliance of the foregoing.
(j)Nasdaq Listing. The Buyer Shares are listed for trading on the Nasdaq. Except as set forth in the Buyer SEC Reports, there is no action or proceeding pending or, to the
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Exhibit 2.1
Knowledge of Buyer, threatened against Buyer by the Nasdaq with respect to any intention by such entity to prohibit or terminate the listing of the Buyer Shares on the Nasdaq.
(k)Brokers’ Fees. Buyer does not have any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which any Seller could become liable or obligated.
(l)Investment. Buyer is not acquiring the Target Securities with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act.
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANIES
The Sellers, jointly and severally, represent and warrant to Buyer that the statements contained in this ARTICLE 3 are correct and complete as of the Closing Date.
3.1Organization, Qualification, and Power. Section 3.1(a) of the Disclosure Schedule sets forth the jurisdiction of incorporation or formation of each Company and each state or other jurisdiction in which such Person is licensed or qualified to do business. Each Company is duly organized, validly existing, and in good standing under the Laws of its jurisdiction of incorporation or formation. Each Company is duly authorized to conduct their business and are in good standing under the Laws of each jurisdiction where such qualification is required. Each Company has full corporate power and authority and all Permits necessary to carry on the businesses in which it is engaged and to own, lease and use the properties owned, leased and used by them. Section 3.1(b) of the Disclosure Schedule lists the board of directors, managers, management board and officers, as the case may be, of each Company. Sellers have delivered to Buyer correct and complete copies of the Organizational Documents, the minute book and equity record books for each Company, each of which is correct and complete. No Company is in default under or in violation of any provision of their Organizational Documents. All actions of each Company have been duly authorized, approved, and taken in accordance with the Organizational Documents of such Company.
3.2Authorization of Contemplated Transactions. BHB has full power, authority and legal capacity to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations hereunder and thereunder. The execution and delivery by BHB of this Agreement and the Ancillary Agreements to which it is a party and the performance by BHB of the transactions contemplated hereby and thereby have been duly approved by all requisite limited liability company action of BHB. This Agreement constitutes the valid and legally binding obligation of BHB, enforceable against it in accordance with the terms of this Agreement, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally and the availability of equitable remedies. Upon the execution and delivery by BHB of each Ancillary Agreement to which it is a party, such Ancillary Agreement will constitute the valid and legally binding obligation of BHB, enforceable against it in accordance with the terms of such Ancillary Agreement, except as enforcement may be limited by applicable bankruptcy, insolvency,
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Exhibit 2.1
reorganization, moratorium and other similar Laws affecting the rights of creditors generally and the availability of equitable remedies.
(a)All of the Target Securities are owned beneficially and of record by Sellers in proportion to the Pro Rata Shares. The Target Securities represent 100% of the outstanding equity or other ownership interests in BHB. All of the Target Securities have been duly authorized, are validly issued, fully paid, and have no requirement of additional capital contributions and have been issued without violation of any preemptive right or other right to purchase. Sellers have good and indefeasible title to all of the Target Securities free and clear of all Liens. There are no other equity or other ownership interests in any Company, or outstanding securities convertible or exchangeable into equity or other ownership interests of any Company, and there are no options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other Contracts that could require any Company to issue, sell or otherwise cause to become outstanding or to acquire, repurchase or redeem equity or other ownership interests in any Company. Section 3.3(b) of the Disclosure Schedule sets forth all of the outstanding or authorized equity appreciation, phantom equity, profit participation, payments triggered by a change of control of any Company or the occurrence of the transactions contemplated by this Agreement, or similar rights with respect to any Company in effect immediately prior to the Closing, all of which will be terminated and of no further force or effect as of the Closing. There are no voting trusts, proxies, or other Contracts with respect to the voting of the stock or other ownership interests of any Company. Upon consummation of the transactions contemplated hereby, Buyer will be the sole owner, beneficially and of record, of 100% of the issued and outstanding equity interests of BHB, free and clear of any Liens.
(b)All of the Subsidiaries, direct and indirect, of BHB are listed in Section 3.3(b) of the Disclosure Schedule. Section 3.3(b) of the Disclosure Schedule lists the entire authorized stock or other ownership interests of each such Subsidiary and the record and beneficial owner of such stock or other ownership interests, all of which have been duly authorized, are validly issued, fully paid and non-assessable and have been issued without violation of any preemptive right or other right to purchase. BHB owns, directly or indirectly, all of the stock or other ownership interests of the Subsidiaries listed in Section 3.3(b) of the Disclosure Schedule, free and clear of all Liens. No Company or Subsidiary of any Company owns any other stock or other ownership interests in any Person other than as listed on Section 3.3(b) of the Disclosure Schedule, and there are no outstanding securities convertible or exchangeable into stock or other ownership interests of any Subsidiary of any Company, and there are no options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other Contracts that could require any such Subsidiary to issue, sell or otherwise cause to become outstanding or to acquire, repurchase or redeem stock or other ownership interests in any such Subsidiary. There are no outstanding or authorized equity appreciation, phantom appreciation, profit participation, or similar rights with respect to any Subsidiary listed on Section 3.3(b) of the Disclosure Schedule. There are no voting trusts, proxies, or other Contracts with respect to the voting of the stock or other ownership interests of any such Subsidiary.
3.4Non-contravention. Except as listed in Section 3.4 of the Disclosure Schedule, neither the execution and the delivery of this Agreement nor the Ancillary Agreements to which
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Exhibit 2.1
BHB is a party, nor the consummation of the transactions contemplated hereby or thereby, will (a) violate or conflict with any Law or Order to which any Company or any of the assets used by the Business is subject, (b) violate or conflict with any provision of the Organizational Documents of any Company, or (c) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice or payment under any Contract, Permit, instrument, or other arrangement to which any Company is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Lien upon any of its assets). Section 3.4 of the Disclosure Schedule sets forth each notice, filing, Consent, or Permit to or from any Governmental Body or other Person that BHB or any other Company is required to give, make, or obtain in order to consummate the transactions contemplated by this Agreement or the Ancillary Agreements to which BHB is a party.
3.5Brokers’ Fees. Except as listed in Section 3.5 of the Disclosure Schedule, no Company has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.
(a)The Company Group has good and marketable title to, or a valid leasehold interest or license in, the properties and assets (tangible and intangible) used by them, located on their premises, or shown on the Most Recent Balance Sheet or acquired after the date thereof, other than inventory sold in the Ordinary Course of Business, free and clear of all Liens, except for Permitted Liens.
(b)The buildings, machinery, equipment, and other tangible assets that the Company Group owns and leases are free from material defects (patent and latent), have been maintained in accordance with normal industry practice, and are in good operating condition and repair (subject to normal wear and tear) and are suitable for the purposes for which they are presently used. The inventory of the Company Group (i) does not include any items that are obsolete or of a quantity or quality not usable or salable in the Ordinary Course of Business and
(ii) includes only items sold by the Company Group in the Ordinary Course of Business in the conduct of the Business. The inventory disposed of subsequent to the date of the Most Recent Fiscal Year End has been disposed of only in the Ordinary Course of Business. The assets, properties and rights owned by the Company Group are all the assets, properties and rights used by the Company Group in the operation of the Business or necessary to operate the Business (both actual and intended), consistent with past practice, and prior to or at the Closing, all of the assets of the Company Group will be owned by a Company, free and clear of all Liens, except for Permitted Liens.
(a)
Attached to Section 3.7(a) of the Disclosure Schedule are correct and complete copies of the following financial statements of BHB (collectively, the “Financial Statements”): (i) audited consolidated balance sheets, statements of income, stockholders’ equity, and cash flows as of and for the fiscal years ended December 31, 2019 and December 31, 2020 (the “Most Recent Fiscal Year End”); and (ii) unaudited consolidated balance sheets, statements
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Exhibit 2.1
of income, stockholders’ equity, and cash flows (the “Most Recent Financial Statements”) as of and for the six (6) month period ended June 30, 2021 (the “Most Recent Fiscal Month End”). The Financial Statements are correct and complete and consistent with the books and records of each Company (which are in turn correct and complete), have been prepared in accordance with GAAP consistently applied, and presented fairly in all material respects the financial condition, results of operation, changes in equity and cash flow of the Company Group as of and for their respective dates and for the periods then ending; provided, however, that the Most Recent Financial Statements are subject to normal, recurring year-end adjustments (none of which will be material individually or in the aggregate).
(b)Since the Most Recent Fiscal Year End, the business of the Company Group has been conducted in the Ordinary Course of Business, and there has not been any Material Adverse Change and no event has occurred which could reasonably be expected to result in a Material Adverse Change. Without limiting the generality of the foregoing, since the Most Recent Fiscal Year End, except as listed in Section 3.7(b) of the Disclosure Schedule no Company has:
(i)sold, leased, transferred or assigned any assets or property (tangible or intangible) with a value in excess of One Hundred Thousand Dollars ($100,000.00 USD), other than sales of inventory in the Ordinary Course of Business;
(ii)experienced any damage, destruction or loss (whether or not covered by insurance) to its assets or property (tangible or intangible) in excess of One Hundred Thousand Dollars ($100,000.00 USD);
(iii)received notice from any Person regarding the acceleration, termination, modification or cancelation of a Contract, which, if in existence on the date hereof, would be a Material Contract;
(v)forgave, canceled, compromised, waived or released any Debt owed to it or any right or claim thereto;
(vi)issued, sold or otherwise disposed of any of its equity or other ownership interests, or granted any options, warrants or other rights to acquire (including upon conversion, exchange or exercise) any of its equity or other ownership interests or declared, set aside, made or paid any dividend or distribution with respect to its equity or other ownership interests or redeemed, purchased or otherwise acquired any stock or other ownership interest or amended or made any change to any of its Organizational Documents or made any other payment to its partners or other equityholders (or any Affiliates of such members or stockholders);
(vii)granted any increase in salary or bonus or otherwise increased the compensation or benefits payable or provided to any director, officer, partner, manager, employee, consultant, advisor or agent;
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Exhibit 2.1
(viii)engaged in any promotional, sales or discount or other activity that has or could reasonably be expected to have the effect of accelerating sales prior to the Closing that would otherwise be expected to occur subsequent to the Closing;
(ix)made any commitment outside of the Ordinary Course of Business or in excess of One Hundred Thousand Dollars ($100,000.00 USD) in the aggregate for capital expenditures to be paid after the Closing or failed to incur capital expenditures in accordance with its capital expense budget;
(x)instituted any material change in the conduct of its business or any material change in its accounting practices or methods, cash management practices or method of purchase, sale, lease, management, marketing, or operation;
(xi)made or revised any material Tax election, adopted or changed any material Tax accounting method, waived any statute of limitation in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, or settled or compromised any Tax liability;
(xii)collected its accounts receivable or paid any accrued liabilities or accounts payable or prepaid any expenses or other items, in each case other than in the Ordinary Course of Business, or taken any other action, or omitted to take any other action, not in the Ordinary Course of Business, which would materially affect the Working Capital as of the Closing Date;
(c)All notes and accounts receivable reflected on the Most Recent Financial Statements, and all accounts receivable of the Company Group generated since the Most Recent Fiscal Month End (the “Receivables”), constitute bona fide receivables resulting from the sale of inventory, services or other obligations in favor of the Company Group as to which full performance has been fully rendered, and are valid and enforceable claims. The Receivables are not subject to any pending or, to the Knowledge of BHB, threatened defense, counterclaim, right of offset, returns, allowances or credits, except to the extent reserved in the final calculation of Working Capital. The reserves against the accounts receivable for returns, allowances, chargebacks and bad debts are commercially reasonable and have been determined in accordance with GAAP, consistently applied.
(d)The accounts payable of the Company Group reflected on the Most Recent Financial Statements arose from bona fide transactions in the Ordinary Course of Business, and all such accounts payable have either been paid, are not yet due and payable in the Ordinary Course of Business, or are being contested by the applicable member of the Company Group in good faith.
3.8Undisclosed Liabilities. No Company has any, and there is no basis for any, liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), except for liabilities that (a) are accrued or reserved against in the Most Recent
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Exhibit 2.1
Financial Statements, (b) were incurred subsequent to the Most Recent Fiscal Month End in the Ordinary Course of Business, (c) result from the obligations of the Companies under this Agreement or the Ancillary Agreements or (d) liabilities and obligations pursuant to any Material Contract which arose in the Ordinary Course of Business and did not result from any default, tort, breach of contract or breach of warranty.
(a)Each Company, their respective predecessors and Affiliates, and each of their respective current and former directors, officers, managers, and employees, in the course of their respective duties, have at all times complied and are in compliance with all applicable Laws and Orders as are applicable to each such Company’s business, affairs and operations, and no Proceeding has been filed or commenced or, to the Knowledge of BHB, threatened alleging any failure so to comply. Neither any member of the Company Group nor Seller has received any notice or communication alleging any non-compliance of the foregoing.
(b)Section 3.9(b) of the Disclosure Schedule sets forth a correct and complete list of all Permits held by the Company Group or used in the business, affairs and operations of any member of the Company Group and all Consents obtained with respect to such Permits in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. Such Permits (i) constitute all Permits currently required for the conduct of the business, affairs and operations of the Company Group and (ii) are valid and in full force and effect. Such Consents constitute all Consents required with respect to such Permits to ensure that all such Permits remain in good standing and in full force and effect following the Closing. No Company, nor any of their directors, managers, partners, officers or employees (A) is in violation of any term of any such Permit, (B) has received notice of any pending or threatened Proceeding alleging that any operation or activity of any Company or any of their directors, managers, officers or employees is in violation of any applicable Laws or Permits and has no knowledge that any Governmental Body or third party is considering any such Proceeding, (C) has received notice that any Governmental Body has taken, is taking, or intends to take action to limit, suspend, modify or revoke or to not renew any Permit, and has no knowledge that any such Governmental Body is considering taking or would have reasonable grounds to take such action, (D) has, or has had on its behalf, filed, declared, obtained, maintained or submitted all reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any applicable Laws or Permits and to keep the Permits in good standing and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission).
(c)Immediately following the Closing, each Permit set forth on Section 3.9(b) of the Disclosure Schedule or that should be set for in Section 3.9(b) of the Disclosure Schedule will be available for full use and exploitation by a Company. All Consents set forth on Section 3.9(b) of the Disclosure Schedule or that should be set for in Section 3.9(b) of the Disclosure Schedule are valid and in full force in effect immediately following the Closing.
(d)Each product sold by any Company or in their inventory: (i) meets the applicable specifications for the product; (ii) is fit for the purpose for which it is intended, and is
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Exhibit 2.1
of merchantable quality; (iii) has been cultivated, processed, packaged, labelled, imported, tested, stored, transported and delivered in accordance with the Permits and all applicable Laws; (iv) is not adulterated, tainted or contaminated and does not contain any substance not permitted by applicable Laws; and (v) has been cultivated, processed, packaged, labelled, imported, tested, stored and transported in facilities authorized by the applicable Permit in accordance with the terms of such Permit. Any marketing and promotion activities of each Company relating to its products complies with all applicable Laws in all material respects.
(e)No Company, nor any of their officers, managers, equityholders, partners, members, directors, agents, employees or any other Persons acting on their behalf has (i) made any illegal payment or provided any unlawful compensation or gifts to any officer or employee of any Governmental Body, or any employee, customer or supplier of any Company, or (ii) accepted or received any unlawful contributions, payments, expenditures or gifts; and no Proceeding has been filed or commenced alleging any such payments, contributions or gifts.
(f)The Company Group has implemented, maintains, regularly audits and complies in all material respects with internal compliance programs designed to detect and prevent violations of any applicable Laws related to the Hemp and Hemp-derived-product industry, periodically reviews and updates such internal compliance programs to account for any changes in Laws applicable to Company’s business, affairs and operations, as needed, employs or engages internal personnel and third party consultants to perform routine audits to test the effectiveness of each Company’s internal compliance programs and processes and controls related thereto. All directors, officers, internal personnel and third party consultants of each Company have, where reasonably applicable to the position and services rendered by such Persons, sufficient knowledge of Laws relating to Hemp and products derived from Hemp which are applicable to each Company’s business, affairs and operations (including, without limitation, to the extent applicable, the Agricultural Act of 2014, the Agricultural Improvement Act of 2018, the Federal Food, Drug, and Cosmetic Act, the Controlled Substances Act, and all other Laws applicable to each Company’s business, affairs and operations and the Hemp and Hemp-derived-product industry) and all such Persons have all qualifications, including security clearances, training, experience and technical knowledge required by applicable Laws. Each Company has provided sufficient training to employees responsible for such Person’s internal compliance programs, including, without limitation, ensuring that, where reasonably applicable to the position and services rendered by such Persons, they are adequately informed (i) to the extent applicable, of the Agricultural Act of 2014, the Agricultural Improvement Act of 2018, the Federal Food, Drug, and Cosmetic Act, the Controlled Substances Act and all other Laws applicable to each Company’s business, operations and affairs and the Hemp and Hemp-derived-product industry, and any changes thereto; and (ii) of each Company’s internal compliance programs and controls related thereto. Each of the current and former employees and third-party consultants of each Company has agreed, in writing, to abide by each of the internal compliance policies applicable to such current or former employees or third- party consultants.
(a)The Company Group has filed with the appropriate taxing authorities all Tax Returns that they were required to file. All such Tax Returns are correct and complete in all material respects. [***]. No Company is currently the beneficiary of any extension of time within which to file any Tax Return or pay any Tax. There are no Liens for Taxes (other than Taxes not yet due and payable) upon the Target Securities or any of the assets of any member of the Company Group.
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Exhibit 2.1
(b)Each Company has withheld or collected and paid to the proper Governmental Body or other Person all Taxes required to be withheld, collected or paid by it from all employees, clients, independent contractors, creditors, shareholders and any other applicable payees in material compliance with applicable Law. All forms and other filings required with respect to any such payments (including, without limitation, Forms W-2 and 1099) have been properly completed and filed taking into account all available extensions. All Persons treated as independent contractors of the Company Group are properly classified as such.
(c)Adequate reserves and accruals have been established on the Most Recent Financial Statements to provide for the payment of all Taxes which are not yet due and payable with respect to the Company Group.
(d)No deficiency or proposed adjustment for any amount of Tax has been proposed, asserted or assessed by any taxing authority against any Company that has not been paid, settled or otherwise resolved. There is no Proceeding or audit now pending, proposed or, to the Knowledge of BHB, threatened against any Company or concerning the Company Group with respect to any Taxes. No Company been notified by any taxing authority that any issues have been raised with respect to any Tax Return. There has not been, within the past five (5) calendar years, an examination or written notice of potential examination of the Tax Returns filed with respect to the Company Group by any taxing authority.
(e)All Taxes that are required to be withheld or collected by the Company Group, including Taxes arising as a result of payments (or amounts allocable) to foreign persons or to employees, agents, contractors or equityholders of the Company Group, have been duly withheld and collected and, to the extent required, have been properly paid or deposited as required by applicable Laws.
(f)No claim has ever been made by any taxing authority in a jurisdiction where Company does not file Tax Returns that they are or may be subject to taxation by that jurisdiction.
(g)No Company is a party to any Tax allocation, sharing, indemnity, or reimbursement agreement or arrangement, and are not liable for the Taxes of any other Person as a transferee or successor, by Contract or otherwise.
(h)No Company: (i) is or has ever been a member of an affiliated group (within the meaning of Section 1504(a) of the Code or similar group defined under any similar provision of state, local or non-U.S. Tax law) filing a consolidated, combined, unitary or aggregate group Tax return for any taxable period; or (ii) has any liability for the Taxes of any Person under Treasury Regulation 1.1502-6 (or any corresponding or similar provision of state, local or non-
U.S. Tax law) as a transferee or successor, by Contract (other than a Contract entered into in the
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Exhibit 2.1
ordinary course of business, the principal subject matter of which is not the allocation, sharing or indemnification of Taxes), operation of law or otherwise.
(i)No member of the Company Group will be required as a result of (i) a change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) use of an improper method of accounting for a taxable period ending on or prior to the Closing Date, (iii) any “closing agreement,” as described in Section 7121 of the Code (or any corresponding provision of state, local or foreign Law), (iv) any installment sale or open transaction disposition prior to the Closing Date, (v) the receipt of any prepaid revenue prior to the Closing Date, or (vi) election under Section 108(i) of the Code, to include any item of income or exclude any item of deduction for any taxable period (or portion thereof) beginning after the Closing Date that would not have otherwise so been included or excluded as the case may be.
(j)Except as set forth in Schedule 3.10(j) of the Disclosure Schedule, no Company owns an interest in any controlled foreign corporation (as defined in Section 957 of the Code), passive foreign investment company (as defined in Section 1297 of the Code), or other entity the income of which is or could be required to be included in the income of any member of the Company Group.
(k)No member of the Company Group and no Seller is a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code.
(l)Section 3.10(l) of the Disclosure Schedule lists all Tax Returns filed by the Company Group for Tax periods ended on or after December 31, 2017, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. No member of the Company Group has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to the payment of any Tax or any Tax assessment or deficiency.
(m)There is no Contract to which any Company is a party that will, individually or collectively, result in the payment of any amount that would not be deductible by reason of Section 280G (as determined without regard to Section 280G(b)(4)), 162 or 404 of the Code.
(n)Except as set forth in Section 3.10(n) of the Disclosure Schedule, each Company is, and at all times since formation has been, validly treated as a either a partnership or a “disregarded entity” (within the meaning of Treasury Regulations Section 301.7701-3(b)(1)(ii)) for federal income Tax purposes (and, where applicable, state and local income Tax purposes).
(o)Except as set forth in Section 3.10(o) of the Disclosure Schedule, no member of the Company Group has engaged in a trade or business, had a permanent establishment (within the meaning of an applicable Tax treaty or convention between the United States and such foreign country), has an office or fixed place of business in a country other than the United States, or otherwise been subject to taxation in any other country other than the United States.
(p)No member of the Company Group has been a party to any “Reportable Transaction” within the meaning of Treasury Resolution Sections 1.6011-4(b).
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Exhibit 2.1
(q)No Company has deferred (i) any “applicable employment taxes” under Section 2302 of the CARES Act (or any corresponding or similar provision of state or local Tax law), or (ii) any payroll Tax obligations (including those imposed by Sections 3101(a) and 3201 of the Code) pursuant to or in connection with the Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, dated August 8, 2020 or Notice 2020- 22.
(b)Section 3.11(b) of the Disclosure Schedule sets forth the address of each parcel of Leased Real Property, and a true and complete list of all Leases for each parcel of Leased Real Property. Sellers have made available to Buyer a true and complete copy of each Lease, and in the case of any oral Lease, a written summary of the material terms of such Lease.
(c)Subject to the respective terms and conditions in the Leases, a Company is the sole legal and equitable owner of the leasehold interest in the Leased Real Property and possesses good and enforceable title thereto, free and clear of all Liens (other than Permitted Liens).
(d)With respect to each parcel of Real Property: (i) there are no pending or, to the Knowledge of BHB, threatened condemnation Proceedings, suits or administrative actions relating to any such parcel or other matters adversely affecting the current use, occupancy or value thereof; (ii) the use, ownership, occupancy and operation of the Real Property in the manner in which it is now used, owned, occupied and operated comply with all zoning, building, use, safety or other similar Laws; (iii) all Improvements on any such parcel are in good operating condition, ordinary wear and tear excepted, are supplied with utilities and other services necessary for the operation of the Business as currently conducted at such Real Property and safe for their current occupancy and use; (iv) neither any member of the Company Group nor Seller has received any notice of any special Tax, levy or assessment for benefits or betterments that affect any parcel of Real Property and, to the Knowledge of BHB, no such special Taxes, levies or assessments are pending or contemplated; (v) there are no Contracts granting to any third party or parties the right of use or occupancy of any such Real Property, and there are no third parties (other than the Company and its Subsidiaries) in possession of any such Real Property; (vi) each such Real Property abuts on and has adequate direct vehicular access to a public road and there is no pending or, to the Knowledge of BHB, threatened termination of such access, (vii) all water, oil, gas, electrical, steam, compressed air, telecommunications, sewer, storm and waste water systems and other utility services or systems for such Real Property have been installed and are operational and sufficient for the operation of the Company Group’s business as currently conducted thereon, and neither any Company nor any Seller has received any notice of discontinuance of or reduction in such services, and (viii) such Real Property is in material compliance with all applicable Laws and Permits, including, but not limited to, building, zoning, subdivision, health and safety and other land use and building codes, ordinances, statutes or laws, including the Americans with Disabilities Act of 1990, as amended, and all insurance requirements affecting such Real Property, and neither any Company nor any Seller has received notice of violation of any such Laws which have not heretofore been cured or corrected. The Real Property comprises all of the real property owned,
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Exhibit 2.1
leased, subleased, licensed or otherwise occupied or used or intended to be used by the Company Group, and the Company Group is not a party to any Contract or option to purchase or lease any real property or any portion thereof or interest therein.
(e)With respect to each Lease, (i) no member of the Company Group, as applicable, is in default thereunder, and, to the Knowledge of BHB, no event has occurred which with the giving of notice or passage of time, or both, would constitute a breach or default thereunder by any member of the Company Group (as applicable) or any other party thereto, (ii) the applicable member of the Company Group’s possession and quiet enjoyment of the Leased Real Property under such Lease has never been disturbed, and there are no current disputes with respect to such Lease, (iii) no security deposit or portion thereof deposited with respect to such Lease has been applied in respect of a breach or default under such Lease which has not been redeposited in full, (iv) no member of the Company Group owes, nor will owe in the future, any brokerage commissions or finder’s fees with respect to such Lease, (v) no member of the Company Group has subleased, licensed or otherwise granted any other Person the right to use or occupy such Leased Real Property or any portion thereof and there are no Persons other than member of the Company Group in possession of such Leased Real Property, (vi) no member of the Company Group has collaterally assigned or granted any security interest in such Lease or any interest therein, (vii) such Leased Real Property, including without limitation, the mechanical systems, HVAC systems, plumbing, electrical, security, utility and sprinkler systems, are in reasonable, working condition, subject only to normal, scheduled maintenance, are reasonably sufficient for the operation thereof for its current use, and to the Knowledge of BHB, there are no material structural or other physical defects or deficiencies in the condition of such improvements, and there are no facts or conditions that would, individually or in the aggregate, interfere in any material respect with the use or occupancy of such improvements or any portion thereof in the operation of the business of the Company Group as currently conducted thereon, and (viii) neither such Leased Real Property nor the use or occupancy thereof violates in any way any applicable Permits, covenants, conditions or restrictions, whether federal, state, local or private, and the Leased Real Property or the applicable member of the Company Group has received all required certificates, licenses, Permits, authorizations and approvals in connection with the use and occupancy thereof.
(a)The Company Group owns and possesses or has the right to use pursuant to a valid and enforceable written Contract, all Intellectual Property necessary for the operation of the business of the Company Group, including the Business.
(b)
No member of the Company Group has interfered with, infringed upon, misappropriated, or violated any Intellectual Property rights of third parties in any respect, and no member of the Company Group, nor any of their directors, managers, members, partners and officers, has received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that any member of the Company Group must license or refrain from using any Intellectual Property rights of any third party). Except as set forth in Section 3.12(b) of the Disclosure Schedule, no third party has interfered with, challenged, or, to the Knowledge of BHB, infringed upon, misappropriated, or violated any Intellectual Property rights of the Company Group.
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Exhibit 2.1
(c)Sections 3.12(c)(i)-(iii) of the Disclosure Schedule identify the following Intellectual Property that is owned by the Company Group or currently used in the conduct of the business of the Company Group (indicting which member of the Company Group owns such Intellectual Property), whether registered or unregistered: (i) inventions, invention disclosures, discoveries and improvements (whether or not patentable), issued patents and patent applications, and counterparts claiming priority therefrom, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof (together, the “Patents”); (ii) trademarks, service marks, certification marks, collective marks, logos, slogans, trade dress, trade names (including social media user account names), other source or business identifiers, and respective applications (together, the “Trademarks”); and (iii) works of authorship and other copyrightable subject matter, whether or not published, including copyrights, software code, and databases (and all translations, derivative works, adaptations, compilations, and combinations of the foregoing) (together, the “Copyrights”). Section 3.12(c)(iv) of the Disclosure Schedule identifies each license, sublicense, agreement, or other permission pursuant to which any member of the Company Group have granted any rights to any third party with respect to any of its Intellectual Property (together with any exceptions) and any agreements that affect the Company Group’s rights to any Intellectual Property. Seller has delivered to Buyer correct and complete copies of all such applications and registrations for the Intellectual Property listed in Sections 3.12(c)(i)-(iii) of the Disclosure Schedule and all documents (including all amendments) listed in Section 3.12(c)(iv) of the Disclosure Schedule. The Company Group has, and upon the Closing a member of the Company Group will have, all right, title and interest in and to, free and clear of any Lien, license, or other restriction or limitation regarding use, and have the sole and exclusive right to use (and Seller, its equityholders, and their Affiliates do not have and do not claim to have any individual right to use) all the Intellectual Property required to be disclosed on Sections 3.12(c)(i)-(iii) of the Disclosure Schedule (the “Designated Intellectual Property”) (subject to the applicable license agreements listed in Section 3.12(c)(iv) of the Disclosure Schedule), and such Intellectual Property is not subject to any outstanding Order restricting the use or licensing thereof by the Company Group, and no member of the Company Group has received any written claim challenging the validity or effectiveness of such Intellectual Property, and such Intellectual Property is valid and enforceable.
(d)The Company Group has made all necessary filings and paid all necessary registration, maintenance and renewal fees to maintain the Designated Intellectual Property. There are no outstanding deadlines of any patent, copyright or trademark office (or any analogous office or registry anywhere in the world) in relation to such Designated Intellectual Property that will expire within six (6) months of the Closing Date.
(e)Each item of Intellectual Property owned or used by the Company Group immediately prior to the Closing will be owned or available for use, respectively, by the Company and its Subsidiaries immediately subsequent to the Closing on identical terms and conditions as owned or used by the Company Group immediately prior to the Closing.
(f)The Company Group has not infringed any Intellectual Property rights or other rights of any other Person, and the continued operation of the Business by the Company and its Subsidiaries consistent with past practices of the Company Group will not infringe any Intellectual Property rights or other rights of any other Person. Except as listed in Section 3.12(f), since January 1, 2016, no claims of any kind have been made or asserted by any other Person
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Exhibit 2.1
against any member of the Company Group or against any of their employees, agents or contractors, customers, vendors, suppliers, or distributors, claiming or alleging that the Company Group or any of their products (including Software and products currently under development), services or methods of operation infringe, have infringed, contribute to infringement or induce the infringement of, or misappropriate the Intellectual Property rights or other rights of any other Person, violate any right of any other Person (including rights to privacy or publicity) or constitute unfair competition, nor is any member of the Company Group aware of or on written notice of any such infringement, misappropriation or violation.
(g)Section 3.12(g)(i) of the Disclosure Schedule identifies all third party Software used by the Company Group in the operation of the Business (except for “off-the-shelf,” commercially-available software), and Section 3.12(g)(ii) of the Disclosure Schedule identifies all Software developed by or for the Company Group and the location of such Software. The Company Group owns and possesses or has the right to use pursuant to a valid and enforceable written Contract, all Software used by the Company Group in the operation of its business. After the Closing, all Software will be owned or available for use, respectively, by the Company and its Subsidiaries immediately subsequent to the Closing on identical terms and conditions as owned or used by the Company Group immediately prior to the Closing.
(h)The Company Group has adopted policies and procedures to control the use of third-party Intellectual Property, including Software available for download without charge on the internet or any other Software not introduced into the development environment through a formal procurement process and pursuant to a license agreement determined to be appropriate for establishing Company Group’s rights and obligations with respect to such Intellectual Property.
(i)The Company Group has taken all necessary steps to protect and preserve the confidentiality of all trade secrets, know-how, source code, databases, customer lists, schematics, ideas, algorithms and processes and all use, disclosure or appropriation thereof by or to any Person has been pursuant to the terms of a written agreement between such third party and the Company Group. Each member of the Company Group has complied with all of its confidentiality obligations under each Contract to which such Person is a party.
(j)Section 3.12(j) of the Disclosure Schedule contains a complete and accurate list and summary description of all rights in internet domain names, user names, handles and social media site names presently used or owned by the Company Group or otherwise used in connection with the Business. The Company Group owns or has the right to use all internet domain names, subdomains, URLs, website names, social media site names, user names, handles, email addresses, log-in names, passwords, pin numbers, customer numbers, and the like, or other account information necessary to access, transfer, use and update all of the foregoing presently used or owned by the Company Group (collectively “Net Names”). All Net Names have been registered in the name of a member of the Company Group and are, and have been, in compliance with all Laws. Except as set forth in Section 3.12(j) of the Disclosure Schedule, no Net Name has been or is now involved in any dispute, opposition, invalidation or cancellation Proceeding and no such action is threatened with respect to any Net Name. In addition, to the Knowledge of BHB: (i) no Net Name has been challenged, interfered with or threatened in any way and (ii) no Net Name infringes, interferes with or is alleged to interfere with or infringe the trademark, copyright or
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Exhibit 2.1
domain name of any other Person. Upon the Closing, all Net Names will be available for use by the Company or one of its Subsidiaries.
(a)Section 3.13(a) of the Disclosure Schedule lists the following Contracts to which any member of the Company Group is a party or which are binding on any assets of the any member of the Company Group used in the Business:
(ii)each Contract that requires a Company to pay, or entitles a Company to receive, or could result in obligations of a Company in the amount of, in the aggregate,
$50,000 or more in any twenty-four (24) month period;
(iii)each Contract containing a “most-favored-nation” provision or any provisions of similar effect;
(iv)each Contract that may not be unilaterally terminated by a Company, without penalty or fee, upon no more than sixty (60) days’ prior written notice;
(v)each Contract that requires the consent of any Person prior to a change of ownership or control of any Company;
(vi)each joint venture, partnership or Contract involving a sharing of profits, losses, costs or liabilities with any other Person;
(vii)each Contract containing any covenant that purports to restrict the business activity of the Company Group or limit the freedom of the Company Group to engage in any line of business or to compete with any Person;
(x)each Contract providing for the payment of any cash or other compensation or benefits upon the consummation of the transactions contemplated by this Agreement;
(xi)each Contract with any labor union, labor organization or trust fund or any bonus, pension, profit sharing, retirement or any other form of deferred compensation plan or practice, whether formal or informal, or any severance agreement or arrangement;
(xii)each Contract under which the Company Group has advanced or loaned to any other Person;
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Exhibit 2.1
(xiii)each Contract with any Seller, any equityholder or other beneficial owner of Seller, or any other Affiliate of any member of the Company Group;
(xv)each employment or consulting Contract or other Contract with any of the Company Group’s officers, managers, partners, directors or employees;
effect;
binding on Affiliate of any Company other than an Affiliate that is another Company; and
(xix)any other agreement material to the Company Group whether or not entered into in the Ordinary Course of Business.
(b)Seller has delivered to Buyer a correct and complete copy of each written Material Contract, together with all amendments, exhibits, attachments, waivers or other changes thereto. Section 3.13(b) of the Disclosure Schedule contains an accurate and complete description of all material terms of all oral Material Contracts.
(c)Each Material Contract is legal, valid, binding, enforceable, in full force and effect and will continue to be legal, valid, binding and enforceable on identical terms following the Closing Date. Except as specifically disclosed and described in Section 3.13(c) of the Disclosure Schedule, (i) no Material Contract has been breached or canceled by the applicable member of the Company Group or, to the Knowledge of BHB, any other party thereto, (ii) the applicable member of the Company Group has performed all obligations under such Material Contracts required to be performed by it, (iii) to the Knowledge of BHB, there is no event which, upon giving of notice or lapse of time or both, would constitute a breach or default under any such Material Contract or would permit the termination, modification or acceleration of such Material Contract, (iv) except to make the statements in clause (v) of this Section 3.13(c) accurate, no member of the Company Group has assigned, delegated or otherwise transferred to any Person any of its rights, title or interest under any such Material Contract, and (v) following the Closing, all Material Contracts will be available to the applicable member of the Company Group on identical terms as such Material Contracts were available to the Company Group prior to the Closing.
3.14Insurance. Section 3.14(a) of the Disclosure Schedule sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, director & officer, and workers’ compensation coverage and bond and surety arrangements) with respect to which any member of the Company Group is a party or a named insured or with respect to which any member of the Company Group (including by virtue of coverage of the assets thereof) is otherwise the beneficiary of coverage (collectively, the “Company Insurance Agreements”):
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Exhibit 2.1
(a)the name of the insurer, the name of the policyholder, and the name of each covered insured;
(c)a description of any retroactive premium adjustments or other material loss- sharing arrangements; and
(d)a description of any and all claims by any Company or any other Person pending under any Company Insurance Agreement as to which coverage has been questioned, denied, or disputed.
All premiums payable under the Company Insurance Agreements have been paid. There are no threatened terminations of, or material premium increases with respect to, any Company Insurance Agreements. Section 3.14(b) of the Disclosure Schedule sets forth a list of all claims made under the Company Insurance Agreements, or under any other insurance policy, bond or agreement covering the any member of the Company Group or any their operations since January 1, 2016. The Company Group and their operations have been covered during the past (5) years by insurance in scope and amount customary and reasonable for the business in which they have engaged during such period and as required by any Material Contracts.
3.15Litigation. Except as set forth in Section 3.15 of the Disclosure Schedule, there are no (and during the last two (2) years preceding the date hereof, there have not been any) Proceedings, Orders, or, except as did not or would not have, directly or indirectly, a Material Adverse Effect, complaints, charges, grievances, or investigations pending or, to the Knowledge of BHB, threatened or anticipated relating to or affecting the Company Group. There is no outstanding Order to which the Company Group is subject. The Company Group is fully insured with respect to each of the matters set forth on Section 3.15 of the Disclosure Schedule. No Seller is engaged in or a party to or, to the Knowledge of BHB, threatened with any complaint, charge, Proceeding, Order, investigation or other process or procedure for settling disputes or disagreements with respect to the Company Group or the transactions contemplated by this Agreement or any Ancillary Agreement, and no Seller nor any member of the Company Group has received written notice of a claim or dispute that is reasonably likely to result in any such complaint, charge, Proceeding, Order, investigation or other process or procedure for settling disputes or disagreements with respect to the Company Group or the transactions contemplated by this Agreement or any Ancillary Agreement.
(a)Section 3.16(a) of the Disclosure Schedule sets forth a complete and correct list of all employees and independent contractors of the Company Group providing services to the Business, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate; (v) current target commission, bonus or other incentive-based compensation amounts; (vi) whether such individual is on short-term disability leave (and if so, expected date of return to work); (vii) whether such individual is on long-term disability leave (and if so, expected date of return to work);
(viii) classification as exempt versus non-exempt under the Fair Labor Standards Act and similar
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Exhibit 2.1
state Laws; (ix) the amount of accrued and unused vacation time; (x) the identity of the labor organization or union representing the individual if the individual is a member of a bargaining unit represented by a labor organization or union; and (xi) indicating whether there has been any increase in compensation, bonus, incentive, or service award or any grant of any severance or termination pay or any other increase in benefits or any commitment to do any of the foregoing since the Most Recent Fiscal Year End. No Company has any employees in the State of California or any employee that would cause any Company to be subject to any Laws regarding employment in the State of California.
(b)Sellers have provided Buyer with complete and correct copies of (i) all existing severance, accrued vacation or other leave agreement, policies or retiree benefits of any such officer, employee or consultant, (ii) all employee trade secret, non-compete, non-solicit, non- disclosure and/or invention assignment agreements, (iii) all payments to be made to employees and contractors of the Company Group in connection with the transactions contemplated by this Agreement and the Ancillary Agreement, including severance payments, Bonus Pool Agreements, accrued and unused vacation for all employees, and incentive payments, and (iv) all policies, manuals and handbooks applicable to any current or former director, manager, officer, employee, consultant or independent contractor of the Company Group. The employment, consulting or independent contractor arrangement of each