Date Filed 5/25/2023 6:52 PM
`Superior Court - Suffolk
`Docket Number
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`COMMONWEALTH OF MASSACHUSETTS
`
`SUFFOLK,ss
`
`SUPERIOR COURT
`DEPARTMENT OF THE TRIAL
`
`COURT
`
`
`
`)
`GARAGESWEATLLCf/k/a TRIBE WOD )
`LLC, JARED BANE, and ALEXANDRE
`VITET,
`
`Plaintiffs,
`
`v.
`
`NeeNeeNeeeeeeeeeeeeeeeee”
`
`[Admittance sought into Business Litigation
`Session]
`
`CIVIL ACTION NO.
`
`FACTORY 14 UK ACQUISITION
`IV LTD., RAZOR GROUP GMBH,and
`RAZOR GROUP USA, LLC,
`
`Defendants.
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`COMPLAINT FOR INJUNCTIVE RELIEF AND DAMAGES
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`INTRODUCTION
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`Plaintiffs Jared Bane (“Bane”) and Alexandre Vitet (“Vitet”) (collectively, the
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`‘“Founders”) are the founders and former members and managersofPlaintiff Garage Sweat LLC
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`f/k/a Tribe WOD LLC(Plaintiffs hereinafter collectively, “Plaintiffs” or “Sellers’”’), a company
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`that designed, manufactured, and sold cutting-edge, innovative, tactical-inspired equipment and
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`gear for use in cross-training workout regimens. Launchedbythe Plaintiffs in a Marblehead,
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`Massachusetts garage in or about 2019, the brand exploded in 2020-2021, progressing from zero
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`to over $2.5 million in sales in a matter of months. Based on promisesof global expansion,
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`refinement and enhancementof its marketing andsales structures, and certain exceedance of
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`“earnout” benchmarksspelled out in the agreement documents, Plaintiffs sold the assets of the
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`company to Defendant Factory 14 UK Acquisition IV Ltd. (“Factory 14’), a UK-based entity, in
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`Date Filed 5/25/2023 6:52 PM
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`Docket Number
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`September of 2021, which resold Tribe WODsix monthslater to Defendant Razor Group,
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`GmbH(“Razor”), a German company with operations in Texas. Instead of the enhancements
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`promised, Defendants gutted Tribe WOD’s experienced workforce, disregarded the Founders’
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`advice provided as paid consultants, and have blatantly violated the parties’ Asset Purchase
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`Agreement (the “APA”) both as to financial reporting requirements, and payment of earnout
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`sums due. Plaintiffs seek injunctive performance ofthe financial reporting requisites and
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`monetary damages to address Defendants’ fraudulent inducement, unfair and deceptive business
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`practices, and breachesof contract.
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`PARTIES
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`1.
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`Plaintiff Jared Bane (‘Plaintiffor “Bane’’) is an individual whoresides in
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`Marblehead, Essex County, Massachusetts.
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`2.
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`Plaintiff Jared Bane (‘Plaintiff’ or ““Bane’’) is an individual whoresides in
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`Marblehead, Essex County, Massachusetts.
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`3.
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`Plaintiff Garage Sweat LLC f/k/a Tribe WOD LLC, is a Massachusetts limited
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`liability company with a principal place of business in Marblehead, Massachusetts.
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`4.
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`Defendant Factory 14 UK Acquisition IV Ltd.is a limited liability company
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`incorporated underthe laws of England and Wales, with the company number 13562100, and
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`registered office address of 100 Avebury Boulevard, Milton Keynes, United Kingdom, MK9
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`1FH.
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`5.
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`Defendant Razor Group GmbHis a limited liability company organized underthe
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`laws of Germany,with a principal place of business in the United States at 316 West 12"Street,
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`5" Floor, Austin, Texas, and in Germany at Prinzessinnenstr. 20, 10969, Berlin, Germany.
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`6.
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`Defendant Razor Group USA, LLC,is a corporation organized underthe laws of
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`Superior Court - Suffolk
`Docket Number
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`Delaware, with a principal place of business at 316 West 12" Street, 5Floor, Austin, Texas.
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`JURISDICTION and VENUE
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`7.
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`8.
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`This Court has jurisdiction over this dispute pursuant to Mass. Gen. L. c. 212, § 3.
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`Becausethis is a complex business dispute and meetsall of the othercriteria,
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`Plaintiffs seek admittance to the Business Litigation Session.
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`9.
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`The Court has jurisdiction over Defendants pursuant to Mass. Gen. L. c. 223A,§
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`3, because Defendants have, since no later than September 2021, transacted business in
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`Massachusetts through the Tribe WODbrand,including conductgivingrise to the causes of
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`action asserted herein.
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`10.
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`The Court also has jurisdiction over Defendants because the Asset Purchase
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`Agreement executed by Factory 14 and assigned to Razor, provides for application of
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`Massachusetts law to any dispute arising out of, relating to, or in connection with such
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`Agreement, and underthe related Consulting Agreements betweenPlaintiffs and Defendants, the
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`parties provide for exclusive jurisdiction over any dispute or claim “that arises out of or in
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`connection with this agreementorits subject matter or formation”in any ofthe “state or federal
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`courts of the Commonwealth of Massachusetts USA.”
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`11.|Venueis proper in this county because Defendants do business in Suffolk County,
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`are corporate entities with their principal places of business outside of Massachusetts, and
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`because the terms of the Consulting Agreements permit the bringing of such an action in any
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`state or federal court in Massachusetts.
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`FACTS COMMONTO ALL COUNTS
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`12.
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`In or about April 2020, Vitet, a talented industrial designer and CrossFit”
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`enthusiast, founded TribeWOD LLC,to market and sell cutting-edge, stylish, tactical-inspired
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`equipmentand gearfor use in cross-training workout regimens.
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`13.
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`Bane,a licensed Nursing Home Administrator who had run nursing homes for
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`over a decade, joined with Vitet in April of 2020 as a memberand co-managerto expand and
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`grow the business.
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`14.
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`Vitet’s original designs include the TribeWOD Hammerand Sledgehammer,
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`handled free-weight devices, a weighted vest to be worn for cross-training workouts, the “King
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`Keg,” a thirty-five to six hundred pound weighted barrel for strongman or powerlifting training,
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`and other products.
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`Rapid Growth
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`15.
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`On the strength of Vitet’s sleek designs, Bane’s executive experience, and the
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`Founders’ savvy use of self-produced marketing videos and social media dispersal, TribeWOD
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`made an immediate impact in the market for at-homecross-training gear.
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`16.=Inits first year, TribeWOD grossed over $2.5 million in sales and returned over
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`$250,000 in earnings before interest, taxes, depreciation, and amortization (“EBITDA”).
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`17.
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`The Founders had begun operations in Vitet’s garage, using a containerin his
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`driveway to receive and then ship out products — sometimes hundredsin a day.
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`18.
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`Asthey grew, the Founders moved distribution from Vitet’s garage to a
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`warehouse in Marblehead and established sales channels through Amazon, Shopify, and multiple
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`other online platforms.
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`19.
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` Vitet continued to design new products, and he and Bane increased brand
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`awareness and spurred sales via self-produced videos and other marketing content that they
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`posted on YouTube,their website, and multiple social media platforms including Facebook and
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`Instagram.
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`20.+Asof the spring of 2021, TribeWOD had established manufacturing partners in
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`Asia, wasselling and delivering products to the European Union and United Kingdom, had
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`negotiated an advantageous deal with DHL to ship goodsit wasselling to Canada, Australia, and
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`New Zealand, and wasreceiving orders faster than it could fulfill them.
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`Buyers’ Interest and Negotiations
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`21.
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`By July of 2021, the company’s rapid growth hadattracted interested buyers,
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`which included a potential acquirer who found the company through Shopify, as well as
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`Defendant Factory 14, a UK entity.
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`22.
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`Tribe WODalso had opportunities to obtain substantial funding to continue to
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`grow the brand.
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`23.
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`Factory 14 emergedas the leading offeror because, in addition to a cash payment
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`similar to what others offered, it promised to pay multiples of the initial payment through
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`earmouts tied to TribeWOD’s annual EBITDAfor a lengthy post-closing period, and promised to
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`keep the Plaintiffs on as consultants in “guaranteed” positions to guide and grow the business.
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`24.
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`To inducethe Plaintiffs to sell, Factory 14 represented itself as experts in online
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`marketing and sales who would provide the company with cash to grow, personnel and structural
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`resources, and logistical support to grow overseas, including in the UK, EU, Australia, and New
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`Zealand.
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`25.
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`Amongits other pre-sale promises, and with the specific intent and effect of
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`causing the Founders to chooseit as the buyer, Factory 14 promised that the EBITDA
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`benchmarkestablished for the Founders to achieve earnout compensation would not be reduced
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`by “managementfees,”
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`99 66
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`“acquisition fees,” or other one-time expenses or personnel costs that
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`were not narrowly tied to the business’s operation.
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`26.
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`Asadirect result of Factory 14’s representations, the Founders engaged in an
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`exhaustive and difficult due diligence process.
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`27.
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`The Founders were obligated to open up their books to Factory 14 and
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`painstakingly tie each purchase order to each sale made, establish TribeWOD’s cost of goods
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`sold (“CGS”) for each product sold, and calculate a reliable EBITDAfigure for the trailing
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`twelve-month period.
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`28.
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`Keying off of these numbers for the purchase price and earnout compensation,
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`the parties negotiated the terms of and then signed the Asset Purchase Agreement (“APA”) on
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`September 1, 2021, and closed on the sale of the business onthat date.
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`The APA
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`29.
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`The APA governedthe sale of the Tribe WOD brandandallofits associated
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`assets to Factory 14. See APA, § 2.01, Appendix 1, Ex. 1 hereto.
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`30.
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`In exchange,the Plaintiffs received an initial payment of $2,164,000 shortly after
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`the closing, and were to receive further payments at one-yearintervals thereafter based on the
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`ongoing business performance of the Tribe WOD brand, whoseoperation had been assumed by
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`Factory 14. See id., at § 2.04 (a).
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`31.
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`Specifically, the APA provided for the Plaintiffs to receive an additional $512,000
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`provided that Tribe WOD’s EBITDAforthe first 12 months after closing was equalto or greater
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`than its EBITDAfor the previous 12-month period (the “Stability Payment”). See id., at § 2.04
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`(b)(i).
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`32.
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`In order to determine whether the Stability Payment was due, Defendants were
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`required to provide detailed financial information and calculations of “LTM EBITDA” —
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`cumulative EBITDAfor the preceding 12-month period — at 6- and 12-month anniversaries of
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`the transaction’s closing. See APA,at Definitions, p. 6; § 2.04(b)(ii).
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`33.
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`The Plaintiffs were then to receive a multiple of 3.25x Tribe WOD’s incremental
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`EBITDAfor each of the three years post-closing after subtraction of any Stability Payment made
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`(the “Earn-Out Payments”). /d. at § 2.04 (c)(1)-(i1i).
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`34.
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`Defendants were required to provide the same detailed financial information and
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`calculations with respect to the Earn-Out Payments within 15 days after the one-year, two-year,
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`and three-year anniversaries of the closing. /d. at § 2.04 (c)(iv).
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`35.
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`The detailed financial reporting and calculations required for determining the
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`Stability Payment and Earn-Out Payments was required to be made “in accordance with Exhibit
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`2a of Appendix 2” to the APA. See APA,at Appendix 2, Exhibit 2a.
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`36.
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`Inthe event that Factory 14 wereto sellall or substantially all of its assets to a
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`third party, Factory 14 was to remain responsible forall of its Stability and Earn-Out Payment
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`obligations and was required to “make provision for the transferee, or successor to assume and
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`succeed to” such obligations within Section 2.04. See APA, § 2.04 (e).
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`37.
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`In addition to transferring the business to Factory 14, the Plaintiffs were required
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`to enter into and comply with Consulting Agreements executed by the parties at closing,
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`whereby Baneagreedto “fulfill[] the role typically designated to a Chief Operating Officer” and
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`Vitet agreed to fulfill the duties of a “Chief Design Officer” until terminated by Factory 14 upon
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`30 days’ notice, or by the Founders upon 60 days’ notice. See APA,at § 2.05; Vitet Consulting
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`Agreement, Ex. 2 hereto, at §§ 1.1, 5.1, and Exhibit A thereto; Bane Consulting Agreement, Ex.
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`3 hereto, at §§ 1.1, 5.1, Exhibit A thereto.
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`38.
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`The APA further required that each party “will permit the other Party andits
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`accountants, counsel, and other Representatives to have reasonable access to and examine and
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`make copies of all books and records relating to the Business .. .” See APA,at § 5.02 (a).
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`39.
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`The Consulting Agreements had the same effective date and were incorporated
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`into the APA as Appendix 5 thereto. See APA,at §§ 2.05, 8.01; Consulting Agreements, Ex.’s 2,
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`3, at p. 1.
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`40.
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`The facts set forth herein and the subject matter of this lawsuit arises out ofor is
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`in connection with the Consulting Agreements and/or their subject matter, as contemplated by
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`Section 10.4 thereof. See Consulting Agreementsat § 10.4, Ex.’s 2, 3.
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`41.
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`In or about May of 2022, the Plaintiffs were informed that Factory 14, including
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`the Tribe WODbusiness, had been sold to Defendant Razor Group Gmbh and/or Razor Group
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`USA, LLC, and despite an anti-assignment provision in the APA,all of Factory 14’s rights and
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`obligations under the APA had been assigned to Razor. See Razor Group Notice of Assignment,
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`May20, 2022, Ex. 4 hereto.
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`42.
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`Upon information and belief, Factory 14 knewofthe potential transaction with
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`Razorprior to execution of the APA, but purposely withheld this material fact from the
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`Plaintiffs.
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`43.|Upon information and belief, the acquisition of Tribe WOD and Consulting
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`Agreements were part of a pattern of acquisitions that bolstered the financials of Factory 14 for
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`the primary purposeofraising capital and obtaining investment.
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`44.
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`Upon information and belief, Factory 14 used the business reputation and success
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`of the Founders and Tribe WODto falsely represent its business acumenandto increase its value
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`with respect to its transaction with Razor.
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`Stability and Earn-Out Payments Easily Achievable
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`45.
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`The Stability and Earn-Out Payments were reasonably expected to generate
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`substantial additional compensationto the Plaintiffs.
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`46.
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`The relatively small initial payment and earn-out structure reflected the parties’
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`shared belief, and Factory 14’s representations, that the company’s value and expected
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`profitability was far in excess of the amountpaidat closing.
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`47.
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`In the Letter of Intent that the parties executed on July 27, 2021, Factory 14 had
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`valued the Tribe WOD brandat $4,845,756 as of June 2021.
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`48.
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`The Stability Payment and Earn-Out Payments were designed to — and were
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`expected to -- achieve total compensationto the Plaintiffs well in excess of this valuation.
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`49.
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`At the time of the closing Tribe WOD wasin the top 4% ofthe fastest growing
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`brands in the United States and the top 1% for all Shopify stores.
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`50.
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`Tribe WOD wasactively disrupting a $37 Billion dollar fitness industry and had a
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`devoted group of over 45,000 followers acrossall social media channels.
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`51. With the additional resources that Factory 14 promised -- including experts,
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`development of new products, geographic expansion, and accessto capital -- Tribe WOD was
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`certain to continue its rapid growth following the closing of the APA.
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`52.
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`In order for the earn-out benchmarksto be reached, Factory 14 had only to make
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`reasonable efforts to continue to operate and grow an already highly successful brand that had
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`established revenue channels and clear opportunities for expansion.
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`53.
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`In order to inducethe Plaintiffs to choose Factory 14 as its buyer, Factory 14
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`made multiple representations and promises concerning its plan for Tribe WOD growth. For
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`example, on July 21, 2021, Hanna Nowotzin of Factory 14 stated: “We see huge growth potential
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`for TRIBE WOD, particularly by growing your Amazon presence, launching new products and
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`expanding into new geographies.”
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`54.
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`If Factory 14 or Razor had followed through on these promises, Tribe WOD
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`would have easily exceeded—if not doubled or tripled—what Factory 14 calculated asits trailing
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`12-month pre-closing annual EBITDAfigure of $468,000, which was almost double the
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`company’s EBITDAfouror five months priorto thesale.
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`55.|Upon information and belief, Razor has also used the Founders’ and Tribe
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`WOD’s business skill and success to spur investmentand raise capital, while failing to fulfill
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`obligations that Factory 14 incurred through the APA to build and burnish the Tribe WODbrand,
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`while falsifying or obfuscating the business’s financials and performance since taking overits
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`operations.
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`Defendants Breach Their Obligations
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`56.
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`Following the closing of the Tribe WODsale, however, Factory 14 and then
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`Razor made clear through their actions and omissionsthat they never intended to grow Tribe
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`WOD’s revenues, or increaseits profitability.
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`57.
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`To the contrary, Defendants immediately set about depleting the brand’s assets
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`and sabotagingits ability to succeed. For example, Factory 14 promptly fired all of Tribe WOD’s
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`in-house creative content specialists, and never took any steps to replace them,instead using
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`unpaid interns with no business experience to run the brand.
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`58.
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` Asaresult, scant new visual marketing content had been produced since January
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`2022, with nothingat all produced for up to 18 months post-closing. Factory 14 and Razor had
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`been repeatedly re-using stale ad content from over a year ago instead of creating any new
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`marketing materials until recent, half-hearted efforts.
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`59.
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`Factory 14 also asked Mr. Vitet, in his post-closing consulting role, to design new
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`products to expand Tribe WOD’s product offerings. Mr. Vitet did so, with several new products
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`having been prototyped and ready for production as early as January 2022.
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`60.
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`Purchase orders for samples andfirst production runs had been paid in advance,
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`and the products had been announced on Tribe WOD’s marketing channels. Defendants took no
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`steps to release these new products, or have delayed their launch for months to years because of
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`incompetency or indifference. Factory 14 also promised overseas expansion, and to open up new
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`geographical areas for scaled up operations and revenue growth. Neither Factory 14 nor Razor
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`have everactually taken any steps in this direction.
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`61.
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`During negotiation of the APA and as a specific inducement to choose Defendants
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`as the buyer, Factory 14 had specifically touted its ability and intention to provide on-site quality
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`control supervision at product manufacturing facilities. Defendants have provided nothing of the
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`sort.
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`62.
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`Defendants’ failure to inspect Tribe WOD’s products before shipping led to
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`avoidable quality discrepancies, which lengthened orderdelivery times, damaged the brand and
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`harmedsales.
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`63.
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`Factory 14 also promised that it would be able to partner with known
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`manufacturers with whichit had existing relationships, to achieve production cost savings. Once
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`the APA wassigned, this was never discussed again, and Defendants have taken no action
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`consistent with this representation and promise.
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`64.
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`Factory 14 and Razorhavealso failed to attend to the basic necessities of
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`competent operation of the Tribe WODbusiness, consistently failing to pay invoices for shippers
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`and suppliers for monthsat a time, causing lost sales and massive customerorder refunds, failing
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`to pay for distribution channels such as Shopify, and failing to maintain access to PayPal, a
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`popular payment channel. Tribe WOD’s advertisements on Facebook and Google were shut
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`down for nonpayment and unavailability of funds.
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`65.
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`Defendants never transferred, from Tribe WOD LLC, accounts with DHL, UPS,
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`USPS, or the lease on its warehouse, and its former bank account was not reconciled until the
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`sale to Razor.
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`66.
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`Since the closing, Factory 14 and Razor havealso failed to comply with federal
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`and state tax and import laws, wage laws, and have otherwise mismanaged the business
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`financially.
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`67.
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`Following the closing, Bane repeatedly advised Factory 14 personnel of
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`outstanding state sales tax obligations. To date, upon information andbelief, Defendants have
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`failed to even register to do business in any U.S. state, have never applied for a Federal Tax I.D.
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`Number, and have neverpaid sales tax to any state despite having significant sales volume
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`throughout the United States.
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`68.
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`To avoid tax and related regulatory requirements, Defendants have continued
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`importing products to the U.S. in the name of Tribe WOD LLC,an entity whose name was
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`changedas part of the APAtransaction (with ownership retained by the Founders), and in which
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`neither Factory 14 nor Razor has any ownership or control. This has led to enormous confusion
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`and delays in shipping, in additionto likely violating U.S. import laws.
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`69.
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`Defendants have also continued using bank accounts in the name of Tribe WOD
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`LLC, and paid employees and contractors through this defunct entity, where these personnel had
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`direct contractual relationships only with Factory 14 or Razor.
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`70.
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`Defendants’ failure to transfer all aspects of the business, their incompetency in
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`fulfilling orders, and their slapdash and unprofessional customerservice system has causedirate
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`customers to track down the Founders, who are long removed from the business, to harass and
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`threaten them becauseoftheir frustration with the company.
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`71.
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`Defendants had no U.S. bank accountor credit card and were unable to obtain
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`either, and were thus unable to pay any of the company’s bills.
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`72.
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`Factory 14 had promisedto rely on its “experts” to open business to business sales
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`channels, but ignored the Founders’ extensive efforts to establish this segment and Defendants
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`have taken none of the steps promised toward this stated intention.
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`73.|Defendants appear to have prioritized Amazon sales, which has lead to massive
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`expenses from Amazon fees and outsourced shipping to Fulfillment by Amazon (“FBA”), and
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`devaluation of the business by converting it from a true brandto essentially an Amazon “drop
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`shipper.”
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`74.
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`Defendants have further diluted and devalued the brand byfailing to address
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`blatant trademark violations by sellers of pirated products on Amazon and elsewhere, and even
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`to take routine steps to maintain the company’s intellectual property protections.
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`75.
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`Plaintiffs have received calls from outside counsel that handles Tribe WOD’s IP
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`filings to say that representatives from Defendants are not returning his calls with respect to
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`renewals and other protective actions that must be taken.
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`76.
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`Through the Consulting Agreements and APA, Defendants promised and agreed
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`that the Founders were to have complete access to and control of Tribe WOD during the
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`transition period, and provided the Founderstitles and job descriptionsthat reflected such
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`agreement.
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`77.
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`Defendants instead excluded the Founders from all such access and control,
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`prematurely terminated the Consulting Agreements, and upon information and belief, diverted
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`income of the business to Defendants’ other businesses while handing the reins of Tribe WODto
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`unpaid interns and others without experience or know-how to carry through the plan for growth
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`and enhancementthat the Earn Out provisions of the APA required.
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`Defendants Breach Financial Reporting Requirements
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`78.
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`Factory 14 and Razorhavealso failed to deliver financial reporting as required
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`under Section 2.04 of the APA, at 6-month and 12-monthintervals following the closing.
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`79.
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`Razordelivered a purported EBITDAcalculation on August 5, 2022, and then in
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`April 2023, but both omitted the necessary detail concerning revenues, costs, and what
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`calculations were employed to determine the purported EBITDAfigures presented, andfails to
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`break down revenuebyoriginating channel.
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`80.
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`The financial information in both spreadsheets provided also contradicted
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`information in an earlier profit & loss statement the Founders had received from Factory 14.
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`81.
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`The Founders have repeatedly demanded the updated, full and complete reporting
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`required by the APA,to no avail.
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`82.
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`Defendantsassert that the business has suffered because of post-Covid 19 changes
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`in consumers’ spending habits, but even according to their own opaque and flawed data, the
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`business’s net revenues have not diminished, while Defendants falsely claim that EBITDA has
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`dropped from $468,000 to a negative figure.
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`83.
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`Despite equivalent purported revenues, Defendantsassert that “Other Expenses”
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`(which they do not define or explain), and inexplicably inflated selling costs (for which they
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`provide bare numbers without any detail or explanation) have made a highly profitable brand
`
`unprofitable, while they have slashed most of the brand’s marketing, product development and
`
`other expenses. Defendants have drastically reduced spending on any aspect of the brand’s
`
`development, yet their financial reporting showsthat costs are many multiples greater than prior
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`to these cuts.
`
`84.
`
`There is no rational explanation for this contradiction, except that Defendants are
`
`either falsifying the data provided to inflate expenses and thereby deprive the Plaintiffs of the
`
`agreed post-closing compensation,or are assigning Razor costs unrelated to operation of the
`
`Tribe WODbusinessto its financial statements, for the same purpose.
`
`85.
`
`Defendants have committed fraud in the inducement with respectto Plaintiffs’
`
`entering into the APA,are in breach of numerous terms of such agreement, have breached the
`
`implied covenant of good faith and fair dealing, their duty to make reasonableefforts to allow
`
`Plaintiffs to obtain the benefit of the earn-out and related provisions of the APA, and have
`
`committed knowing and willful violations of Mass. Gen. L. Chapter 93A through the unfair and
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`deceptive practices in trade or commerce detailed herein.
`
`86.
`
`Defendant Factory 14 also breached the APA’s anti-assignment provisions by
`
`assigningall of its rights and obligations to Razor.
`
`87.
`
`Plaintiffs have fulfilled all of their obligations under the APA and Consulting
`
`Agreements, and all other predicates to bringing this action.
`
`CAUSESOF ACTION
`
`COUNTI - DECEIT/FRAUD IN THE INDUCEMENT
`(Factory 14 and Razor)
`
`88.
`
`89.
`
`Plaintiffs repeat and reallege each allegation set forth in the paragraphs above.
`
`As morefully set forth above, Defendant Factory 14 (and throughits acquisition
`
`of such entity, and on its own behalf following such acquisition) and Defendant Razor
`
`knowingly misrepresented and/or intentionally or negligently omitted to disclose numerous
`
`critical facts prior to and subsequent to the execution of the APA, with the express purpose of
`
`persuading Plaintiffs to sell the Tribe WOD business, and to deny the Plaintiffs the benefits of
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`Docket Number
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`their agreement, including the Stability Payment and Earn-Out Payments.
`
`90.
`
`Asmore fully set forth above, such false and misleading statements and omissions
`
`include, without limitation:
`
`a.
`
`b.
`
`that Factory 14 were experts in online marketing and sales who would provide
`the company with cash to grow, personnel and structural resources, and
`logistical support to grow overseas, including in the UK, EU,Australia and
`New Zealand.
`
`as admitted and acknowledged by Hanna Nowotzin in a February 17, 2022
`meeting in Massachusetts, that the EBITDA benchmarkestablished for the
`Plaintiffs to achieve earnout compensation would not be reduced by
`“managementfees,” “acquisition fees,” or other one-time expenses or
`personnelcosts that were not narrowly tied to the business’s operation.
`
`c. Hanna Nowotzin’s statement to Jared Banethat: “We see huge growth
`potential for TRIBE WOD, particularly by growing your Amazonpresence,
`launching new products and expanding into new geographies.”
`
`d.
`
`e.
`
`f.
`
`that the upfront payment being made was a small percentage of the eventual
`purchaseprice of the company.
`
`In projections provided to the Plaintiffs, represented that with its added
`expertise, resources, capital infusions, and other enhancements, the company
`would launch Plaintiffs’ new product designs and shortly reach monthly
`figures of $585,000 in profit, on $900,000 in revenues, with operating
`expenses ofjust $181,800.
`
`that the EBITDAforthe business for the year following the transaction was
`less than the sum identified in the APA that would trigger the Stability
`Payment and Earn-Out Payments, and that such EBITDA numberwasin the
`negative, despite prior contrary representations and earning the same or
`greater net revenues during such period.
`
`g.
`
`that the positions granted to them as Consultants were guaranteed for at least
`as long as the Stability Payments and Earn-Out Payments provisions were
`unfulfilled.
`
`h. Factory 14 failed to advise the Plaintiffs that it had plansin placeto sell all of
`its brands and business to Razor, which occurred approximately six months
`later.
`
`i. Factory 14 failed to advise the Plaintiffs that it (or its assignee, Razor) planned
`to terminate their experienced employeesand replace them with unpaid
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`interns who had no experience with brands such as Tribe WOD, fail to
`transfer the business to a separate entity registered to do businessin the U.S.,
`and fail to comply with Federal and State tax and other regulatory obligations.
`
`J. Factory 14 failed to advise the Foundersthat it intended to ignore their input,
`fail to act on their advice, and terminate the Consultant Agreements soon after
`the closing.
`
`91.
`
`Each of these misrepresentations and omissions was madeas a statement(or
`
`omission) of fact, and was knowingly or recklessly false when made, as became apparent within
`
`monthsafter the closing.
`
`92.
`
`The Plaintiffs justifiably relied on these misrepresentations and omissions in
`
`choosing Factory 14 as the buyer of Tribe WOD and closing onthe sale for the smallinitial
`
`paymentagreed to, and subsequentto the closing, in continuing with the companyas consultants,
`
`and in forbearing to file suit to enforce their rights.
`
`93.
`
`Asa direct and proximateresult, the Plaintiffs suffered detriment and harm in an
`
`amount to be determinedattrial.
`
`COUNTII -- BREACH OF CONTRACT
`(Factory 14 and Razor)
`
`94.
`
`95.
`
`96.
`
`Plaintiffs repeat and reallege each allegation set forth in the paragraphs above.
`
`Defendants and Plaintiff entered into the APA as a binding contract.
`
`As described morefully above, the APA included explicit financial reporting
`
`requirements to allow the parties to calculate the EBITDAfigures that determine whether
`
`Stability and Earn-out Payments are due.
`
`97.
`
`Despite repeated demand from the Plaintiffs, and Defendants’ repeated promises
`
`to provide full, complete, and accurate financial reports pursuant to the APA, Defendants have
`
`failed and refused to do so.
`
`98.
`
`The APA also required Defendants to make the books andrecords of the business
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`available at reasonable notice to Plaintiffs.
`
`99.
`
`Despite repeated requests, Defendants have failed and refused to provide accessto
`
`the books and records of the business, as required by the APA.
`
`100. Defendants have further failed and refused to make the Stability Payment required
`
`at the one-year anniversary of the execution date of the APA, and bytheir actions and
`
`representations, have repudiated the Earn-Out Payment provisions of the APA,rendering their
`
`breach of the obligation to make the Earn-Out Paymentscertain.
`
`101.
`
`By their conduct set forth above, Defendants have breached the APA without
`
`excuse orright.
`
`102.
`
`Such breaches of contract have directly and proximately caused, and will cause
`
`further, monetary damageto Plaintiffs, including consequential, incidental, and other forms of
`
`damagesto which Plaintiffs may be entitled, plus interest, costs, and attorney’s fees, in an
`
`amountto be provenattrial.
`
`COUNTIII -- BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
`AND OBLIGATION TO MAKE REASONABLE EFFORTS
`(Factory 14 and Razor)
`
`103.
`
`Plaintiffs repeat and reallege each allegation set forth in the paragraphs above.
`
`104. As more fully set forth above, Defendants are boundby the terms of the APA,
`
`which imposed upon them a duty of good faith