MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
This SUBSIDIARY PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of March 26, 2001 by and between Xxxxxxxxx Toys LLC, a Nevada limited
liability company ("TTOYS"), Xxxxx Xxxxxxxxx, an individual ("Xxxxxxxxx"),
Mega Micro Technologies Group, a Nevada corporation ("MGGA"), and Mega Micro
Technologies, Inc., a California corporation and wholly-owned subsidiary of
MGGA ("Mega").
This Agreement sets forth the terms and conditions upon which MGGA will
sell and convey to TTOYS, and TTOYS will purchase from MGGA, 100% of the
issued and outstanding shares of Mega.
RECITALS
WHEREAS, Mega is a provider of computer components, software, and custom-
built systems to corporate customers and to businesses serving business;
WHEREAS, Mega maintains a 3,000 sq.ft. retail storefront located at 0000
Xxxxxx Xxxxxx, xx Xxx Xxxxx, Xxxxxxxxxx, which is subject to a three-year and
four month lease dated December 1, 2000 (the "Lease");
WHEREAS, Xxxxxxxxx currently holds 698,000 shares of MGGA common stock,
of which 349,000 shares is subject to a certain Lock-Up Agreement dated June
8, 1999 (the "Lock-Up Agreement"), a copy of which is attached hereto as
Exhibit A;
WHEREAS, TTOYS is desirous of purchasing 100% of Mega in exchange for
$200,000 and 500,000 shares of MGGA common stock, which will be contributed
by Xxxxxxxxx on behalf of TTOYS;
In consideration of the mutual agreements contained herein, intending to
be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF MEGA; CLOSING
1.01.Purchase and Sale of Mega. Subject to the terms and conditions of this
Agreement, at the Closing, Mega agrees to sell, transfer, convey, assign
and deliver to TTOYS, and TTOYS agrees to purchase, acquire and accept
from Mega, free and clear of all liens, charges or encumbrances of
whatsoever nature, 100% of the issued and outstanding shares of Mega. As
part of the purchase, TTOYS will receive all of the assets of Mega of
any kind, character, or description, known or unknown, whether accrued,
absolute, or otherwise (and regardless of whether reflected on Mega's
Financial Statements), all as they exist on the Closing Date, including
without limitation:
MGGA Initial ____ Mega Initial ___ TTOYS Initial __ Xxxxxxxxx Initial _____
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
(a) All right, title and interest of Mega in and to all of Mega's
inventory, wherever located, including raw material, work in
process, and finished goods;
(b) All of Mega's cash, cash on hand, cash on deposit, accounts,
accounts receivable (subject to the provisions referenced in
Section 1.04(b) hereof), trade receivables and notes receivable;
(c) All of Mega's fixtures, machinery, equipment, furniture, and
supplies;
(d) All right, title and interest of Mega in and to all prepaid rentals
and other prepaid expenses, bonds and deposits (including those for
health insurance);
(e) All vehicles owned or leased by Mega;
(f) All Business records including all drawings, bills of materials and
lists, vendor agreements and lists, credit files, sales records,
warranty records, inventory records, product literature and
marketing studies;
(g) All licenses, permits and other intellectual property used in
connection with the Business of Mega.
(h) All other books and records associated with the Business of Mega
(including Mega's corporate minute books and related corporate
records);
(i) To the extent assignable, all rights of Mega under the contracts
and leases entered into by Mega in connection with the Business
(the "Assumed Contracts"); and
(j) All customer, distributor and supplier files and mailing lists of
Mega.
All of the assets referenced above and being purchased under this
Agreement are collectively referred to herein as the "Assets."
1.02.Assumption of Liabilities. On the Closing Date, TTOYS shall assume, pay,
perform, and discharge all charges, debts, obligations, contracts,
agreements, and liabilities of Mega (the "Assumed Liabilities"). The
Assumed Liabilities shall include, but shall not be limited to:
(a) All liabilities of Mega on the Financial Statements;
(b) Accounts payable;
(c) Accrued employee vacation and sick pay;
(d) Warranty claims;
MGGA Initial __ Mega Initial ___ TTOYS Initial ___ Xxxxxxxxx Initial __
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
(e) Any and all automobile leases;
(f) All liabilities under the Assumed Contracts, to the extent the
liabilities or claims arise either prior to or subsequent to Mega
Ownership Period; and
(g) All other liabilities of Mega, whether fixed or contingent, known or
unknown, arising out of the operation of the Business either prior to or
subsequent to Mega Ownership Period; save and except for any Retained
Liabilities as defined in Section 1.03.
1.03.Liabilities to be Retained by MGGA. MGGA shall retain only the following
Mega liabilities (the "Retained Liabilities"):
(a) Federal and state income taxes, federal and state employment taxes
and state sales taxes due and payable for periods within Mega
Ownership Period, which shall be paid from funds of MGGA rather
than from any funds of Mega;
(b) Professional fees owed by Mega with regard to this transaction
and/or this Agreement, which shall be paid from funds of MGGA
rather than from any funds of Mega;
1.04.Consideration. As payment in full for Mega, subject to the terms and
conditions of this Agreement, and in reliance on the representations,
warranties and agreements of Mega and MGGA contained herein, TTOYS shall pay
the following consideration:
(a) Common Stock. TTOYS, though Xxxxxxxxx, shall deliver to MGGA at
Closing Five Hundred Thousand (500,000) shares of MGGA common
stock. The shares of common stock shall be split equally between
Xxxxxxxxx'x holdings at 250,000 shares which shall remain subject
to the Lock-Up Agreement and 250,000 shares of restricted common
stock which Xxxxxxxxx received pursuant to MGGA's April 2000
restricted stock dividend.
(b) Cash. The cash consideration to be paid by TTOYS shall be Two
Hundred Thousand Dollars ($200,000) (the "Cash Purchase Price"),
which shall be payable pursuant to the following terms and
conditions:
(i) MGGA shall establish a new bank account (the "Mega Account
Receivable Account") at Silver State Bank of Nevada for the
specific purpose of depositing all accounts receivable payments
from Mega. MGGA shall apply all deposited accounts receivable
funds towards payment of the Cash Purchase Price. MGGA will
provide a weekly statement to Mega as to the amount of funds
collected and the principal balance remaining on the Cash Purchase
Price.
MGGA Initial ____ Mega Initial ___ TTOYS Initial ___ Xxxxxxxxx Initial ___
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
(ii) Once the entire Cash Purchase Price has been collected pursuant to
the above provision, MGGA shall close the Mega Account Receivable
Account.
(iii) At all times during the payment of the Cash Purchase Price, TTOYS
shall cause Mega's inventory value to be at least 125% of the
balance remaining to be paid on the Cash Purchase Price. By way of
example, if the balance due on the Cash Purchase Price is
$100,000, TTOYS shall cause Mega to maintain $125,000 worth of
current inventory. MGGA shall have the right at any time,
without notice to Mega or TTOYS, to audit or inspect the current
inventory of Mega to ensure compliance with this Section
1.04(b)(iii).
(iv) All of Mega's inventory following the Closing of this Agreement
shall be pledged as collateral towards the payment of the Cash
Purchase Price. Such inventory shall be subject to the limits as
set forth in Section 1.04(b)(iii) above.
(v) In the event TTOYS is unable to pay the Cash Purchase Price in full
within 180 days of Closing of this Agreement, MGGA shall, upon ten
(10) days written notice to TTOYS and Mega, be entitled to seize
all of the current inventory of Mega and proceed with liquidation
of the inventory to be applied to any unpaid portion of the Cash
Purchase Price. MGGA will only liquidate enough of the inventory to
pay any unpaid portion of the Cash Purchase Price and will return
any remaining inventory to TTOYS and Mega. In the event the
proceeds from the liquidation of the inventory is insufficient to
cover any unpaid portion of the Cash Purchase Price, MGGA shall,
upon an additional 48 hours written notice, be entitled to begin
collections of any Mega trade and accounts receivable, notes, etc.
and MGGA shall be entitled to seize and begin liquidation of any
remaining assets of Mega to satisfy any unpaid portion of the
Cash Purchase Price.
All of the consideration referenced in this Section 1.04 to be paid
under this Agreement is collectively referred to herein as the "Purchase
Price."
1.05 Closing. The Closing of the transactions contemplated by this Agreement
will take place at the offices of Securities Law Institute, at 0000 Xxxx
Xxxxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx, or at such other location
or by such other means as the parties may agree, including exchange of
signatures via express mail or facsimile, at 9:30 a.m. on a date not
later than April 1, 2001.
MGGA Initial __ Mega Initial ____ TTOYS Initial ____ Xxxxxxxxx Initial __
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
1.06.Effective Time. The "Effective Time" shall mean 9:00 a.m., San Diego
local time, on March 22, 2001. The parties agree that (i) between the
Effective Time and the Closing the business of Mega shall be operated
for the benefit of and at the risk of TTOYS and (with TTOYS hereby
agreeing to insure against and hold MGGA harmless with respect to risk
of loss or damage to the Assets during such time) and (ii) the transfer
of the Assets to TTOYS and the assumption of any liabilities hereunder
by TTOYS shall be effective from and after the Effective Time without
further action by the parties hereto.
1.07.Deliveries at Closing.
(a) At the Closing, MGGA will deliver to TTOYS:
(i) a certificate representing 100% of the issued and outstanding
shares of Mega along with all corporate documents of Mega,
including an unaudited balance sheet of Mega, which will
effectuate the transfer of the Mega Assets by MGGA to TTOYS
and the acquisition of Mega by TTOYS; and
(ii) the Mutual Release (as hereinafter defined); and
(b) At the Closing, TTOYS will deliver to Mega:
(i) certificates in the amount of 500,000 shares, which shall be
applied to the Stock Portion of the Purchase Price; and
(ii) the Mutual Release.
1.08.Board of Directors and Officers Mega. Concurrent with Closing, each of
MGGA and TTOYS agrees to take such action as is necessary (i) to cause
the number of directors comprising the full Board of Directors of Mega
to be two (2) persons and (ii) to cause Xxxxx Xxxxxxxxx and Xxxxxx
Xxxxxx (the "TTOYS Designees") to be elected as directors of Mega. In
addition, MGGA shall take all action necessary to cause, to the greatest
extent practicable, the TTOYS Designees to serve on Mega's Board of
Directors until the 2001 Annual Meeting. If a TTOYS Designee shall
decline or be unable to serve as a director, TTOYS shall nominate
another person to serve in such person's stead, which such person shall
be subject to approval of the other party. From and after the Closing,
and until successors are duly elected or appointed and qualified in
accordance with applicable law, Xxxxx Xxxxxxxxx shall be Chief Executive
Officer and President, Secretary, and Treasurer of Mega.
MGGA Initial __ Mega Initial ___ TTOYS Initial ___ Xxxxxxxxx Initial __
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MEGA AND MGGA
Mega and MGGA hereby jointly and severally represent, warrant and
covenant to TTOYS as set forth below in this Article II. All representations
and warranties in this Article II are deemed to be made by Mega and MGGA on,
and be effective as of, both the date hereof and the Closing Date.
2.01.Corporate Organization; Power, Etc. Mega is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California and has full corporate power and authority to carry
on the Business as it is now being conducted and to own the Assets it
now owns and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each other jurisdiction in which
it owns or leases any real property or in which the nature of the
Business transacted by it makes such licensing or qualification
necessary.
0.00.Xx Affiliates. Mega does not own, directly or indirectly, any capital
stock or other equity securities of any corporation, partnership,
limited liability company, trust, joint venture or other entity nor have
any direct or indirect equity or ownership interest in any business.
2.03.Authorization of Agreements, Validity, Etc. The execution, delivery and
performance by Mega and MGGA of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
requisite corporate action and will not violate any provision of law,
any order of any court or other agency of government, the Certificate of
Incorporation or Bylaws (or similar governing documents) of Mega or
MGGA, any judgment, award or decree or any indenture, agreement or other
instrument to which Mega or MGGA is a party, or by which either of them
or any of their properties or assets is bound or affected, or result in
a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or
result in the creation of imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of the Assets of Mega. This Agreement
has been duly executed and delivered by Mega and MGGA and constitutes
the legal, valid and binding agreement of Mega and MGGA enforceable in
accordance with its terms, except that such enforcement
may be subject to traditional equitable remedies, bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditor's rights.
2.04 No Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate or
be in conflict with, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by,
or cause the acceleration of the maturity of any debt or obligation
pursuant to, or result in the creation or imposition of any security
interest, lien or other encumbrance upon any Assets under any agreement
or commitment to which Mega is a party or by which Mega is bound, or to
which the Assets are subject.
MGGA Initial ___ Mega Initial __ TTOYS Initial _____ Xxxxxxxxx Initial ___
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
0.00.Xxxxxxxxx Statements; No Undisclosed Liabilities. The unaudited
Financial Statements for Mega as of and for the fiscal year ended
December 31, 2000, have been delivered to TTOYS. Said Financial
Statements are true, accurate and complete in all material respects, and
present fairly the financial condition of Mega as of such dates and the
results of operations of Mega for such periods.
2.06.Accounts Receivable. To Mega's knowledge, all accounts receivable of
Mega represent sales actually made in the ordinary course of business.
2.07.Inventory. To Mega's knowledge, all inventory of Mega consists of a
quality and quantity usable and salable in the ordinary course of
business.
2.08.Conduct of the Business. To Mega's knowledge, since December 31, 2000,
and through the Closing Date,
(a) the Business has been conducted only in the ordinary and usual
course consistent with past practice;
(b) there has not been any material damage, destruction or loss,
whether or not covered by insurance, which would adversely affect
the Assets or the Business;
(c) there has not been any agreements, commitments or transactions to
sell, transfer, assign or encumber the Assets, nor has there been
any actual sale, transfer or other disposal of any of the Assets,
except in the ordinary course of business;
(d) there has not been any incurrence or assumption, whether directly
or by way of any guarantee or otherwise, of any obligations or
liabilities, affecting the Assets or the Business, except in the
ordinary course of business;
(e) there has not been any dividends or other distribution (whether in
cash, stock or property or any combination thereof) declared, set
aside or paid in respect of Mega's capital stock which are or may
be payable out of the Assets;
(f) there has not been any agreement, whether in writing or otherwise,
to take any action the performance of which would change the
representations contained in this Section 2.08 in the future so
that any such representation would not be true in all material
respects as of the Closing.
2.09.Title to Properties; Encumbrances. To Mega's knowledge, except as set
forth on the Financial Statements, Mega has good, valid and marketable
title to all the Assets, subject to no mortgages, security interests,
liens, pledges, conditional sale agreements, or encumbrances of any
nature whatsoever. In the aggregate, the Assets presently owned, leased
or licensed by Mega include all rights, properties and other assets
reasonably necessary to permit Mega to conduct the Business in all
material respects in the same manner as the Business has been conducted
prior to the date hereof.
MGGA Initial ____ Mega Initial ____ TTOYS Initial ___ Xxxxxxxxx Initial __
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
2.10.Intellectual Property. To Mega's knowledge, Mega is not infringing upon
any patent, trademark, service xxxx, or copyright belonging to any other
person. Further, no claim of infringement is presently pending, nor has
any such claim been made against Mega with respect to Mega's Business.
0.00.Xxxxx Compliance. To Mega's knowledge, Mega has complied with all
applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state and local governments (and all agencies
thereof), except where the failure to comply would not have a material
adverse effect upon the financial condition of Mega taken as a whole.
Mega has not received any notification of any asserted present or past
failure by Mega to comply with such laws, rules or regulations.
2.12.Plant and Equipment. MGGA has not received notification that Mega, the
Assets or the Business are in violation of any applicable building,
zoning, anti-pollution, health or other law, ordinance or regulation in
respect of its plants or structures or their operations and no such
violation exists.
2.13 Contracts and Commitments.
(a) To Mega's knowledge, except as set forth on the Financial
Statements, none of the Assumed Liabilities constitutes an
agreement or contract to make any single capital expenditure or
commitment in excess of $10,000 for additions to property, plant or
equipment or to make aggregate capital expenditures and commitments
in excess of $10,000 (on a consolidated basis) for additions to
property, plant or equipment;
(b) To Mega's knowledge, except as set forth on the Financial
Statements and the Lease, none of the Assumed Liabilities
constitutes a purchase contract or commitment that continues for a
period of more than twelve (12) months or that is in excess of the
normal, ordinary and usual requirements of the Business or that is
at an excessive price;
(c) To Mega's knowledge, Mega is not in material default under or in
violation of, nor is there any basis for any valid claim of
material default under or violation of, any Assumed Liability;
(d) To Mega's knowledge, there are no agreements that would restrict
TTOYS from carrying on the Business anywhere in the world;
(e) To Mega's knowledge, except as set forth on the Financial
Statements and except for the Lease, there are no debt obligations
for borrowed money, including guarantees of or agreements to
acquire any such debt obligation of others that encumber or
otherwise effect the Assets; the Assets are not subject to any debt
or obligation of Mega or MGGA, including debts or obligations
MGGA Initial __ Mega Initial ___ TTOYS Initial ___ Xxxxxxxxx Initial __
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation,
partnership, joint venture, association, organization or other
entity or granted or extended any power of attorney.
2.14.Agreements in Full Force and Effect. To MGGA's knowledge, all contracts,
agreements, plans, leases, policies and licenses referred to in this
Agreement as Assumed Liabilities are valid and in full force and effect.
2.15.Litigation. To MGGA's knowledge, there is no action, suit, inquiry,
proceeding or investigation by or before any court or governmental or
other regulatory or administrative agency or commission pending or
threatened against or involving in any material respect Mega or the
Assets or which questions or challenges the validity of this Agreement
or any action taken or to be taken pursuant to this Agreement or in
connection with the transactions contemplated hereby; nor, to MGGA's
knowledge, is there any valid basis for any such action, proceeding or
investigation. To MGGA's knowledge, the Assets are not subject to any
judgment, order or decree entered in any lawsuit or proceeding which may
have an adverse effect on the Business.
2.16.Environmental Protection. MGGA is not aware of, nor has MGGA received
notice of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which
may interfere with or prevent continued compliance, or which may give
rise to any common law or legal liability, or otherwise form the basis
of any claim, action, suit, proceeding, hearing or investigation, based
on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any
pollutant, contaminant, or hazardous or toxic material or waste.
2.17.Good Title Conveyed, Etc. Mega has complete and unrestricted power and
the unqualified right to sell, assign, transfer and deliver the Assets
to TTOYS, and upon consummation of the transactions contemplated by this
Agreement, TTOYS will acquire, good, valid and marketable title to the
Assets to be transferred to TTOYS hereunder, free and clear of all
mortgages, pledges, liens, security interests, conditional sales
agreements, encumbrances or charges of any kind, except as set forth on
the Financial Statements and except for the Lease.
2.18.Taxes. Mega has duly and timely filed or caused to be filed all federal,
state, local and foreign income, franchise, excise, payroll, sales and
use, property and withholding tax returns, reports, estimates and
information and other statements or returns (collectively "Returns")
required to be filed by or on behalf of it pursuant to any applicable
federal, state, local or foreign tax laws for all years and periods for
which such Tax Returns have become due. All such Returns were believed
by Mega to be materially correct as filed and to correctly reflect any
Tax or Taxes required to be paid or collected by (or allocable to or
collectible from) Mega. Such Returns correctly reflect any Taxes
required to be paid or collected by Mega.
MGGA Initial ___ Mega Initial __ TTOYS Initial ___ Xxxxxxxxx Initial _____
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
2.19.Disclosure. No representations or warranties by Mega or the MGGA in this
Agreement and no statement contained in any document (including, without
limitation, the Financial Statements) or certificate, furnished or to be
furnished by Mega to TTOYS or any of its representatives pursuant to the
provisions hereof or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of material fact
or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TTOYS
TTOYS represents and warrants to Mega and MGGA as follows:
3.01 Authorization; Etc. TTOYS has full power and authority to enter into
this Agreement and to carry out the transactions contemplated hereby.
This Agreement is a valid and binding agreement of TTOYS enforceable in
accordance with its terms except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefore may be
brought.
3.02 Validity. This Agreement has been duly executed and delivered by TTOYS
and constitutes the legal, valid and binding obligation of TTOYS,
enforceable against it in accordance with its terms.
0.00.Xx Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate or
be in conflict with, or constitute a default under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, any
agreement or commitment to which TTOYS is a party or by which TTOYS is
bound, or violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority.
3.04.Litigation. To TTOYS's knowledge, there is no action, suit, inquiry,
proceeding or investigation by or before any court or governmental or
other regulatory or administrative agency or commission pending or
threatened against or involving TTOYS, or which questions or challenges
the validity of this Agreement or any action taken or to be taken by
TTOYS pursuant to this Agreement or in connection with the transactions
contemplated hereby.
3.05.Retained Liabilities. To TTOYS's actual knowledge, the Retained
Liabilities are limited to those liabilities described in Section 1.03
of this Agreement.
MGGA Initial ___ Mega Initial ____ TTOYS Initial ____ Xxxxxxxxx Initial ___
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Prior to the signing and Closing of this Agreement, the following
conditions precedent shall have been satisfied or waived:
4.01.Consents Obtained. All consents from third parties, including without
limitation all lenders and secured parties, required to consummate the
transactions contemplated hereby shall have been obtained by TTOYS.
0.00.Xx Government Proceeding or Litigation. No suit, action, investigation,
inquiry or other proceeding-by any governmental body or other person or
legal or administrative proceeding shall have been instituted or
threatened against Mega which questions the validity or legality of any
of the transactions contemplated by this Agreement.
0.00.Xx Injunction. On the Closing Date there shall be no effective
threatened injunction, writ, preliminary restraining order or any order
of any nature issued by a court of competent jurisdiction directing that
the transactions provided for herein or any of them not be consummated
as so provided or imposing any conditions on the consummation of the
transaction contemplated hereby which TTOYS deems unacceptable in its
sole discretion.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES
0.00.Xxxxxx Release. At Closing, TTOYS shall enter into and deliver to Mega
and MGGA, and Mega and MGGA shall enter into and deliver to TTOYS, a
mutual release in the form attached hereto (the "Mutual Release").
5.02.Survival of Obligations. Notwithstanding any provisions of this
Agreement or of any agreement, document, certificate or other instrument
delivered in connection with the terms of this Agreement, including,
without limitation, the Mutual Releases shall survive the Closing of the
transactions contemplated by this Agreement.
5.03.Further Assurances. After the Closing, MGGA shall from time to time, at
the reasonable request of TTOYS, without cost or expense to TTOYS,
execute and deliver such other instruments of conveyance and transfer
and take such other reasonable actions as are contemplated by this
Agreement.
5.04.Employment of Employees by MGGA. Neither MGGA nor any affiliate of MGGA
shall employ or offer employment to any employee of Mega in any business
during a period of three years following the Closing without the prior
written consent of TTOYS.
MGGA Initial __ Mega Initial ___ TTOYS Initial ____ Xxxxxxxxx Initial ___
MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
0.00.Xxxxxxxx. Except as otherwise represented, warranted or set forth in
this Agreement, TTOYS specifically agrees that it has purchased the
Assets and assumed the Assumed Liabilities "as is," "where is" and "with
all faults" and defects, both latent and patent, known or unknown.
Further, TTOYS specifically agrees that it is not relying upon any oral
discussions between its representatives and any other representative of
Mega or MGGA in entering into this Agreement. TTOYS agrees that it has
performed a due diligence review of the Assets, Assumed Liabilities and
of the financial condition and prospects of the Business in making
TTOYS's voluntary decision to enter into this Agreement. Further, TTOYS
specifically agrees that it will not hold MGGA, or their employees,
agents or owners, responsible for any information about Mega that TTOYS
did not know at the time it entered into this Agreement as TTOYS agrees
that nothing Mega or MGGA, or its agents, employees or owners, said or
did, save and except for the agreements, covenants, representations and
warranties specifically set forth within this Agreement, induced TTOYS
into entering into this Agreement.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
6.01. Investigations; Survival of Warranties. The respective
representations, warranties and covenants of Mega, MGGA and the TTOYS
contained herein or in any certificates or other documents delivered
prior to or at the Closing shall not be deemed waived or otherwise
affected by any investigation made by any party hereto. Each and every
such representation, warranty, covenant and agreement shall survive for
a period of two (2) years after the date such representation and
warranty is deemed made, except that (i) the tax representations,
warranties, covenants and agreements in Article VII shall survive and be
enforceable indefinitely, (ii) other covenants and agreements to be
performed subsequent to the Closing, including without limitation those
covenants contained in Articles IV and V above, shall survive and be
enforceable for period of the applicable statute of limitations, and
(iii) nothing in the foregoing shall be deemed to diminish any
Indemnifying Party's (as hereinafter defined) indemnification
obligations to an Indemnified Party respecting (a) any matter for which
written notice to the Indemnifying Party has been given prior to the end
of the applicable indemnification period, and (b) claims for
indemnification for tax matters and common law fraud, which shall
survive for the duration of the applicable statutes of limitations.
6.02.Indemnification.
(a) MGGA agrees to save harmless, defend and indemnify TTOYS, and any
of TTOYS's respective officers, directors, agents, attorneys,
accountants, or other representatives of such parties against, and
hold them harmless from any and all liabilities, of every kind,
nature and description, fixed or contingent (including, without
limitation, reasonable counsel fees, expert witness fees, and
expenses in connection with any action, claim or proceeding
relating to such liabilities) arising out of or relating to a
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MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
breach of any of the representations and warranties or covenants
contained in this Agreement.
(b)TTOYS agrees to save harmless, defend and indemnify MGGA and
their respective officers, directors, agents, attorneys,
accountants, or other representatives against, and hold them
harmless from any and all liabilities, of every kind, nature and
description, fixed or contingent (including, without limitation,
reasonable counsel fees, expert witness fees, and expenses in
connection with any action, claim or proceeding relating to such
liabilities) arising out of a breach of any of the representations
and warranties or covenants contained herein.
6.03 Injunctive Relief. Notwithstanding the provisions of Section 6.04
hereof, in the event of a breach or threatened breach by MGGA, on the
one hand, or TTOYS on the other hand, of the provisions of this
Agreement, TTOYS on the one hand, or MGGA on the other hand, shall be
entitled in order to maintain the status quo ante pending the outcome of
any arbitration pursuant to Section 6.04 hereof to seek an injunction or
similar equitable relief restraining the other party or MGGA, as the
case may be, from committing or continuing any such breach or threatened
breach or granting specific performance of any act required to be
performed by the other party or MGGA, as the case may be, under any such
provision. The parties hereto hereby consent to the jurisdiction of the
federal courts located in San Diego, California and the California state
courts located in the City of San Diego for any proceedings under this
Section 6.03. The parties hereto agree that the availability of
arbitration in Section 6.04 hereof shall not be used by any party as
grounds for the dismissal of any injunctive actions instituted by TTOYS
pursuant to this Section 6.03.
6.04.Dispute Resolution. The parties acknowledge and agree that this
Agreement and any dispute hereunder shall be subject to and governed by
the dispute resolution provisions set forth in this section 4.4.
(a) DISPUTES. MGGA and TTOYS recognize that disputes as to certain
matters of this Agreement may from time to time arise which relate
to either party's rights and/or obligations hereunder or
thereunder. It is the objective of the parties to establish
procedures to facilitate the resolution of disputes arising under
this Agreement in an expedient manner by mutual cooperation and
without resort to litigation. To accomplish this objective, the
parties agree to follow the procedures set forth in this Article if
and when a dispute arises under this Agreement. In the event of a
dispute between the Parties, any party may, by written notice to
the other, have such dispute referred to their respective chief
executive officers for attempted resolution by good faith
negotiations within fourteen (14) days after such notice is
received. In the event the chief executive officers are not able to
resolve such dispute, either party may at any time after the
fourteen (14) day period seek to resolve the dispute through the
other means provided in Section 6.04(b)
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SUBSIDIARY PURCHASE AGREEMENT
(b) ALTERNATIVE DISPUTE RESOLUTION. Any dispute, controversy or claim
arising out of or relating to this Agreement, including, without
limitation, disputes relating to alleged breach or to termination,
shall be settled by binding Alternative Dispute Resolution ("ADR")
in the manner described below. If a party intends to begin an ADR
to resolve a dispute, such party shall provide written notice (the
"ADR Request") to the other party informing such other party of
such intention and the issues to be resolved. Within fifteen (15)
business days after receipt of the ADR Request, the other party
may, by written notice to counsel for the party initiating ADR, add
additional issues to be resolved.
(c) ARBITRATION PROCEDURE. The ADR shall be conducted pursuant to the
Commercial Arbitration Rules of the American Arbitration
Association for Large, Complex Cases then in effect.
Notwithstanding those rules, the following provisions shall apply
to the ADR hereunder.
(i) ARBITRATOR. The arbitration shall be carried out by a single
arbitrator, who shall be a retired United States judge or
justice or magistrate and shall be selected by the parties
within thirty (30) days of receipt of the ADR Request in
accordance with the procedure described below.
(1) The parties shall select an arbitrator as described in
subsection (2) below, which arbitrator may but need not
be selected from a list of arbitrators such as the CPR
Panel of Distinguished Neutrals of the Center for Public
Resources, subject to: (i) his/her availability and
willingness to serve, (ii) his/her availability to
commence the arbitration within a reasonable period of
time, (iii) his/her agreement to charge fees and expenses
that are reasonable under the circumstances, and (iv)
his/her commitment to render his/her award within the
time periods provided in this Section 6.04.
(2) Each party will exchange a list of ten (10)
qualified arbitrators and in the event that both parties
agree to a single common name that person shall be the
arbitrator. In submitting the ten names, each party shall
prioritize from one to ten the persons on their
respective lists. In the event that there is more than
one common name on the parties' lists, the person having
the lowest combined priority number shall be the selected
arbitrator. The combined priority number shall be the sum
of the order numbers assigned to that person by the
parties. Thus, if one person was MGGA's number two
priority and TTOYS's number three priority, and another
person was MGGA's number two priority and TTOYS's number
four priority, the former would be appointed. If more
than one person has the lowest combined priority number,
the person for whom there is less difference between the
order numbers assigned by
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MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
the parties shall be appointed. Thus, if one person was
MGGA's number one priority and TTOYS's number four
priority, and another person was MGGA's number two
priority and TTOYS's number three priority, the latter
person would be appointed. If this method does not
produce a sole arbitrator or if there are no common
names, the parties shall alternatively strike from the
combined list until one name remains, which shall be the
selected arbitrator. The party to strike first shall be
determined by the toss of a coin.
(3) In the event the arbitrator is unable to meet the
requirements set forth in subsection (i) above, then, in
the event the first selected arbitrator was common to
both lists and there was more than one common name on the
parties' lists, the arbitrator having the next lowest
combined priority number who is able and willing to serve
pursuant to these requirements shall be selected. If
there is no such individual, then the parties shall use
the alternate strike method set forth above. In the event
an arbitrator selected by the alternate strike
methodology is unable or unwilling to serve consistent
with the requirements set forth above, then the alternate
striking procedure shall be retraced in reverse order
until an arbitrator is selected.
The arbitrator shall be neutral, disinterested,
impartial, and independent of the parties and others
having any known interest in the outcome, and shall abide
by the AAA/ABA Code of Ethics for Arbitrators in
Commercial Disputes. There shall be no ex parte
communications with the arbitrator either before or
during the arbitration, relating to the dispute or issues
involved in the dispute or the arbitrator's views on any
such issue.
(ii) INTERIM REVIEW. Either party may apply to any court having
jurisdiction hereof and seek preliminary injunctive relief
until such time as the arbitration award is rendered or the
controversy is otherwise resolved.
(iii)LOCATION. Any arbitration under Section 6.04 shall be
conducted in San Diego, California.
(iv) DISCOVERY PROCEEDINGS AND HEARINGS. The parties shall have the
right to undertake such limited discovery as is expressly
authorized by the arbitrator upon a determination that such
discovery is reasonably necessary to enable the requesting
party to prepare and present its claims and/or defenses at the
hearing. Discovery shall be conducted pursuant to Rules 26-37
of the Federal Rules of Civil Procedure (with references to
"court" in those Rules being considered
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MEGA MICRO TECHNOLOGIES GROUP
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references to the "arbitrator") except as they may be modified
by the arbitrator. In addition:
(1) The arbitrator will determine the specific location
within the State of California and the date and time of
the arbitration hearing, which will commence no later
than ninety (90) days after the date of the appointment
of the arbitrator. The arbitrator will provide reasonable
notice of the hearing date and time.
(2) The arbitrator will ordinarily conduct the arbitration
hearing in the manner set forth in this Section 6.04
except that the Federal Rules of Evidence shall apply.
The arbitrator shall render its decision in writing. If
the AAA rules and the rules of this subsection (2)
conflict in any manner, the rules of this subsection (2)
shall prevail. The arbitrator must hold an oral hearing,
but may impose reasonable time limits on each phase of
the proceeding and may limit testimony to exclude
evidence that would be immaterial or unduly repetitive,
provided that all parties are afforded the opportunity to
present material and relevant evidence and that each
party is given at least an approximately equal amount of
time for presentation of its case.
(3) The arbitrator will require witnesses to testify under
oath if requested by any party.
(4) Any party desiring a stenographic record may secure a
court reporter to attend the proceedings.
(5) The arbitrator will determine the order of proof, which
will generally be similar to that of a court trial,
including opening and closing statements.
(6) When the arbitrator determines that all relevant and
material evidence and arguments have been presented, the
arbitrator will declare the hearing closed. The
arbitrator may defer the closing of the hearing for up to
ten (10) days to permit the parties to submit post-
hearing briefs and or to make closing arguments, as the
arbitrator deems appropriate, before rendering an award.
(7) The arbitrator will render the award and its decisions
within thirty (30) days after the date of the closing of
the hearing or, if an arbitration hearing has been
waived, within thirty (30) days after the date of the
arbitrator's receiving all materials specified by the
parties. The decision and award of the arbitrator will
constitute the arbitration award and will be binding on
the parties.
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MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
(8) The arbitrator shall, in rendering its decision and
award, apply the substantive law of the State of
California, without regard to its conflict of laws
provisions, except that the interpretation of and
enforcement of this Article shall be governed by the
Federal Arbitration Act. The costs of the winning party
and its reasonable attorney's fees shall be paid by the
losing party which shall be designated by the arbitrator.
If the arbitrator is unable to designate a losing party,
it shall so state and each party shall bear its own costs
and attorneys fees.
(v) AWARD. The arbitrator is empowered to award any remedy allowed
by law, including money damages, prejudgment interest and
attorneys' fees, and to grant final, complete, interim, or
interlocutory relief, including injunctive relief.
Notwithstanding the foregoing, punitive or multiple damages
may not be awarded. Judgment upon any arbitration award
hereunder may be entered and enforced in any court having
jurisdiction thereof.
(vi) ARBITRATION FEES. The fees of the arbitrator shall be split
equally between the parties.
(d) CONFIDENTIALITY. The ADR proceeding shall be confidential and the
arbitrator shall issue appropriate protective orders to safeguard
each party's confidential Information. Except as required by law,
no party shall make (or instruct the arbitrator to make) any public
announcement with respect to the proceedings or decision of the
arbitrator without prior written consent of each other party. The
existence of any dispute submitted to ADR, and the award, shall be
kept in confidence by the parties and the arbitrator, except as
required in connection with the enforcement of such award or as
otherwise required by applicable law.
6.06.Limitation on Claims. TTOYS shall not be entitled to make any claim
under this Article VI unless and until the amount of such claim is
reasonably believed by TTOYS to be $10,000 or more or the aggregate of
all claims for misrepresentation or breach of warranty made by the
claimant, shall exceed $20,000. A single claim which exceeds $10,000 may
be collected from the first dollar owed through the total amount of such
claim. Multiple claims each of which is less than $10,000 but which in
the aggregate exceed $20,000 may be collected from dollar $10,001
through the total amount of such claim. The aggregate obligation of Mega
to indemnify TTOYS under this Agreement shall be limited to the amount
of the Purchase Price received by Mega pursuant to this Agreement.
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MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
6.07.Settlement of Third Party Claims. Should any claim be made by a person
or entity not a party to this Agreement with respect to any matter
covered by the indemnities contained in this Article VI, including
without limitation, any claim by a governmental body in connection with
the audit of any federal, state or local tax return, the party or
parties being indemnified (the "Indemnified Party"), on not less than 30
days' notice to the party making the indemnification (the "Indemnifying
Party"), may make settlement (including payment in full) of such claim
and such settlement shall be binding upon all parties hereto for the
purposes hereof, unless within said 30-day period the Indemnifying Party
shall have requested the Indemnified Party to contest such claim at the
expense of the Indemnifying Party. In such event, the Indemnified Party
shall, upon posting of the bond or alternative security described below,
comply with such request and the Indemnifying Party shall have the right
to direct the defense of such claim or any litigation based thereon at
the Indemnifying Party's expense through counsel of its own choosing on
condition that such counsel agrees to look solely to the Indemnifying
Party for payment of its fees. If the Indemnifying Party does retain
counsel on such terms, then the Indemnified Party shall not be entitled
to indemnification under the next sentence of this paragraph for the
cost of any separate counsel it may retain in the matter. In the event
the Indemnifying Party shall so request the Indemnified Party to contest
such claim, the Indemnifying Party shall first furnish to the
Indemnified Party as indemnity against the contested claim a bond in the
amount of the third party claim plus the amount of any expenses
reasonably likely to be incurred by the Indemnified Party in contesting,
defending and litigating the same. In no event shall the Indemnifying
Party or its counsel, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the
entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified
Party a release from all liability in respect of such claim.
6.08.Remedies Cumulative. The remedies provided in this Article VI shall be
cumulative and shall not preclude assertion by any party hereto of any
other rights or the seeking of and other remedies against the other
party hereto.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.01.Amendments, Supplements, Etc. At any time this Agreement may be amended
or supplemented by such additional agreements, articles or certificates,
as may be determined by the parties hereto to be necessary, desirable or
expedient to further the purposes of this Agreement, or to clarify the
intention of the parties hereto, or to add to or modify the covenants,
terms or conditions hereof or to effect or facilitate any governmental
approval or acceptance of this Agreement or to effect or facilitate the
filing or recording of this Agreement or the consummation of any of the
transactions contemplated hereby. Any such instrument must be in writing
and signed by both parties.
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MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
7.02.Waiver of Compliance. Any failure of MGGA or TTOYS to comply with any
obligation, covenant, agreement or condition herein may be expressly
waived in writing by MGGA or TTOYS, respectively, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
7.03. Expenses; Transfer Taxes, Etc. Whether or not the transaction
contemplated by this Agreement shall be consummated, MGGA agrees that
all fees and expenses incurred by it in connection with this Agreement
shall be borne by MGGA and TTOYS agrees that all fees and expenses
incurred by it in connection with this Agreement shall be borne by
TTOYS, including, without limitation as to MGGA or TTOYS, all fees of
counsel, actuaries and accountants.
7.04.Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed
to have been duly given if delivered by hand or mailed, certified or
registered mail with postage prepaid:
(a) If to MGGA, to: Mega Micro Technologies Group
0000 X. Xxxxxxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx, President
with a copy to: Xxxxxxxxxx Law Group
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
or to such other person or address as MGGA shall furnish to TTOYS in writing.
(b) If to TTOYS, to: Xxxxxxxxx Toys LLC
__________________
__________________
or to such other person or address as TTOYS shall furnish to MGGA in writing.
7.05.Assignment; Merger. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties, except by operation of law.
7.06.Governing Law. This Agreement and the legal relations among the parties
hereto shall be governed by and construed in accordance with the laws of
the State of California without regard.
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MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
7.07.Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.08.Headings. The headings of the Sections and Articles of this Agreement
are inserted for convenience only and shall not constitute a part hereof
or affect in any way the meaning or interpretation of this Agreement.
7.09.Entire Agreement. This Agreement, including the exhibits and schedules
hereto and the other documents and certificates delivered pursuant to
the terms hereof, set forth the entire agreement and understanding of
the parties hereto in respect of the subject matter contained herein,
and supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written,
by any officer, employee or representative of any party hereto.
7.10.Third Parties. Except as specifically set forth or referred to herein,
nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties
hereto and their successors or assigns, any rights or remedies under or
by reason of this Agreement.
7.11. Severability. Should any provision of this Agreement be held by a
court or arbitration panel of competent jurisdiction to be enforceable
only if modified, such holding shall not affect the validity of the
remainder of this Agreement, the balance of which shall continue to be
binding upon the parties hereto with any such modification to become a
part hereof and treated as though originally set forth in this
Agreement. The parties further agree that any such court or arbitration
panel is expressly authorized to modify any such unenforceable provision
of this Agreement in lieu of severing such unenforceable provision from
this Agreement in its entirety, whether by rewriting the offending
provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other
modifications as it deems warranted to carry out the intent and
agreement of the parties as embodied herein to the maximum extent
permitted by law. The parties expressly agree that this Agreement as
modified by the court or the arbitration panel shall be binding upon and
enforceable against each of them. In any event, should one or more of
the provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and if
such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had never been set forth herein.
[Signature Page to Follow]
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MEGA MICRO TECHNOLOGIES GROUP
SUBSIDIARY PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above mentioned.
Mega: MGGA:
Mega Micro Technologies, Inc., Mega Micro Technologies Group,
a California corporation a Nevada corporation
By: _/s/ Xxxxxx Embrogno_______ By:_/s/ Xxxxxx Embrogno_____
Xxxxxx Xxxxxxxx, President Xxxxxx Xxxxxxxx, President
TOYS: Xxxxxxxxx:
Xxxxxxxxx Toys LLC Xxxxx Xxxxxxxxx
By: /s/ Xxxxx Xxxxxxxxx ______ /s/ Xxxxx Tarnutzer_____
