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EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of August 2, 1996, among TH-Q, Inc., a New York
corporation (the "Buyer"), on the one hand, and Xxxxxx X. Xxxxxxxxx and Xxxxx
X. Xxxxxxxxx (collectively, the "Sellers", and each individually, a "Seller"),
severally, on the other hand, to purchase and sell shares of capital stock of
Heliotrope Studios, Inc., a Connecticut corporation (the "Company").
The Sellers are the beneficial and record owners of all of the issued
and outstanding shares (the "Shares") of capital stock of the Company. The
Sellers wish to sell and the Buyer wishes to purchase the Shares upon the terms
of this Agreement.
Accordingly, the parties agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale of Shares. On the Closing Date provided for in
Section 2, the Sellers shall sell their Shares to the Buyer and the Buyer shall
purchase the Shares for the purchase price provided in Section 1.2. The Shares
owned by each Seller respectively, consist of the following:
Seller Shares
Xxxxxx Xxxxxxxxx 50
Xxxxx Xxxxxxxxx 50
1.2 Purchase Price. The aggregate purchase price for the
Shares (the "Purchase Price") is $100 cash.
1.2.1 Payment of Purchase Price. The Purchase
Price shall be paid by the Buyer on the Closing Date. The Buyer shall make the
deliveries due to Sellers pursuant to this Section 1.2. in the amount equal to
such Seller's interest in the Purchase Price, set forth as follows:
Seller Cash
Xxxxxx Xxxxxxxxx $50
Xxxxx Xxxxxxxxx $50
1.3 Delivery of Shares. On the Closing Date, the
Sellers shall deliver to the Buyer stock certificates representing all of the
Shares, duly endorsed in blank or accompanied by stock powers duly executed in
blank, in proper form for transfer. The stock certificates for the Shares shall
be deemed to be delivered in Guilford, Connecticut.
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2. Closing; Closing Date. The closing of the sale and purchase
of the Shares contemplated hereby (the "Closing") shall take place on August 2,
1996 by express mail, or such other date and in such other manner as the Buyer
and the Sellers agree. The time and date upon which the Closing occurs is
herein called the "Closing Date."
3. Representations and Warranties of the Sellers. The Sellers,
jointly and severally, represent and warrant to the Buyer as follows:
3.1 Due Incorporation and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Connecticut and has the corporate power and lawful
authority to own, lease and operate its assets, properties and business and to
carry on its business as now being and as heretofore conducted. The Company
does not transact business in any other jurisdiction and files no franchise,
income or other tax returns in any other jurisdiction based upon the ownership
or use of property therein or the derivation of income therefrom nor does it
own or lease property in any other jurisdiction.
3.2 Outstanding Capital Stock. The Company is
authorized to issue 20,000 shares of Common Stock, no par value, 100 shares of
which are issued and outstanding. No other class of capital stock of the
Company is authorized or outstanding. All of the Shares are duly authorized
and are validly issued, fully paid and non-assessable.
3.3 Options or Other Rights. There is no outstanding
right, subscription, warrant, call, unsatisfied preemptive right, option or
other agreement of any kind to purchase or otherwise to receive from the
Company or any Seller any of the outstanding, authorized but unissued,
unauthorized or treasury shares of the capital stock or any other security of
the Company, and there is no outstanding security of any kind convertible into
such capital stock.
3.4 Subsidiaries and Other Affiliates. The Company has
no subsidiaries or affiliates.
3.5 Articles of Incorporation and By-laws. The Company
has heretofore delivered to the Buyer true and complete copies of the Articles
of Incorporation and By-laws of the Company as in effect on the date hereof.
The minute books of the Company contain true and complete records of all
meetings and consents in lieu of meeting of the Board of Directors and of the
stockholders since incorporation and accurately reflect all transactions
referred to in such minutes and consents in lieu of meeting. The stock books
of the Company are true and complete.
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3.6 Balance Sheet. The unaudited balance sheet of the
Company (the "Balance Sheet") dated June 30, 1996 (the "Balance Sheet Date")
attached as Exhibit A to this Agreement, fairly presents the financial
condition of the Company as of June 30, 1996.
3.7 No Material Adverse Change. Since the Balance Sheet
Date, there has been no material adverse change in the assets, properties,
business, operations or condition (financial or otherwise) of the Company,
other than a continuation for the period since the Balance Sheet Date of the
operating losses reflected on the Balance Sheet, and neither the Company nor
any Seller knows of any such change that is threatened, nor has there been any
damage, destruction or loss materially adversely affecting the assets,
properties, business, operations or condition (financial or otherwise) of the
Company whether or not covered by insurance.
3.8 Tax Matters. Except as disclosed on Schedule 3.8,
the Company has paid all federal, state, county, local, foreign and other
taxes, including, without limitation, income taxes, estimated taxes, excise
taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes,
employment and payroll related taxes, property taxes and import duties, whether
or not measured in whole or in part by net income (hereinafter, "Taxes" or,
individually, a "Tax") required to be paid by it through the date hereof, and
all deficiencies or other additions to tax, interest and penalties owed by it,
in connection with any such Taxes, and (ii) has filed all returns for Taxes
that it is required to file through the date hereof.
3.9 Compliance with Laws. Except as set forth on
Schedule 3.9, the Company is not in violation of any applicable order,
judgment, injunction, award or decree. Except as set forth on Schedule 3.9,
the Company is not in violation of any federal, state, local or foreign law,
ordinance or regulatory body, court or arbitrator applicable to the Company
Business (as defined in Section 8 below) which violation may have a material
adverse effect on the Company or the Company Business. Except as set forth on
Schedule 3.9, the Company has all licenses, permits, orders or approvals of any
federal, state, local or foreign governmental or regulatory body (collectively,
"Permits", which term shall not include copyrights) that are material to or
necessary for the conduct of the Company Business; such Permits are in full
force and effect; no violations are or have been recorded in respect of any
Permit; and no proceeding is pending or, to the knowledge of the Company or any
of the Sellers, threatened to revoke or limit any Permit.
3.10 No Breach. The execution, delivery and performance
of this Agreement and the consummation of the
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transactions contemplated hereby will not (i) violate any provision of the
Articles of Incorporation or By-laws of the Company; (ii) violate, conflict
with or result in the breach of any of the terms of, result in a material
modification of the effect of, otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any contract or other agreement to which the
Company is a party or by or to which the Company or any of its assets or
properties may be bound or subject; (iii) violate any order, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body against, or binding upon, the Company or upon the securities or
properties of the Company or the Company Business; (iv) violate any statute,
law or regulation of any jurisdiction as such statute, law or regulation
relates to the Company or the securities or properties of the Company or to the
Company Business; or (v) violate any Permit.
3.11 Actions and Proceedings. Except as set forth on
Schedule 3.11, there are no outstanding orders, judgments, injunctions, awards
or decrees of any court, governmental or regulatory body or arbitration
tribunal against or involving the Company or the Sellers. Except as set forth
on Schedule 3.11, there are no actions, suits or claims or legal,
administrative or arbitral proceedings or, to the knowledge of the Company or
any Seller, investigations pending or, to the knowledge of the Company or any
Seller, threatened against or involving the Company or any of its properties or
assets, that, individually or in the aggregate, could have a material adverse
effect upon the transactions contemplated hereby or upon the assets,
properties, business, operations, or condition (financial or otherwise) of the
Company. As set forth on Schedule 3.11, except for the Company's exposure to
suits to collect unpaid obligations, to the knowledge of the Company or any
Seller, there is no fact, event or circumstance that may give rise to any suit,
action, claim, investigation or proceeding that would be required to be set
forth on Schedule 3.11 if currently pending or threatened. There are no
actions, suits, claims or legal, administrative or arbitral proceedings pending
or, to the knowledge of the Company or any Seller, threatened that would give
rise to any right of indemnification on the part of any director or officer of
the Company, or the heirs, executors or administrators of such director or
officer, against the Company or any successor to the Company Business.
3.12 Contracts and Other Agreements; Consents. Schedule
3.12 sets forth all of the contracts and other agreements to which the Company
is a party or by or to which the Company or its assets or properties are bound
or subject which are deemed to be material by the Company to the Company
Business. All of such contracts and other agreements are valid, subsisting,
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in full force and effect and binding upon the parties in accordance with their
terms. Except as separately identified on Schedule 3.12, the Company is not a
party to or bound by an contract or other agreement (i) under which the Company
or the other party thereto, to the knowledge of the Company, is in material
default, or (ii) that either individually or in the aggregate materially
adversely affects its assets, properties, business, operations or condition
(financial or otherwise), or that was entered into other than in the ordinary
course of business. Except as separately identified on Schedule 3.12, no
approval or consent of any person is needed in order that the contracts and
other agreements set forth on Schedule 3.12 or on any other Schedule continue
in full force and effect following the consummation of the transactions
contemplated by this Agreement.
3.13 Real Estate. Except as specified in this Section
3.13, the Company is party to no lease, sublease or other agreements under
which the Company is bound or contractual obligations on its part to purchase
or acquire any interest in real property. The only lease of real property to
which the Company is a party is the lease of its office premises at 000
Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx, a copy of which has been supplied to
Buyer. Such leases, subleases and other agreements are in full force and
effect and the Company has not received any notice of any default thereunder.
The leasehold interests of the Company are subject to no lien or other
encumbrance and enjoy a right of quiet possession as against any lien or other
encumbrance on the property.
3.14 Accounts and Notes Receivable. The Company has no
accounts or notes receivable.
3.15 Inventory. The Company has no inventory.
3.16 Tangible Property. The only items of tangible
property used by the Company are computers, office furniture and supplies, all
of which are listed on Schedule 3.16. The items listed on Schedule 3.16 as
"borrowed" have been loaned to the Company by its shareholders without charge.
None of the items listed on Schedule 3.16 held under lease. The physical
condition of such property is adequate for the continued conduct of the Company
Business.
3.17 Intangible Property. The Company owns no registered
patents, trademarks, service marks, trade names or franchises, has not
completed and filed any applications for any of the foregoing, and owns no
permits or licenses of any of the foregoing.
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3.18 Liens. Except for liens arising under statute as
security for unpaid judgments, the Company owns outright and has good and
marketable title to all assets and properties owned by it, including, without
limitation, all of the assets and properties reflected on the Balance Sheet, in
each case free and clear of any lien or other encumbrance.
3.19 Accounts Payable. Schedule 3.19 sets forth a true
and correct aged list of all accounts payable of the Company as of July 29,
1996.
3.20 Liabilities. As at the Balance Sheet Date, the
Company had no direct or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, known or unknown, fixed or unfixed,
xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, contingent or otherwise, including, without limitation, liabilities
on account of Taxes, other governmental charges or lawsuits brought, whether or
not of a kind required by generally accepted accounting principles to be set
forth on a financial statement ("Liabilities"), that were not fully and
adequately reflected or reserved against on the Balance Sheet, other than
fines, penalties and interest charges related to the late payment or
non-payment of Taxes. Except as set forth on Schedule 3.20, the Company has no
Liabilities, other than (i) Liabilities fully and adequately reflected or
reserved against on the Balance Sheet, (ii) Liabilities incurred since the
Balance Sheet Date in the ordinary course of business, and (iii) possible
liabilities for attorneys' fees, court costs and interest on judgments for
unpaid amounts owed by the Company. Neither the Company nor any Seller has any
knowledge of any circumstance, condition, event or arrangement that may
hereafter give rise to any Liabilities of the Company or any successor to their
business except in the ordinary course of business or as otherwise set forth on
Schedule 3.20.
3.21 Suppliers and Customers. The Company has no
suppliers or any customer other than Blizzard Entertainment.
3.22 Employee Benefit Plans. The Company has no pension,
profit sharing, retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability, hospitalization,
medical insurance, life insurance and other employee benefit plans, programs or
arrangements, maintained by the Company or under which the Company in respect
of, or which otherwise cover, any of the current or former officers or
employees of the Company or their beneficiaries.
3.23 Employee Relations. The Company has two employees,
in addition to the Sellers. The Company has not, nor, to the knowledge of the
Company or any Seller, is there now
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threatened, work stoppage, work slowdown, or other labor trouble that had or
may have a material adverse effect on the assets, properties, business,
operations or condition (financial or otherwise) of the Company. The Company
has not made a commitment or agreement to increase the compensation or to
modify the conditions or terms of employment of any employee.
3.24 Insurance. The Company carries no insurance of any
kind.
3.25 Company Products. The Company neither manufactures
nor markets nor distributes any tangible products.
3.26 Operations of the Company. Except as set forth on
Schedule 3.26, since the Balance Sheet Date the Company has not:
(i) declared or paid any dividends or
declared or made any other distributions of any kind to its shareholders, or
made any direct or indirect redemption, retirement, purchase or other
acquisition of any shares of its capital stock;
(ii) made any change in its accounting
methods or practices;
(iii) materially changed any of its business
policies;
(iv) made any wage or salary increase or
bonus, or increase in any other direct or indirect compensation, for or to any
of its officers, directors, employees, consultants, agents or other
representatives, or any accrual for or commitment or agreement to make or pay
the same;
(v) made any loan or advance to any of its
shareholders, officers, directors, employees, consultants, agents or other
representatives;
(vi) made any payment or commitment to pay
any severance or termination pay to any of its officers, directors, employees,
consultants, agents or other representatives;
(vii) except in the ordinary course of
business, and in the case of liens, as stated in Section 3.18: entered into
any lease (as Lessor or lessee); disposed of or granted or suffered any lien or
other encumbrance on any of its assets or properties; entered into or amended
any contract or other agreement to which it is a party, or by or to which it or
its assets or properties are bound or subject, or pursuant to which it agrees
to indemnify any party or to refrain from competing with any party;
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(viii) except for any advances made by the
Buyer and accounts payable for rent, utilities, taxes and salaries in the
ordinary course of business, and the fees and disbursements of Xxxxxxxx &
Worcester LLP for services in connection with the negotiation, drafting and
closing under this Agreement, incurred or assumed any indebtedness for borrowed
money, debt, obligation or liability;
(ix) made any acquisition of all or any part
of the assets, properties, capital stock or business of any other person out of
the ordinary course of business;
(x) suffered or incurred any damage,
destruction or loss materially adversely affecting the assets, properties,
business, operations or condition (financial or otherwise) of the Company;
(xi) made any change in the types, nature,
composition or quality of its products which could have a material effect on
the business or condition (financial or otherwise) of the Company;
(xii) terminated or failed to renew, or
received any written threat to terminate or fail to renew, any contract or
other agreement that is or was material to the assets, properties, business,
operations or condition (financial or otherwise) of the Company; or
(xiii) except in the ordinary course of
business, entered into any other material contract or other agreement or other
material transaction.
3.27 Section 341(f) of Internal Revenue Code. The
Company has not at any time consented under section 341(f)(1) of the Code to
have the provisions of section 341(f)(2) of the Code apply to any sale of its
stock.
4. Representations and Warranties of Each Seller Severally. Each
Seller, severally and not jointly, represents and warrants to the Buyer as
follows:
4.1 Title to Shares. Such Seller owns beneficially and
of record, free and clear of any lien or other encumbrance, or owns of record
and has full power and authority to convey free and clear of any lien or other
encumbrance, the Shares purported to be sold by such Seller under Section 1.1
of this Agreement and, upon delivery of and payment for such Shares as herein
provided, the Buyer will acquire good and valid title thereto, free and clear
of any lien or other encumbrance.
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4.2 Authority to Execute and Perform Agreements. Such
Seller has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement and to perform fully
such Seller's obligations hereunder. This Agreement has been duly executed
and delivered and is the valid and binding obligation of such Seller
enforceable in accordance with its terms. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
performance by such Seller of this Agreement in accordance with its respective
terms and conditions will not (i) require the approval or consent of any
governmental or regulatory body or the approval or consent of any other person;
(ii) conflict with or result in any breach or violation of any of the terms and
conditions of, or constitute a default under, any statute, regulation, order,
judgment or decree applicable to such Seller or to the Shares held by such
Seller, or any instrument, contract or other agreement to which such Seller is
a party or by or to which such Seller is or the Shares held by such Seller are
bound or subject; (iii) result in the creation of any lien or other encumbrance
on the Shares held by such Seller. Such Seller has delivered to the Buyer true
and complete copies of all shareholder agreements relating to the Shares.
4.3 Delivery of Buyer Information. Such Seller
acknowledges that the Buyer has delivered to such Seller a copy of the Buyer's
Annual Report on Form 10-K for the year ended December 31, 1995, Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996, and Proxy Statement
in connection with the Annual Meeting of Shareholders of the Buyer held on June
18, 1996 (such documents constituting the "Financial Information").
5. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers as follows:
5.1 Due Incorporation. The Buyer is duly organized,
validly existing and in good standing under the laws of the State of New York,
and has the corporate power and lawful authority to own, lease and operate its
assets, properties and business and to carry on its business as now being and
as heretofore conducted.
5.2 Corporate Power and Authority of the Buyer. The
Buyer has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement and to perform fully
its obligations under this Agreement. This Agreement has been duly executed
and delivered, and is the valid and binding obligation of the Buyer enforceable
in accordance with its terms. The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby, and the performance
by the Buyer of this Agreement in accordance with its respective terms and
conditions will not (i) require the approval or consent of any governmental or
regulatory
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body or the approval or consent of any other person or (ii) conflict with or
result in any breach of default under, the Articles of Incorporation or Bylaws
of the Buyer, or any statute, regulation, order, judgment or decree applicable
to the Buyer or any instrument, contract or other agreement to which Buyer is a
party or by which the Buyer is bound or subject.
5.3 Purchase for Investment. The Buyer acknowledges
that the Shares are not registered under the Securities Act or registered or
qualified under applicable state securities laws and the Buyer is purchasing
the Shares for investment and not for resale or distribution.
5.4 Buyer's Financial Information. The financial
statements included in the Financial Information fairly present the
consolidated financial condition and consolidated results of operations of
Buyer and Buyer's subsidiaries as of the dates and for the periods covered
thereby (subject in the case of interim reports for the first quarter of 1996,
to year-end adjustments consisting only of normal recurring accruals and
customary notes) in accordance with generally accepted accounting principles
applied in a manner consistent with the principles applied during Buyer's
fiscal year ended December 31, 1995.
6. Conditions precedent to the Obligation of the Buyer to Close.
The obligation of the Buyer to enter into and complete the Closing is subject,
at the option of Buyer, to the fulfillment on or prior to the Closing Date of
the following conditions, any one or more of which may be waived by it:
6.1 Representations and Covenants. The representations
and warranties of the Sellers contained in this Agreement shall be true and
correct in all material respects.
6.2 Permits, Approvals and Consents. All Permits and
consents and approvals from parties to contracts or other agreements with the
Company or with any Seller that may be required in connection with the
performance by either Seller of his obligations under this Agreement or the
continuance of such contracts or other agreements and required for the lawful
consummation of the Closing shall have been obtained.
6.3 Satisfactory Due Diligence. The Buyer shall have
satisfied itself, after receipt and consideration of the Schedules and after
the Buyer and its representatives have completed the business and legal review
of the Company Business contemplated by this Agreement, that none of the
information revealed thereby has resulted in, or in the reasonable opinion of
the Buyer may result in, a materially adverse change in the assets, properties,
business of condition (financial or otherwise) of the Company.
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6.4 Resignations of Officers and Directors. The Buyer
shall have received the resignation, dated the Closing Date, of each officer
and director of the Company.
6.5 Litigation. No action, suit or proceeding shall
have been instituted before any court or governmental or regulatory body, or
instituted or threatened by any governmental or regulatory body, to restrain,
modify or prevent the carrying out of the transactions contemplated hereby, or
to seek damages or a discovery order in connection with such transactions, or
that has or may have, in the opinion of the Buyer, a materially adverse effect
on the assets, properties, business, operations or conditions (financial or
otherwise) of the Company.
6.6 Delivery of Stock Certificates; Transfer Taxes. The
Sellers shall have delivered to the Buyer on the Closing Date stock
certificates representing all of the Shares duly endorsed in blank or
accompanied by stock powers duly executed in blank, in proper form for
transfer. Each Seller shall have paid, or caused to be paid, all stock
transfer and other taxes required to be paid in connection with the sale and
delivery to the Buyer of the Shares owned by such Seller.
6.7 Employment Agreements. Simultaneously with the
Closing, the Company, the Buyer and each of the Key Employees (as defined in
Section 8) shall enter into Employment Agreements with the Company in the form
of Exhibit B.
6.8 Stock Option Agreements. Simultaneously with the
Closing, the Buyer and each of the Key Employees shall enter into Stock Option
Agreements with the Company in the form of Exhibit C.
7. Conditions Precedent to the Obligation of the Sellers to
Close. The obligation of the Sellers to enter into and complete the Closing is
subject, at the option of the Sellers acting in accordance with the provisions
of this Agreement with respect to termination hereof, to the fulfillment of the
following conditions, any one or more of which may be waived by them:
7.1 Representations and Covenants. The representations
and warranties of the Buyer contained in this Agreement shall be true and
correct in all material respects.
7.2 Litigation. No action, suit or proceeding shall
have been instituted before any court or governmental or regulatory body, or
instituted or threatened by any governmental or regulatory body, to restrain,
modify or prevent the carrying out of the transactions contemplated hereby, or
to seek damages or a discovery order in connection with such transaction.
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7.3 Employment Agreements. Simultaneously with the
Closing, the Company, the Buyer and each of the Key Employees shall enter into
Employment Agreements with the Company in the form of Exhibit B.
7.4 Stock Option Agreements. Simultaneously with the
Closing, the Buyer shall enter into Stock Option Agreements with each of the
Key Employees in the form of Exhibit B.
8. Covenants of Sellers.
8.1 Covenants Against Competition. Xxxxxx Xxxxxxxxx and
Xxxxx Xxxxxxxxx (the "Key Employees") each acknowledges that (i) the Company is
engaged in the business of developing software for games for use on various
home entertainment systems, including without limitation, video, personal
computers and home console entertainment systems (the "Company Business"),
(ii) he is one of the limited number of persons who developed such business;
(iii) the Company Business is conducted in the United States; (iv) his work for
the Company has given him and will continue to give him access to trade secrets
of and confidential information concerning the Company; (v) the agreements and
covenants contained in this Section 8 are essentially to protect the business
and goodwill purchased by the Buyer; and (vi) the Buyer would not purchase the
Shares but for such agreements and covenants. Accordingly, each covenants and
agrees, with respect to himself, as follows:
8.1.1 Non-Compete. During the term of the Key
Employee's employment with the Company or any of its affiliates and for a
period of one year following the termination, for cause or otherwise, of the
Key Employee's employment with the Company (the "Restricted Period"), the Key
Employee shall not in the United States, or, any political subdivision thereof,
or any other location where the Company is engaged in the Company Business,
directly or indirectly, (i) engage in the Company Business for the Key
Employee's own account; (ii) enter the employ of, or render any services to,
any person engaged in a business which competes with the Company Business or
(iii) become interested in any such person in any capacity, including, without
limitation, as an individual, partner, shareholder, officer, director,
principal, agent, trustee or consultant; provided, however, the Key Employee
may own, directly or indirectly, solely as an investment, securities of any
person traded on any national securities exchange if the Key Employee is not a
controlling person of, or a member of a group which controls, such person and
does not, directly or indirectly, own 5% or more of any class of securities of
such person.
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8.1.2 Confidential Information; Personal
Relationships. During and after the Restricted Period, the Key Employee shall
keep secret and retain in strictest confidence, and shall not use for the
benefit of himself or others, all confidential matters of the Company and other
affiliates, including, without limitation, "know-how," trade secrets, customer
lists, details of client or consultant contracts, pricing policies, operational
methods, marketing plans or strategies, product development techniques or
plans, business acquisition plans, new personnel acquisition plans, methods of
manufacture, technical processes, designs and design projects, inventions and
research projects of the Company or other affiliates learned by the Key
Employee heretofore or hereafter, other than information which is now, or
hereafter becomes, publicly known without any breach by either Employee of the
provisions of this Section 8.1.2; nor may the Key Employee exploit for his own
benefit or the benefit of others personal relationships with customers or
suppliers of the Company formed heretofore or hereafter in competition with the
Company or any affiliate of the Company.
8.1.3 Property of the Company. All memoranda,
notes, lists, records and other documents or papers (and all copies thereof),
including such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Key Employee, or made available
to the Key Employee relating to the Company or other affiliates, are and shall
be the Company's property and shall be delivered to the Company promptly upon
the termination of the Key Employees employment with the Company or other
affiliates or at any other time on request.
8.1.4 Employees and Consultants of the
Company. During the Restricted Period, the Key Employee shall not, directly or
indirectly, hire or solicit any employee or any consultant of the Company or
other affiliates or encourage any such employee or consultant to leave such
employment or terminate such consulting agreement, respectively.
8.2 Rights and Remedies Upon Breach. If the Key
Employee breaches, or threatens to commit a breach of, any of the provisions of
Section 8.1 (the "Restrictive Covenants"), the Company shall have the following
rights and remedies, each of which rights and remedies shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under
law or in equity:
8.2.1 Specific Performance. The right and
remedy to have the Restrictive Covenants specifically enforced by any court of
competent jurisdiction, it being agreed that any
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breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company and that money damages would not provide an
adequate remedy to the Company.
8.2.2 Accounting. The right and remedy to
require the Key Employee to account for and pay over to the Company, as the
case may be, all compensation, profits, monies, accruals, increments or other
benefits derived or received by the Key Employee as the result of any
transactions constituting a breach of the Restrictive Covenants.
8.3 Severability of Covenants. Each Key Employee
acknowledges and agrees that the Restrictive Covenants are reasonable and valid
in geographical and temporal scope and in all other respects. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions.
8.4 Blue-Pencilling. If any court determines that any
of the Restrictive Covenants, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, such court shall have the
power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable.
8.5 Outstanding Liabilities. In the event that the
Liabilities of the Company as of the Closing Date (whether billed or not as of
the Closing Date) exceed an aggregate amount of $90,000 (which $90,000 amount
shall include the $25,000 advance made by the Buyer to the Company prior to
Closing) (the "Permitted Liabilities"), the Sellers jointly and severally agree
to pay such Liabilities to the extent and in the amount that such Liabilities
exceed, whether individually or in the aggregate, the Permitted Liabilities.
Payment of the Liabilities by the Sellers shall be made to the respective
parties to whom such Liabilities are owed or, in the event that such
Liabilities are repaid by the Buyer, to the Buyer pursuant to Section 10.1.
9. Survival of Representations and Warranties of the Sellers.
Notwithstanding any right of the Buyer fully to investigate the affairs of the
Company and notwithstanding any knowledge of facts determined or determinable
by the Buyer pursuant to such investigation or right of investigation, the
Buyer has the right to rely fully upon the representations, warranties,
covenants and agreements of the Sellers and of each Seller contained in this
Agreement. All such representation, warranties, covenants and agreements shall
survive the execution and delivery hereof and the Closing hereunder for a
period of twelve (12) months after the Closing.
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10. Indemnification.
10.1 Obligation of the Sellers to Indemnify. The Sellers
jointly and severally agree to indemnify, defend and hold harmless the Buyer
(and its directors, officers, employees, affiliates and assigns) from and
against all losses, liabilities, damages, deficiencies, costs or expenses
(including interest, penalties and reasonable attorneys' fees and
disbursements) ("Losses") based upon, arising out of or otherwise in respect of
any inaccuracy in or any breach of any representation, warranty, covenant or
agreement of the Sellers contained in this Agreement or in any document or
other papers delivered pursuant to Sections 3 or 6. The Sellers also jointly
and severally agree to indemnify and hold harmless the Buyer (and its
directors, officers, employees, affiliates and assigns) payments made by the
Buyer in respect of Liabilities of the Company which exceed Permitted
Liabilities (as referred to in Section 8.5), including, without limitation,
damages, deficiencies, costs or expenses (including interest, penalties and
reasonable attorneys' fees and disbursements). The obligation to indemnify set
forth in this Section 10.1 are hereinafter referred to as the "Joint
Obligation." Each Seller agrees to indemnify, defend and hold harmless the
Buyer (and its directors, officers, employees, affiliates and assigns) from and
against any Losses based upon, arising out of or otherwise in respect of any
inaccuracy in or any breach of any representation, warranty, covenant or
agreement of such Seller contained in Section 4.1 or 4.2 or in any document or
other papers delivered pursuant to Sections 4.1, 4.2 or 6 (the "Individual
Obligation").
10.2 Obligation of the Buyer to Indemnify. The Buyer
agrees to indemnify, defend and hold harmless the Sellers from and against any
Losses based upon, arising out of or otherwise in respect of any inaccuracy in
or breach of any representation, warranty, covenant or agreement of the Buyer
contained in Section 5 or in any document of other papers delivered pursuant to
Section 5 or 7.
11. Miscellaneous.
11.1 Certain Definitions. As used in this Agreement, the
following terms have the following meanings unless the context otherwise
requires:
(i) "affiliate" with respect to any person
at any time, means any other person which at such time is controlling,
controlled by or under common control with such person.
(ii) "contracts and other agreements" means
all contracts, agreements, indentures, notes, bonds, loans,
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instruments, leases, mortgages, franchises, licenses or other binding
arrangements.
(iii) "document or other papers" means any
document, agreement, instrument, certificate, notice, consent, affidavit,
letter, telegram, telex, statement, schedule (including any Schedule to this
Agreement), exhibit (including any Exhibit to this Agreement) or any other
paper whatsoever.
(iv) "governmental or regulatory body" means
any government or political subdivision thereof, whether federal, state, local
or foreign, or any agency or instrumentality of any such government or
political subdivision.
(v) "lien or other encumbrance" means any
lien, pledge, mortgage, security interest, claim, lease, charge, option, right
of first refusal, easement, servitude, transfer restriction under any
shareholder or similar agreement, encumbrance or any other restriction or
limitation whatsoever.
(vi) "person" means any individual,
corporation, partnership, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
(vii) "property" means real, personal or mixed
property, tangible or intangible.
11.2 Knowledge. As used in this Agreement, the term
"knowledge," with respect to the Company or the Buyer, means the actual
knowledge of its officers, directors or shareholders and, with respect to the
Sellers, means the actual knowledge of any of the Sellers.
11.3 Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered, or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, on the date on which received or on which delivery
is refused, as follows:
(i) if to the Buyer, to:
TH-Q, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
with a copy to:
Sidley & Austin
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555 West Fifth Street, 40th Floor
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(ii) if to the Sellers, to:
Heliotrope Studios, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
with a copy to:
Xxxxxxxx & Worcester LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
11.4 Entire Agreement. This Agreement
(including the Schedules) and the collateral agreements executed in connection
with the consummation of the transactions contemplated herein contain the
entire agreement among the parties with respect to the purchase of the Shares
and related transactions, and supersedes all prior agreements, written or oral,
with respect thereto.
11.5 Waivers and Amendments; Non-Contractual
Remedies; Preservation of Remedies. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof. Nor
shall any waiver on the part of any party of any such right, power or
privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies of any party based
upon, arising out of or otherwise in respect of any inaccuracy in or breach of
any representation, warranty, covenant or agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant or agreement contained in this agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or breach.
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11.6 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such State
(without regard to any conflicts of law provisions hereof). By its execution
and delivery of this Agreement, Buyer and each Seller agrees that any action,
suit or proceeding against it arising out of or by reason of this Agreement,
the Employment Agreement, the Option Agreements or the transaction contemplated
by any of them may be brought in any state or federal court of competent
jurisdiction sitting in the Borough of Manhattan in the City, county and State
of New York, in addition to any other court in which such action, suit or
proceeding might have been brought, agrees that process may be served in any
such action, suit or proceeding in any manner provided by the rules of such
court, and without limitation by delivering a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, to such party at its
or his address for notices provided for herein, and agrees to be bound by the
judgment of such court, in any such action, suit or proceeding.
11.7 Binding Effect; Third Party
Beneficiaries. This Agreement shall be binding upon and inure to the sole
benefit of the parties to this Agreement and their respective successors and no
other party shall have any right, priority or benefit under this Agreement.
11.8 Variations in Pronouns. All pronouns
and any variations thereof refer to the masculine, feminine or neuter, singular
or plural, as the context may require.
11.9 Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
11.10 Exhibits and Schedules. The Exhibits
and Schedules are a part of this Agreement as if fully set forth herein. All
references herein to Sections, subsections, clauses, Exhibits and Schedules
shall be deemed references to such parts of this Agreement, unless the context
shall otherwise require.
11.11 Headings. The headings in this
Agreement are for reference only, and shall not affect the interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BUYER: TH-Q, Inc.
/s/ Xxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
SELLERS: Xxxxxx X. Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
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