Exhibit 10.257
ASSET AND WARRANT PURCHASE AGREEMENT
THIS ASEET AND WARRANT PURCHASE AGREEMENT (the "Agreement") is made and entered
into this ___ day of August, 2002, by and between EASTERN AIR LINES, INC., a
Delaware corporation ("Eastern") and MEGO FINANCIAL CORP., a New York
-------
corporation ("Mego").
----
RECITALS:
---------
WHEREAS, Eastern is the owner of 100% of the common stock of FareQuest;
WHEREAS, Eastern desires to sell, and Mego desires to purchase all of the assets
of FareQuest (the "FareQuest Assets"), pursuant to the terms and conditions of
this Agreement;
WHEREAS, Eastern desires to retain a twenty percent (20%) interest in the future
business opportunities of FareQuest, and Mego desires to grant Eastern such an
interest;
WHEREAS, Eastern is the owner of 1,065,000 warrants on a split-adjusted basis in
ARINC Incorporated, pursuant to a Warrant Agreement dated April 13, 1999 (the
"ARINC Warrant Agreement");
WHEREAS, the warrants held by Eastern in ARINC are subject to all rights,
benefits and interests granted to Eastern pursuant to that Registration Rights
Agreement dated April 13, 1999 (the "ARINC Registration Rights Agreement"); and
WHEREAS, Eastern desires to sell, and Mego desires to purchase one and one-half
percent (1.5%) of Eastern's interest in the ARINC Warrants (the "ARINC
Warrants"), pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, Eastern and Mego agree as follows:
1. Sale of the FareQuest Assets and Warrants. Subject to the terms and
-----------------------------------------------
conditions of this Agreement, at the Closing (as defined below), Eastern will
sell, transfer, convey and deliver to Mego, and Mego will purchase from Eastern,
the FareQuest Assets and the ARINC Warrants.
(a) Such sale of the FareQuest Assets shall include all of the following:
i. All rights to the ATS license dated March 29, 2002 and license
payments due thereunder (Exhibit 1);
ii. All definitive agreements and letters of intent by and between
FareQuest and travel agents or other travel providers (Exhibit 2);
iii. The URLs for XxxxXxxxx.xxx, XxxxXxxxx.xxx, XxxxXxxxx.xxx and
XxxxXxxxx.xx (Exhibit 3);
iv. All of FareQuest's furniture, fixtures and equipment (Exhibit 4);
v. Software, copyrights, trademarks, or any other intellectual property
(Exhibit 5);
vi. Such lease or contractual obligations as Mego determines to assume or
acquire (Exhibit 6).
(b) Such sale of the ARINC Warrants shall include the sale, conveyance,
transfer and delivery to Mego of all right, title, interest and ownership of
15,975 ARINC Warrants. The ARINC Warrants shall be subject to all terms
conditions and restrictions set forth in the ARINC Warrant Agreement, which is
attached hereto as Exhibit 7, and the ARINC Registration Rights Agreement, which
is attached hereto as Exhibit 8, the terms of which are incorporated by
reference herein. Specifically, Mego agrees to accept the assignment of the
ARINC Warrants and agrees to be bound by Eastern's benefits and obligations
under the ARINC Warrant Agreement pursuant to Section 12(h) thereof as reflected
in the attached Exhibit 9. In addition, Mego agrees to accept the assignment of
all rights, benefits and obligations of the ARINC Registration Rights Agreement
and shall become a party to such Agreement pursuant to Section 3.6(c) thereof,
as reflected in the attached Exhibit 9.
2. Purchase Price. The purchase price for the FareQuest Assets and ARINC
----------------
Warrants (the "Purchase Price") shall consist of the following:
(a) Mego Shares. At the Closing, Mego shall issue to Eastern 41,667 shares
-------------
of the common stock of Mego (the "Mego Shares"). Mego shall have the
obligation, under certain circumstances, to cause the registration under the
Securities Act of the shares received by Eastern, pursuant to the terms and
conditions of a registration rights agreement in the form of Exhibit 10 to this
Agreement (the "EAL Registration Rights Agreement"), for the stock to be
registered on or before December 31, 2002.
(b) Carried Interest. Mego agrees to grant Eastern a twenty percent (20%)
------------------
carried interest in the results of FareQuest's operations and/or the
consummation of any subsequent disposition of the FareQuest business or assets
to an unrelated third party (the "Carried Interest"). The Carried Interest will
be represented by a warrant exercisable immediately by Eastern for 20% of
the Mego-FareQuest shares (the "Mego-FareQuest Warrant"), in the form set forth
in the attached Exhibit 11. The Carried Interest and representative
Mego-FareQuest Warrant may be adjusted in the following circumstances:
i. The Carried Interest will be reduced to seventeen percent (17%) in the
event that Mego expends $400,000 or more to complete the technology
development of FareQuest.
ii. The Carried Interest will be further reduced to fifteen percent (15%)
in the event that Mego expends $800,000 or more to complete the
technology development of FareQuest.
3. Repurchase of Carried Interest.
----------------------------------
(a) Mego may acquire the Carried Interest at any time during the 24 months
immediately following the sixth month after the Closing, at the then fair market
value, as determined by a mutually agreed third party appraiser, or as
otherwise determined to the satisfaction of both parties. The fair market value
may be satisfied through delivery of an equivalent value in number of Mego
common stock, as determined based upon the 10 day average of Mego common stock
during the 10 days prior to the notice of Mego's intent to acquire the carried
interest (the "Carried Interest Repurchase Shares").
(b) In the event Mego elects to acquire the Carried Interest utilizing Mego
common equity, Mego shall register such shares within ninety (90) days from the
date of the election. The Carried Interest Repurchase Shares shall be subject
to the same Registration Rights Agreement governing the Mego Shares and appended
hereto as Exhibit 9.
4. Eastern Put Option.
---------------------
(a) Eastern may require Mego to acquire the Carried Interest at any time
after six months from the Closing of the Agreement, for an exercise price of
$200,000 (the "Put Option"). Eastern shall receive Mego common stock, the
number of shares of which is based upon the 10 day moving average stock price
for the 10 days immediately preceding Eastern's notice of intent to exercise the
Put Option (the "Put Option Shares"). Alternatively, Mego may elect to
satisfy the Put Option by surrendering its ARINC Warrant Interest to Eastern,
unless the Warrant has been previously exercised, in place of the Put Option
Shares.
(b) In the event Mego elects to satisfy the Put Option utilizing Mego common
equity, Mego shall register such shares within ninety (90) days from the
date of the election. The Put Option Shares shall be subject to the same
Registration Rights Agreement governing the Mego Shares and appended hereto as
Exhibit 9.
5. Closing. The closing of the transactions contemplated by this Agreement
--------
(the "Closing") will occur at the offices of Eastern in Miami on August __,
-------
2002, or such other time, place and date which are mutually acceptable to the
parties (the "Closing Date"). At the Closing, Eastern will deliver to Mego the
------------
FareQuest Assets as well as all financial books and records of FareQuest, and
Mego shall execute and deliver to Eastern the certificates evidencing the Mego
Shares and the Mego Registration Rights Agreement.
6. Representations, Warranties and Covenants of Eastern. Eastern
----------------------------------------------------------
represents, warrants and covenants to Mego as follows:
(a) Corporate Organization. Eastern is a corporation duly organized,
------------------------
validly existing and in good standing under the laws of the State of Delaware,
with the corporate power to own its properties and to conduct its business as
presently conducted.
(b) Authorization. Eastern has full legal right, power and authority to
--------------
enter into and perform this Agreement, and the execution and delivery hereof by
Eastern and the consummation of the transactions contemplated hereby have been
duly authorized by all required corporate action of Eastern. This Agreement has
been duly executed and delivered on behalf of Eastern and constitutes a valid
and binding agreement of Eastern, enforceable against Eastern in accordance with
its terms, subject to applicable bankruptcy, insolvency and other laws
affecting the enforceability of creditors rights generally.
(c) Approvals. No governmental or other authorization, approval, order,
----------
license, permit, franchise or consent, and no registration, declaration, notice
or filing by Eastern with any governmental authority (including the bankruptcy
court with jurisdiction over the estate of Eastern) is required in connection
with the execution, delivery and performance of this Agreement by Eastern.
(d) Absence of Conflicting Agreements, Etc. Neither the execution and
-------------------------------------------
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or By-laws
of Eastern or of any agreement or instrument to, which Eastern is a party or by
which Eastern or any of its property is bound, or constitute a default under any
of the foregoing, or violate any law, rule, regulation, judgment or decree
by which Eastern or any of its property is bound.
(e) Ownership of Assets. Eastern is the sole and exclusive legal and
----------------------
equitable owner of and has good and marketable title to the ARINC Warrants
described in Exhibit 7 to this Agreement and such Warrants are free and clear of
all encumbrances unless otherwise indicated herein. No Person or Entity
has an option to purchase, right of first refusal or other similar right with
respect to all or any part of the ARINC Warrants.
(f) Litigation. There is no action, suit, proceeding or investigation
-----------
pending or, to the knowledge of Eastern currently threatened against Eastern
that questions the validity of this Agreement or any other agreement
contemplated by this Agreement, or the right of Eastern to enter into such
agreements or to consummate the transactions contemplated hereby.
(g) Audit. The FareQuest operating results for 2001 were subject to audit
------
as part of the audit of Eastern's consolidated 2001 operating results, and to
the best of Eastern's knowledge the audit determined that FareQuest's operating
results were fairly stated in all material respects.
7. Representations, Warranties and Covenants of FareQuest. FareQuest
------------------------------------------------------------
represents, warrants and covenants to Mego as follows:
(a) Corporate Organization. FareQuest is a corporation duly organized,
------------------------
validly existing and in good standing under the laws of the State of Delaware,
with the corporate power to own its properties and to conduct its business as
presently conducted.
(b) Authorization. FareQuest has full legal right, power and authority to
--------------
enter into and perform this Agreement, and the execution and delivery hereof by
FareQuest and the consummation of the transactions contemplated hereby have been
duly authorized by all required corporate action of FareQuest. This
Agreement has been duly executed and delivered on behalf of FareQuest and
constitutes a valid and binding agreement of FareQuest, enforceable against
FareQuest in accordance with its terms, subject to applicable bankruptcy,
insolvency and other laws affecting the enforceability of creditors rights
generally.
(c) Approvals. No governmental or other authorization, approval, order,
----------
license, permit, franchise or consent, and no registration, declaration, notice
or filing by FareQuest with any governmental authority is required in connection
with the execution, delivery and performance of this Agreement by
FareQuest.
(d) Absence of Conflicting Agreements, Etc. Neither the execution and
-------------------------------------------
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or By-laws
of FareQuest or of any agreement or instrument to, which FareQuest is a party or
by which FareQuest or any of its property is bound, or constitute a default
under any of the foregoing, or violate any law, rule, regulation, judgment or
decree by which FareQuest or any of its property is bound.
(e) Ownership of Assets. FareQuest is the sole and exclusive legal and
----------------------
equitable owner of and has good and marketable title to the assets described in
Section 1(a) and Exhibits 1-6 to this Agreement and such Warrants are free and
clear of all encumbrances unless otherwise indicated herein. No Person or
Entity has an option to purchase, right of first refusal or other similar right
with respect to all or any part of the FareQuest Assets. All of the personal
property of FareQuest used in the operation of its business is in good working
order and repair, ordinary wear and tear excepted, and is suitable and adequate
for the uses for which it is intended or is being used.
(f) Litigation. There is no action, suit, proceeding or investigation
-----------
pending or, to the knowledge of FareQuest currently threatened against FareQuest
that questions the validity of this Agreement or any other agreement
contemplated by this Agreement, or the right of FareQuest to enter into such
agreements or to consummate the transactions contemplated hereby.
(g) Audit. The FareQuest operating results for 2001 were subject to audit
------
as part of the audit of Eastern's consolidated 2001 operating results, and to
the best of FareQuest's knowledge the audit determined that FareQuest's
operating results were fairly stated in all material respects.
8. Representations, Warranties and Covenants of Mego. Mego represents,
-------------------------------------------------------
warrants and covenants to Eastern as follows:
(a) Corporate Organization. Mego is a corporation duly organized, validly
------------------------
existing and in good standing under the laws of the State of New York, with the
corporate power to own its properties and to conduct its business as presently
conducted.
(b) Authorization. Mego has full legal right, power and authority to enter
--------------
into and perform this Agreement and each of the Exhibits to this Agreement
(collectively, the "Transaction Documents"), and the execution and delivery
----------------------
thereof by Mego and the consummation of the transactions contemplated thereby
have been duly authorized by all required corporate action of Mego. This
Agreement has been duly executed on behalf of Mego and constitutes a valid and
binding agreement of Mego, enforceable against Mego in accordance with its
terms, subject to applicable bankruptcy insolvency and other laws affecting the
enforceability of creditors rights generally.
(c) Approvals. No governmental or other authorization, approval, order,
----------
license, permit, franchise or consent, and no registration, declaration, notice
of filing by Mego with any governmental authority is required in connection with
the execution, delivery and performance of this Agreement and the other
Transaction Documents (except as specified in the Registration Rights
Agreement).
(d) Absence of Conflicting Agreements, Etc. Neither the execution and
-------------------------------------------
delivery of this Agreement and the other Transaction Documents, nor the
consummation of the transactions contemplated hereby and thereby, will conflict
with or result in a breach of any of the terms, conditions or provisions of the
Certificate of Incorporation or By-laws of Mego or of any agreement or
instrument to which Mego is a party or by which Mego or any of its property is
bound, or constitute a default under any of the foregoing, or violate any law,
rule, regulation, judgment of decree by which Mego or any of its property is
bound.
(e) Litigation. There is no action, suit, proceeding or investigation
-----------
pending or to the knowledge of Mego, currently threatened against Mego that
questions the validity of this Agreement or any other agreements contemplated by
this Agreement, or the right of Mego to enter into such agreements or to
consummate the transactions contemplated hereby or thereby.
9. Conditions to Closing.
------------------------
(a) The obligation of Mego to consummate the transactions contemplated by
this Agreement is subject to the fulfillment and satisfaction of each and every
one of the following conditions on or prior to the Closing, any or all which may
be waived in whole or in part by Mego:
(1) The representations and warranties of both Eastern and FareQuest
contained in this Agreement shall be true and correct in all material respects
as of the date when made and shall be deemed to be made again at and as of the
Closing Date and shall be true at and as of such time in all material respects.
(2) Eastern and FareQuest shall have performed and complied, in all material
respects, with all agreements and conditions required by this Agreement to
be performed and complied with by it prior to or on the Closing Date.
(3) Eastern and FareQuest shall have delivered the FareQuest Assets.
(4) Eastern shall have delivered documents evidencing the ARINC Warrants.
(b) The obligation of Eastern to consummate the transactions contemplated
by this Agreement are subject to the fulfillment and satisfaction of each and
every one of the following conditions on or prior to the Closing, any or all of
which may be waived, in whole or in part, by Eastern:
(1) The representations and warranties of Mego contained in this Agreement
shall be true and correct in all material respects when made and shall be deemed
to be made again at and as of the Closing Date and shall be true at and as
of such time in all material respects.
(2) Mego shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by Mego
prior to or on the Closing Date.
(3) Mego shall have executed and delivered the stock certificates evidencing
the Mego Shares, the EAL Registration Rights Agreement and the
Mego-FareQuest Warrants.
10. Termination.
------------
(a) This Agreement may be terminated at any time on or prior to the Closing:
(1) by mutual consent of Eastern and Mego; or
(2) at the election of Mego if: (aa) Eastern or FareQuest has materially
breached or failed to perform or comply with any of its representations,
warranties, covenants or obligations under this Agreement, or (bb) any of the
conditions set forth in Section 9(a) is not satisfied as and when required by
this Agreement.
(3) at the election of Eastern, if (aa) Mego has materially breached or
failed to perform or comply with any of its representations, warranties,
covenants and obligations under this Agreement or (bb) any of the conditions and
proceedings set forth in Section 9(b) is not satisfied as and when required
by this Agreement. or (cc) if the Closing has not been consummated by August
___, 2002.
(b) Written notice of any termination pursuant to this Section 10 shall be
given by the party electing termination of this Agreement to the other party and
such notice shall state the reason for the termination. Upon the
termination of this Agreement prior to the consummation of the Closing in
accordance with the terms hereof, this Agreement shall become null and void and
have no effect, and none of the parties shall have any liability to the other
except that:
(1) if Eastern refuses to close, or otherwise intentionally breaches
any of its representations, warranties and covenants hereunder, then Mego
shall have the right to pursue any and all remedies available at law and
equity, including the remedy of specific performance; and
(2) if Mego refuses to close, or otherwise intentionally breaches any
of its representations, warranties or covenants under this Agreement, then
Eastern shall have the right to pursue any and all remedies available at
law and equity, including the remedy of specific performance.
11. Break-Up fee. If this agreement shall be Terminated due to another
--------------
offer received by Eastern under which Eastern shall receive consideration
greater than the Purchase Price, upon subsequent execution of the agreement made
by the competing purchaser, Eastern shall become obligated to pay Mego the
sum of $50,000 in immediately available funds. Such payment shall be made no
later than three days after such transaction's consummation, in consideration of
the time and expense incurred by Mego in association with this proposed
transaction.
12. Miscellaneous.
--------------
(a) Expenses. Each of the parties hereto shall bear and pay all costs and
---------
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived at
----------------------
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) Entire Agreement: Severability. This Agreement and the exhibits hereto
--------------------------------
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(d) Governing Law. This Agreement shall be governed and construed in
---------------
accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are for
---------------------
convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
--------
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mall (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Mego to:
-----------------
Mego Financial Corp.
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy to:
------------------
Xxx X. Xxxxxx
0000 Xxxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
If to Eastern to:
--------------------
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxx Sicilian, Esq.
Facsimile: (000) 000-0000
With a copy to:
------------------
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx Xx., Esq.
Facsimile: (000) 000-0000
(g) Counterparts. This Agreement and any amendments hereto may be executed
-------------
in counterparts, each of which shall be considered one and the same agreement
and shall become effective when both counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
(h) Further Assurances. The parties shall execute and deliver all other
--------------------
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions contemplated by this
Agreement.
(i) Specific Performance. The parties hereto agree that this Agreement may
----------------------
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
(j) Successors and Assigns. This Agreement shall be binding upon and shall
------------------------
inure to the benefit of and be enforceable by and against the successors and
assigns of the parties hereto.
(k) Survival of Representations, Warranties and Agreements. All
------------------------------------------------------------
representations, warranties, covenants and agreements made herein shall survive
the Closing.
(l) Brokers and Finders. Neither Mego nor Eastern has engaged or otherwise
---------------------
dealt with any person or entity in any manner which might give rise to a claim
against the other party hereto for any commission, fee or payment of any kind to
any broker, finder or other agent and each party hereto shall indemnify the
other against any such claim or expense associated therewith, including
attorneys' fees.
(m) Public Announcements. Other than as may be required by law, no party to
---------------------
this Agreement will make any public announcements regarding the execution
of this Agreement or its terms without the prior written approval of the other
party.
IN WITNESS WHEREOF, Eastern and Mego have caused this Agreement to be duly
executed as of the day and year first above written.
EASTERN AIR LINES, INC.
By: _________________________________
Name: _______________________________
Its: ________________________________
FAREQUEST, INC.
By: _________________________________
Name: _______________________________
Its: ________________________________
MEGO FINANCIAL CORP.
By: _________________________________
Name: _______________________________
Its: ________________________________
