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EXCHANGE AGREEMENT
DATED AS OF JANUARY 1, 1997
AMONG
ACTION PERFORMANCE COMPANIES, INC.,
XXXXXXX X. XXXXXX, AND
XXXXXXX X. XXXXXX
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TABLE OF CONTENTS
Page
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SECTION 1
EXCHANGE OF SHARES............................ 1
SECTION 2
REPRESENTATIONS AND WARRANTIES...................... 1
2.1 Representations and Warranties of Seller............................ 1
(a) Due Incorporation, Good Standing, and Qualification........ 1
(b) Capital Stock.............................................. 1
(c) Options, Warrants, and Rights.............................. 1
(d) Subsidiaries............................................... 2
(e) Financial Statements....................................... 2
(f) Books and Records.......................................... 2
(g) No Material Change......................................... 2
(h) Actions in the Ordinary Course of Business................. 2
(i) Title to Properties........................................ 2
(j) Litigation................................................. 3
(k) Rights and Licenses........................................ 3
(l) No Violation............................................... 3
(m) Taxes...................................................... 3
(n) Accounts Receivable........................................ 3
(o) Contracts.................................................. 3
(p) Compliance with Law and Other Regulations.................. 4
(q) Insurance.................................................. 4
(r) Articles, Bylaws, and Minute Books......................... 4
(s) Employees.................................................. 4
(t) No Payments to Directors, Officers, Shareholders or Others. 4
(u) Accuracy of Statements..................................... 4
2.2 Further Representations and Warranties of Sellers................... 4
(a) Ownership of Capital Stock of CMP.......................... 5
(b) Rights to Acquire Shares................................... 5
(c) Power to Execute Agreement................................. 5
(d) Agreement Not in Breach of Other Instruments............... 5
(e) Reliance Upon Seller's Advisors............................ 5
(f) Intent and Access.......................................... 5
2.3 Representations and Warranties of Buyer............................. 5
(a) Due Incorporation, Good Standing, and Qualification........ 6
(b) Corporate Authority........................................ 6
(c) Capital Stock.............................................. 6
(d) Options, Warrants, and Rights.............................. 6
(e) Subsidiaries............................................... 6
(f) Financial Statements....................................... 6
(g) No Material Change......................................... 7
(h) Title to Assets and Properties............................. 7
(i) Litigation................................................. 7
(j) Rights and Licenses........................................ 7
(k) No Violation............................................... 7
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(l) Taxes...................................................... 7
(m) Accounts Receivable........................................ 8
(n) Contracts.................................................. 8
(o) Compliance with Law and Other Regulations.................. 8
(p) Insurance.................................................. 8
(q) Articles, Bylaws, and Minute Books......................... 8
(r) Employees.................................................. 8
(s) SEC Reports................................................ 8
(t) Accuracy of Statements..................................... 9
(u) Status of Buyer Common Stock Being Issued.................. 9
2.4 Survival of Representations and Warranties.......................... 9
SECTION 3
COVENANTS OF SELLERS........................... 9
3.1 Covenants of Sellers................................................ 9
(a) Filing of Tax Returns and Payment of Taxes................. 9
(b) Section 338(h)(10) Election................................ 9
3.2 Further Assurances......................................... 10
SECTION 4
GENERAL................................. 10
4.1 Costs and Indemnity Against Finders................................. 10
4.2 Controlling Law..................................................... 10
4.3 Notices............................................................. 10
4.4 Binding Nature of Agreement; No Assignment.......................... 10
4.5 Entire Agreement.................................................... 11
4.6 Paragraph Headings.................................................. 11
4.7 Counterparts........................................................ 11
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EXCHANGE AGREEMENT
AGREEMENT dated as of January 1, 1997, among ACTION PERFORMANCE
COMPANIES, INC., an Arizona corporation ("Buyer"); and XXXXXXX X. XXXXXX and
XXXXXXX X. XXXXXX (each, a "Seller" and together, "Sellers").
Buyer and Sellers desire that Buyer acquire all of Sellers' shares of
capital stock (the "Shares") of Creative Marketing and Promotions, Inc., a North
Carolina corporation ("CMP") in exchange for shares of Buyer's Common Stock, all
on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein, the parties agree as follows:
SECTION 1
EXCHANGE OF SHARES
1.1 Exchange of Shares. Based upon and subject to the representations,
warranties, covenants, agreements, and other terms and conditions set forth in
this Agreement, as of the date of this Agreement (the "Closing Date"), the
Sellers hereby convey, transfer, assign, and deliver the Shares to Buyer in
exchange for an aggregate of 285,714 shares of Buyer's common stock, par value
$.01 per share (the "Buyer's Common Stock"), valued at $17.50 per share. Each
Seller hereby conveys, transfers, assigns, and delivers to Buyer the number of
Shares set forth beside such Seller's name on Schedule 1.1 hereto, in exchange
for the number of shares of Buyer's Common Stock set forth beside such Seller's
name on Schedule 1.1 hereto. Buyer and each of the Sellers hereby acknowledges
receipt of the Shares and the Buyer's Common Stock, respectively.
SECTION 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Sellers. Except as otherwise set
forth in the Sellers' Disclosure Schedule heretofore delivered by Sellers to and
acknowledged as received by Buyer, Sellers jointly and severally represent and
warrant to Buyer as follows:
(a) Due Incorporation, Good Standing, and Qualification. CMP
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation with all requisite corporate
power and authority to own, operate, and lease its assets and properties and to
carry on its business as now being conducted. CMP is not subject to any material
disability by reason of the failure to be duly qualified as a foreign
corporation for the transaction of business or to be in good standing under the
laws of any jurisdiction. Sellers have heretofore delivered to Buyer a list
setting forth, as of the date of this Agreement, each jurisdiction in which (i)
CMP currently conducts it business or has in the past conducted its business on
any basis, (ii) CMP is qualified to do business, and (iii) CMP is qualified for
the purposes of sales and income taxes.
(b) Capital Stock. As of the date hereof, CMP has an
authorized capital stock consisting of 100,000 shares of Common Stock, $1.00 par
value, of which 4,000 shares are issued and outstanding and all of which are
owned by Sellers, free and clear of all claims, liens, charges, and
encumbrances. All of the issued and outstanding shares of capital stock of CMP
have been validly authorized and issued and are fully paid and nonassessable.
(c) Options, Warrants, and Rights. CMP does not have
outstanding any options, warrants, or other rights to purchase, or securities or
other obligations convertible into or exchangeable for, or contracts,
commitments, agreements, arrangements, or understandings to issue, any shares of
its capital stock or other securities.
(d) Subsidiaries. CMP has no subsidiaries. CMP does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest in any
corporation or other business.
(e) Financial Statements. The Balance Sheet of CMP as of
November 30, 1995, and the Statements of Income and Retained Earnings and Cash
Flows of CMP for the year ended November 30, 1995 have been audited by Xxxxx &
Xxxxxx, L.L.P., certified public accountants, and the Balance Sheet of CMP as of
November 30, 1996 and the Statements of Income and Retained Earnings and Cash
Flow of CMP for the 12 months ended November 30, 1996 have been prepared by CMP
without audit. All of the foregoing financial statements have been prepared in
accordance with generally accepted accounting principles, which were applied on
a consistent basis, are correct and complete, and present fairly, in all
material respects, the consolidated financial position, results of operations,
and changes in financial position of CMP as of their respective dates and for
the periods indicated. CMP does not have any material liabilities or obligations
of a type that would be included in a balance sheet prepared in accordance with
generally accepted accounting principles, whether related to tax or non-tax
matters, accrued or contingent, due or not yet due, liquidated or unliquidated,
or otherwise, except as and to the extent disclosed or reflected in the Base
Balance Sheet or Sellers' Disclosure Schedule or incurred since the date of the
Base Balance Sheet in the ordinary course of business.
(f) Books and Records. The books of account and other
corporate records of CMP are complete and accurate, have been maintained in
accordance with good business practices, and the matters contained therein are
appropriately reflected in CMP's financial statements.
(g) No Material Change. Since November 30, 1996, there has not
been and there is not threatened (i) any material adverse change in the
business, assets, properties, financial condition, or operating results of CMP,
(ii) any loss or damage (whether or not covered by insurance) to any of the
assets or properties of CMP, which materially affects or impairs its ability to
conduct its business, or (iii) any mortgage or pledge of any assets or
properties of CMP, or any indebtedness incurred by CMP other than indebtedness,
not material in the aggregate, incurred in the ordinary course of business.
(h) Actions in the Ordinary Course of Business. Since November
30, 1996, CMP has not (i) taken any action outside of the ordinary and usual
course of business; (ii) borrowed any money or become contingently liable for
any obligation or liability of another; (iii) failed to pay all of its debts and
obligations as they became due; (iv) incurred any debt, liability or obligation
of any nature to any party except for obligations arising from the purchase of
goods or the rendition of services in the ordinary course of business, none of
which aggregate more than $100,000 with respect to the same supplier or
customer; (v) knowingly waived any right of substantial value; (vi) failed to
use its best efforts to preserve its business organization intact, to keep
available the services of its employees, or to preserve its relationships with
its customers, suppliers and others with which it deals; or (vii) increased or
committed to increase the salary, fee or compensation of any officer, employee,
independent contractor, agent, firm or person performing services for it.
(i) Title to Properties. CMP has good and marketable title to
all of its real and personal assets and properties, including all assets and
properties reflected in the Base Balance Sheet or acquired subsequent to
November 30, 1996, except assets or properties disposed of subsequent to that
date in the ordinary course of business. Such assets and properties are subject
to no mortgage, indenture, pledge, lien, claim, encumbrance, charge, security
interest, or title retention or other security arrangement, except for liens for
the payment of federal, state, and other taxes, the payment of which is neither
delinquent nor subject to penalties, and except for other liens and encumbrances
incidental to the conduct of the business of CMP or the ownership of its assets
or properties, which were not incurred in connection with the borrowing of money
or the obtaining of advances and which do not
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in the aggregate materially detract from the value of the assets or properties
of CMP or materially impair the use thereof in the operation of its business,
except in each case as disclosed in the Base Balance Sheet. All leases pursuant
to which CMP leases any substantial amount of real or personal property are
valid and effective in accordance with their respective terms.
(j) Litigation. There are no actions, suits, proceedings, or
other litigation pending or, to the knowledge of CMP, threatened against CMP, at
law or in equity, or before or by any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality
that, if determined adversely to CMP, would individually or in the aggregate
have a material adverse effect on the business, assets, properties, operating
results, prospects, or condition, financial or otherwise, of CMP.
(k) Rights and Licenses. CMP has provided Buyer with a list of
all of its trademarks, trademark rights, trade names, trade name rights, and
licenses.
(l) No Violation. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not violate or
result in a breach by CMP of, or constitute a default under, or conflict with,
or cause any acceleration of any obligation with respect to, (i) any provision
or restriction of any charter, bylaw, loan, indenture, or mortgage of CMP, or
(ii) any provision or restriction of any lien, lease agreement, contract,
instrument, order, judgment, award, decree, ordinance, or regulation or any
other restriction of any kind or character to which any assets or properties of
CMP is subject or by which CMP is bound.
(m) Taxes. CMP has duly filed in correct form all Tax Returns
(as defined below) relating to the activities of CMP required or due to be filed
(with regard to applicable extensions) on or prior to the Closing Date. All such
Tax Returns are accurate and complete in all material respects, and CMP has paid
or made provision for the payment of all Taxes (as defined below) that have been
incurred or are due or claimed to be due from it by federal, state, or local
taxing authorities for all periods ending on or before the Closing Date, other
than Taxes or other charges that are not delinquent or are being contested in
good faith and have not been finally determined and have been disclosed to
Buyer. The amounts set up as reserves for Taxes on the books of CMP are
sufficient in the aggregate for the payment of all unpaid Taxes (including any
interest or penalties thereon), whether or not disputed, accrued, or applicable.
No claims for taxes or assessments are being asserted or threatened against CMP.
Sellers have furnished to Buyer copies of all Tax Returns filed for or by CMP
since its inception. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies, or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, license,
payroll, and franchise taxes, imposed by the United States, or any state, local
or foreign government or subdivision or agency thereof and any interest,
penalties or additions attributable thereto, and the term "Tax Return" shall
mean any report, return, or other information required to be supplied to any
taxing authority or required by any taxing authority to be supplied to any other
person. CMP has duly and validly filed elections for S corporation status under
the Internal Revenue Code; none of such elections have been revoked or
terminated; and neither CMP nor any shareholder of CMP has taken any action that
would cause a termination of such S election.
(n) Accounts Receivable. The accounts receivable of CMP have
been acquired in the ordinary course of business and, to the knowledge of
Seller, are valid and enforceable, and are fully collectible, subject to no
known defenses, set-offs, or counterclaims, except to the extent of the reserve
reflected in the books of CMP or in CMP's Disclosure Schedule or in such other
amount not greater than $500,000 unless subject to setoff as a result of actions
by Buyer.
(o) Contracts. CMP is not a party to (i) any plan or contract
providing for bonuses, pensions, options, stock purchases, deferred
compensation, retirement payments, or profit sharing, (ii) any collective
bargaining or other contract or agreement with any labor union, (iii) any lease,
installment purchase agreement, or other contract with respect to any real or
personal property used or proposed to be used in its operations, excepting, in
each case, items included within aggregate amounts disclosed or reflected in the
Base
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Balance Sheet, (iv) any employment agreement or other similar arrangement not
terminable by it upon 30 days or less notice without penalty to it, (v) any
contract or agreement for the purchase of any commodity, material, fixed asset,
or equipment in excess of $100,000, (vi) any contract or agreement creating an
obligation of $100,000 or more, (vii) any contract or agreement that by its
terms does not terminate or is not terminable by it upon 30 days or less notice
without penalty to it, (viii) any loan agreement, indenture, promissory note,
conditional sales agreement, or other similar type of arrangement, (ix) any
material license agreement, or (x) any contract that may result in a material
loss or obligation to it. All material contracts, agreements, and other
arrangements to which CMP is a party are valid and enforceable in accordance
with their terms; CMP and, to CMP's knowledge, all other parties to each of the
foregoing have performed in any material respects all obligations required to be
performed to date; and neither CMP nor, to CMP's knowledge, any such other party
is in default or in arrears under the terms of any of the foregoing.
(p) Compliance with Law and Other Regulations. CMP is not
subject to or has been threatened with any material fine, penalty, liability, or
disability as the result of its failure to comply with any requirement of
federal, state, local, or foreign law or regulation or any requirement of any
governmental body or agency having jurisdiction over it, the conduct of its
business, the use of its assets and properties, or any premises occupied by it.
(q) Insurance. CMP maintains in full force and effect
insurance coverage on its assets, properties, premises, operations, and
personnel in such amounts as CMP deems appropriate, all as set forth on Sellers'
Disclosure Schedule.
(r) Articles, Bylaws, and Minute Books. Sellers have
heretofore delivered to Buyer true and complete copies of the Articles of
Incorporation and Bylaws of CMP as currently in effect. The minute books of CMP
contain complete and accurate records of all meetings and other corporate
actions held or taken by the Boards of Directors (or committees of the Boards of
Directors) and shareholders of CMP since its incorporation.
(s) Employees. CMP has never maintained or contributed to any
"employee benefit plan," as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including, without
limitation, any stock option plan, stock purchase plan, deferred compensation
plan, or other similar employee benefit plan. CMP never contributed to any
"multi-employer pension plan," as such term is defined in Section 3(37)(A) of
ERISA.
(t) No Payments to Directors, Officers, Shareholders or
Others. Except to the extent that the following will have no material adverse
effect on the purchase by Buyer of the Shares or the business, assets, or
properties of CMP pursuant to this Agreement, since November 30, 1996, there has
not been any purchase or redemption of any shares of capital stock of CMP or any
transfer, distribution or payment by CMP, directly or indirectly, of any money
or other assets or properties to any director, officer, shareholder or any of
their affiliates or other person other than the payment of compensation for
services actually rendered at rates not in excess of the rates prevailing on the
Base Balance Sheet or payments in the ordinary course of business or for goods
or services in other than arm's length transactions.
(u) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate, or other information furnished by CMP or Sellers
to Buyer in connection with this Agreement or any of the transactions
contemplated hereby contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein, in light of circumstances in which they are made, not misleading.
2.2 Further Representations and Warranties of Sellers. Each Seller
makes the following further representations and warranties as to himself:
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(a) Ownership of Capital Stock of CMP. Such Seller owns the
number of Shares set forth beside such Seller's name on Schedule 1.1 hereto.
Such Seller has good, marketable and unencumbered title to such Shares, and
there are no restrictions on his right to transfer such Shares to Buyer pursuant
to this Agreement.
(b) Rights to Acquire Shares. Such Seller does not have any
outstanding options, warrants, or other rights to purchase or subscribe for or
contracts or commitments to sell, or any interests, instruments, evidences of
indebtedness or other securities convertible in any manner into, any shares of
CMP's capital stock.
(c) Power to Execute Agreement. Such Seller has full power and
authority to execute, deliver, and perform this Agreement, and this Agreement is
the legal and binding obligation of such Seller, enforceable against such Seller
in accordance with its items, 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.
(d) Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof, will not result in
the breach of any term or provision of, or constitute a default under, or
conflict with, or cause the acceleration of any obligation under, any agreement
or other instrument of any description to which such Seller is a party or by
which such Seller is bound, or any judgment, decree, order or award of any
court, governmental body or arbitrator, or any law, rule or regulation
applicable to such Seller.
(e) Reliance Upon Seller's Advisors. Such Seller acknowledges
that he has been encouraged to rely upon the advice of his legal counsel and
accountants or other financial advisers with respect to the financial, tax, and
other considerations relating to the acquisition of the Buyer's Common Stock.
Such Seller represents and warrants that he has reviewed with the his own tax
advisors the federal, state, local, and foreign tax consequences of the
investment in Buyer's Common Stock. Such Seller is relying solely on such
advisors and not on any statements or representations of Buyer or any of its
officers, directors, employees, or agents and understands that such Seller (and
not Buyer) shall be responsible for his own tax liability, if any, that may
arise as a result of the acquisition of Buyer's Common Stock or the transactions
contemplated by this Agreement.
(f) Intent and Access. Such Seller is acquiring the shares of
Buyer's Common Stock without a view to the public distribution or resale in
violation of any applicable federal or state securities laws. Such Seller
acknowledges that the shares of Buyer's Common Stock are not registered under
the Securities Act of 1933, as amended or any state securities laws and cannot
be sold publicly without registration thereunder or an exemption from such
registration. Such Seller understands that certificates for such shares will
contain a legend with respect to the restrictions on transfer under federal and
applicable state securities laws as well as the fact that the shares are
"restricted securities" under such federal and state laws. Such Seller has been
furnished with such information, both financial and non-financial, with respect
to the operations, business, capital structure, and financial position of Buyer
and its subsidiaries as he believes necessary and has been given the opportunity
to ask questions of and receive answers from Buyer and its subsidiaries and
their officers concerning Buyer and its subsidiaries. Without limiting the
foregoing, such Seller specifically acknowledges the receipt of Buyer's Form
10-KSB Report for the fiscal year ended September 30, 1996, Buyer's Proxy
Statement dated January 29, 1996, Buyer's 1996 Annual Report to Shareholders,
Buyer's Prospectus dated May 29, 1996, Buyer's Current Report on Form 8-K dated
June 20, 1996, and Buyer's Current Report on Form 8-K dated November 7, 1996.
Notwithstanding the foregoing, Sellers understand that Buyer will promptly
undertake to register the Buyer's Common Stock.
2.3 Representations and Warranties of Buyer. Except as otherwise set
forth in the Buyer Disclosure Schedule heretofore delivered by Buyer to Sellers,
and except as disclosed in any document heretofore filed by Buyer with the
Securities and Exchange Commission ("SEC"), Buyer represents and warrants to
Sellers as follows:
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(a) Due Incorporation, Good Standing, and Qualification. Buyer
and each of its subsidiaries are corporations duly organized, validly existing,
and in good standing under the laws of their jurisdictions of incorporation with
all requisite corporate power and authority to own, operate, and lease their
assets and properties and to carry on their business as now being conducted.
Neither Buyer nor any of its subsidiaries is subject to any material disability
by reason of the failure to be duly qualified as a foreign corporation for the
transaction of business or to be in good standing under the laws of any
jurisdiction. As used in this Agreement with reference to Buyer, the term
"subsidiaries" shall include all direct or indirect subsidiaries of Buyer.
(b) Corporate Authority. Buyer has the corporate power and
authority to enter into this Agreement and carry out the transactions
contemplated hereby. The Board of Directors of Buyer has duly authorized the
execution, delivery, and performance of this Agreement. No other corporate
proceedings on the part of Buyer, including a meeting of Buyer's shareholders,
are necessary to authorize the execution and delivery by Buyer of this Agreement
or the consummation by Buyer of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by, and constitutes a legal,
valid, and binding agreement of, Buyer, enforceable against it 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.
(c) Capital Stock. As of the date hereof, Buyer has authorized
capital stock consisting of 25,000,000 shares of Common Stock, $.01 par value,
of which 13,094,962 shares are issued and outstanding, and 5,000,000 shares of
Preferred Stock, no par value, of which no shares are issued and outstanding. As
of such date, 1,166,303 shares of Buyer Common Stock were reserved for issuance
upon the exercise of outstanding stock options and warrants. All of the issued
and outstanding shares of capital stock of Buyer and each of its subsidiaries
have been, and Buyer's Common Stock, when issued pursuant to this Agreement will
be, validly authorized and issued and fully paid and nonassessable.
(d) Options, Warrants, and Rights. Neither Buyer nor any of
its subsidiaries has outstanding any options, warrants, or other rights to
purchase, or securities or other obligations convertible into or exchangeable
for, or contracts, commitments, agreements, arrangements or understandings to
issue, any shares of their capital stock or other securities, other than those
referred to in Section 2.2(c).
(e) Subsidiaries. The outstanding shares of capital stock of
the subsidiaries of Buyer owned by Buyer or any of its subsidiaries are owned
free and clear of all claims, liens, charges, and encumbrances. Buyer does not
own, directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest in any
corporation or other business.
(f) Financial Statements. The Consolidated Balance Sheets of
Buyer and its subsidiaries as of September 30, 1995 and September 30, 1996 and
the Consolidated Statements of Operations, the Consolidated Statements of
Shareholders' Equity, and the Consolidated Statements of Cash Flows of Buyer and
its subsidiaries for the three years ended September 30, 1996, and all related
schedules and notes to the foregoing, have been reported on by Xxxxxx Xxxxxxxx
LLP, independent public accountants. All of the foregoing financial statements
have been prepared in accordance with generally accepted accounting principles,
which were applied on a consistent basis (except as described therein), are
correct and complete, and present fairly, in all material respects, the
financial position, results of operations, and changes of financial position of
Buyer and its subsidiaries as of their respective dates and for the periods
indicated. Neither Buyer nor any of its subsidiaries has any material
liabilities or obligations of a type that would be included in a balance sheet
prepared in accordance with generally accepted accounting principles, whether
related to tax or non-tax matters, accrued or contingent, due or not yet due,
liquidated or unliquidated or otherwise, except as and to the extent disclosed
or reflected in the Consolidated Balance Sheet of Buyer and its subsidiaries as
of September 30, 1996, or incurred since September 30, 1996, in the ordinary
course of business or as contemplated by this Agreement.
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(g) No Material Change. Since September 30, 1996, there has
not been and there is not threatened (i) any material adverse change in the
business, assets, properties, financial condition, or operating results of Buyer
or its subsidiaries taken as a whole, (ii) any loss or damage (whether or not
covered by insurance) to any of the assets or properties of Buyer or its
subsidiaries, which materially affects or impairs their ability to conduct their
business, or (iii) any mortgage or pledge of any material amount of the assets
or properties of Buyer or any of its subsidiaries, or any indebtedness incurred
by Buyer or any of its subsidiaries, other than indebtedness, not material in
the aggregate, incurred in the ordinary course of business.
(h) Title to Assets and Properties. Buyer and its subsidiaries
have good and marketable title to all of their respective real and personal
assets and properties, including all assets and properties reflected in the
Consolidated Balance Sheet of Buyer and its subsidiaries as of September 30,
1996, or acquired subsequent to September 30, 1996, except assets or properties
disposed of subsequent to that date in the ordinary course of business. Such
assets and properties are subject to no mortgage, indenture, pledge, lien,
claim, encumbrance, charge, security interest, or title retention or other
security arrangement, except for liens for the payment of federal, state, and
other taxes, the payment of which is neither delinquent nor subject to
penalties, and except for other liens and encumbrances incidental to the conduct
of the business of Buyer and its subsidiaries or the ownership of their assets
or properties, which were not incurred in connection with the borrowing of money
or the obtaining of advances, and which do not in the aggregate materially
detract from the value of the assets or properties of Buyer and its subsidiaries
taken as a whole or materially impair the use thereof in the operation of their
respective businesses, except in each case as disclosed in the Consolidated
Balance Sheet as of September 30, 1996. All leases pursuant to which Buyer or
any of its subsidiaries lease any substantial amount of real or personal
property are valid and effective in accordance with their respective terms.
Buyer and each of its subsidiaries own or have the right to use all assets and
properties necessary to conduct their business as currently conducted.
(i) Litigation. There are no actions, suits, proceedings, or
other litigation pending or, to the knowledge of Buyer, threatened against Buyer
or any of its subsidiaries, at law or in equity, or before or by any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality that, if determined adversely to Buyer or its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the business, assets, properties, operating results, prospects, or
condition, financial or otherwise, of Buyer and its subsidiaries taken as a
whole.
(j) Rights and Licenses. Neither Buyer nor any of its
subsidiaries is subject to any material disability or liability by reason of its
failure to possess any trademark, trademark right, trade name, trade name right,
or license.
(k) No Violation. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not violate or
result in a breach by Buyer or any of its subsidiaries of, or constitute a
default under, or conflict with, or cause any acceleration of any obligation
with respect to, (i) any provision or restriction of any charter, bylaw, loan,
indenture, or mortgage of Buyer or any of its subsidiaries, or (ii) any
provision or restriction of any lien, lease agreement, contract, instrument,
order, judgment, award, decree, ordinance, or regulation or any other
restriction of any kind or character to which any assets or properties of Buyer
or any of its subsidiaries is subject or by which Buyer or any of its
subsidiaries is bound.
(l) Taxes. Buyer has duly filed in correct form all Tax
Returns relating to the activities of Buyer and its subsidiaries required or due
to be filed (with regard to applicable extensions) on or prior to the Closing
Date. All such Tax Returns are accurate and complete in all material respects,
and Buyer has paid or made provision for the payment of all Taxes that have been
incurred or are due or claimed to be due from it by federal, state, or local
taxing authorities for all periods ending on or before the Closing Date, other
than Taxes or other charges that are not delinquent or are being contested in
good faith and have not been finally determined and have been disclosed to
Seller. The amounts set up as reserves for Taxes on the books of Buyer and its
subsidiaries are sufficient in the aggregate for the payment of all unpaid Taxes
(including any interest or penalties thereon), whether
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or not disputed, accrued, or applicable. No claims for taxes or assessments are
being asserted or threatened against Buyer or any of its subsidiaries.
(m) Accounts Receivable. The accounts receivable of Buyer and
its subsidiaries have been acquired in the ordinary course of business, are
valid and enforceable, and are fully collectible, subject to no known defenses,
setoffs, or counterclaims, except to the extent of the reserve reflected in the
books of Buyer and its subsidiaries or in such other amount that is not material
in the aggregate.
(n) Contracts. Neither Buyer nor any of its subsidiaries is a
party to (i) any plan or contract providing for bonuses, pensions, options,
stock purchases, deferred compensation, retirement payments, or profit sharing,
(ii) any collective bargaining or other contract or agreement with any labor
union, (iii) any lease, installment purchase agreement, or other contract with
respect to any real or personal property used or proposed to be used in its
operations excepting, in each case, items included within aggregate amounts
disclosed or reflected in the Consolidated Balance Sheet of Buyer and its
subsidiaries as of September 30, 1996, (iv) any employment agreement or other
similar arrangement not terminable by it upon 30 days or less notice without
penalty to it, (v) any contract or agreement for the purchase of any commodity,
material, fixed asset, or equipment in excess of $100,000, (vi) any contract or
agreement creating an obligation of $100,000 or more, (vii) any contract or
agreement that by its terms does not terminate or is not terminable by it upon
30 days or less notice without penalty to it, (viii) any loan agreement,
indenture, promissory note, conditional sales agreement, or other similar type
of arrangement, (ix) any material license agreement, or (x) any contract that
may result in a material loss or obligation to it. All material contracts,
agreements, and other arrangements to which Buyer or any of its subsidiaries is
a party are valid and enforceable in accordance with their terms; Buyer, its
subsidiaries, and all other parties to each of the foregoing have performed all
obligations required to be performed to date; neither Buyer, nor any of its
subsidiaries, nor any such other party is in default or in arrears under the
terms of any of the foregoing; and no condition exists or event has occurred
that, with the giving of notice or lapse of time or both, would constitute a
default under any of them.
(o) Compliance with Law and Other Regulations. Neither Buyer
nor any of its subsidiaries is subject to or has been threatened with any
material fine, penalty, liability, or disability as the result of its failure to
comply with any requirement of federal, state, local, or foreign law or
regulation or any requirement of any governmental body or agency having
jurisdiction over it, the conduct of its business, the use of its assets and
properties, or any premises occupied by it.
(p) Insurance. Buyer and each of its subsidiaries maintains in
full force and effect insurance coverage on their assets, properties, premises,
operations, and personnel in such amounts as Buyer deems appropriate.
(q) Articles, Bylaws, and Minute Books. Buyer has heretofore
delivered to Sellers true and complete copies of its Articles of Incorporation
and Bylaws of Buyer as currently in effect. The minute books of Buyer contain
complete and accurate records of all meetings and other corporate actions held
or taken by the Boards of Directors (or committees of the Boards of Directors)
and shareholders of Buyer since its incorporation.
(r) Employees. Neither Buyer nor any of its subsidiaries has
ever maintained or contributed to any "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, including, without limitation, any stock
option plan, stock purchase plan, deferred compensation plan, or other similar
employee benefit plan, other than Buyer's Stock Option Plans. Neither Buyer nor
any of its subsidiaries has ever contributed to any "multi-employer pension
plan," as such term is defined in Section 3(37)(A) of ERISA.
(s) SEC Reports. Buyer's report on Form 10-KSB for the fiscal
year ended September 30, 1996 filed with the SEC and all reports and proxy
statements filed by Buyer thereafter pursuant to Section 13(a) or 14(a) of the
Securities Exchange Act of 1934 do not contain a misstatement of a material fact
or omit to state
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a material fact required to be stated therein or necessary to make the
statements therein not misleading as of the time the document was filed. Since
the filing of such report on Form 10-KSB, no other report, proxy statement, or
other document has been required to be filed by Buyer pursuant to Section 13(a)
or 14(a) of the Securities Exchange Act of 1934 that has not been filed.
(t) Accuracy of Statements. Neither this Agreement nor any
statement, list, certificate, or other information furnished by Buyer to Sellers
in connection with this Agreement or any of the transactions contemplated hereby
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
(u) Status of Buyer Common Stock Being Issued. The shares of
Buyer's Common Stock issued in exchange for the Shares are validly authorized
and issued, fully paid, nonassessable, authorized for trading on the Nasdaq
National Market, and free of preemptive or other similar rights, but subject to
the resale restrictions required by Rule 144 promulgated pursuant to the
Securities Act of 1933, as amended ("Rule 144").
2.4 Survival of Representations and Warranties. Each of the
representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement irrespective of
any investigations or inquiries made by any party or any knowledge that any
party may possess, and each party shall be entitled to rely upon such
representations and warranties irrespective of any investigations, inquiries, or
knowledge. Notwithstanding the foregoing, no claims for indemnity arising out of
a false, misleading, or otherwise incorrect representation or warranty may be
made after one year from the Closing Date, and neither Buyer nor Sellers shall
be responsible for any indemnity claim for an amount less than $250,000 or
greater than $4,000,000 arising out of a false, misleading, or otherwise
incorrect representation or warranty relating to this Agreement; provided,
however, that the foregoing limitation will have no force or effect with respect
to any defect of Buyer's Common Stock.
SECTION 3
COVENANTS OF SELLERS
3.1 Covenants of Sellers. Each Seller further agrees, unless Buyer
otherwise agrees in writing, subsequent to the Closing Date:
(a) Filing of Tax Returns and Payment of Taxes. As promptly as
practicable after the Closing Date, Sellers shall, at their cost and expense,
prepare or cause to be prepared all federal, state, and local S corporation Tax
Returns for all periods prior to the Closing Date. Not less than 30 days prior
to the anticipated date for filing such returns, Sellers shall provide a copy of
each such Tax Returns to Buyer for its review and consent or approval. Sellers
shall make any revisions to such Tax Returns that Buyer may reasonably request.
Upon approval of such Tax Returns by Buyer, such approval not to be unreasonably
withheld, Sellers shall promptly file such Tax Returns or cause them to be
filed. Each Seller agrees that Sellers shall be jointly and severally
responsible for any and all tax obligations of CMP or the Sellers arising as a
result of CMP's status as an S corporation prior to the Closing Date. Each
Seller agrees that Sellers shall promptly pay any and all Taxes determined to be
owed by CMP or either or both of the Sellers as a result of CMP's status as an S
corporation prior to the Closing Date.
(b) Section 338(h)(10) Election. In the event that Buyer
determines that it is eligible to file an election under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended, with respect to the exchange of
Shares and Buyer's Common Stock pursuant to this Agreement, Sellers will, upon
request by Buyer, promptly join in the filing of such an election and in making
corresponding elections under any state or local tax law. Buyer shall be
responsible for preparing all such elections, including preparation of forms
required to be filed in order to make such elections.
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3.2 Further Assurances. On and after the Closing Date, Sellers and
Buyer shall execute and deliver all such deeds, bills of sale, assignments, and
other instruments and shall take or cause to be taken such further or other
actions as any party may reasonably request from time to time in order to
effectuate the transactions provided for herein. The parties shall cooperate
with each other and with their respective counsel and accountants in connection
with any steps to be taken as a part of their respective obligations under this
Agreement.
SECTION 4
GENERAL
4.1 Costs and Indemnity Against Finders. Each party hereto shall be
responsible for its own costs and expenses in negotiating and performing this
Agreement and hereby indemnifies and holds the other parties harmless against
any claim for finders' fees based on alleged retention of a finder by it.
4.2 Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement shall be governed by and
construed in accordance with the laws of the state of Arizona, notwithstanding
any Arizona or other conflict-of-law provisions to the contrary.
4.3 Notices. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received when delivered against receipt
or when deposited in the United States mails, first class postage prepaid,
addressed as set forth below:
If to Buyer: If to Sellers:
0000 Xxxx Xxxxx Xxxxxx 0000 Xxxxxxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000 Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx Attention: Xxxxxxx X. Xxxxxx
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
with a copy given in the manner with a copy given in the manner
prescribed above, to: prescribed above, to:
O'Connor, Cavanagh, Anderson, Robinson, Xxxxxxxx & Xxxxxx, P.A.
Xxxxxxxxxxxxx & Xxxxxxxx, P.A. 000 Xxxxx Xxxxx Xxxxxx
One East Camelback Road Suite 1900
Phoenix, Arizona 85012 Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxx, Esq. Attention: Xxxxxxx X. Xxxxxxxx, Xx., Esq.
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Any party may alter the address to which communications or copies are
to be sent by giving notice to such other parties of change of address in
conformity with the provisions of this paragraph for the giving of notice.
4.4 Binding Nature of Agreement; No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors, and assigns, except that no party may assign,
delegate, or transfer its rights or obligations under this Agreement without the
prior written consent of the other parties hereto. Any assignment, delegation,
or transfer made in violation of this Section 4.4 shall be null and void.
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4.5 Entire Agreement. This Agreement contains the entire understanding
among the parties hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
inducements, and conditions, express or implied, oral or written, except as
herein contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
4.6 Paragraph Headings. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
4.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ACTION PERFORMANCE COMPANIES, INC.
By:___________________________________
Its:__________________________________
______________________________________
Xxxxxxx X. Xxxxxx
______________________________________
Xxxxxxx X. Xxxxxx
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