ASSET PURCHASE AGREEMENT BY AND BETWEEN TIX CORPORATION AND EXHIBIT MERCHANDISING LLC AND MAGIC ARTS & ENTERTAINMENT-FLORIDA, INC. AND JOHN T. NORMAN AS TRUSTEE OF THE JOHN T. NORMAN TRUST DATED: as of August 6, 2007
Exhibit
10.1
BY
AND BETWEEN
TIX
CORPORATION
“BUYER”
AND
EXHIBIT
MERCHANDISING LLC
“SELLER”
AND
MAGIC
ARTS & ENTERTAINMENT-FLORIDA, INC.
AND
XXXX
X. XXXXXX AS TRUSTEE OF THE XXXX X. XXXXXX TRUST
“MEMBERS”
DATED:
as of August 6, 2007
This
ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of August 6, 2007 (the
“Agreement Date”), is by and between TIX CORPORATION, a Delaware corporation
(“Buyer”),
on
the one hand, and EXHIBIT MERCHANDISING LLC, an Ohio limited liability company
(“Seller”),
and
MAGIC
ARTS & ENTERTAINMENT-FLORIDA, INC.,
a
Florida corporation, and XXXX
X.
XXXXXX AS TRUSTEE OF THE XXXX X. XXXXXX TRUST
(collectively, the “Members” and individually, a “Member”), on the other
hand.
RECITALS
A. Seller
owns certain assets that it uses in the conduct of the Business (as defined
below).
B. Buyer
desires to purchase from Seller, and Seller desires to sell to Buyer, such
assets and to assume certain liabilities of Seller associated therewith, subject
to the terms and conditions set forth in this Agreement.
C. The
Members own all of the membership interests of Seller and will benefit from
the
transactions contemplated herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
in
this Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE
I.
DEFINITIONS
1.1 Defined
Terms.
As used
in this Agreement, the terms below shall have the following meanings. Any such
term, unless the context otherwise requires, may be used in the singular or
plural, depending upon the reference.
“Affiliate”
has
the
meaning set forth in the Exchange Act. Without limiting the foregoing, all
directors and officers of a Person that is a corporation and all managing
members of a Person that is a limited liability company shall be deemed
Affiliates of such Person for all purposes hereunder.
“Ancillary
Agreements”
means
the Assignment of Contract Rights, the Assignment of Intellectual Property
documents, the Assumption Agreement, the Xxxx of Sale, the Voting Agreement,
the
Consulting Agreement, the Employment Agreements and the Non-Competition
Agreement.
“Assigned
Contracts”
means
(i) those Contracts listed on Schedule
1.3
under
the heading ‘Assigned Contracts’ and (ii) any other Seller Contracts not so
listed that Buyer, in its sole discretion, expressly elects in writing to accept
and assume.
“Assigned
Leases”
means
those Leases listed on Schedule
1.3
under
the heading ‘Assigned Leases.’
“Assignment
of Contract Rights”
means
that certain assignment of contract rights, substantially in the form attached
hereto as Exhibit
A,
to be
entered into at Closing by Seller.
“Assignment
of Intellectual Property Rights”
means,
collectively, that certain assignment of trademarks and domain names,
substantially in the form attached hereto as Exhibit
B,
to be
entered into at Closing by Seller.
“Assumption
Agreement”
means
that certain assumption agreement, substantially in the form attached hereto
as
Exhibit
C,
to be
entered into at Closing by Buyer in favor of Seller.
“Balance
Sheet”
means
the consolidated balance sheet of Seller dated the Balance Sheet Date, together
with the notes thereon.
“Balance
Sheet Date”
means
December 31, 2006.
“Benefit
Arrangement”
means
any employment, consulting, severance or other similar contract, plan,
arrangement or policy, and each plan, arrangement (written or oral), program,
agreement or commitment providing for insurance coverage (including any
self-insured arrangements), workers’ compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health, disability or accident benefits or for deferred compensation,
profit-sharing bonuses, stock options, stock purchases or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
which (A) is not a Welfare Plan, Pension Plan or Multi-employer Plan, and (B)
is
entered into, maintained, contributed to or required to be contributed to,
by
Seller or an ERISA Affiliate or under which Seller or any ERISA Affiliate may
incur any liability.
“Best
Efforts”
means
the diligent, reasonable and good faith efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible on commercially reasonable
terms.
“Xxxx
of Sale”
means
that certain xxxx of sale, substantially in the form attached hereto as
Exhibit
D,
to be
entered into at Closing by Seller in favor of Buyer.
“Books
and Records”
means
(i) all records and lists of Seller pertaining to the Purchased Assets, (ii)
all
records and lists pertaining to the Business or the customers, suppliers or
personnel of Seller, (iii) all product, business and marketing plans of Seller
pertaining to the Business and (iv) all books, ledgers, files, reports, plans,
drawings and operating records of every kind maintained by Seller pertaining
to
the Business.
“Breach”
means,
and a breach of a representation, warranty, covenant, obligation or other
provision of this Agreement or any Ancillary Agreement will be deemed to have
occurred if there is or has been, any inaccuracy in or breach of, or any failure
to perform or comply with, such representation, warranty, covenant, obligation
or other provision.
2
“Business”
means
product merchandise development and sales related to museum
exhibits.
“Business
Day”
means
any day of the year on which national banking institutions in Los Angeles,
California are open to the public for conducting business and are not required
or authorized to close.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Common
Stock”
means
Restricted Shares of the Common Stock of Buyer, par value $0.08 per
share.
“Condition-Related
Material Adverse Effect”
or
“Condition-Related
Material Adverse Change”
means
any effect, change, event, circumstance or condition which, when considered
either individually or with other effects, changes, events or circumstances,
has
or causes a significant and substantial adverse effect or change in (i) for
purposes of Section
7.2
and
Section
9.3(A)(3),
the
condition (financial or other), business, results of operations, assets,
Liabilities, properties or operations of the Business taken as a whole and/or
the Purchased Assets taken as a whole or (ii) for purposes of Section
7.1
and
Section
9.3(A)(4),
the
ability of Seller to consummate the transactions contemplated hereby, and/or
the
condition (financial or other), business, results of operations, assets,
liabilities, properties or operations of the business of the Buyer taken as
a
whole.
“Consent”
means
any approval, consent, ratification, waiver, or other authorization (including
any Permit).
“Consultant”
means
Xxx X. Xxxxxxxx.
“Consulting
Agreement”
means
the consulting agreement to be entered into at Closing by Buyer and the
Consultant, as described in Section 7.1(H).
“Contract”
means
any agreement, contract, note, loan, evidence of indebtedness, purchase order,
letter of credit, indenture, security or pledge agreement, covenant not to
compete, license, instrument, commitment, obligation, promise or undertaking
(whether written or oral and whether express or implied) to which Seller is
a
party or is bound and which relates to the Business or the Purchased
Assets.
“Contract
Rights”
means
all of the rights and, to the extent they are Assumed Liabilities, obligations
of Seller under the Assigned Contracts.
“Customer/User
Data”
means
the lists and databases of the Persons who are customers of the Business, have
registered on-line with the Business or who have subscribed on-line for services
or products of the Business, including, without limitation, through the
Websites.
“Default”
means
(a) a breach of or default under any material representation, warranty,
covenant, obligation or other provision of any Contract or Lease, (b) the
occurrence of an event that with the passage of time or the giving of notice
or
both would constitute a breach or default under any material representation,
warranty, covenant, obligation or other provision of any Contract or Lease
or
(c) the occurrence of an event that with or without the passage of time or
the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract or Lease.
3
“Disclosure
Schedule”
means
the schedule executed and delivered by Seller to Buyer as of the Closing Date
setting forth the exceptions to the representations and warranties contained
in
Article
IV
and
certain other information called for by this Agreement. Unless otherwise
specified, each reference in this Agreement to any numbered schedule is a
reference to the corresponding numbered schedule which is included in the
Disclosure Schedule.
“EBITDA”
means
earnings before interest, taxes, depreciation and amortization.
“Employee
Plans”
means
all Benefit Arrangements, Pension Plans and Welfare Plans.
“Employment
Agreements”
means
the employment agreements (and separate related confidentiality agreements,
upon
Buyer’s request), to be entered into at Closing by Buyer and the Persons
described in Sections
7.2(G)
and
7.1(G).
“Encumbrance”
means
any charge, claim, co-authorship, co-inventorship, or co-ownership interest,
condition, easement, equitable interest, lien, option, pledge, security
interest, right of first refusal or restriction of any kind (including any
restriction on use, voting, transfer (other than restrictions on transfer
imposed by federal and state securities laws), receipt of income or exercise
of
any other attribute of ownership).
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as it may be amended from time to time,
and
the rules and regulations promulgated thereunder.
“Excluded
Assets,”
notwithstanding any other provision of this Agreement, means the following
assets of Seller which are not to be acquired by Buyer pursuant to this
Agreement:
(1) the
original minute books, membership records and seals of Seller; provided
that
copies thereof have been delivered to Buyer;
(2) all
personnel records and other records that Seller is required by Law to retain
in
original form; provided
that, in
each case, copies thereof have been delivered to Buyer; and
(3) all
rights of Seller under this Agreement or any of the Ancillary
Agreements.
“Facilities”
means
all offices, warehouses, improvements and all other related facilities used
in
connection with the Business.
“Facility
Lease”
means
all of the leases of Facilities listed on Schedule
4.11(a).
4
“Family
Member”
means,
with respect to any individual (i) the individual, (ii) the individual’s spouse,
(iii) any other natural Person who is related to the individual or the
individual’s spouse within the second degree (including adopted children) and
(iv) any other natural Person who resides with such individual.
“Financial
Statements”
means
the Year-End Financial Statements and the Interim Financial
Statements.
“Funded
Debt”
means,
as of the Closing Date, without duplication, (i) all indebtedness of Seller
for
borrowed money or for the deferred purchase price of any property or services
(other than current trade liabilities incurred in the Ordinary Course of
Business and payable in accordance with customary practices), (ii) any other
indebtedness of Seller which is evidenced by a note, bond, debenture or similar
instrument, (iii) all obligations of Seller under capital leases, except for
those capital leases specifically listed in Schedule
1.4,
(iv)
any Liabilities of Seller for any brokerage, investment banking or similar
fee
in connection with the transactions contemplated by this Agreement and the
Ancillary Agreements, (v) all Liabilities secured by any Encumbrance on any
property owned by Seller whether or not Seller or any such Subsidiary has
assumed or otherwise become liable for the payment thereof, (vi) all guarantees
of Seller, (vii) all Liabilities of Seller for overdrafts or outstanding checks,
and (viii) all accrued but unpaid interest, any premiums payable or any other
charges on any of the obligations set forth in clauses (i) through (viii) above.
“GAAP”
means
generally accepted accounting principles as used in the United States, as in
effect from time to time.
“Governmental
Body”
means
any:
(1) nation,
state, county, city, town, village, district or other jurisdiction of any
nature;
(2) federal,
state, local, municipal, foreign or other government;
(3) governmental
or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official or entity and any court or other
tribunal);
(4) multi-national
organization or body; or
(5) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power of any
nature.
“Insurance
Policies”
means
the insurance policies related to the Purchased Assets and listed on
Schedule
4.19.
“Intellectual
Property”
means:
(a) inventions and discoveries (whether or not patentable and whether or not
reduced to practice), improvements thereto, and patents, patent applications,
invention disclosures, and other rights of invention, worldwide, including
without limitation any reissues, divisions, continuations and
continuations-in-part, provisionals, reexamined patents or other applications
or
patents claiming the benefit of the filing date of any such application or
patent; (b) trademarks, service marks, trade names, trade dress, logos, domain
names, product names and slogans, including any common law rights,
registrations, and applications for registration for any of the foregoing,
and
the goodwill associated with all of the foregoing, worldwide; (c) copyrightable
works, all rights in copyrights, including moral rights, copyrights, website
content, and other rights of authorship and exploitation, and any applications,
registrations and renewals in connection therewith, worldwide; (d) trade secrets
and confidential business and technical information, including, without
limitation, Customer/User Data Website user information, customer and supplier
lists and related information, pricing and cost information, business and
marketing plans, advertising statistics, any other financial, marketing and
business data, technical data, specifications, schematics and know-how; (e)
to
the extent not covered by subsections (a) through (d), above, software and
Websites (including all related computer code and content); (f) rights to
exclude others from appropriating any of such Intellectual Property, including
the rights to xxx for and remedies against past, present and future
infringements of any or all of the foregoing and rights of priority and
protection of interests therein; and (g) any other proprietary, intellectual
property and other rights relating to any or all of the foregoing anywhere
in
the world.
5
“Interim
Balance Sheet”
means
the unaudited consolidated balance sheet of Seller dated the Interim Balance
Sheet Date, together with notes thereon.
“Interim
Balance Sheet Date”
means
March 31, 2007.
“Interim
Financial Statements”
means
the Interim Balance Sheet and the unaudited statements of operations, changes
in
members’ equity and cash flow for the period ended on the Interim Balance Sheet
Date.
“Inventory”
means
all inventory held for resale by Seller (including inventory held on consignment
with third parties) and all of the raw materials, work in process, finished
products, wrapping, jewel cases, jewel case inserts and labels, supply and
packaging items and similar items of Seller with respect to the Business, in
each case, wherever the same may be located.
“IRS”
means
the Internal Revenue Service, a division of the United States Treasury
Department, or any successor thereto.
“Knowledge”
means
and an individual shall be deemed to have “Knowledge” of a particular fact or
other matter if such individual is actually aware of such fact or other matter.
A Person (other than an individual and other than Seller) shall be deemed to
have “Knowledge” of a particular fact or other matter if any individual who is
serving, or who has at any time served as a director or officer of such Person
(or in any similar capacity) has, or at any time had, Knowledge of such fact
or
other matter.
“Law”
means
any federal, state, local, municipal foreign, international, multinational
or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, statute or treaty.
“Leased
Real Property”
means
all leased property described in the Facility Leases.
6
“Leasehold
Estates”
means
all of Seller’s rights and obligations as lessee under the Leases.
“Leasehold
Improvements”
means
all leasehold improvements situated in or on the Leased Real Property and owned
by Seller.
“Leases”
means
all of the existing leases of Seller listed on Schedule
4.13(a).
“Legal
Proceeding”
means
any action, arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, investigative or informal) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
“Liabilities”
means
any direct or indirect liability, indebtedness, obligation, commitment, expense,
claim, deficiency, guaranty or endorsement of or by any Person of any type,
whether known or unknown, accrued, absolute, contingent, matured, unmatured,
liquidated or unliquidated or otherwise.
“Loss”
means
any claim, liability, obligation, loss, damage, assessment, penalty, judgment,
settlement, cost and expense, including costs attributable to the loss of the
use of funds to the date on which a payment is made with respect to a matter
of
indemnification under Article
VIII,
and
including reasonable attorneys’ and accountants’ fees and disbursements incurred
in investigating, preparing, defending against or prosecuting any
Claim.
“Material
Adverse Effect”
or
“Material
Adverse Change”
means
any effect, change, event, circumstance or condition which, when considered
either individually or with other effects, changes, events or circumstances,
has
or causes a significant and substantial adverse effect or change in the
condition (financial or other), business, results of operations, assets,
Liabilities, properties or operations of Seller, the Business and/or the
Purchased Assets or on the ability of Seller to consummate the transactions
contemplated hereby.
“Multiemployer
Plan”
means
any “multiemployer plan” as defined in Section
3(37)
of
ERISA.
“Non-Competition
Agreement”
means
the Non-Competition Agreement between Buyer, on the one hand, and each of
Seller, Xxxxxx X. Xxxxx, Xxx X. Xxxxxxxx, and Xxxx X. Xxxxxx, on the other
hand,
in the form attached hereto as
Exhibit
F.
“Occupational
Safety and Health Law”
means
any Legal Requirement in effect on or prior to the Closing Date designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working
conditions.
“Order”
means
any award, decision, consent decree, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any
arbitrator.
7
“Ordinary
Course of Business”
or
“ordinary
course”
or
any
similar phrase means the usual and ordinary course of business of Seller,
consistent with its past custom and practice.
“Owned
Real Property”
means
all interests in real property owned in fee by Seller, including, without
limitation, all rights, easements and privileges appertaining or relating
thereto, all buildings, fixtures, and improvements located thereon and all
Facilities thereon, if any.
“Pension
Plan”
means
any “employee pension benefit plan” as defined in Section
3(2)
of ERISA
(other than a Multiemployer Plan) which Seller or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or has maintained,
administered, contributed to or was required to contribute to, or under which
Seller or any ERISA Affiliate may incur any liability.
“Permits”
means
any approval, Consent, license, permit, waiver or other authorization issued,
granted, given or otherwise made available by or under the authority of any
Governmental Body or any other Person or pursuant to any Law necessary for
the
past, present or anticipated (but for the consummation of the transactions
contemplated hereby) future conduct of, or relating to, the operation of the
Business.
“Permitted
Encumbrances”
means
the Encumbrances listed on Schedule
1.5.
“Permitted
Exceptions”
means
(i) statutory liens for current taxes, assessments or other governmental charges
not yet delinquent or the amount or validity of which is being contested in
good
faith by appropriate proceedings, provided that an appropriate reserve is
established therefor and such liens are disclosed on Schedule
1.2;
(ii)
mechanics’, carriers’, workers’, repairers’ and similar Liens arising or
incurred in the Ordinary Course of Business that are not material to the
Business, the Purchased Assets, the operations and financial condition of the
property so encumbered or to Seller; (iii) zoning, entitlement and other land
use and environmental Laws by any Governmental Body, provided that such Laws
have not been violated; and (iv) those items listed on Schedule
1.2.
“Person”
means
any individual, corporation (including any non-profit corporation), general
or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union or other entity or Governmental
Body.
“Purchased
Assets”
means
all of Seller’s right, title and interest in and to the business, properties,
assets and rights of any kind, whether tangible or intangible, real or personal
and constituting, or used in connection with, or related to, the Business owned
by Seller or in which Seller has any interest, including, without limitation,
all of the right, title and interest of Seller in and to the following (but
not
including the Excluded Assets):
(1) all
accounts receivable (whether current or noncurrent), refunds, deposits,
prepayments or prepaid expenses existing on the Closing Date;
(2) all
Assigned Contracts and Contract Rights;
(3) all
Assigned Leases, Leasehold Estates and Leasehold Improvements;
8
(4) all
Tangible Personal Property;
(5) all
Inventory;
(6) all
Books
and Records;
(7) all
Intellectual Property;
(8) all
Permits and pending applications therefor and renewals thereof, including,
without limitation, those Permits listed on Schedule
4.18,
to the
extent transferable;
(9) all
computers and, to the extent transferable, the Software Rights;
(10) all
insurance benefits, rights and/or proceeds arising from, or related to, the
Purchased Assets or the Assumed Liabilities with respect to periods through
the
Closing Date;
(11) all
available supplies, sales literature, promotional literature, customer, supplier
and distributor lists and data, art work, display units, telephone and fax
numbers, Customer/User Data and purchasing records;
(12) all
rights under or pursuant to all warranties, representations and guarantees
made
by suppliers in connection with the Purchased Assets or services furnished
to
Seller pertaining to the Business or affecting the Purchased
Assets;
(13) all
claims, causes of action, chooses in action, rights of recovery and rights
of
set-off of any kind, against any Person, including, without limitation, any
Encumbrances or other rights to payment or to enforce payment in connection
with
products delivered by Seller on or prior to the Closing Date, whether now
accrued or accruing in the future, relating to the Purchased Assets;
(14) all
goodwill and other intangible rights;
(15) all
cash
and cash equivalents; and
(16) all
properties, assets and rights set forth on Schedule
1.3
attached
hereto.
“Representative”
means
any officer, director, principal, attorney, agent, employee or other
representative.
“Restricted
Shares”
means
unregistered shares of the Common Stock of Buyer issued in reliance upon the
exemption from securities registration afforded by Section
4(2)
of the
Securities Act of 1933, as amended (the “1933 Act”) and bearing a restrictive
legend.
“Seller
Contracts”
means
all Contracts (i) relating to the Business under which Seller has or may acquire
any rights or benefits, (ii) relating to the Business under which Seller has
or
may become subject to any obligation or Liability or (iii) by which any of
the
Purchased Assets or Assumed Liabilities is or may become bound.
9
“Seller
Indemnification Obligations”
means
Seller’s indemnification obligations set forth in Article
VIII
herein.
“Seller’s
Website”
means
xxx.xxxxxxxxxxxxxxxxxxxx.xxx and xxx.xxxxxxxxxx.xxx.
“Subsidiary”
means
any Person of which a majority of the outstanding voting securities or other
voting equity interests are owned, directly or indirectly, by Seller.
“Tangible
Personal Property”
means
all equipment, tools, fixtures, furniture, office equipment, computer hardware,
supplies, materials and other items of tangible personal property (other than
Inventory) of every kind owned or leased by Seller (wherever located (including
any Tangible Personal Property in the possession of any of Seller’s suppliers)
and whether or not carried on its books) and related to the Business, together
with any express or implied warranty by the manufacturers or sellers or lessors
of any item or component part thereof and all maintenance records and documents
related thereto.
“Taxes”
means
(i) all federal, state, provincial, local or foreign taxes, charges, fees,
imposts, levies or other assessments, including, without limitation, all net
income, gross receipts, capital, sales, use, escheat, ad
valorem,
value
added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, health, social security, unemployment, excise,
workplace safety and insurance, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever; (ii) all interest, penalties, fines, additions to tax or additional
amounts imposed by any taxing authority in connection with any item described
in
clause (i); and (iii) any joint, several or transferee liability in respect
of
any items described in clauses (i) and/or (ii) imposed by any tax
Laws.
“Tax
Return”
means
all returns, declarations, reports, estimates, information returns and
statements required to be filed in respect of any Taxes, and any amendments
to
any of the foregoing.
“Threatened”
describes any claim, Legal Proceeding, dispute, action or other matter if (i)
any demand or statement has been made (orally or in writing) with respect to
such claim, Legal Proceeding, dispute, action or other matter or (ii) any notice
has been given (orally or in writing) with respect thereto.
“Treasury
Regulations”
means
the treasury regulations promulgated under the Code.
“Voting
Agreement”
means
an agreement between the Buyer and Xxxxxx X. Xxxxx pursuant to which Xxxxxx
X.
Xxxxx grants to the Buyer (acting through the Buyer’s board of directors) the
right to vote the Company Shares owned by Xxxxx on the terms set forth
therein.
“Websites”
means
the content, pages and other portions of the Seller’s Websites that are related
to the Business and/or the Purchased Assets.
“Welfare
Plan”
means
any “employee welfare benefit plan” as defined in Section
3(1)
of ERISA
which Seller or any ERISA Affiliate maintains, administers, contributes to
or is
required to contribute to, or under which Seller or any ERISA Affiliate may
incur any Liability.
10
“Year-End
Financial Statements”
means
the Balance Sheet and the related audited statements of operations, changes
in
members’ equity and cash flow for the fiscal years ended December 31, 2004, 2005
and 2006.
1.2 Other
Defined Terms; Other Definitional Provisions.
(A) Other
Defined Terms.
The
following terms shall have the meanings defined for such terms in the Sections
set forth below:
Term
|
Section
|
|
Accountant
|
2.5(C)
|
|
Acquisition
Proposal
|
6.11(A)
|
|
Agreement
|
Preamble
|
|
Agreement
Date
|
Preamble
|
|
Allocation
|
2.5(A)
|
|
Assumed
Liabilities
|
2.2
|
|
Assumed
Line
|
2.2(D)
|
|
Assumed
Payable
|
2.2(C)
|
|
Business
Employee Plans
|
4.14(A)
|
|
Buyer
|
Preamble
|
|
Buyer
Documents
|
5.2
|
|
Buyer
Indemnified Parties
|
8.2(A)
|
|
Charter
|
4.4
|
|
Claim
|
8.4(A)
|
|
Claim
Notice
|
8.4(A)
|
|
Closing
|
3.1
|
|
Closing
Date
|
3.1
|
|
COBRA
|
6.6(E)
|
|
Company
Shares
|
2.4
|
|
Consideration
|
2.4
|
|
ERISA
Affiliate
|
6.6(E)
|
|
Excluded
Liabilities
|
2.3
|
|
Licensed
Proprietary Rights
|
4.12(A)
|
|
Losses
|
8.2(D)
|
|
Members
|
Preamble
|
|
Members’
Meeting
|
6.3
|
|
Net
Inventories
|
2.4(A)(ii)(b)
|
|
Outside
Date
|
9.3(A)(2)(a)
|
|
Owned
Proprietary Rights
|
4.12(A)
|
|
Potential
Employees
|
6.6(B)
|
|
Rehired
Employees
|
6.6(B)
|
|
Seller
|
Preamble
|
|
Seller
Documents
|
4.2
|
|
Seller
Indemnified Parties
|
8.2(C)
|
|
SOS
|
3.2(A)(6)
|
|
Threshold
Amount
|
8.3
|
|
WARN
Act
|
6.6(D)
|
11
(B) Other
Definitional Provisions.
Any
reference to an Article, Section, Exhibit or Annex is a reference to an Article
or Section of, or an Exhibit or Annex to, this Agreement.
Terms
defined in the singular shall have a comparable meaning when used in the plural,
and vice
versa.
The
words
“include,” “includes” and “including” mean include, includes and including
without limitation.
All
references to “related to,” “relating to,” “pertaining to,” “in connection with”
or similar phrases with respect to the Business or Purchased Assets shall mean,
without limitation, all matters directly or indirectly related to, relating
to,
in relation to, pertaining to, involving, concerning, with regards to, and
in
connection with, the Business or Purchased Assets.
ARTICLE
II.
PURCHASE
AND SALE OF ASSETS
2.1 Transfer
of Purchased Assets.
Upon
the terms and subject to the conditions contained in this Agreement, at the
Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer,
and
Buyer shall acquire from Seller, the Purchased Assets, free and clear of all
Encumbrances other than Permitted Exceptions.
2.2 Assumption
of Liabilities.
Upon
the terms and subject to the conditions contained in this Agreement, at the
Closing, Buyer shall assume only the following Liabilities of Seller
(collectively, the “Assumed
Liabilities”):
(A) All
Liabilities accruing, arising out of, or relating to events or occurrences
happening after the Closing Date under the Business and Purchased
Assets,;
(B) All
Liabilities and obligations of the Seller under the Assigned Contracts and
Assigned Leases either (i) to furnish goods, services, and other non-cash
benefits to another party after the Closing or (ii) to pay for goods, services,
and other non-cash benefits that another party will furnish to it after the
Closing, but excluding any Liability for any Default under any such Assigned
Contract or Assigned Lease by Seller occurring on or prior to the Closing
Date;
(C) The
accounts payable attributable to Inventory set forth and described in reasonable
detail on Schedule
2.2
(the
“Assumed Payables”); and
(D) The
remaining balance on Seller’s line of credit (the “Assumed Line”).
2.3 Excluded
Liabilities.
Notwithstanding any other provision of this Agreement, Buyer shall not assume,
or otherwise be responsible for (and nothing in this Agreement or any Ancillary
Agreement shall be construed as imposing on Buyer), except for the Assumed
Liabilities expressly specified in Section
2.2,
any
Liabilities of Seller, in each case, whether arising out of occurrences prior
to, at or after the Closing Date (the “Excluded
Liabilities”),
which
Excluded Liabilities include, without limitation, the following:
12
(A) Any
Liability of Seller or its ERISA Affiliates to or in respect of any employee,
former employee or other service provider of Seller, including, without
limitation, (i) any Liability under any employment agreement or severance plan
or agreement, whether or not written, between Seller and any Person (including
without limitation under (a) that certain Employment Agreement by and between
Seller and Xxxx Xxxxxxx, (b) that certain Employment Agreement by and between
Seller and Xxxxxx Xxxxxx, and (c) that certain Employment Agreement by and
between Seller and Xxxx Xxxxxxxx, (ii) any Liability under any Employee Plan
at
any time maintained, contributed to or required to be contributed to by or
with
respect to Seller or under which Seller may incur Liability, or any
contributions, benefits or Liabilities therefor, or any Liability with respect
to the withdrawal or partial withdrawal by Seller, any Subsidiary or any ERISA
Affiliate from or termination of any Employee Plan and (iii) any claim related
in any way to employment, termination of employment, pay equity, equal
employment opportunity, discrimination, harassment, retaliation, wrongful
termination, immigration, wages, hours, benefits, terms and conditions of
employment, collective bargaining, the payment of social security and similar
Taxes, occupational health and safety, and plant closing;
(B) Any
Liability of Seller in respect of any Taxes;
(C) Any
Liability of Seller arising from any injury to or death of any Person or damage
to or destruction of any property, whether based on negligence, breach of
warranty, strict liability, enterprise liability or any other legal or equitable
theory arising from defects in products manufactured or from services performed
by or on behalf of Seller on or prior to the Closing Date;
(D) Any
Liability of Seller under any Assigned Contract or Assigned Lease (i) that
arises after the Closing Date but that arises out of or relates to any Default
by Seller that occurred prior to the Closing Date or (ii) that was not incurred
by Seller or in the Ordinary Course of Business;
(E) Any
Liability of Seller under any Contract or Lease that is not an Assigned Contract
or Assigned Lease;
(F) Any
Liability of Seller arising out of or resulting from its compliance or
noncompliance with any Law or Order;
(G) Any
Liability of Seller arising out of or related to any Legal Proceeding against
it
or any Legal Proceeding which has an adverse effect on the Purchased Assets
or
the Business and which was asserted on or prior to the Closing Date or to the
extent the basis of which arose on or prior to the Closing Date;
(H) Any
Liability of Seller resulting from entering into, performing its obligations
pursuant to or consummating the transactions contemplated by this Agreement
or
any Ancillary Agreement (including, without limitation, any Liability of Seller
pursuant to Article
VIII
of this
Agreement);
13
(I) Any
Liability of Seller to or in respect of any former or current members of Seller
or any other holder of equity interests of Seller, including, without
limitation, relating to this Agreement, any Ancillary Agreement or the
transactions contemplated hereby and thereby;
(J) Any
Liability of Seller for any Funded Debt;
(K) Any
Liability of Seller arising out of any environmental or health and safety
claims, costs or damages or for violation of Environmental Laws or Occupational
Safety and Health Laws pertaining to the Purchased Assets or the Business,
which
relate to conditions or events occurring or commencing prior to the Closing
Date, including, without limitation, claims, costs or damages relating to any
Environmental, Health and Safety Liabilities;
(L) Any
Liability of Seller for any indemnification obligations pursuant to any claim
or
notice received prior to the Closing Date with respect to any Intellectual
Property;
(M) Any
Liability that is not an Assumed Liability.
2.4 Consideration.
(A) Consideration.
Subject
to adjustment pursuant to Section
2.6
hereof,
at the Closing, in exchange for the sale, assignment, transfer, conveyance
and
delivery from Seller of the Purchased Assets in accordance with Section
2.1
and the
other Ancillary Agreements, Buyer shall:
(i) assume
the Assumed Liabilities pursuant to this Agreement; and
(ii) pay
by
wire transfer of immediately available funds to an account designated by Seller
(which account shall be designated at least three Business Days prior to the
Closing) the amount:
(a) of
Eight
Million Dollars ($8,000,000); and
(b) equal
to
the sum of Seller’s cash and cash equivalents plus Net Inventories. As used
herein, “Net Inventories” shall mean Inventory (valued at cost) in good repair
less the amount of the Assumed Payables and the unpaid amount of the Assumed
Line. In valuing the Inventory, the parties shall work together to take a count
of the Inventory as close to the Closing Date as reasonably practicable but
no
more than three business days prior to such Date.
(iii) pay
Twenty Million Dollars ($20,000,000) by issuing to the Members of Seller (or
Affiliates of the Members of Seller) and employees of the Seller 5,000,000
Restricted Shares of the Common Stock of the Buyer (the “Company Shares”), which
is based upon an agreed price of $4.00 per share, as follows: 1,935,000 Company
Shares to Xxxxxx X. Xxxxx, 1,435,000 Company Shares to Xxx X. Xxxxxxxx,
1,435,000 Company Shares to Xxxx X. Xxxxxx as Trustee of the Xxxx X. Xxxxxx
Trust, and 195,000 to employees of Seller as set forth on Schedule 2.4 attached
hereto.
14
(B) Egyptian
Merchandise Contract.
If,
within two (2) years from the Closing Date, there is an announcement of a
major archeological find in Egypt approved by Buyer, and, if at any time within
three (3) years after such announcement, Seller provides proof to Buyer
that Seller or any Member or Affiliate of a Member has obtained for Buyer a
contract approved by Buyer to provide merchandise to any proposed exhibition
related to such archeological find, Buyer shall issue to the Members of Seller
(or Affiliates of the Members of Seller) Restricted Shares of Common Stock
of
Purchaser having a then fair market value of $10,000,000 based on the average
of
the closing prices for such stock for the five trading days immediately prior
to
the date of determination, but in no event shall the number of Restricted Shares
exceed 2,000,000 Common Shares (subject to adjustment for stock splits,
recapitalizations etc). Said Restricted Shares of Common Stock of Buyer shall
be
issued to the Members of Seller (or Affiliates of the Members of Seller) no
later than of the date the exhibition opens, as follows: one-third (1/3) of
such
Restricted Shares of Common Stock to Xxxxxx X. Xxxxx, one-third (1/3) to Xxx
X.
Xxxxxxxx, and one-third (1/3) to Xxxx X. Xxxxxx as Trustee of the Xxxx X. Xxxxxx
Trust.
2.5 Allocation
of Consideration.
(A) The
Consideration (including, for purposes of this Section
2.5,
the
Assumed Liabilities and other items, in each case, to the extent properly taken
into account under applicable Treasury Regulations) shall be allocated among
the
Purchased Assets and, unless the parties agree otherwise, the other Ancillary
Agreements owned by Seller in the manner required by Section 1060 of the
Code.
(B) As
soon
as reasonably practicable after the Closing, Buyer shall deliver to Seller
the
proposed allocation (the “Allocation”).
If,
within twenty (20) days of Buyer’s delivery to Seller of the proposed
Allocation, Seller does not deliver to Buyer a written objection to such
proposed Allocation, the Allocation shall be deemed approved. If Seller shall
so
object to Buyer’s proposed Allocation, Seller and Buyer shall thereafter
cooperate in good faith to resolve any dispute over Buyer’s proposed Allocation,
and the Allocation shall be determined in the manner as may be agreed upon
by
the parties. If, within fifteen (15) days after Seller delivers to Buyer
Seller’s written objection to Buyer’s proposed Allocation, the parties cannot
agree on an Allocation as provided in the preceding sentence, then such dispute
shall promptly be submitted by the parties for resolution in a manner consistent
with the procedures set forth in Section
2.5(C),
and the
Allocation shall be determined pursuant to such resolution.
(C) Buyer
and
Seller shall use their respective Best Efforts for a period of thirty (30)
days
after Seller’s delivery of a written objection to Buyer’s proposed Allocation
(or such longer period as Buyer and Seller shall mutually agree upon) to resolve
any disagreements raised by Seller with respect thereto. If, at the end of
such
period, Buyer and Seller are unable to resolve such disagreements, the then
accountants of Buyer and Seller shall jointly select a third independent auditor
of recognized national standing (the “Accountant”)
to
resolve any remaining disagreements. The Accountant will make its determination
based solely on presentations made by Buyer and Seller (made or provided by
each
party to the other at the same time it is made or provided to the Accountant)
and not by independent review. It is the intent of the parties hereto that
the
process set forth in this Section
2.5(C)
and the
activities of the Accountant in connection herewith is not intended to be and,
in fact, is not an arbitration and that no formal arbitration rules shall be
followed (including rules with respect to procedures and discovery). The
determination by the Accountant shall be final, binding and conclusive on the
parties. Buyer and Seller shall use their Best Efforts to cause the Accountant
to make their determination within thirty (30) days of accepting its
engagement.
15
(D) Buyer
and
Seller agree to each prepare and file on a timely basis with the IRS
substantially identical initial, supplemental and, if required, amended Forms
8594 “Asset Acquisition Statements Under Section 1060” consistent with the
Allocation. Unless otherwise required by a “determination” as defined in
Section
1313(a)
of the
Code, Buyer and Seller further agree to be bound by the Allocation and to take
no tax or accounting position that is inconsistent with the Allocation.
Notwithstanding anything in this Section
2.5
to the
contrary, the Allocation (and any adjustments thereto) shall be made in the
manner required by Section 1060 of the Code. Notwithstanding any other
provisions of this Agreement, this Section
2.5
shall
survive the Closing Date without limitation.
2.6 Prorations.
(A) Interest.
On the
Closing Date, or as promptly as practicable following the Closing Date, but
in
no event later than sixty (60) calendar days thereafter, all prepaid interest
and interest payable with respect to any interest bearing obligations assumed
by
Buyer hereunder shall be prorated between Buyer and Seller as of the Closing
Date.
(B) Utilities;
Taxes.
On the
Closing Date, or as promptly as practicable following the Closing Date, but
in
no event later than sixty (60) calendar days thereafter, the real and personal
property taxes, water, gas, electricity and other utilities, common area
maintenance reimbursements to lessors and other similar periodic charges payable
with respect to the Purchased Assets or the Business shall be prorated between
Buyer and Seller effective as of the Closing Date. To the extent practicable,
utility meter readings for the Facilities shall be determined as of the Closing
Date. If the real property tax rate for the current tax year is not established
by the Closing Date, the prorations shall be made on the basis of the rate
in
effect for the preceding tax year and shall be adjusted when the exact amounts
are determined. All such prorations shall be based upon the most recent
available assessed value of any Facility prior to the Closing Date or upon
certified and verifiable statements provided by the landlord(s) of any
Facilities.
2.7 Closing
Costs; Transfer Taxes and Fees.
Seller
shall be responsible for any documentary and transfer Taxes and any sales,
use
or other Taxes imposed by reason of the transfers of the Purchased Assets
provided under this Agreement and any deficiency, interest or penalty asserted
with respect thereto. Seller shall pay the fees and costs of recording or filing
all applicable conveyancing instruments described in Section
3.2(A).
Seller
shall pay all costs of applying for new Permits and obtaining the transfer
of
existing Permits which may be lawfully transferred.
ARTICLE
III.
CLOSING
3.1 Closing.
The
closing of the transfer of the Purchased Assets provided for in Section
2.1
(the
“Closing”)
shall
take place at 10:00 a.m. local time on August 9, 2007 or on such other date
mutually agreeable to Buyer and Seller, but in no event later than the date
that
is three Business Days after the date on which the last of the conditions set
forth in Article
VII
hereof
is either satisfied or waived (the “Closing
Date”)
at the
offices of Xxxx & Xxxxx located at 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx
Xxxxxxx, Xxxxxxxxxx, 00000, or at such other place as Seller and Buyer may
mutually agree.
16
3.2 Conveyances
at Closing.
(A) Deliveries
to Buyer.
At the
Closing, Seller shall deliver, or cause to be delivered, to Buyer, the
following:
(1) the
Voting Agreement, executed by Seller,
(2) the
Assignment of Contract Rights, executed by Seller;
(3) the
Assignment of Intellectual Property documents, each executed by Seller and
in
recordable form to the extent necessary to assign the Intellectual
Property;
(4) the
Xxxx
of Sale, executed by Seller;
(5) the
Books
and Records of Seller;
(6) a
certified copy of the Charter and a certificate of good standing with respect
to
Seller, issued by the Ohio Secretary of State (the “SOS”);
(7) the
Non-Competition Agreement, executed by each of Seller, Xxxxxx March, Xxx
Xxxxxxxx and Xxxx Xxxxxx;
(8) the
Employment Agreements, executed by each party to such Employment Agreement
other
than Buyer;
(9) the
Consulting Agreement, executed by the Consultant; and
(10) such
other documents and such deeds, bills of sale, assignments, certificates of
title and other instruments of conveyance and transfer as Buyer may reasonably
request to evidence compliance with the conditions to this Agreement or which
may otherwise be necessary to effect the transactions contemplated by this
Agreement.
(B) Deliveries
to Seller.
At the
Closing, Buyer shall deliver, or cause to be delivered, to Seller, the
following:
(1) the
Assumption Agreement, executed by Buyer; and
(2) the
Consideration due at Closing.
17
ARTICLE
IV.
REPRESENTATIONS
AND WARRANTIES OF SELLER AND THE MEMBERS
Seller
and except with respect to Sections 4.12, 4.14, 4.15, 4.17, 4.18, and 4.19,
the
Members hereby represent and warrant to Buyer that, except as otherwise set
forth in the Disclosure Schedule, the statements contained in this Article
IV
are true
and correct as of the Agreement Date and as of the Closing Date.
4.1 Organization
and Good Standing.
Seller
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Ohio and has all requisite power and
authority to own, lease and operate its properties and assets and to carry
on
the Business as it is presently being conducted. Seller is duly qualified and
in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to so qualify could not reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect on the Seller. Copies of the Operating Agreement of Seller, and all
amendments thereto, heretofore delivered to Buyer are accurate and complete
as
of the Agreement Date.
4.2 Authorization;
Enforceability.
Seller
has all requisite power and authority, and has taken all action necessary,
to
execute and deliver this Agreement and each Ancillary Agreement to which it
is a
party and each other agreement, document, instrument or certificate contemplated
by this Agreement and/or any Ancillary Agreement or to be executed by Seller
in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, each of the documents set forth in
Section
3.2(A)
(such
other agreements, documents, instruments and certificates required to be
executed by Seller being referred to herein, collectively, as the “Seller
Documents”),
and,
subject only to the satisfaction of the conditions, other than conditions that
are within the control of Seller, to Seller’s obligations to close the transfer
of the Purchased Assets, to consummate the transactions contemplated hereby
and
thereby. This Agreement and each of the Seller Documents have been duly and
validly executed and delivered by Seller and this Agreement and each of the
Seller Documents on the Closing Date shall constitute valid and legally binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms, in each case, except as such enforceability may be limited
by
(a) bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors’ rights generally and (b) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
4.3 Subsidiaries.
There
are no Subsidiaries of Seller.
4.4 Books
and Records.
Seller
has made and kept (and made available to Buyer) Books and Records and accounts,
which, in reasonable detail, accurately and fairly reflect the activities of
Seller pertaining to the Business. Seller has delivered to Buyer true, correct
and complete copies of the Articles of Organization of Seller, including all
amendments thereto (as certified by the Secretary of State of Ohio, the
“Charter”),
and
the Operating Agreement of Seller, including all amendments thereto, all as
currently in effect. Seller has not, in any manner that pertains to, or could
affect, the Business or the Purchased Assets, engaged in any transaction,
maintained any bank account or used any corporate funds except for transactions,
bank accounts and funds which have been and are reflected in the normally
maintained Books and Records of Seller which have been provided to
Buyer.
18
4.5 Conflicts;
Third Party Consents.
(A) Except
as
set forth on Schedule
4.5(a),
assuming all Consents described in Schedule
4.5(b)
have
been obtained or made, as applicable, the execution, delivery and performance
of
this Agreement and the Seller Documents by Seller shall not, directly or
indirectly (with or without notice or lapse of time):
(1) contravene,
conflict with or result in a violation of (A) any provision of the Charter
of
Seller or (B) any resolution or other action adopted or taken by the management
or the members of Seller;
(2) contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge, any of the transactions contemplated by
this Agreement, any Ancillary Agreement or the Seller Documents or to exercise
any remedy or obtain any relief under, any Law or any Order to which Seller
or
any assets owned or used by Seller, may be subject;
(3) contravene,
conflict with or result in a violation of any of the terms or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Permit that is held by Seller or that otherwise relates
to the Business of, or any of the assets owned or used by, Seller;
(4) contravene,
conflict with or result in a violation or breach of any provision of, or give
any Person the right to declare a Default or exercise any remedy under, or
to
accelerate the maturity or performance of, or to cancel, terminate or modify,
any Assigned Contract of Seller;
(5) result
in
the imposition or creation of any Encumbrance upon or with respect to any of
the
Purchased Assets; or
(6) result
in
any breach of, or constitute a Default (or event which with the giving of notice
or lapse of time, or both, would become a Default) under, or give to any Person
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of any Encumbrance on any of the Purchased Assets, any note,
bond, mortgage, indenture, Contract, agreement, Lease, license, Permit,
franchise or other instrument to which Seller is a party or by which any of
the
Purchased Assets are bound, except for purposes of clauses (ii)-(v) above,
for
contraventions, conflicts, violations, revocations, withdrawals, suspensions,
modifications, breaches, Defaults, rights of termination, amendment,
acceleration or cancellation, or creations of Encumbrances, that would not,
individually or in the aggregate, have a Material Adverse Effect.
(B) Except
as
set forth in Schedule
4.5(b),
execution and delivery of this Agreement and the Seller Documents by Seller
and
the consummation of the transactions contemplated hereby and thereby does not,
and shall not require any Consent, or other action by, or filing with or
notification to, any Governmental Body or any other Person.
19
4.6 Financial
Statements.
(A) Attached
hereto as Annex I and Annex II are the Year End Financial Statements and the
Interim Financial Statements, respectively. The Year End Financial Statements
have been prepared from the Books and Records and fairly and accurately present
the financial condition and the results of operations, income, expenses, assets,
Liabilities (including all reserves), changes in shareholders’ equity and cash
flow of Seller as of the respective dates of, and for the periods referred
to
in, such Year End Financial Statements, in accordance with GAAP applied on
a
consistent basis throughout the periods indicated. The Interim Financial
Statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information. Accordingly,
they do not include all of the information and notes required by GAAP for
complete financial statements.
(B) Seller
maintains a standard system of accounting established and administered in
accordance with GAAP.
4.7 Purchased
Assets.
Seller
has and will transfer good and marketable title to the Purchased Assets and
upon
the consummation of the transactions contemplated hereby and by the Seller
Documents, Buyer will acquire good and marketable title to all of the Purchased
Assets, free and clear of all Encumbrances other than Permitted Encumbrances.
The Purchased Assets include, without limitation, all assets, tangible or
intangible, of any nature whatsoever, necessary for the conduct of the Business
and are sufficient for the continued conduct of the Business after the Closing
in substantially the same manner as conducted prior to the Closing as well
as
the continued distribution, exploitation, development and modification of the
Intellectual Property that comprises part of the Purchased Assets. Schedule
4.7
contains
accurate lists of all Purchased Assets comprised of Tangible Personal Property
where the value of an individual item exceeds One Thousand Dollars ($1,000)
and
all descriptive information contained in Schedule
4.7
is
accurate..
4.8 Liabilities.
Other
than the Excluded Liabilities, and except as set forth in Schedule
4.8,
Seller
has no Liabilities relating to the Purchased Assets or the Business due or
to
become due except (a) Liabilities relating to the Purchased Assets or the
Business that are reflected in the Interim Balance Sheet which have not been
paid or discharged since the Interim Balance Sheet Date, or otherwise
specifically disclosed in the Disclosure Schedule, and (b) Liabilities relating
to the Purchased Assets or the Business incurred in the Ordinary Course of
Business since the Interim Balance Sheet Date (none of which relates to any
Default under any Contract or Lease, breach of warranty, tort, infringement
or
violation of any Law or Order or arose out of any Legal Proceeding) and none
of
which would have a Material Adverse Effect.
4.9 Absence
of Certain Changes or Events.
Except
as set forth on Schedule
4.9,
since
the Interim Balance Sheet Date, Seller has conducted the Business in the
Ordinary Course of Business and there has not been any:
(A) Material
Adverse Change and no event has occurred and no circumstance exists that may
result in a Material Adverse Change other than Material Adverse Changes
resulting from historical seasonality of the Business;
20
(B) purchase,
redemption, retirement or other acquisition by Seller of any membership interest
of Seller;
(C) amendment
to the Operating Agreement of Seller;
(D) payment
or increase by Seller of any bonuses, salaries or other compensation (including
management or other similar fees) or entry into any employment, severance or
similar Contract with any employee engaged in the Business and which Buyer
is
required to hire after Closing, other than increases in salary to employees
made
in the Ordinary Course of Business;
(E) adverse
change in employee relations which has or is reasonably likely to have a
Material Adverse Effect;
(F) damage
to
or destruction or loss of any of the Purchased Assets or to any other asset
or
property of Seller relating to the Business, whether or not covered by
insurance, that could reasonably be expected to constitute a Material Adverse
Effect on the Business;
(G) entry
into, termination or acceleration of, or receipt of notice of termination by
Seller of (1) any material license, distributorship, dealer, sales
representative, joint venture, credit or similar agreement relating to the
Business or (2) other than Assumed Liabilities set forth on Schedule
2.2,
any
Contract or transaction involving a Liability by or to Seller for which Buyer
may be liable after the Closing;
(H) sale
(other than sales of inventory in the Ordinary Course of Business), lease or
other disposition of any of the Purchased Assets or of any other asset or
property of Seller relating to the Business;
(I) mortgage,
pledge or imposition of any Encumbrance on any Purchased Asset, including the
sale, lease or other disposition of any of its Intellectual Property relating
to
the Business;
(J) (i)
delay
or failure to repay when due any obligation of Seller, which delay or failure
could have a Material Adverse Effect on Seller, other than such items as have
been specifically documented to Buyer in writing or (ii) delay or failure to
repay when due any obligation of Seller which delay or failure could have a
Material Adverse Effect on Seller, the Business or the Purchased Assets, in
each
case, including without limitation, accounts payable and accrued expenses,
except to the extent such obligation is being disputed in good faith by
Seller;
(K) cancellation
or waiver by Seller of any claims or rights with a value to Seller relating
to
the Business or the Purchased Assets in excess of Five Thousand Dollars ($5,000)
individually or in the aggregate;
(L) failure
by Seller to use reasonable efforts to preserve intact the current business
organization of Seller relating to the Business, and maintain the relations
and
goodwill with its suppliers, customers, landlords, creditors, employees,
licensors, resellers, distributors, agents and others having business
relationships with them relating to the Business where such failure could
reasonably be expected to have a Material Adverse Effect on Seller;
21
(M) licensing
out on an exclusive basis or other than in the Ordinary Course of Business,
disposition or lapsing of any Intellectual Property or any disclosure to any
Person of any trade secret or other confidential information without appropriate
protections in place;
(N) change
in
the accounting methods, principles or practices used by Seller;
(O) price
protection, discount, rebate, incentive, price reduction, free or discounted
upgrade offer, free or discounted bundling offer or other similar programs
affecting any of the Purchased Assets, other than a limited number of free
copies of Seller’s software products provided directly by Seller on a
case-by-case basis, which limited number of free copies could not be expected
to
have a Material Adverse Effect;
(P) capital
expenditures by Seller relating to the Business in excess of $20,000
individually or $50,000 in the aggregate; or
(Q) agreement,
whether oral or written, by Seller with respect to or to do any of the foregoing
other than as expressly provided for herein.
4.10 Taxes.
(A) Filing
of Tax Returns.
Seller
has duly and timely filed (or caused to be filed) with the appropriate taxing
authorities all Tax Returns required to be filed through the Closing Date.
All
such Tax Returns filed are complete and accurate in all respects. Except as
set
forth on Schedule
4.10(a),
Seller
is not currently the beneficiary of any extension of time within which to file
any Tax Return. No claim has ever been made against Seller or its assets by
an
authority in a jurisdiction where Seller does not file Tax Returns such that
Seller is or may be subject to taxation by that jurisdiction.
(B) Payment
of Taxes.
All
Taxes owed and due by Seller (whether or not shown on any Tax Return) have
been
paid. The unpaid Taxes of Seller, if any, (i) did not, as of the date of its
Interim Balance Sheet, exceed the reserve for Tax liability (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of its Interim Balance Sheet (rather
than in any notes thereto), and (ii) have not exceeded that reserve as adjusted
for operations and transactions through the Closing Date in accordance with
the
past custom and practice of Seller in filing its Tax Returns. Since the date
of
its Interim Balance Sheet, Seller has not (A) incurred any Liability for Taxes
other than in the Ordinary Course of Business or (B) paid Taxes other than
Taxes
paid on a timely basis and in a manner consistent with past custom and
practice.
(C) Audits,
Investigations, Disputes or Claims.
Currently, no deficiencies for Taxes are claimed, proposed or assessed by any
taxing or other governmental authority against Seller. Except as set forth
on
Schedule
4.10(c),
there
are no pending or, to the Knowledge of Seller, threatened audits,
investigations, disputes or claims or other actions for or relating to any
Liability for Taxes with respect to Seller, and there are no matters under
discussion by or on behalf of Seller with any Governmental Body, or known to
Seller, with respect to Taxes that are likely to result in an additional
Liability for Taxes with respect to Seller. Audits of federal, state and local
Tax Returns by the relevant taxing authorities have been completed for the
periods set forth in Schedule
4.10(c)
and,
except as set forth in Schedule
4.10(c),
none of
Seller, any Subsidiary thereof, or any predecessor thereof has been notified
that any taxing authority intends to audit a Tax Return for any other period.
Seller has delivered to Purchaser complete and accurate copies of Seller’s
federal, state and local Tax Returns for the years ended December 31, 2003,
2004, 2005 and 2006 as well as complete and accurate copies of all examination
reports and statements of deficiencies assessed against or agreed to by Seller
at any time. Seller has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. No power of attorney granted by Seller with respect to any Taxes
is
currently in force.
22
(D) Lien.
There
are no Encumbrances for Taxes (other than for current Taxes not yet due and
payable) on any of the Purchased Assets of Seller or any of its membership
interests.
(E) Tax
Elections.
All
material elections with respect to Taxes affecting Seller or any of its
respective assets as of the Closing Date are set forth in Schedule
4.10(e).
Seller
has not: (i) consented at any time under Section 341(f)(1) of the Code to have
the provisions of Section 341(f)(2) of the Code apply to any disposition of
any
of its assets; (ii) agreed, and is not required, to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise; (iii) made an election, and is not required, to treat any of its
assets as owned by another Person pursuant to the provisions of Section 168(f)
of the Code or as tax-exempt bond financed property or tax-exempt use property
within the meaning of Section 168 of the Code; (iv) acquired, and does not
own,
any assets that directly or indirectly secure any debt the interest on which
is
tax exempt under Section 103(a) of the Code; (v) made a consent dividend
election under Section 565 of the Code; or (vi) made any of the foregoing
elections and is not required to apply any of the foregoing rules under any
comparable state or local Tax provision.
(F) Prior
Affiliated Groups.
Seller
is not and has never been a member of an affiliated group of corporations within
the meaning of Section 1504 of the Code. Seller does not have any Liability
for
the Taxes of any Person (i) under Treasury Regulations Section 1.1502-6 (or
any
similar provision of state, local or foreign law), (ii) as a transferee or
successor, (iii) by Contract, or (iv) otherwise.
(G) Tax
Sharing Agreements.
There
are no agreements for the sharing of Tax liabilities or similar arrangements
(including indemnity arrangements) with respect to or involving Seller or any
of
its assets or the Business, and, after the Closing Date, neither Seller nor
any
of its assets or the Business shall be bound by any such Tax-sharing agreements
or similar arrangements or have any Liability thereunder for amounts due in
respect of periods prior to the Closing Date.
(H) Partnerships
and Single Member LLCs.
Seller
(i) is not subject to any joint venture, partnership, or other arrangement
or
contract which is treated as a partnership for Tax purposes, (ii) does not
own a
single member limited liability company which is treated as a disregarded
entity, (iii) is not a shareholder of a “controlled foreign corporation” as
defined in Section 957 of the Code (or any similar provision of state, local
or
foreign law) and (iv) is not a “personal holding company” as defined in Section
542 of the Code (or any similar provision of state, local or foreign law).
23
(I) No
Withholding.
Seller
has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897 of the Code. Seller has withheld and paid all Taxes required
to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third party.
The transactions contemplated herein are not subject to the tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of
the
Code or of any other provision of law.
(J) International
Boycott.
Seller
has not participated in and is not participating in an international boycott
within the meaning of Section 999 of the Code.
(K) Permanent
Establishment.
Except
as set forth in Schedule
4.10(k),
Seller
does not have and has never had a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States and such foreign country.
(L) Parachute
Payments.
Except
as set forth on Schedule
4.10(l),
Seller
is not a party to any existing Contract, arrangement or plan that has resulted
or would result (upon the Closing or otherwise), separately or in the aggregate,
in the payment of any “excess parachute payments” within the meaning of Section
280(G) of the Code.
(M) Tax
Shelters.
Neither
Seller nor any Subsidiary has participated in and Seller is not now
participating in, any transaction described in Section 6111(c) or (d) of the
Code or Section 6112(b) of the Code or the Treasury Regulations thereunder,
or
in any reportable transaction described in such regulations.
4.11 Facilities.
Seller
does not own any Owned Real Property or any interest, other than a leasehold
interest, in any Facility or real property. Schedule
4.11(a)
lists
and describes all Facilities and real property leased by Seller and all
subleases. Except for Facility Leases and subleases listed on Schedule
4.11(a),
there
are no leases, subleases, licenses, occupancy agreements, options, rights,
concessions or other agreements or arrangements, written or oral, granting
to
any Person the right to purchase, use or occupy any Facility, or any real
property in connection with the Business or any portion thereof or interest
in
any such Facility or real property.
4.12 Intellectual
Property; Software.
(A) Schedule
4.12(a)
hereto
sets forth contains a true, correct and complete list of all Intellectual
Property owned by Seller (the “Owned
Proprietary Rights”).
Schedule
4.12(a)
hereto
also lists each material license for Intellectual Property licensed by Seller
(the “Licensed
Proprietary Rights”).
(B) (i)
The
operation of the business of Seller, including the use of the Owned Proprietary
Rights, does not infringe or misappropriate or otherwise materially violate
the
Intellectual Property rights of any third party, and no claim is pending or,
to
the knowledge of Seller, threatened against Seller alleging any of the
foregoing, (ii) Seller owns, or with respect to the Licensed Proprietary Rights,
licenses all of the Intellectual Property necessary for the conduct of the
business of Seller, and (iii) except for the Owned Proprietary Rights and the
Licensed Proprietary Rights, no material right, license, lease, consent, or
other agreement is required with respect to any Intellectual Property for the
conduct of the business of Seller.
24
(C) Subject
only to the terms of the licenses listed on Schedule
4.12(c)
or
licenses that are immaterial to the Ordinary Course of Business of the Seller,
or except as disclosed in Schedule
4.12(c),
Seller
is (i) the sole owner of the entire and unencumbered right, title and interest
in and to each item of the Owned Proprietary Rights, and (ii) entitled to use
the Owned Proprietary Rights and Licensed Proprietary Rights in the ordinary
course of its business to the extent such Proprietary Rights are used in the
operation of the business of the Seller.
(D) The
Owned
Proprietary Rights and Licensed Proprietary Rights include all of the material
Intellectual Property used in the Business, and there are no other items of
Intellectual Property that are material to the Business.
(E) Seller
has made available to Buyer all material correspondence and all written opinions
in its possession relating to potential infringement or misappropriation (i)
by
Seller of any Proprietary Rights of any third party or (ii) by any third party
of any of the Owned Proprietary Rights or Licensed Proprietary
Rights.
(F) To
the
Knowledge of Seller, (i) no third party is engaging in any activity that
infringes or misappropriates the Owned Proprietary Rights or Licensed
Proprietary Rights and (ii) Seller has not granted any material license or
other
right to any third party with respect to the Owned Proprietary Rights or
Licensed Proprietary Rights.
(G) Seller
has a license to use all software development tools, library functions,
compilers and other third-party software that are used in the operation of
the
Business and are material to the Business, taken as a whole..
4.13 Contracts;
No Defaults.
(A) Schedule
4.13(a)
contains
a complete and accurate list, and Seller has made available to Buyer true and
complete copies, of all executory Seller Contracts of the following
categories:
(1) Contracts
that involve performance of services or delivery of goods by Seller during
any
twelve (12) month period of an amount or value, individually or, for a series
of
related Contracts, in the aggregate, in excess of Five Thousand Dollars
($5,000);Contracts that involve performance of services or delivery of goods
or
materials to Seller during any twelve (12) month period of an amount or value,
individually or, for a series of related Contracts, in the aggregate, in excess
of Five Thousand Dollars ($5,000);
(2) Contracts
that were not entered into in the Ordinary Course of Business;
25
(3) Facility
Leases and Leases of Tangible Personal Property of Seller and other Contracts,
in each case, affecting the ownership of, leasing of, title to, use of, or
any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments, in each case, of less than Five Thousand Dollars
($5,000) and with terms of less than one year);
(4) Licensing
agreements of Seller and other Contracts, in each case, with respect to patents,
trademarks, copyrights or other Intellectual Property as well as the forms
of
all agreements with current or former employees, consultants or contractors
regarding the appropriation of, or the non-disclosure of, any of the
Intellectual Property set forth on Schedule
4.12(a);
(5) collective
bargaining agreements of Seller and other Contracts, in each case, to or with
any labor union or other employee representative of a group of employees and
each other written employment or consulting agreement with any employees or
consultants;
(6) joint
ventures or partnerships (however named) of Seller and other Contracts, in
each
case, involving a sharing of profits, losses, costs or liabilities by Seller
with any other Person;
(7) Contracts
containing covenants that in any way purport to restrict the business activity
of Seller or limit the freedom of Seller to engage in any line of business
or to
compete with any Person or that subject Seller to confidentiality or
non-disclosure obligations;
(8) Contracts
providing for payments to or by any Person based on sales, purchases or profits,
other than direct payments for goods;
(9) powers
of
attorney granted by or to Seller that are currently effective and
outstanding;
(10) Contracts
entered into other than in the Ordinary Course of Business that contain or
provide for an express undertaking by Seller to be responsible for consequential
damages;
(11) Contracts
for capital expenditures relating to the Business in excess of Five Thousand
Dollars ($5,000) individually or Ten Thousand Dollars ($10,000) in the
aggregate;
(12) Contracts
which, to the Knowledge of Seller, will result in a material loss to
Seller;
(13) Contracts
between Seller and any of its former or current stockholders or shareholders,
directors, officers and employees (other than standard employment agreements
previously furnished to or approved by Buyer and other than option and warrant
agreements with Seller’s officers, directors and employees);
26
(14) written
warranties, guaranties, and/or other similar undertakings with respect to
contractual performance extended by Seller, other than in the Ordinary Course
of
Business; and
(15) each
amendment, supplement, and modification (whether oral or written) in respect
of
any of the foregoing.
(B) To
the
Knowledge of Seller, no officer, director, agent, employee, consultant or
contractor of Seller is bound by any Contract that purports to limit the ability
of such officer, director, agent, employee, consultant or contractor to (i)
engage in or continue any conduct, activity or practice relating to the Business
or (ii) assign to Seller or to any other Person any rights to any invention,
improvement or discovery.
(C) To
the
Knowledge of Seller, each Contract set forth on Schedule
1.3
is in
full force and effect and is valid and enforceable in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors’ rights
generally and (ii) the general principles of equity, regardless of whether
asserted in a proceeding in equity or at law.
(D) To
the
Knowledge of Seller:
(1) Seller
is, and at all times has been, in compliance with all material terms and
requirements of each Contract set forth on Schedule
4.13(a)
under
which Seller has or had any obligation or Liability or by which Seller or any
of
the assets owned or used by Seller is or was bound;
(2) each
other Person that has or had any obligation or Liability under any Contract
set
forth on Schedule
4.13(a)
under
which Seller has or had any rights is, and has been, in compliance with all
material terms and requirements of such Contract;
(3) no
event
has occurred or circumstance exists that (with or without notice or lapse of
time) may contravene, conflict with, or result in a violation or breach of,
or
give Seller or any other Person the right to declare a default or exercise
any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any Contract set forth on Schedule
4.13(a);
and
(4) Seller
has not given to or received from any other Person, any written or, to the
Knowledge of Seller, other notice or other communication regarding any actual,
alleged, possible or potential violation or breach of, or default under, any
Contract set forth on Schedule
4.13(a).
(E) There
are
no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to Seller under current or
completed Contracts, as applicable, with any Person and no such Person has
made
written demand for such renegotiation.
(F) Contracts
relating to the provision of products or services by Seller have been entered
into in the Ordinary Course of Business and have been entered into without
the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation
of
any Laws.
27
(G) Seller
has no reason to believe that the products and services called for by any
unfinished Seller Contract cannot be supplied in accordance with the terms
of
such Contract, including time specifications, and has no reason to believe
that
any unfinished Contract will upon performance by Seller result in a loss to
Seller.
(H) All
of
the Seller Contracts set forth on Schedule
4.13(a)
are
assignable to Buyer without the consent of any other Person, except as
specifically noted on Schedule
4.5(b).
4.14 Employee
Benefits.
(A) Schedule
4.14
contains
a complete list of all Employee Plans (i) covering employees, directors or
consultants or former employees, directors or consultants in, or related to,
the
Business and/or (ii) with respect to which Buyer may incur any Liability
(“Business
Employee Plans”).
Seller has delivered or made available to Buyer true and complete copies of
all
Employee Plans, including written interpretations thereof and written
descriptions thereof which have been distributed to Seller’s employees and for
which Seller has copies, all annuity contracts or other funding instruments
relating thereto, and a complete description of all Employee Plans which are
not
in writing.
(B) Neither
Seller nor any ERISA Affiliate sponsors, maintains, contributes to or has an
obligation to contribute to, or has sponsored, maintained, contributed to or
had
an obligation to contribute to, any Pension Plan subject to Title IV of ERISA,
any Multiemployer Plan or any Registered Pension Plan in Canada.
(C) Each
Welfare Plan which covers or has covered employees or former employees of Seller
or of its Affiliates in the Business and which is a “group health plan,” as
defined in Section 607(1) of ERISA, has been operated in compliance with
provisions of Part 6 of Title I, Subtitle B of ERISA and Section 4980B of the
Code at all times.
(D) There
is
no Legal Proceeding or Order outstanding, relating to or seeking benefits under
any Business Employee Plan that is pending, threatened or anticipated against
Seller, any ERISA Affiliate or any Employee Plan.
(E) Neither
Seller nor any ERISA Affiliate has any liability for unpaid contributions under
Section 515 of ERISA with respect to any Welfare Plan (i) covering employees,
directors or consultants or former employees, directors or consultants in,
or
related to, the Business and (ii) with respect to which Buyer may incur any
Liability.
(F) There
are
no liens arising under the Code or ERISA with respect to the operation,
termination, restoration or funding of any Business Employee Plan or arising
in
connection with any excise tax or penalty tax with respect to any Business
Employee Plan.
(G) Each
Business Employee Plan has at all times been maintained in all material
respects, by its terms and in operation, in accordance with all applicable
laws,
including, without limitation, ERISA and the Code.
28
(H) Seller
and its ERISA Affiliates have made full and timely payment of all amounts
required to be contributed under the terms of each Business Employee Plan and
applicable Law or required to be paid as expenses or as Taxes under applicable
Laws, under such Employee Plan, and Seller and its ERISA Affiliates shall
continue to do so through the Closing Date.
(I) Seller
has no Business Employee Plan intended to qualify under Section 401 of the
Code.
(J) Neither
the execution and delivery of this Agreement or other related agreements by
Seller nor the consummation of the transactions contemplated hereby or thereby
will result in the acceleration or creation of any rights of any person to
benefits under any Employee Plan (including, without limitation, the
acceleration of the vesting or exercisability of any stock options, the
acceleration of the vesting of any restricted stock, the acceleration of the
accrual or vesting of any benefits under any Pension Plan or the acceleration
or
creation of any rights under any severance, parachute or change in control
agreement).
(K) Neither
Seller nor any ERISA Affiliate has incurred any liability with respect to any
Employee Plan which may create or result in any liability to Buyer.
4.15 Labor
Matters; Employees.
Seller
is not a party to any collective bargaining or other labor Contract. There
has
not been, there is not presently pending or existing, and, to the Knowledge
of
Seller, there is not threatened (i) any strike, slowdown, picketing, work
stoppage or employee grievance process against Seller or the Business; (ii)
any
Legal Proceeding against or affecting Seller or the Business relating to the
alleged violation of any Law or Order pertaining to labor relations or
employment matters; or (iii) union organizing campaign or any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by Seller, and no such
action is contemplated by Seller. Seller has complied with all material Laws
relating to employment, equal employment opportunity, nondiscrimination,
harassment, retaliation, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar Taxes, occupational
health and safety, and plant closing. Seller is not liable for the payment
of
any compensation, damages, Taxes, fines, penalties or other amounts (including,
without limitation, amounts related to workplace safety and insurance), however
designated, for failure to comply with any of the foregoing Laws.
4.16 Legal
Proceedings.
There
is no Legal Proceeding or Order (a) pending or, to the Knowledge of Seller,
threatened or anticipated against or affecting Seller, the Business or the
Purchased Assets (or to the Knowledge of Seller, pending or threatened, against
any of the officers, directors or employees of Seller with respect to their
business activities related to or affecting the Business); (b) that challenges
or that may have the effect of preventing, making illegal, delaying or otherwise
interfering with any of the transactions contemplated by this Agreement; or
(c)
related to the Business or the Purchased Assets to which Seller is otherwise
a
party. To the Knowledge of Seller, there is no reasonable basis for any such
Legal Proceeding or Order. Except as set forth on Schedule
4.16,
to the
Knowledge of Seller, no officer, director, agent or employee of Seller is
subject to any Order that prohibits such officer, director, agent or employee
from engaging in or continuing any conduct, activity, or practice relating
to
the Business. Except as set forth on Schedule
4.16,
neither
Seller nor the Business or the Purchased Assets is subject to any Order of
any
Governmental Body and Seller is not engaged in any Legal Proceeding to recover
monies due it or for damages sustained by it. Seller is not and has not been
in
Default with respect to any Order, and there are no unsatisfied judgments
against Seller or the Business or the Purchased Assets. There is not a
reasonable likelihood of an adverse determination of any pending Legal
Proceedings. There are no Orders or agreements with, or Encumbrances by, any
Governmental Body or quasi-governmental entity relating to any Environmental
Law
which regulate, obligate, bind or in any way affect Seller or any
Facility.
29
4.17 Compliance
with Law.
(A) Seller,
to its Knowledge, and the conduct of the Business are and at all times have
been
in compliance with all Laws or Orders applicable to them or to the conduct
and
operations of the Business or relating to or affecting the Purchased Assets.
Seller has not received any notice to the effect that, or otherwise been advised
of (i) any actual, alleged, possible or potential violation of, or failure
to
comply with, any such Laws or Orders or (ii) any actual, alleged, possible
or
potential obligation on the part of Seller to undertake, or to bear all or
any
portion of the cost of, any remedial action of any nature. No event has occurred
or circumstance exists that (with or without notice or lapse of time) (i) may
constitute or result in a violation by Seller of, or a failure on the part
of
Seller, any such Laws or Orders or (ii) may give rise to any obligation on
the
part of Seller to undertake, or to bear all or any portion of the cost of,
any
remedial action of any nature, except, in either case separately or the cases
together, where such violation or failure to comply could not reasonably be
expected to have a Material Adverse Effect.
(B) None
of
Seller, or any of its directors, officers or Representatives or to the Knowledge
of Seller, any employee or other Person affiliated with or acting for or on
behalf of Seller, has, directly or indirectly, (i) made any contribution, bribe,
rebate, payoff, influence payment, kickback or other payment to any Person,
private or public, regardless of form, whether in money, property or services
(A) to obtain favorable treatment in securing business, (B) to pay for favorable
treatment for business secured, (C) to obtain special concessions or for special
concessions already obtained, for or in respect of Seller or any of its
Affiliates or (D) in violation of any Laws of the United States (including,
without limitation, the Foreign Corrupt Practices Act of 1977, as amended (15
U.S.C. Sections 78dd-1 et seq.)) or any laws of any other country having
jurisdiction; or (ii) established or maintained any fund or asset that has
not
been recorded in the Books and Records of Seller.
4.18 Permits.
Schedule
4.18
sets
forth a complete list of all Permits held by Seller or used in the conduct
of
the Business or which relate to the Purchased Assets. The Permits set forth
on
Schedule
4.18
collectively constitute all of the Permits necessary for Seller to lawfully
conduct and operate the Business, as applicable, as they are presently conducted
and to permit Seller to own and use the Purchased Assets to own and use its
assets, in each case, in the manner in which they are presently owned and used.
Except as set forth on Schedule
4.18,
Seller
is and at all times has been in compliance with all material Permits applicable
to it or to the conduct and operations of the Business or relating to or
affecting the Purchased Assets. Seller has not received any notice to the effect
that, or otherwise been advised of (i) any actual, alleged, possible or
potential violation of, or failure to comply with, any such Permits or (ii)
any
actual, alleged, possible or potential revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any Permit set forth
on
or required to be set forth on Schedule
4.18.
No
event has occurred, and to Seller’s Knowledge no circumstance exists, that (with
or without notice or lapse of time) (i) may constitute or result directly or
indirectly in a violation by Seller of, or a failure on the part of Seller
to
comply with, any such Permits or (ii) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any Permit set forth on or required to be set forth on
Schedule
4.18.
All
applications for or renewals of all Permits have been timely filed and made
and
no Permit will expire or be terminated as a result of the consummation of the
transactions contemplated by this Agreement. No present or former shareholder,
director, officer or employee of Seller or any Affiliate thereof, or any other
Person, owns or has any proprietary, financial or other interest (direct or
indirect) in any Permit which Seller owns, possesses or uses.
30
4.19 Insurance.
Schedule
4.19
sets
forth a complete and accurate list (showing as to each policy or binder the
carrier, policy or binder the carrier, policy number, coverage limits,
expiration dates, annual premiums and a general description of the type of
coverage provided) of all policies or binders of insurance of any kind or nature
covering Seller, the Business, the Purchased Assets, or any employees,
properties or assets of Seller relating to the Business, including, without
limitation, policies of life, disability, fire, theft, workers compensation,
employee fidelity and other casualty and liability insurance. All such policies
are in full force an effect. Seller is not in Default under any of such policies
or binders, and Seller has not failed to give any notice or to present any
claim
under any such policy or binder in a due and timely fashion.
4.20 Inventory;
Receivables; Payables.
(A) Schedule
4.20(a)
contains
a complete and accurate list of all Inventory constituting any part of the
Purchased Assets set forth on the Interim Balance Sheet and the addresses at
which the Inventory is located. The Inventory as set forth on the Interim
Balance Sheet or arising since the Interim Balance Sheet Date was acquired
and
has been maintained in accordance with the regular business practices of Seller,
consists of new and unused items of a quality and quantity usable or saleable
in
the Ordinary Course of Business within the past six months, and is valued at
reasonable amounts based on the normal valuation policy of Seller at prices
equal to the cost. None of such Inventory is damaged.
(B) Schedule
4.20(b)
contains
an accurate list of accounts receivable constituting part of the Purchased
Assets. All accounts receivable of Seller constituting any part of the Purchased
Assets set forth on the Interim Balance Sheet and all accounts receivable
arising since the Interim Balance Sheet Date, have arisen from bona
fide
transactions in the Ordinary Course of Business. To the Knowledge of Seller,
none of the accounts receivable of Seller constituting any part of the Purchased
Assets reflected on the Interim Balance Sheet and arising since the Interim
Balance Sheet Date are subject to any defenses, counterclaims or rights of
setoff.
(C) All
accounts payable of Seller pertaining to the Purchased Assets or constituting
any part of the Assumed Liabilities reflected on the Interim Balance Sheet
or
arising after the Interim Balance Sheet Date are the result of bona
fide
transactions in the Ordinary Course of Business and have been paid or will
be
paid in Seller’s Ordinary Course of Business or are not yet due and payable (in
all cases without any extensions of payment terms or waivers of penalties being
sought or extended).
31
4.21 Related
Party Transactions.
Except
as set forth on Schedule
4.21,
none of
Seller, any Affiliate thereof, Seller’s members or any Affiliate or Family
Member thereof is presently or has, since the Interim Financial Statements,
borrowed any moneys from or has any outstanding debt or other obligations to
Seller or is presently a party to any transaction with Seller relating to the
Business. Except as set forth on Schedule
4.21,
none of
Seller, any Affiliate thereof, or any director, officer or key employee of
any
such Persons (a) owns any direct or indirect interest of any kind in (except
for
ownership of less than 1% of any public company, provided, that such owner’s
role is that solely of a passive investor), or controls or is a director,
officer, employee or partner of, consultant to, lender to or borrower from,
or
has the right to participate in the profits of, any Person which is (i) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of Seller,
(ii) engaged in a business related to the Business or (iii) a participant in
any
transaction to which Seller is a party or (b) is a party to any Contract with
Seller. Except as set forth on Schedule
4.21,
Seller
has no Contract or understanding with any officer, director or key employee
of
Seller or any of Seller’s shareholders or any Affiliate or Family Member thereof
with respect to the subject matter of this Agreement, the consideration payable
hereunder or any other matter.
4.22 No
Brokers.
None of
Seller or any of the Affiliates or Representatives of Seller has entered into
or
will enter into any Contract, agreement, arrangement or understanding with
any
broker, finder or similar agent or Person which will result in the obligation
of
Buyer to pay any finder’s fee, brokerage commission or similar payment in
connection with the transactions contemplated by this Agreement. Buyer shall
have no responsibility, liability or obligation related to any finder’s fee,
brokerage commission or similar payment in connection with any of the items
set
forth on Schedule
4.22.
4.23 No
Other Agreements.
Neither
Seller, nor any of its members, officers, directors or Affiliates has any legal
obligation, absolute or contingent, to any other Person to sell, assign or
transfer any part of the Purchased Assets (other than Inventory in the Ordinary
Course of Business), to sell any stock of or other equity interest (other than
warrants or options in favor of Seller’s officers, directors or employees) in
Seller or to effect any merger, consolidation or other reorganization of Seller
or to enter into any agreement with respect thereto.
4.24 Material
Misstatements Or Omissions.
To the
Knowledge of the representing parties, no representation or warranty made by
Seller in this Agreement or the Disclosure Schedule omits or will omit to state
any material fact necessary to make the statements or facts contained therein
not misleading.
ARTICLE
V.
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to Seller that the statements contained in this
Article
V
are true
and correct as of the Agreement Date and as of the Closing Date.
32
5.1 Organization
of Buyer.
Buyer
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware, and has all requisite power and authority to
own,
lease and operate its properties and assets and to carry on its business as
it
is presently being conducted. Buyer is duly qualified and in good standing
to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to so qualify could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect on the
Buyer.
5.2 Authorization.
Buyer
has full power and authority to execute and deliver this Agreement and each
other agreement, document, instrument or certificate contemplated by this
Agreement or to be executed by Buyer in connection with the consummation of
the
transactions contemplated hereby (such other agreements, documents, instruments
and certificates required to be executed by Buyer being hereinafter referred
to,
collectively, as the “Buyer
Documents”),
and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Buyer of this Agreement and each of the Buyer
Documents have been duly authorized by all necessary action on behalf of Buyer.
This Agreement and each of the Buyer Documents have been duly executed and
delivered by Buyer and (assuming the due authorization, execution and delivery
by the other parties hereto and thereto) this Agreement and each of the Buyer
Documents constitute, valid and legally binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms, except
as
such enforceability may be limited by (a) bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditors’ rights generally and
(b) the general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
5.3 Conflicts;
Third Party Consents.
Neither
the execution and delivery of this Agreement or the Buyer Documents nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Buyer with any of the provisions hereof or thereof, will (a) conflict with,
or result in the breach of, any provision of the certificate of formation or
the
operating agreement of Buyer, (b) conflict with, violate, result in the breach
or termination of, or constitute a Default under any indebtedness, instrument,
obligation or Contract to which Buyer is a party or by which Buyer or its
properties or assets are bound or (c) violate any Law or any Order of any
Governmental Body by which Buyer or its properties or assets are bound. No
Order
of, Consent or Permit from or declaration or filing with, or notification to,
any Person, including, without limitation, any Governmental Body, is required
to
be made or obtained by Buyer in connection with the execution, delivery and
performance of this Agreement or the Buyer Documents and the consummation of
the
transactions contemplated hereby and thereby.
5.4 Legal
Proceedings.
There
are no Legal Proceedings pending, or to the knowledge of Buyer, threatened
that
are reasonably likely to prohibit or restrain the ability of Buyer to enter
into
this Agreement or consummate the transactions contemplated hereby.
5.5 No
Brokers.
Neither
Buyer nor any of its Affiliates or Representatives has entered into or will
enter into any Contract, agreement, arrangement or understanding with any
broker, finder or similar agent or Person which will result in the obligation
of
Seller to pay any finder’s fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
33
ARTICLE
VI.
COVENANTS
OF SELLER AND BUYER
Seller,
the Members and Buyer, as the case may be, each covenant with the other as
follows:
6.1 Further
Assurances.
Upon
the terms and subject to the conditions contained in this Agreement, the parties
agree, before and after the Closing, (a) to use all reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement and the Ancillary Agreements, (b) to execute
any
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the transactions contemplated
hereunder or thereunder, and (c) to cooperate with each other in connection
with
the foregoing. As promptly as possible after the Agreement Date, Seller will
make all filings required by Law to be made by them in order to consummate
the
transactions contemplated hereby, will obtain all other required Consents
(provided, that Buyer shall not be required to make any payments, commence
litigation or agree to modifications of the terms of any Contracts or Leases
in
order to obtain any such Consent) and Permits and will apply for any new Permits
necessary to consummate the transactions contemplated hereby. As promptly as
possible after the Agreement Date, Buyer will give all notices to third parties
and make all filings required by Law to be made by it in order to consummate
the
transactions contemplated hereby. At the request of Buyer, Seller and the
Members shall provide such information and documentation reasonably available
to
such Person in connection with Buyer’s reporting obligations to the US
Securities and Exchange Commission.
6.2 Conduct
of Business.
From
the Agreement Date through the Closing Date, Seller shall, except as permitted
by this Agreement or as consented to by Buyer in writing, conduct the Business
only in the Ordinary Course of Business and (i) will not take any action
inconsistent with this Agreement or any of the Ancillary Agreements or with
the
consummation of the transactions contemplated hereby and thereby, and (ii)
use
its Best Efforts to maintain the continuity of management and maintain the
Purchased Assets in a state of repair and condition that complies with Laws
and
is consistent with the requirements of the Business as it is presently
conducted. In addition and without limiting the generality of the foregoing,
Seller shall not, and except as specifically permitted by this Agreement or
as
consented to by Buyer in writing, take any affirmative action, or fail to take
any reasonable action, in each case which would reasonably be expected to result
in the occurrence of any of the changes or events listed in Section
4.9
of this
Agreement.
6.3 Members’
Meeting.
Seller
shall, to the extent permitted or required under Ohio law, take all action
reasonably necessary in accordance with applicable law and Seller’s Operating
Agreement to duly call, give notice of, convene and hold a meeting of its
members, or otherwise take such action by written consent (the “Members’
Meeting”)
as
promptly as practicable after the Agreement Date for the purpose of, among
other
things, considering and taking action, as necessary, upon the transactions
contemplated by this Agreement.
6.4 Consents.
Notwithstanding anything in this Agreement to the contrary, this Agreement
shall
not constitute an agreement to assign any of the Purchased Assets or any claim
or right or any benefit arising thereunder or resulting therefrom if an
attempted assignment thereof, without the Consent of a third party thereto,
would constitute a Default thereof or in any way adversely affect the rights
of
Buyer thereunder or thereto. Buyer and Seller further agree that, although
Buyer
and Seller agree to cooperate with each other in attempting to obtain all
Consents, any failure to obtain any Consents by either Buyer or Seller, as
the
case may be, for any reason whatsoever shall not constitute a Breach of this
Agreement by Seller or Buyer, as the case may be. If any of the Purchased Assets
are not assigned to Buyer on the Closing Date due to circumstances described
in
this Section
6.4,
then
Buyer shall not assume any Liabilities related to or arising out of such
non-transferred Purchased Asset until such Purchased Asset can be properly
transferred to Buyer and Buyer has all of the benefits of such Purchased Asset.
If any Consent is not obtained, or if an attempted assignment thereof would
be
ineffective or would affect the rights thereunder so that Buyer would not
receive all such rights, Seller will use its Best Efforts to provide to Buyer
the benefits of such Purchased Assets, including, without limitation,
enforcement for the benefit of Buyer of any and all rights of Seller against
a
third party thereto arising out of the Default or cancellation by such third
party or otherwise. Notwithstanding anything in this Agreement to the contrary,
nothing contained in this Section
6.4
shall be
deemed to constitute a waiver or have any effect on the conditions to Buyer’s
obligations to consummate the transactions contemplated hereby as set forth
in
Section
7.2(E).
34
6.5 Notification
of Certain Matters.
From
the Agreement Date to the Closing Date, Seller shall give prompt notice to
Buyer
of (a) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement or in any exhibit or schedule hereto to be untrue or inaccurate
in any respect and (b) any failure of Seller or any of its Affiliates or
Representatives, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by such Person under this Agreement or any
exhibit or schedule hereto; provided, however, that such disclosure shall not
be
deemed to cure any breach of a representation, warranty, covenant or agreement
or to satisfy any condition. Seller shall promptly notify Buyer of any default,
the threat or commencement of any Legal Proceeding, or any development that
occurs before the Closing that could have a Material Adverse Effect. In
addition, during such period, Seller will confer with Buyer concerning
operational matters of a material nature and otherwise report periodically
to
Buyer concerning the status of the Business.
6.6 Employee
Matters.
(A) Seller
shall be solely responsible for all obligations and Liabilities arising under
or
with respect to all Seller Employee Plans. Buyer shall not assume any Seller
Employee Plan or any obligation or Liability thereunder.
(B) Subject
to Section 7.2(G), as of the Closing Date, the Buyer shall offer employment
to all of the Seller’s employees employed by the Seller immediately prior to the
Closing Date (except those employees on long-term leave of absence, long-term
disability or layoff) (“Potential Employees”) at the same wages and salaries as
of the date hereof. Each Potential Employee who accepts employment with Buyer
is
referred to herein as a “Rehired Employee”.
35
(C) All
employees who are offered and accept employment by Buyer shall be entitled
to
participate in all Employee Plans maintained by Buyer for which its employees
are eligible upon satisfaction of the requirements applicable for such
participation in such plans; provided, however, that with respect to any benefit
plan providing health coverage, provided that the following does not conflict
with Buyer’s existing health care policies. (i) Buyer shall waive for such
employees who are actively working as of the Closing Date or within three days
of the Closing Date or on vacation or leave of absence unrelated to a medical
condition exclusion to the extent, but only to the extent, that such exclusion
is broader or more burdensome on the employee or his or her dependants than
the
participation requirement, waiting period or pre-existing condition exclusion
in
any of Seller’s Employee Plans which provides health coverage and (ii) Buyer
shall cause such plan to credit expenses incurred by such employees (and their
spouses and eligible dependents) during the plan year in which the Closing
Date
occurs toward the out-of-pocket maximums and deductibles applicable under such
plan for such plan year to the extent that such expenses were credited toward
the out-of-pocket maximums and deductibles applicable under the comparable
Buyer
Employee Plan. Notwithstanding the preceding sentence, the Buyer covenants
and
agrees that it shall provide all employees that are offered and accepted
employment by the Buyer credit for all of their employment service with the
Seller for the purposes of both participation and vesting requirements and
any
pre-existing condition exclusion under all benefit plans, including any Buyer
Employee Plans. Each employee who is offered and accepts employment by the
Buyer
shall receive credit for such employee’s accrued but unused vacation as of the
Closing Date.
(D) The
Buyer
shall take no action within the ninety (90) day period subsequent to the Closing
which results or will result in an “employment loss” (as such term is defined in
the Worker Adjustment and Retraining Notification Act, 29 USC §§2101-2109 (the
“WARN Act”)) with respect to employees who accept employment by
Buyer.
(E) Seller
and its ERISA Affiliates (as defined below) shall comply with the provisions
of
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”),
as
set forth in Section 4980B of the Code and Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended, with respect to any
employee, former employee or beneficiary of any such employee or former employee
who is covered under any Group Health Plan (as defined in Section 5001(b)(1)
of
the Code) maintained by Seller and its ERISA Affiliates as of the Closing Date
or whose “qualifying event,” within the meaning of Section 4980B(f) of the Code,
occurs on or prior to the Closing Date, whether pursuant to the provisions
of
COBRA or otherwise. For purposes of this Agreement, “ERISA Affiliate” shall mean
any entity which is (or at any relevant time was) a member of a “controlled
group of corporations” with, under “common control” with, or a member of an
“affiliated service group” with, Seller as defined in Section
414(b),
(c),
(m)
or
(o)
of the
Code.
(F) Buyer
and
its ERISA Affiliates shall comply with the provisions of COBRA, as set forth
in
Section 4980B of the Code and Part 6 of Title I of ERISA with respect to each
Rehired Employee after the Closing Date who is covered under any Group Health
Plan (as defined in Section 5001(b)(1) of the Code) maintained by Buyer and
its
ERISA Affiliates after the Closing Date or whose “qualifying event,” within the
meaning of Section 4980B(f) of the Code, occurs after the Closing Date, whether
pursuant to the provisions of COBRA or otherwise.
36
(G) Subject
to Section 7.1(G) below, nothing contained in this Agreement shall confer upon
any Rehired Employee any right with respect to continued employment by Buyer,
nor shall anything herein interfere with the right of Buyer to terminate any
Rehired Employee at any time.
(H) Seller
shall not, directly or indirectly, solicit for employment any Rehired Employee,
unless Buyer first terminates the employment of such Rehired Employee or gives
its written consent to such employment or offer of employment; provided,
however, Seller shall not be prohibited from hiring an employee of Buyer (other
than a Rehired Employee) who, with no advance knowledge of or prior discussions
with Seller, terminates employment with Buyer and applies for a posted job
with
Seller.
6.7 Collection
of Accounts Receivable and Letters of Credit.
At the
Closing, Buyer will acquire hereunder, and thereafter Buyer or its designee
shall have the right and authority to collect for Buyer’s or its designee’s
account, all receivables, letters of credit and other items which constitute
a
part of the Purchased Assets, and Seller shall, within five business days after
receipt of any payment in respect of any of the foregoing, properly endorse
and
deliver to Buyer any letters of credit, documents or checks received on account
of or otherwise relating to any such receivables, letters of credit or other
items. Seller shall promptly transfer or deliver to Buyer or its designee any
cash or other property that Seller may receive in respect of any deposit,
prepaid expense, claim, contract, license, lease, commitment, sales order,
purchase order, letters of credit or receivable of any character, or any other
item constituting a part of the Purchased Assets.
6.8 Books
and Records.
Each
party hereto agrees that it will cooperate with and make available to the other
party, during normal business hours, all Books and Records, information and
employees (without substantial disruption of employment) retained and remaining
in existence after the Closing which are necessary or useful in connection
with
any Tax inquiry, audit, investigation or dispute, any litigation or
investigation or any other matter requiring any such Books and Records,
information or employees for any reasonable business purpose. The party
requesting any such Books and Records, information or employees shall bear
all
of the out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys’ fees, but excluding reimbursement for salaries and
employee benefits) reasonably incurred in connection with providing such Books
and Records, information or employees. All information received pursuant to
this
Section
6.8
shall be
kept confidential by the party obtaining such information, subject to any
disclosure that is required to be made by such party in order to comply with
applicable Laws or the rules or regulations of any securities exchange upon
which its securities are traded.
6.9 Tax
Matters.
(A) Payment.
Seller
shall pay, or cause to be paid, when due all Taxes for which Seller is or may
be
liable that are or may become payable with respect to all taxable periods ending
on, prior to or after the Closing Date.
(B) Cooperation
and Records Retention.
Seller
and Buyer shall (i) each provide the other with such assistance as may
reasonably be requested by any of them in connection with the preparation of
any
return, audit, or other examination by any Tax authority or Legal Proceedings
relating to Liability for Taxes, (ii) each retain and provide the other with
any
records or other information that may be relevant to such return, audit or
examination, Legal Proceeding or determination, and (iii) each provide the
other
with any final determination of any such audit or examination, proceeding,
or
determination that affects any amount required to be shown on any Tax Returns
of
the other for any period. Without limiting the generality of the foregoing,
Buyer and Seller shall each retain, until the applicable statutes of limitations
(including any extensions) have expired, copies of all Tax Returns, supporting
work schedules, and other records or information that may be relevant to such
returns for all Tax periods or portions thereof ending on or before the Closing
Date and shall not destroy or otherwise dispose of any such records without
first providing the other party with a reasonable opportunity to review and
copy
the same.
37
(C) Payment
of Liabilities.
Following the Closing Date, Seller shall pay promptly when due all of the
Liabilities for Taxes of Seller and other debts and Liabilities of Seller,
other
than the Assumed Liabilities.
6.10 Bulk
Sales.
It may
not be practicable to comply or attempt to comply with the procedures of the
“Bulk Sales Act” or similar law of any or all of the states in which the
Purchased Assets are situated or of any other state which may be asserted to
be
applicable to the transactions contemplated hereby. Accordingly, to induce
Buyer
to waive any requirements for compliance with any or all of such laws, Seller
hereby agrees that the indemnity provisions of Article
VIII
shall
apply to any Losses of Buyer arising out of or resulting from the failure of
Seller or Buyer to comply with any such laws.
6.11 No-Shop
Clause.
(A) From
and
after the date of the execution and delivery of this Agreement by Seller until
the termination of this Agreement or the consummation of the transactions
contemplated hereby, Seller will not, without the prior written consent of
Buyer
or except as otherwise permitted by this Agreement directly or indirectly:
(i)
other than in the Ordinary Course of Business, sell, assign, lease, pledge
or
otherwise transfer or dispose of all or any portion of the Purchased Assets,
the
Business or any material portion or amount of equity securities of Seller,
whether through merger, consolidation, business combination, asset sale, share
exchange or otherwise (and including in connection with an offer for all or
a
material portion of Seller’s stock or assets) (each of such actions being an
“Acquisition
Proposal”);
(ii)
solicit offers for, offer up or seek any Acquisition Proposal; (iii) initiate,
encourage or provide any documents or information to any third party in
connection with, or negotiate with any person regarding any inquires, proposals
or offers relating to any Acquisition Proposal; or (iv) enter into any agreement
or discussions with any party (other than Buyer) with respect to any Acquisition
Proposal.
(B) Without
limiting the foregoing, it is agreed that any violation of the restrictions
set
forth in Section
6.11(A)
by any
of Seller’s Representatives shall be a breach of Section
6.11(A)
by
Seller. Upon execution of this Agreement, Seller shall, and shall cause its
Representatives to, cease immediately and cause to be terminated any and all
existing discussions or negotiations with any Persons conducted heretofore
with
respect to an Acquisition Proposal and promptly request that all confidential
information with respect thereto furnished on behalf of Seller be
returned.
38
6.12 Assignment
of Agreements.
Following Closing, Seller shall use its best efforts to assign to Buyer as
soon
as possible following Closing (i) those agreements set forth on Schedule
4.5(b)
hereto
and (ii) those agreements which are being negotiated at the time of the
Agreement Date which are executed following the Agreement Date by Seller and
a
third party and which would have been set forth on Schedule
4.5(b)
hereto
had such agreements been executed prior to the Agreement Date (as reasonably
agreed by Buyer and Seller).
6.13 Board
Seat.
At any
time and from time to time on or after the Closing Date, Seller shall have
the
right to designate an individual to sit on Buyer’s board of directors. Subject
to the reasonable approval of the Buyer’s board of directors with respect to
such designee, the Buyer will use reasonable efforts to seek stockbroker
approval for such designee’s election to the board. Seller’s initial designee is
Xxx Xxxxxxx who is presently a member of Buyer’s board of directors. Such right
shall extend for a period of three years from the Closing Date.
6.14 Name
Change.
Within
twenty days of the Closing Date, Seller shall change its name to one which
shall
not include “Exhibit Merchandising.”
ARTICLE
VII.
CONDITIONS
PRECEDENT TO CLOSING
7.1 Conditions
to Seller’s Obligations to Close.
The
obligations of Seller to consummate the transactions provided for hereby are
subject to the satisfaction, before or on the Closing Date, of each of the
conditions set forth below in this Section
7.1,
any of
which may be waived by Seller.
(A) Representations,
Warranties and Covenants.
(i) All
representations and warranties of Buyer contained in this Agreement, except
for
those representations and warranties the Breach of which could not (individually
or in the aggregate) reasonably be expected to have a Condition-Related Material
Adverse Effect, shall be true and correct at and as of the Agreement Date and
at
and as of the Closing Date, except to the extent such representations and
warranties expressly relate solely to an earlier date, and (ii) Buyer shall
have
performed and satisfied all agreements and covenants, except for those covenants
and agreements the breach of which could not (individually or in the aggregate)
reasonably be expected to have a Condition-Related Material Adverse Effect,
required hereby to be performed by it before or on the Closing Date.
(B) No
Actions or Court Orders.
There
shall not be any Regulation or Court Order that makes the purchase and sale
of
the Business or the Purchased Assets contemplated hereby illegal or otherwise
prohibited.
(C) Authorization.
Seller
shall have received from Buyer a copy of resolutions of the Board of Directors
of Buyer approving this Agreement and the Ancillary Agreements to which Buyer
is
a party and the transactions contemplated hereby or thereby and Buyer shall
have
obtained from its shareholders the approval of the transactions contemplated
by
this Agreement.
39
(D) Ancillary
Agreements.
Buyer
shall have executed and delivered the Ancillary Agreements to which Buyer is
a
party.
(E) No
Material Adverse Change.
There
shall have been no Condition-Related Material Adverse Change.
(F) Employees.
Each of
Xxxx Xxxxxxx, Xxxxxx Xxxxxx and Xxxx Xxxxxxxx shall have agreed to accept
employment with Buyer on terms acceptable to them and to Buyer.
(G) Consultant.
Consultant shall have agreed to the terms of the Consulting Agreement with
Buyer
on terms acceptable to Buyer and Consultant. The Consulting Agreement will
be
for a term of at least two years and provide for compensation in the amount of
100,000 Restricted Shares of Buyer’s Common Stock issued as of the Closing.
Consultant shall provide consulting services to Buyer and shall be a member
of
the Buyer’s transition, assimilation, and operating team. Should a disagreement
arise between Consultant and Buyer with respect to any of Consultant’s
recommendations related to the transition, assimilation, or operations of the
Business after the Closing, the disagreement shall be resolved by a committee
consisting of Consultant, Xxxxx Xxxxxxx, and Xxxxxxxx Xxxxx.
(H) Officer’s
Certificate.
Buyer
shall furnish Seller with such certificates of Buyer’s officers (including
incumbency certificates) as Seller may reasonably request in order to evidence
compliance with the conditions set forth in this Section
7.1.
(I) Closing
Deliverables.
Buyer
shall have delivered, or caused to be delivered, to Seller those items set
forth
in Section
3.2(B)
hereof.
7.2 Conditions
to Buyer’s Obligations to Close.
The
obligations of Buyer to consummate the transactions provided for hereby are
subject to the satisfaction, before or on the Closing Date, of each of the
conditions set forth below in this Section
7.2,
any of
which may be waived by Buyer.
(A) Representations,
Warranties and Covenants.
(i) All
representations and warranties of Seller contained in this Agreement, except
for
those representations and warranties the Breach of which could not (individually
or in the aggregate) reasonably be expected to have a Condition-Related Material
Adverse Effect, shall be true and correct at and as of the Agreement Date and
at
and as of the Closing Date, except to the extent such representations and
warranties expressly relate solely to an earlier date, and (ii) Seller shall
have performed and satisfied all agreements and covenants, except for those
covenants and agreements the breach of which (individually or in the aggregate)
could not reasonably be expected to have a Condition-Related Material Adverse
Effect, required hereby to be performed by it before or on the Closing
Date.
(B) No
Actions or Court Orders.
No
Action by any Governmental Body or other Person shall have been instituted
or
threatened which questions the validity or legality of the transactions
contemplated hereby and which could reasonably be expected to damage Buyer,
the
Purchased Assets or the Business materially if the transactions contemplated
hereby are consummated, and which could (individually or in the aggregate)
have
a Condition-Related Material Adverse Effect. There shall not be any Regulation
or Court Order that makes the purchase and sale of the Business or the Purchased
Assets contemplated hereby illegal or otherwise prohibited.
40
(C) Authorization.
Buyer
shall have received from Seller a copy of resolutions adopted by the Members
of
Seller approving this Agreement and the Ancillary Agreements to which Seller
is
a party and the transactions contemplated hereby or thereby.
(D) Ancillary
Agreements.
Seller
shall have executed and delivered the Ancillary Agreements to which it is a
party.
(E) Consents.
All
Permits, consents, approvals and waivers from Governmental Bodies and other
Persons set forth on Schedule
7.2(e)
shall
have been obtained, except to the extent that the failure to obtain such
Permits, consents, approvals and waivers could not reasonably be expected to
have a Materially Adverse Effect on Buyer after the Closing.
(F) No
Material Adverse Change.
There
shall have been no Condition-Related Material Adverse Change.
(G) Employees.
Each of
Xxxx Xxxxxxx, Xxxxxx Xxxxxx and Xxxx Xxxxxxxx shall have agreed to accept
employment with Buyer on terms acceptable to them and to Buyer.
(H) Non-Competition
Agreement.
The
Non-Competition Agreement between Buyer and each of Seller, Xxxxxx Xxxxx, Xxx
Xxxxxxxx and Xxxx Xxxxxx, dated as of the Agreement Date, in the form attached
hereto as Exhibit F, shall not have terminated and shall be in full force and
effect. Notwithstanding any restrictions that may be contained in the
Non-Competition Agreement, Buyer agrees, understands, and acknowledges that
the
Seller or its Members or its or their Affiliates will have the right to enter
into a contract to operate and supply the museum store at the Egyptian Museum
in
Cairo and that Buyer shall have no right, title, or interest in the contract
or
any of the profits, proceeds, revenues, or other benefits derived from such
contract.
(I) Officer’s
Certificate.
Seller
shall furnish Buyer with such certificates of Seller’s officers (including
incumbency certificates) as Buyer may reasonably request in order to evidence
compliance with the conditions set forth in this Section
7.2.
(J) Non-Foreign
Status.
Seller
shall have furnished Buyer with an affidavit, stating, under penalty of perjury,
the transferor’s United States taxpayer identification number and that the
transferor is not a foreign person, pursuant to Section 1445(b)(2) of the
Code.
(K) Closing
Deliverables.
Seller
shall have delivered, or caused to be delivered, to Buyer those items set forth
in Section
3.2(A)
hereof.
ARTICLE
VIII.
INDEMNIFICATION
8.1 Survival
of Representations, Etc.
All of
the representations and warranties contained in this Agreement, other than
the
representations and warranties contained in Sections
4.1,
4.2,
4.7,
4.10,
4.14,
4.17,
4.21,
5.1,
5.2
and
5.5
shall
survive the Closing and shall continue in full force and effect for a period
of
one year after the Closing Date. The representations and warranties contained
in
Sections
4.10,
4.14,
and
4.17
shall
survive the Closing and shall terminate only when the applicable statutes of
limitations with respect to the liabilities in question expire, in each case
giving effect to any tolling or extensions thereof. The representations and
warranties contained in Sections
4.1,
4.2,
4.7,
4.21,
5.1,
5.2
and
5.5
and all
covenants and obligations of the parties made herein shall survive the Closing
and shall continue in full force and effect indefinitely, but in no event shall
the survival period extend beyond the expiration of the statutory term
(including any renewals or extensions thereof) of the trademark, copyright
or
patent at issue. The right to indemnification, payment of Losses or other remedy
based on such representations, warranties, covenants and obligations will not
be
affected by any investigation conducted with respect to, or any knowledge of
the
party entitled to such right to indemnification acquired (or capable of being
acquired) at any time, whether before or after the Closing Date, with respect
to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Losses, or other remedies based on such
representations, warranties, covenants and obligations.
41
8.2 Indemnification.
(A) By
Seller.
Subject
to Section
8.3,
the
Seller hereby agrees (without duplication) to indemnify, protect, defend (at
Buyer’s request), release and hold Buyer and its directors, officers, managers,
members, employees, agents, successors, Affiliates and assigns (collectively,
the “Buyer
Indemnified Parties”)
harmless from and against any and all Losses incurred in connection with,
arising out of, resulting from or incident to:
(1) any
Breach or inaccuracy of any representation or warranty of Seller set forth
in
this Agreement or contained in any certificate delivered by or on behalf of
Seller pursuant to this Agreement;
(2) any
Breach of any covenant or other agreement made by Seller in or pursuant to
this
Agreement;
(3) any
Excluded Liability;
(4) any
Liability imposed upon Buyer by reason of Buyer’s status as transferee of the
Business or the Purchased Assets other than any Assumed Liability;
(5) any
Liability (A) imposed upon Buyer by reason of Buyer’s decision not to hire any
of Seller’s employees, other than any Liability arising out of Buyer’s violation
of any federal or state employment discrimination Law in its hiring practices
with respect to Seller’s employees, or (B) under the WARN Act which may result
from any termination of any employees of Seller in connection with the
transactions contemplated by this Agreement;
(6) any
Liability arising under or with respect to any and all Employee Plans, and
any
Liability with respect to any of Seller’s employees, former employees or service
providers relating to acts or omissions which occurred on or prior to the
Closing Date;
42
(7) any
product shipped or manufactured by, or any services provided by, Seller prior
to
the Closing Date; or
(8) any
claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based on any agreement or understanding alleged to have been made by such Person
with Seller or any shareholder thereof (or any Person acting (or purportedly
acting) on behalf of any such Person) in connection with the transactions
contemplated by this Agreement.
(B) By
the
Members.
Subject
to Section 8.3, each of the Members hereby agrees (without duplication) to
indemnify, protect, defend (at Buyer’s request), release and hold the Buyer
Indemnified Parties harmless from and against any and all Losses incurred in
connection with, arising out of, resulting from or incident to any Breach or
inaccuracy of any representation or warranty of the Members set forth in this
Agreement.
(C) By
Buyer.
Subject
to Section
8.3,
Buyer
hereby agrees (without duplication) to indemnify, protect, defend (at Seller’s
request), release and hold Seller and its directors, officers, employees,
agents, successors and assigns (collectively, the “Seller
Indemnified Parties”)
harmless from and against any and all Losses incurred in connection with,
arising out of, resulting from or incident to:
(1) any
Breach or inaccuracy of any representation or warranty of Buyer set forth in
this Agreement or contained in any certificate delivered by or on behalf of
Buyer pursuant to this Agreement;
(2) any
Breach of any covenant or other agreement made by Buyer in or pursuant to this
Agreement;
(3) after
the
Closing, any Assumed Liability; or
(4) any
Liability with respect to the Rehired Employees, including, without limitation,
any Liability arising out of or related to termination of their employment
and
any claim for unfair labor practices, but only to the extent such Liability
arises from actions taken by Buyer after the Closing Date.
(D) The
term
“Losses” as used in this Section
8.2
is not
limited to matters asserted by third parties against any indemnified party,
but
includes Losses incurred or sustained by an indemnified party in the absence
of
third party claims. Payments by an indemnified party of amounts for which such
indemnified party is indemnified under this Article
VIII
shall
not be a condition precedent to recovery.
8.3 Limitations
on Indemnification for Certain Breaches.
An
indemnifying party shall not have any Liability under Section
8.2(A)
or
8.2(B)
for any
Claims unless the aggregate amount of Losses to the indemnified parties finally
determined to arise thereunder exceeds Fifty Thousand Dollars ($50,000) (the
“Threshold
Amount”),
in
which event the indemnifying party shall be required to pay the full amount
of
such Losses in excess of the Threshold Amount; provided, however, that the
maximum liability of any party hereunder shall be limited to the consideration
received by such party under this Agreement.
43
8.4 Indemnification
Procedures.
(A) In
the
event that any Legal Proceeding shall be instituted or any claim or demand
shall
be asserted (individually and collectively, a “Claim”)
by any
Person in respect of which payment may be sought under this Article
VIII
(regardless of the provisions of Section 8.3),
the
indemnified party shall reasonably and promptly cause written notice (a
“Claim
Notice”)
of the
assertion of any Claim of which it has knowledge which is covered by this
indemnity to be delivered to the indemnifying party; provided,
however,
that
the failure of the indemnified party to give the Claim Notice shall not release,
waive or otherwise affect the indemnifying party’s obligations with respect
thereto, except to the extent that the indemnifying party can demonstrate actual
loss and material prejudice as a result of such failure. If the indemnifying
party shall notify the indemnified party in writing within five (5) Business
Days (or sooner, if the nature of the Claim so requires) that the indemnifying
party shall be obligated under the terms of its indemnity hereunder in
connection with such lawsuit or action, then the indemnifying party shall be
entitled, if it so elects at its own cost, risk and expense, (i) to take control
of the defense and investigation of such lawsuit or action, (ii) to employ
and
engage attorneys of its own choice, but, in any event, reasonably acceptable
to
the indemnified party, to handle and defend the same unless the named parties
to
such action or proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and the indemnified party has
been
advised in writing by counsel that there may be one or more material legal
defenses available to such indemnified party that are different from or
additional to those available to the indemnifying party, in which event the
indemnified party shall be entitled, at the indemnifying party’s cost, risk and
expense, to a single firm of separate counsel (plus any necessary local
counsel), all at reasonable cost, of its own choosing, reasonably acceptable
to
the indemnifying party and (iii) to compromise or settle such lawsuit or action,
which compromise or settlement shall be made only with the prior written consent
of the indemnified party, such consent not to be unreasonably withheld or
delayed.
(B) If
the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Losses indemnified against hereunder,
fails to notify the indemnified party of its election as provided in this
Section
8.4
or
contests its obligation to indemnify the indemnified party for such Losses
under
this Agreement, the indemnified party may defend against, negotiate, settle
or
otherwise deal with such Claim. If the indemnified party defends any Claim,
then
the indemnifying party shall reimburse the indemnified party for the Losses
incurred in defending such Claim upon submission of periodic bills. If the
indemnifying party shall assume the defense of any Claim, the indemnified party
may participate, at its own expense, in the defense of such Claim; provided,
however,
that
such indemnified party shall be entitled to participate in any such defense
with
separate counsel at the expense of the indemnifying party if (i) so requested
by
the indemnifying party to participate or (ii) in the reasonable opinion of
counsel to the indemnified party, a material conflict or potential material
conflict exists between the indemnified party and the indemnifying party that
would make such separate representation required; and provided,
further,
that
the indemnifying party shall not be required to pay for more than one such
counsel for all indemnified parties in connection with any Claim. If the
indemnifying party shall assume the defense of any Claim, the indemnifying
party
shall obtain the prior written consent of the indemnified party before entering
into any settlement of such Claim or ceasing to defend such Claim if, pursuant
to or as a result of such settlement or cessation, injunctive or other equitable
relief shall be imposed against the indemnified party or if such settlement
or
cessation does not expressly and unconditionally release the indemnified party
from all Liabilities or obligations with respect to such Claim, with prejudice.
The parties hereto agree to cooperate fully with each other in connection with
the defense, negotiation or settlement of any Claim.
44
ARTICLE
IX.
MISCELLANEOUS
9.1 Publicity.
No
party to this Agreement shall issue any press release or make any public
announcement regarding the transactions contemplated by this Agreement without
the prior written approval of the other party.
9.2 Confidential
Information.
The
parties acknowledge that the transaction described in this Agreement is of
a
confidential nature and shall not be disclosed except to Representatives and
Affiliates, or as required by Law, until such time as the parties make a public
announcement regarding the transaction as provided in Section
9.1.
No
party shall make any public disclosure of the specific terms of this Agreement,
except as required by Law. In connection with the negotiation of this Agreement
and preparation for the consummation of the transactions contemplated hereby,
each party acknowledges that it will have access to confidential information
relating to the other party. Such confidential information shall be subject
to
the Confidentiality Agreement and kept confidential. Notwithstanding anything
to
the contrary set forth herein or in any other written or oral understanding
or
agreement to which the parties hereto are parties or by which they are bound,
the parties hereto acknowledge and agree that any obligations of confidentiality
contained herein and therein shall not apply to the tax treatment and tax
structure of the transactions contemplated hereby upon the earlier to occur
of
(i) the date of the public announcement of discussions relating to the
transactions contemplated hereby, (ii) the date of the public announcement
of
the transactions contemplated hereby, or (iii) the Agreement Date, all within
the meaning of Treasury Regulations Section 1.6011-4; provided, however, that
each party hereto recognizes that the privilege each has to maintain, in its
sole discretion, the confidentiality of a communication relating to the
transactions contemplated hereby, including a confidential communication with
its, his or her attorney or a confidential communication with a federally
authorized tax practitioner under Section 7525 of the Code, is not intended
to
be affected by the foregoing.
9.3 Termination
Events.
(A) This
Agreement may be terminated at any time prior to the Closing:
(1) by
the
mutual written agreement of Buyer and Seller;
(2) by
Buyer
or Seller:
(a) on
or
after August 31, 2007 if the Closing shall not have occurred by the close of
business on such date, provided
that
such date may, from time to time, be extended by either party (with written
notice to the other party) up to and including August 31, 2007, in the event
that the conditions set forth in Section
7.1(A),
(B),
(C),
(F),
or
(G)
or
Section
7.2(A),
(B),
(C),
(E)
or
(G)
have not
been fully satisfied (such date, as it may be extended, the “Outside
Date”);
and
provided further,
that
the terminating or extending party may not be in default of any of its
obligations hereunder and may not have caused the failure of the transactions
contemplated by this Agreement to have occurred on or before such date;
or
45
(b) if
there
shall be in effect a final nonappealable Order of a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby; it being agreed that
the
parties hereto shall promptly appeal any adverse determination which is
appealable (and pursue such appeal with reasonable diligence);
(3) by
Buyer
if there is a breach of any representation or warranty set forth in Article
IV
or any
covenant or agreement to be complied with or performed by Seller pursuant to
the
terms of this Agreement and which breach (individually or in the aggregate)
could reasonably be expected to have a Condition-Related Material Adverse Effect
or the failure of a condition set forth in Section
7.2
to be
satisfied (and such condition is not waived in writing by Buyer) on or prior
to
the Closing Date, or the occurrence of any event which results or would result
in the failure of a condition set forth in Section
7.2
to be
satisfied on or prior to the Closing Date, provided
that
Buyer may not terminate this Agreement prior to the Closing if Seller has not
had an adequate opportunity to cure such failure;
(4) by
Seller
if there is a breach of any representation or warranty set forth in Article
V
or of
any covenant or agreement to be complied with or performed by Buyer pursuant
to
the terms of this Agreement and which breach (individually or in the aggregate)
could reasonably be expected to have a Condition-Related Material Adverse Effect
or the failure of a condition set forth in Section
7.1
to be
satisfied (and such condition is not waived in writing by Seller) on or prior
to
the Closing Date, or the occurrence of any event which results or would result
in the failure of a condition set forth in Section
7.1
to be
satisfied on or prior to the Closing Date; provided
that
Seller may not terminate this Agreement prior to the Closing Date if Buyer
has
not had an adequate opportunity to cure such failure.
(B) Upon
the
occurrence of any valid termination event set forth in this Section
9.3,
Buyer
and/or Seller, as applicable, shall deliver written notice to the
non-terminating party. Upon delivery of such notice, this Agreement shall
terminate and the transfer of the Purchased Assets contemplated hereby shall
be
deemed to have been abandoned without further action by Buyer or Seller. Upon
such termination, Buyer shall deliver or destroy all confidential information
regarding Seller in accordance with the Confidentiality Agreement, Seller shall
deliver or destroy all confidential information related to Buyer to which Seller
had access in connection with the negotiation of this Agreement and the
consummation of the transactions contemplated hereby.
(C) In
the
event that this Agreement is validly terminated as provided in this Section
9.3,
then
each of the parties shall be relieved of their respective duties and obligations
arising under this Agreement after the date of such termination and such
termination shall be without Liability to Buyer or Seller; provided,
however,
that
nothing in this Section
9.3
shall
relieve Buyer or Seller of any Liability for any willful breach of this
Agreement occurring prior to the proper termination of this
Agreement.
46
9.4 Expenses.
Seller,
on one hand, and Buyer, on the other hand, shall each bear its own expenses,
including attorneys’, accountants’ and other professionals’ fees, incurred in
connection with the negotiation and execution of this Agreement and each other
agreement, document and instrument contemplated by this Agreement and the
consummation of the transactions contemplated hereby and thereby.
Notwithstanding the foregoing, Buyer shall reimburse Seller the reasonable
out-of-pocket cost incurred by Seller in having audited financial statements
prepared in the event this Agreement is terminated by Seller pursuant to
Section 9.3(A)(4)
9.5 Specific
Performance.
Seller
and Buyer acknowledge and agree that the Breach of this Agreement by a party
would cause irreparable damage to the other and that the non breaching party
may
not have an adequate remedy at law. Therefore, the obligations of Seller and
Buyer under this Agreement, including, without limitation, Seller’s obligation
to transfer the Purchased Assets to Buyer and Buyer’s obligation to purchase the
Purchased Assets from Seller, shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which any party may have under this Agreement
or
otherwise.
9.6 Waiver
of Jury Trial.
Each
party hereto hereby expressly waives any right to trial by jury of any claim,
demand, action or cause of action arising under or in connection with this
Agreement or the transactions contemplated hereby.
9.7 Entire
Agreement; Amendments and Waivers.
This
Agreement, including the schedules and exhibits hereto and together with the
Confidentiality Agreement and the Ancillary Agreements, represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of
any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including, without limitation, any investigation
by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with, nor shall it diminish or obviate in
any
way, any representation, warranty, covenant or agreement contained herein or
in
any Ancillary Agreement. The waiver by any party hereto of a Breach of any
provision of this Agreement shall not operate or be construed as a further
or
continuing waiver of such Breach or as a waiver of any other or subsequent
Breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise
of
any other right, power or remedy. All remedies hereunder are cumulative and
are
not exclusive of any other remedies provided by law. No supplement, modification
or waiver of this Agreement shall be binding unless executed in writing by
the
party to be bound thereby.
9.8 Governing
Law.
This
Agreement shall be construed, interpreted and the rights of the parties
determined in accordance with the laws of the State of Delaware, without
reference to principles of conflicts of laws.
47
9.9 Headings.
The
titles, captions or headings of the Articles and Sections herein are for
convenience of reference only and are not intended to be a part of or to affect
or restrict the meaning or interpretation of this Agreement.
9.10 Notices.
All
notices, requests, approvals, consents, demands, claims and other communications
required or permitted to be given under this Agreement shall be in writing
and
shall be served personally, or sent by a national overnight delivery or courier
company, or by U.S. registered or certified mail, postage prepaid, return
receipt requested, and addressed as follows:
If
to Buyer, to:
|
|
Tix
Corporation
00000
Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxx
Xxxx, XX 00000
Attention:
Xxxxx Xxxxxxx
Tel:
(000) 000-0000
Fax:
(000) 000-0000
|
|
with
a copy to:
|
|
Xxxx
& Xxxxx
0000
Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxx Xxxxxxxx
Tel:
(000) 000-0000
Fax:
(000) 000-0000
|
|
If
to Seller, to:
|
|
Exhibit
Merchandising LLC
00000
Xxxxxxx Xxxxxxx, Xxxx X
Xxxxxxxxxx,
XX 00000
Attention:
Xxx X. Xxxxxxxx
Tel:
(000) 000-0000
Fax:
(000) 000-0000
|
|
with
a copy to:
|
|
Xxxxxxxxxxxx
XxXxxxx Xxxxxxx & Xxxxxx, P.C.
Four
Gateway Center
000
Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx,
XX 00000
Attention:
H. Yale Gutnick
Tel:
(000) 000-0000
Fax:
(000) 000-0000
|
48
Any
such
notices shall be deemed delivered upon delivery or refusal to accept delivery
as
indicated in writing by the Person attempting to make personal service, on
the
U.S. Postal Service return receipt, or by similar written advice from the
overnight delivery company; provided,
however,
that if
any such notice shall also be sent by electronic transmission device, such
as
telex, telecopy, fax machine or computer to a fax number set forth above, such
notice shall be deemed given at the time and on the date of machine transmittal
(except if sent after 5:00 p.m. recipient’s time, in which case the notice shall
be deemed given at 9:00 a.m. on the next Business Day) if the sending party
receives a written send verification on its machine and sends a duplicate notice
on the same day or the next Business Day by personal service, registered or
certified U.S. mail, or overnight delivery in the manner described above. Each
party hereto shall make an ordinary, good faith effort to ensure that it will
accept or receive notices that are given in accordance with this Section
9.10,
and
that any Person to be given notice actually receives such notice. Any party
to
whom notices are to be sent pursuant to this Agreement may from time to time
change its address and/or facsimile number for future communication hereunder
by
giving notice in the manner prescribed herein to all other parties hereto,
provided that the address and/or facsimile number change shall not be effective
until five (5) Business Days after the notice of change has been
given.
9.11 Severability.
In the
event that any one or more of the provisions contained in this Agreement or
in
any other instrument referred to herein, shall, for any reason, be held to
be
invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such
instrument.
9.12 Binding
Effect; Third Party Beneficiaries; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Nothing in this Agreement
shall create or be deemed to create any rights as third party beneficiaries
to
this Agreement in any Person not a party to this Agreement, except as provided
below; provided,
however,
that
any Person that is not a party to this Agreement but, by the terms of
Section
8.2,
is
entitled to indemnification, shall be considered a third party beneficiary
of
this Agreement, with full rights of enforcement as though such Person was a
signatory to this Agreement. No assignment of this Agreement or of any rights
or
obligations hereunder may be made by either Seller or Buyer (by operation of
law
or otherwise) without the prior written consent of the other party hereto and
any attempted assignment without the required consent shall be void;
provided,
however,
that
Buyer may assign this Agreement and any or all rights or obligations hereunder
(including, without limitation, Buyer’s rights to acquire the Purchased Assets
and Buyer’s rights to seek indemnification in accordance with Article
VIII)
to any
Affiliate of Buyer. Upon any such permitted assignment, unless the context
otherwise requires, the references in this Agreement to Buyer shall also apply
to any such assignee; provided,
however,
that
Buyer shall nevertheless remain primarily liable for its obligations under
this
Agreement.
9.13 Attorneys’
Fees and Costs.
In the
event of any action at law or in equity between the parties hereto to enforce
any of the provisions hereof, the unsuccessful party to such litigation shall
pay to the successful party all costs and expenses, including reasonable
attorneys’ fees, incurred therein by such successful party; and if such
successful party shall recover judgment in any such action or proceeding, such
costs, expenses and reasonable attorneys’ fees may be included in and as part of
such judgment..
49
9.14 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
9.15 Legends.
Seller
understands that the stock certificates representing the Common Stock shall
bear
any legend as required by the "blue sky" laws of any state and a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
9.16 Representation
by Counsel.
Each party hereto represents and agrees with each other that it has been
represented by or had the opportunity to be represented by independent counsel
of its own choosing, and that it has had the full right and opportunity to
consult with its respective attorney(s) to the extent, if any, that it desired,
it availed itself of this right and opportunity, that it or its authorized
officers (as the case may be) have carefully read and fully understand this
Agreement in its entirety and have had it fully explained to them by such
party’s respective counsel, that each is fully aware of the contents thereof and
its meaning, intent and legal effect, and that it or its authorized officer
(as
the case may be) is competent to execute this Agreement and has executed this
Agreement free from coercion, duress or undue influence.
9.17 Schedules.
In the
event of any inconsistency between the statements in the body of this Agreement
and those in the Disclosure Schedule (other than an exception expressly set
forth as such in the Disclosure Schedule with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
9.18 No
Interpretation Against Drafter.
This
Agreement is the product of negotiations between the parties hereto represented
by counsel and any rules of construction relating to interpretation against
the
drafter of an agreement shall not apply to this Agreement and are expressly
waived.
(SIGNATURE
PAGE FOLLOWS)
50
IN
WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
has
caused this Agreement to be duly executed on its respective behalf by its
respective officer(s) thereunto duly authorized, as of the day and year first
above written.
“Buyer”
|
||
TIX
CORPORATION,
a
Delaware corporation
|
||
|
|
|
By: | ||
Name: Xxxxx Xxxxxxx |
||
Title: Chief Executive Officer |
“Seller”
|
||
EXHIBIT
MERCHANDISING LLC,
an
Ohio limited liability company
|
||
|
|
|
By: | ||
Name: Xxx X. Xxxxxxxx |
||
Title: President |
“Members”
|
||
Magic
Arts & Entertainment-Florida, Inc.
|
||
|
|
|
By: | ||
Name: Xxx X. Xxxxxxxx |
||
Title: President |
Name: Xxxx
X. Xxxxxx as Trustee of
The Xxxx X. Xxxxxx
Trust
|
51
LIST
OF EXHIBITS AND ANNEXES
Annexes
Annex
I
|
Year
End Financial Statements
|
|
Annex
II
|
Interim
Financial Statements
|
Exhibits
Exhibit
A
|
Assignment
of Contract Rights
|
|
Exhibit
B
|
Assignment
of Trademarks and Domain Names
|
|
Assumption
Agreement
|
||
Exhibit
D
|
Xxxx
of Sale
|
|
Exhibit
E-1
|
Form
of Consulting Agreement
|
|
Exhibit
E-2
|
Form
of Employment Agreement
|
|
Exhibit
E-3
|
Employee
List
|
|
Exhibit
E-4
|
Employees
Receiving Company Shares
|
|
Exhibit
F
|
Non-Competition
Agreement
|
|
Allocation
|
||
Exhibit
H
|
Voting
Agreement
|
52
REPRESENTATIONS
AND WARRANTIES
OF
SELLER AND THE MEMBERS
Required
Schedules and Attachments
Schedule
1.3 list of all contracts to be assigned
·
|
ADP
Screening and Selection Services
|
·
|
CHMC
- Cartouche Paper Kiosk Usage
|
·
|
Troika
Entertainment - JCS Merchandising
Agreement
|
·
|
AEI
(Pirates) Merchandising Agreement
|
·
|
AEI
(Egyptian) Merchandising Agreement
|
·
|
Canadian
Retail Solutions - Remote Data
Backup
|
·
|
Canadian
Retail Solutions - Platinum Support
Plan
|
·
|
Canadian
Retail Solutions/Island Pacific - POS Software Usage
Agreement
|
·
|
KPMG
- UK Business Establishment
consulting/Advice
|
·
|
KPMG
- UK Business Tax and Registration filing
assistance
|
·
|
National
Geographic - SECOND AMMENDMENT re: purchase of catalogs at
wholesale
|
·
|
Museum
Music - Music CD Production for
resale
|
·
|
Antiken
Museum Basel - Tut Image usage
license
|
·
|
Brinks
- Cash pickups in Philly
|
·
|
UniteU
- Beta Test Agreement re: Shift 4 Credit Card
Processing
|
·
|
UPC
Code (barcoding) registrations
|
·
|
Cingular/AT&T
Wireless-Cell Phone for Xxxx and
Xxxx
|
·
|
Verizon
Wireless - Cell Phone for Xxxxx
Xxxxxx
|
·
|
Employment
Agreements:
|
·
|
Xxxxxx
Xxxxxx
|
·
|
Xxxx
Xxxxxxxx
|
·
|
Xxxxx
Xxxxxx (simple form)
|
REPRESENTATIONS
AND WARRANTIES
OF
SELLER AND THE MEMBERS
Required
Schedules and Attachments
·
|
AJ
Eldousky (simple form)
|
TERMINATE:
·
|
Field
Museum Consulting Agreement
|
·
|
MCS
- Museum Consulting Services,
Inc.
|
·
|
National
City Bank - Line of Credit
|
Schedule
1.3 list of all leases to be assigned
·
|
CRI
Properties - Warehouse Lease
|
·
|
AEI/AEG
Sublease of Warehouse Space
|
·
|
Xxxxxxx
Management - Philadelphia managers
apartment
|
·
|
Port
Richmond Self Storage - Philly off-site
warehouse
|
·
|
Xxxxxx
Commerce Building - Cincinnati off-site
storage
|
·
|
ADT
- Security system at Warehouse
|
Schedule
2.2 list of accounts payable attributable to inventory
Will
be
compiled on closing date as the figure routinely moves from a direct print
of AP
listing from accounting software.
Schedule
2.4 list of shares to be distributed to our staff
Xxxx
Xxxxxxx
|
30,000
|
|||
XxxxXxx
Xxxxxxx
|
15,000
|
|||
Xxxxxxx
Xxxxxxxx
|
15,000
|
|||
Xxxxx
Xxxxxxxx
|
15,000
|
|||
Xxxxxx
Xxxxxx
|
15,000
|
|||
Xxxxx
Xxxxxxx
|
10,000
|
|||
Xxxx
Xxxxx
|
10,000
|
|||
Xxxx
Xxxxx
|
7,500
|
|||
Xxxx
Xxxxxxxx
|
10,000
|
|||
Xxxxx
Xxxxxxxx
|
7,500
|
|||
Xxxx
Xxxxxx
|
5,000
|
2
REPRESENTATIONS
AND WARRANTIES
OF
SELLER AND THE MEMBERS
Required
Schedules and Attachments
Xxxxx
Xxxxxxx
|
5,000
|
|||
Xxxx
Xxxxxxxx
|
5,000
|
|||
Xxxxxxxx
Xxxxxxx
|
5,000
|
|||
Xxx
Xxxxx
|
5,000
|
|||
Xxxxx
Xxxxxxxx
|
5,000
|
|||
Xxxxxxx
Xxxxxxxx
|
5,000
|
|||
Xxxx
Xxxxxxx
|
5,000
|
|||
Xxxxxx
Xxxx
|
5,000
|
|||
Xxxxx
Xxxxxxxx
|
5,000
|
|||
Xxxxxxx
Xxxxxx
|
5,000
|
|||
Xxxxxxx
Xxxxxx
|
5,000
|
Schedule
4.19 list of insurance policies
·
|
General
Liability
|
·
|
Inland
Marine
|
·
|
Ohio
Worker’s Compensation
|
·
|
All
States Worker’s Compensation
|
·
|
Anthem
blue Cross Blue Shield Employee Health
Benefits
|
·
|
Currently
negotiating Ocean Cargo between Chubb and
Expeditors
|
Schedule
4.5(a) list of consents required
·
|
Xxx
Xxxxxxxx f/b/o Magic Arts and Entertainment, - Florida,
Inc.
|
·
|
Xxx
Xxxxx f/b/o Magic Arts and Entertainment, - Florida,
Inc.
|
·
|
Xxxx
Xxxxxx f/b/o Xxxx Xxxxxx Trust
|
Schedule
4.7 list of Purchased Assets constituting tangible personal property where
the
value of an item exceeds $1K.
See
attached Excel Schedule titled “Fixed Assets Schedule.xls”
3
REPRESENTATIONS
AND WARRANTIES
OF
SELLER AND THE MEMBERS
Required
Schedules and Attachments
Schedule
4.8 list of liabilities relating to the Purchased
Assets
All
assets are owned outright, no balances are owed.
Schedule
4.9 list any changes in the business not in the ordinary course since
March 31,2007
·
|
Our
newest exhibit, “Real Pirates” opened in Cincinnati on June
29
|
·
|
Tut
2 and Ramses exhibition contract clarification is
signed
|
·
|
Pirates
Exhibition assignment rights clause has been
amended
|
·
|
Hired
a “Corporate Controller” Xxxxx Xxxxxxxx (position was in overhead staffing
budgets) in May
|
·
|
Hired
an additional “revenue analyst” bookkeeper (position has been budgeted for
and approved by Xxxxx Xxxxxxx) as well in
July
|
·
|
Changed
Insurance brokers from USI (headquartered in Florida) to Insurance
Partners, a local agency, however kept same policies in place - just
a
change in the “agent of record”.
|
Schedule
4.10(a) Exception to timely filing of tax returns
None
that
we are aware of.
Schedule
4.10(c) tax elections
See
section 13 of OPERATING AGREEMENT:
4
REPRESENTATIONS
AND WARRANTIES
OF
SELLER AND THE MEMBERS
Required
Schedules and Attachments
13.
Tax
Elections.
(a)
Elections
to be Made.
To the
extent permitted by applicable tax law, the Company may make the following
elections on the appropriate tax returns:
(1)
to
adopt the calendar year as the Company’s taxable year;
(2)
to
adopt the cash method of accounting and to keep the Company’s books and records
on the income-tax method;
(3)
if a
transfer of a Membership Interest as described in section 743 of the
Code
occurs, on written request of the transferee, or if a distribution of
Company
property is made on which gain described in section 734(b)(1)(A) of the
Code is
recognized or there is an excess of adjusted basis as described in section
734(b)(1)(B) of the Code, to elect, pursuant to section 754 of the Code,
to
adjust the basis of Company properties;
(4)
to
elect to amortize the organizational expenses of the Company and the
start-up
expenditures of the Company ratably over a period of 60 months as permitted
by
sections 195 and 709(b) of the Code; and
(5)
any
other election the Members may deem appropriate and in the best interests
of the
Members.
(b)
No
Election of Corporate Taxation.
Neither
the Company nor any Member may make an election for the Company to be
taxable as
a corporation for federal income tax purposes or to
be
excluded from the application of the provisions of subchapter K of chapter
1 of
subtitle A of the Code or any similar provisions of applicable state
law, and no
provision of this Agreement shall be construed to sanction or approve
such an
election.
Schedule
4.10(k) list of offices outside the US
None
at
this time,. Though we will have an office in London as we open Tut starting
in
October/November. That address will be:
Xxx
X0
Xxx
Xxxxxx
Xxxxxxxxx
Xxxxxx
Xxxxxx
XX00 ODX
Schedule
4.10(l) parachute payments
None
that
we are aware of.
Schedule
4.12(a) list of intellectual property owned
Exhibit
Merchandising LLC name and logo:
![exhibit logo](https://www.sec.gov/Archives/edgar/data/925956/000114420407042580/exhibit.jpg)
Schedule
4.12(a) list of IP licensed
·
|
etail
Pro Point of Sale Software
|
5
REPRESENTATIONS
AND WARRANTIES
OF
SELLER AND THE MEMBERS
Required
Schedules and Attachments
·
|
QuickBooks
Pro Accounting Software
|
·
|
Other
various ordinary computer software
|
Schedule
4.12(c)list of licenses
·
|
Antiken
Museum Basel - Tut Image usage
license
|
·
|
Federal
Fish and Wildlife Permit (import of Mother of Pearl from
Egypt)
|
·
|
FCC
Radio License
|
·
|
US
Department of Homeland Security Bureau of Customs and Border Protection
“Customs Bond” - Continuous entry (renews August
9)
|
Schedule
4.13 list of all contracts
Captured
in 1.3 above.
Schedule
4.5(b) exceptions to assignability of contracts
·
|
AEI/AEG
- Pirates Contract can be assigned with written authorization
xxx
|
·
|
NOTE:
An amendment has been signed
|
·
|
Antiken
Museum Basel says “non transferable” in section
1
|
·
|
Port
Richie Self Storage is not assignable - Section
19
|
·
|
Xxxxxxx
Management may be assigned with written notice - Section
6
|
·
|
AEI/AEG
Sublease requires written notice and acceptance - Section 12.A and
12.B
|
·
|
CRI
Properties requires written notice and acceptance - section
8.2
|
·
|
UniteU
Beta Test Agreement - Section 7 says no
assignments.
|
·
|
National
City Bank Line of Credit - Not
assignable
|
6
REPRESENTATIONS
AND WARRANTIES
OF
SELLER AND THE MEMBERS
Required
Schedules and Attachments
Schedule
4.14 list of Employee Benefit Plans
·
|
Anthem
Blue Cross Blue Shield - Health vision dental and life - renews
9/15/07
|
·
|
Fidelity
Investments ADP Simple XXX retirement
plan
|
Schedule
4.18 list of permits; exceptions to compliance or
termination
Sales
tax
Permits are held in:
·
|
State
of Ohio
|
·
|
State
of Pennsylvania
|
·
|
State
of Illinois (in process of terminating this account as we have left
Illinois)
|
·
|
We
are in process of opening VAT accounts in the United Kingdom for
opening
of Tut in November
|
Schedule
4.20(a)list of inventory
Will
be
compiled on closing date as the figure routinely moves from a direct print
of AP
listing from Point of Sale/Inventory Control software.
Schedule
4.20(b)accounts receivable
Will
be
compiled on closing date as the figure routinely moves from a direct print
of AP
listing from accounting software.
Schedule
4.21 Related party transaction
·
|
Xxxx
Xxxxxx is the managing member of the Xxxx Xxxxxx Trust, 1/3 owner
of EM.
Xxxx runs Arts and Exhibitions International the firm who EM has
its main
exhibition contracts with.
|
·
|
Xxx
Xxxxxxxx and Xxx Xxxxx (Principles of Magic Arts and Entertainment
-
Florida, Inc., 2/3 member of EM) were also involved as equity participants
in AEI prior to its sale to AEG (a fully unrelated party) in November
2006. Xxx and Xxx no longer have any duties or responsibilities with
regard to the management of that company, however they do maintain
“earn
out” clauses with regards to the purchase agreement related to that
transaction.
|
7
REPRESENTATIONS
AND WARRANTIES
OF
SELLER AND THE MEMBERS
Required
Schedules and Attachments
Schedule
4.22 Brokers
None
that
we are aware of
8