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EXHIBIT 10.15
CONTRIBUTION AND ACQUISITION AGREEMENT
This CONTRIBUTION AND ACQUISITION AGREEMENT, dated as of February 3,
1999 (the "Agreement"), among COLLECTORS UNIVERSE, INC., a Delaware corporation
("CUI"), and XXX X. XXXXXX RARE COINS, INC., a Kansas corporation (the
"Company") and XXX X. XXXXXX, an individual who is the sole stockholder of the
Company ("Stockholder").
RECITALS:
A. CUI has been formed, organized and capitalized under the laws of the
State of Delaware for the purposes of effecting the transactions contemplated in
this Agreement and the other agreements listed on Exhibit A hereto (the "Other
Contribution Agreements") and to conduct such other business and affairs as the
Board of Directors of CUI may from time to time find to be in the best interests
of CUI.
B. Each of the corporations or other business entities whose shares,
ownership interests or assets are being contributed to CUI pursuant to this
Agreement and or the Other Contribution Agreements (hereinafter sometimes
referred to collectively as the "Founding Companies") is engaged in the business
of marketing and selling, or providing services to businesses that market and
sell, Collectibles (as defined in Section 9.2 of this Agreement) at retail
establishments, by mail order, at trade shows or auctions or over the internet
or by other means of electronic commerce. CUI intends to integrate the products
and services offered by each of the Founding Companies in order to expand the
sale of their products, increase the efficiencies and reduce the operating costs
of the Founding Companies and to increase their presence and expand their sales
over the Internet.
C. The Company is engaged in the business of marketing and selling rare
currencies that are Collectibles (the "Business"). CUI desires to acquire, and
the Company and Stockholder desire to contribute and transfer and convey to CUI
the Business and the Contributed Assets (as hereinafter defined) of the
Business, in exchange for CUI shares and other consideration, all on the terms
and conditions set forth herein, at or about the same time as and in conjunction
with the consummation of the similar transactions contemplated by the Other
Contribution Agreements.
D. This Agreement is being entered into by the parties, and the Other
Contribution Agreements are being or have been entered into by CUI and the other
parties thereto, as part of a unified plan of contribution and exchange of stock
(the "Plan") that is intended by the parties to qualify for non-recognition
treatment under Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code"). However, none of the parties to this Agreement, nor any of the
parties to the Other Contribution Agreements, has made or is making any
representations or warranties with respect to whether the transactions being
consummated pursuant to and as part of such Plan will comply with the
requirements of Code Section 351 or as to the consequences, under applicable
federal, state or other tax laws, of such transactions to the parties to this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, CUI, and the Company and Stockholder hereby agree as follows:
ARTICLE I
CONTRIBUTION OF ASSETS; EXCHANGE OF CONSIDERATION
1.1 The Contributed Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as hereinafter defined),
the Company shall contribute, transfer, convey and assign to CUI, and CUI shall
acquire from the Company, free and clear of any and all Liens and Encumbrances
(as hereinafter defined), the Business and the assets that are used in or
necessary for the
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conduct of the Business, which are described in Exhibit B hereto ("Contributed
Assets"). The Company is not contributing or transferring to CUI and CUI is not
acquiring from the Company, any of the cash (other than as provided in Section
5.6 hereof) or any accounts receivables or equipment, leasehold improvements or
other tangible assets owned by the Company or any inventory owned by and in the
possession of the Company on the Closing Date (the "Retained Assets").
1.2 Acquisition Consideration. On the terms and subject to the
conditions that are set forth in this Agreement, at the Closing CUI shall, as
consideration for the contribution of the Contributed Assets and Business to CUI
issue to Stockholder (i) an aggregate of Seven Hundred Sixty Thousand (760,000)
validly issued, fully paid and nonassessable shares of Common Stock of CUI ("CUI
Shares"), (ii) a promissory note, substantially in the form of Exhibit C hereto
(the "CUI Note") in the principal amount of One Million Dollars and payable six
(6) months from the Closing Date, and (iii) the sum of $100,000 in cash (the
"Cash Payment"). The CUI Shares and CUI Note and the Cash Payment shall
constitute and will sometimes be referred to herein as the "Acquisition
Consideration."
1.3 Allocation of Purchase Price. The amount of the Acquisition
Consideration shall be allocated among the Contributed Assets as set forth in
Exhibit D attached hereto (the "Consideration Allocation"). Each of the parties,
when reporting the transactions consummated hereunder in their respective Tax
Returns (as hereinafter defined), before any governmental agency charged with
the collection of any tax or in any judicial proceeding, shall allocate the
Acquisition Consideration in a manner that is consistent with the Consideration
Allocation set forth in Exhibit D hereto. Additionally, each of the parties will
comply with, and furnish the information required by, Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"), and any regulations
thereunder.
1.4 Closing. The consummation of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Xxxxxxxxx Xxxxx Xxxxxxx &
Xxxxx, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, on
the third (3rd) business day after satisfaction or waiver of the conditions
precedent set forth in Article VI of this Agreement (the "Closing Date"),
provided, however, that, if the Closing occurs on or before March 12, 1999, the
transactions contemplated hereby shall be effective for accounting purposes as
of February 5, 1999 (the "Effective Date"). At the Closing, (i) the Company
shall execute and deliver a Xxxx of Sale and Assignment Agreement substantially
in the form of Exhibit E hereto (the "Xxxx of Sale") and (ii) a non-competition
agreement in the form of Exhibit F hereto (the "Company Non-Competition
Agreement"), and (ii) the Stockholder shall execute and deliver a Stockholders
Agreement substantially in the form of Exhibit G hereto and a non-competition
agreement substantially in the form of Exhibit H hereto (respectively, the
"Stockholders Agreement" and the "Stockholders Non-Competition Agreement" and,
collectively with the Company Non-Competition Agreement (the "Additional
Agreements"). In exchange therefor, CUI shall deliver to Stockholder a
certificate evidencing the CUI Shares, issued in the name of Stockholder, the
CUI Note made payable to the order of the Stockholder and the Cash Payment. At
the Closing, the parties also shall execute and deliver the additional documents
and instruments listed on Exhibit I hereto (the "Closing Documents").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND STOCKHOLDER
The Company and the Stockholder hereby jointly and severally represent
and warrant to CUI that, except as set forth in the written disclosure schedule
delivered on or prior to the date hereof by the Company to CUI that is arranged
in paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article II (the "Company Disclosure Schedule"):
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas and it has the requisite corporate
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power and authority to own, lease and operate the Contributed Assets and to
conduct the Business as it is now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and Approvals would not have a Material Adverse Effect (as hereinafter defined).
The Company is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, leased or operated by it or the nature of its activities
make such qualification or licensing necessary, except for any such failure to
be so duly qualified or licensed and in good standing that would not have a
Material Adverse Effect. Except as set forth in Section 2.1 of the Company
Disclosure Schedule, the Company does not directly or indirectly own any
ownership, equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, limited liability company, partnership, joint venture or other
business association or entity. The term "Material Adverse Effect," when used in
connection with the Company or the Business, means any change, effect or
circumstance that is materially adverse to the Business, or its financial
condition, assets, results of operations or prospects, or the ability of CUI to
conduct the Business after the Closing, other than any such changes,
circumstances or effects that are described in the Company Disclosure Schedule.
2.2 Articles of Incorporation and By-Laws. Stockholder has heretofore
furnished to CUI a complete and correct copy of its Articles of Incorporation
and By-Laws, as amended to date. Such Articles of Incorporation and By-Laws are
in full force and effect. The Company is not in violation of any of the
provisions of its Articles of Incorporation or By-Laws.
2.3 Capitalization. Stockholder is, and between the date hereof and
completion of the Closing shall be, the sole owner, beneficially and of record,
of all of the outstanding shares of capital stock of the Company.
2.4 Authority Relative to this Agreement.
(a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and the Company Non-Competition Agreement
and to perform its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Company Non-Competition Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate and stockholder action, and no other corporate or stockholder
proceedings or actions are necessary for or in connection therewith.
(b) This Agreement has been duly and validly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by CUI, this Agreement constitutes, and upon its execution and delivery by the
Company, the Company Non-Competition Agreement will constitute, a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as the enforceability thereof may be limited
by (i) bankruptcy, insolvency, reorganization, arrangement, moratorium, or other
similar laws relating to or affecting rights of creditors, and (ii) general
equitable principles, regardless of whether the issue of enforceability is
considered in a proceeding in equity or at law.
2.5 Material Contracts; No Conflict.
(a) Section 2.5 of the Company Disclosure Schedule includes a
list of all promissory notes, mortgages, contracts, leases, licenses, permits,
franchises, employment and severance agreements and all other agreements and
obligations to which the Company is a party or by which it is bound and (i)
which provide for payments either by or to the Company of more than $1,000 per
month or more than
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$15,000 in the aggregate, or (ii) which requires the giving of more than 30 days
notice or the payment of any amounts by the Company as a condition or
requirement of its termination or non-renewal by the Company, or (iii) as to
which a termination or non-renewal or a breach or default could have a Material
Adverse Effect on the Company, or (iv) which, in the absence of a the obtaining
of a consent or approval from the other party or parties thereto, would be
breached or violated by reason of the consummation of the transactions
contemplated hereby or (vi) which imposes any restrictions on the conduct of the
Company's business or any Liens or Encumbrances on the Contributed Assets
(collectively, the "Material Contracts"). The Company and Stockholder have
furnished true and correct copies of all such Material Contracts to the CUI or
its counsel. The Company is not in default of, and there is no event, condition
or circumstance which has occurred that, with the passage of time or the giving
of notice, or both, would constitute a default by the Company under, any of the
Material Contracts.
(b) Except as set forth in Section 2.5 of the Company
Disclosure Schedule, the execution, delivery and performance of this Agreement
by the Company and Stockholder and the execution, delivery and performance by
the Company of the Company Non-Competition Agreement, do not and will not, (i)
conflict with or violate the Articles of Incorporation or By-Laws of the
Company, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or by which its properties are
bound or affected, or (iii) require the consent or approval of any party to, or
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or impair the Company's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of any
Material Contract or Company Permit (as hereinafter defined), or result in the
creation of a Lien or Encumbrance on any of the Contributed Assets pursuant to
any Material Contract or Company Permit.
2.6 Compliance, Permits.
(a) Except as disclosed in Section 2.6 of the Company
Disclosure Schedule, the Company is not in default or violation of, (i) any law,
rule, regulation, writ, order, judgment or decree applicable to the Company or
by which any of its properties is bound or affected or (ii) any Material
Contract, and no event has occurred which, either with the passage of time or
the giving of notice, or both, would constitute a breach or violation of any
such law, rule, regulation, writ, order, judgment or decree or any Material
Contract.
(b) Except as disclosed in Section 2.6 of the Company
Disclosure Schedule, the Company holds and is in compliance with the terms of
all permits, licenses, easements, variances, exemptions, consents, certificates,
orders and approvals from governmental authorities which are material to the
ownership and use of the Contributed Assets or the operation of the Business as
it is now being conducted (collectively, the "Company Permits"), except where
any failure to have or to comply with any Company Permits would not have a
Material Adverse Effect on the Business. A list of the Company Permits is set
forth in Section 2.6 of the Company Disclosure Schedule. .
2.7 Financial Statements and Liabilities.
(a) Financial Statements. The Company and Stockholder have
furnished true and complete copies of the financial statements of the Company,
consisting of balance sheets as of, and related statements of income, cash flow
and stockholders equity for the twelve month period ended, December 31, 1997 and
1998 (the "Company Financial Statements"). The Company Financial Statements were
prepared on a accrual basis, in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be
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indicated in the footnotes thereto), and the Company Financial Statements fairly
present in all material respects the financial position of the Company as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods covered thereby.
(b) No Undisclosed Liabilities. Except as is disclosed in
Section 2.7 of the Company Disclosure Schedule, the Company does not have any
liabilities (absolute, accrued, contingent or otherwise), except (i) liabilities
that individually and in the aggregate are adequately provided for in the
Company's balance sheet (including any related notes thereto) as of December 31,
1998 included in the Company Financial Statement (the "1998 Company Balance
Sheet"), (ii) non-material liabilities which were incurred in the ordinary
course of business and were not required under generally accepted accounting
principles to be reflected on the 1998 Company Balance Sheet, or which were
incurred after December 31, 1998 in the ordinary course of business and
consistent with past practice and would not be required, under generally
accepted accounting principles, to be reflected on a Company balance sheet
prepared in accordance with GAAP.
2.8 Absence of Certain Changes or Events. Except as set forth in
Section 2.8 of the Company Disclosure Schedule, since January 1, 1999, the
Company has conducted its business in the ordinary course and there has not
occurred: (i) any damage to, destruction or loss of any of the Contributed
Assets(whether or not covered by insurance); (ii) the commencement or threat of
litigation or governmental proceeding or investigation, that, if adversely
determined against the Company, would have a Material Adverse Effect on the
Company or would interfere with the consummation of the transactions
contemplated hereby; (iii) any material revaluation by the Company of any of the
Contributed Assets; (iv) any other action or event that, if it had occurred
after the date of this Agreement and prior to the Closing, would have violated,
or required the consent of CUI under, Section 5.1 of this Agreement; (v) the
execution of any agreement to do any of the foregoing, or (vi) the occurrence of
any event or circumstance or the taking of any action that has had or might have
a Material Adverse Effect on the Company.
2.9 Absence of Litigation. Except as set forth in Section 2.9 of the
Company Disclosure Schedule, there are no claims, actions, suits, proceedings or
investigations (governmental or other) that are pending or, to the knowledge of
the Company or Stockholder, threatened against the Company, the Business or the
Contributed Assets, before any court, arbitrator or administrative, governmental
or regulatory authority or body, domestic or foreign. There are no facts or
circumstances known to the Company or the Stockholder which is reasonably likely
to result in the bringing of any such action or proceeding against the Company,
the Business or any of the Contributed Assets.
2.10 Employee Benefit Plans, Employment Agreements. Neither the Company
nor any trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with the
Company (an "ERISA Affiliate") maintains or, during the past 10 years has
maintained any employee pension plans (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
employee welfare plans (as defined in Section 3(1) of ERISA). Except for health
insurance and term life insurance maintained by the Company for its employees,
or as otherwise set forth in Section 2.10 of the Company Disclosure Schedule,
the Company does not have or maintain, and during the past five (5) years has
not maintained, any bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance or other similar fringe or
employee benefit plans, programs or arrangements for any current or former
employees or independent contractors or consultants to the Company ("Company
Employee Plans"), excluding agreements with former employees under which the
Company has no remaining monetary or other obligations. No Company Employee Plan
promises or provides retiree
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medical or other retiree welfare benefits to any person, and no Company Employee
Plan is a "multiemployer plan" as such term is defined in Section 3(37) of
ERISA.
2.11 Labor Matters. Except as disclosed in Section 2.11 of the Company
Disclosure Schedule, (i) there are no controversies pending or, to the knowledge
of the Company or Stockholder, threatened, between the Company and any of its
employees; (ii) the Company is a not party to any collective bargaining
agreement or other labor union contract, nor does the Company or Stockholder
know of any activities or proceedings of any labor union to organize any of its
employees; and (iii) neither the Company nor the Stockholder has any knowledge
of any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or
with respect to any employees of the Company. The Company is in compliance with
all laws and regulations governing the employment of and working conditions of
its employees.
2.12 Restrictions on Business Activities. Except for this Agreement or
as set forth in Section 2.12 of the Company Disclosure Schedule, there is no
agreement, judgment, injunction, order or decree binding upon the Company or
Stockholder which has or could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of the Company or the
conduct of Business, as currently conducted, by the Company or by CUI after the
Closing.
2.13 Title to and Adequacy of Contributed Assets. Except as set forth
in Section 2.13 of the Company Disclosure Schedule, the Company has and at the
Closing shall convey to CUI, good, defensible and marketable title to all of the
Contributed Assets, free and clear of all liens, security interests, mortgages,
pledges, options, charges and encumbrances (collectively, "Liens and
Encumbrances"), except for liens for taxes not yet due and payable and such
liens or other imperfections of title, if any, as do not materially detract from
the value of or interfere with the present use or subsequent disposition of such
Assets or the consummation of the transactions contemplated hereby. The
Contributed Assets, together with assets subject to leases included in the
Assigned Contracts, are all of the assets required to enable CUI to conduct the
Business as it has been conducted by the Company during the past 12 months.
2.14 Taxes. Except as disclosed in Section 2.14 of the Company
Disclosure Schedule, the Company has filed all United States federal income tax
returns and all other material tax returns required to be filed by it, and the
Company has paid and discharged all Taxes (as defined in Section 9.2) due with
respect to the periods or transactions covered by such tax returns and have paid
all other taxes as are due, except as may be determined to be owed upon
completion of any tax return not yet filed based upon an extension of time to
file, and there are no other Taxes that would be due if asserted by a taxing
authority, except with respect to which the Company is maintaining reserves to
the extent currently required. There are no tax liens on any of the Contributed
Assets; and the Company has not granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any Tax.
2.15 Intellectual Property.
(a) Except as set forth in Section 2.15 of the Company Disclosure
Schedule, the Company owns, or is licensed or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, trade secrets, technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information that are used in the Business of the Company as
currently conducted and a list of which is set forth as part of Exhibit B hereto
(collectively, the "Company Intellectual Property").
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(b) Except as disclosed in Section 2.15 of the Company Disclosure
Schedule, the Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder, in
violation of any licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which the Company is authorized to use any
patents, trademarks, trade names, service marks, copyrights, trade secrets,
technology, know-how, computer software programs or applications, or other
tangible or intangible proprietary information owned by any third party
("Third-Party Intellectual Property Rights"). No claims with respect to any of
the Company Intellectual Property or Third Party Intellectual Property Rights
(to the extent arising out of any use, reproduction or distribution of such
Third Party Intellectual Property Rights by or through the Company), are
currently pending or, to the knowledge of the Company or Stockholder, are
threatened by any person. Neither the Company nor the Stockholder knows of any
valid grounds for any bona fide claims (i) to the effect that the conduct of the
Business or the sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by Company infringes on any
copyright, patent, trademark, service xxxx or trade secret or other intellectual
property rights of any person; (ii) against the use by the Company of any
Company or any Third Party Intellectual Property Rights; (iii) challenging the
ownership, validity or effectiveness of any of the Company's Intellectual
Property; or (iv) challenging the license or legally enforceable right of the
Company to use of the Third Party Intellectual Property Rights.
(c) To the knowledge Company and the Stockholder, (i) all Company
Intellectual Property and its rights therein, including patents, registered
trademarks, service marks and copyrights held by the Company, are valid and
subsisting. Except as set forth in Section 2.15 of the Company Disclosure
Schedule, and (ii) there is no material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party,
including employee or former employee of the Company.
(d) All computer software and hardware used in the conduct of the
Company's business and operations are Year 2000 compliant, which means that such
software and hardware are designed to be used prior to, during, and after the
calendar year 2000 A.D., and such software and hardware will operate during each
of such time periods without error relating to date data, specifically including
any error relating to, or the product of, date data which represents or
references different centuries or more than one century.
2.16 Customers and Suppliers. Set forth on Section 2.16 of the Company
Disclosure Schedule are lists of the identities of the twenty (20) largest
customers and twenty (20) largest suppliers, respectively, of the Company in
each of calendar years 1997 and 1998, ranked by and setting forth the dollar
volume of their transactions with the Company during those respective calendar
years. Except as set forth on Section 2.16 of the Company Disclosure Schedule,
(i) since July 1, 1998 there has been no material adverse change in the business
relationship of the Company with any such customer or supplier or any other
event which has had or could reasonably be expected to have a Material Adverse
Effect on the Company, and (ii) neither the Company nor the Stockholder has any
present information or is aware of any facts indicating that any of such
customers or suppliers of the Company intends to cease doing or alter materially
the amount of the business that any of them did with the Company during the 12
months ended December 31, 1998.
2.17 Related Party Transactions. Except for employment agreements or
relationships that the Company has with its officers and employees and any
agreements or transactions that are set forth in Section 2.5 or Section 2.17 of
the Company Disclosure Schedule, the Company is not a party to any agreement or
transaction with any of its officers, directors, stockholders or employees, or
any of their relatives or affiliates that would or is expected to continue
beyond the Closing Date. To the knowledge of
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the Stockholder and the Company, no officer, director, stockholder or employee,
or any relative or affiliate thereof, owns any interest in any competitor,
lessor, lessee or customer or supplier of the Company.
2.18 Insurance. Section 2.18 of the Company Disclosure Schedule
contains a list of each policy of fire, general liability, product liability,
business interruption, worker's compensation and other forms of insurance
maintained by the Company for the protection of the Company and its assets and
business. True and correct copies of such policies have been delivered to CUI.
All such policies are, and for at least the past five (5) years such policies
(or policies substantially equivalent thereto) have been, in full force and
effect and without any gaps in coverage, all premiums with respect thereto
covering all periods up to and including the date hereof have been paid, and no
notice of cancellation, termination or denial of coverage has been received with
respect to any such policy.
2.19 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
2.20 Full Disclosure. No representation or warranty made by the Company
or the Stockholder contained in this Agreement and none of their respective or
joint statements contained in any certificate or schedule furnished or to be
furnished by the Company or the Stockholder to CUI in, or pursuant to the
provisions of, this Agreement, including without limitation the Company
Disclosure Schedule, contains or shall contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make statements
herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to CUI that:
3.1 Authority and Capacity. Stockholder has the full legal right and
capacity to execute and deliver, and to perform his obligations under, and has
duly executed and delivered, this Agreement with the intent to be legally bound
hereby. This Agreement constitutes, and when executed and delivered by the
Stockholder, the Stockholders Agreement and Stockholder Non-Competition
Agreement will constitute, valid and legally binding obligations of the
Stockholder that are enforceable against him in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights and by general
principles of equity relating to the availability of equitable remedies
(regardless of whether any such agreements are sought to be enforced in a
proceeding at law or in equity). Stockholder is not obligated to obtain any
consent or approval of any other person in connection with the execution and
delivery of this Agreement or the Stockholders Agreement or his Non-Competition
Agreement or the consummation of the transactions contemplated hereby or thereby
and the execution and delivery of this Agreement and such other Agreements and
the consummation by him of the transactions contemplated hereby or thereby will
not violate, or constitute a breach or default under or cause the acceleration
of any obligation or liability under any contract, promissory note, mortgage,
lease, license, permit, writ, decree or other instrument or agreement to which
Stockholder is a party or is subject.
3.2 Securities Law Compliance. Stockholder represents and warrants
that:
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(a) He has been advised and understands and agrees that the CUI
Shares will not be registered under the Securities Act of 1933, as amended (the
"1933 Act"), nor qualified under any state securities laws, on the ground (among
others) that no distribution or public offering of the CUI Shares is to be
effected in connection with the transactions contemplated herein and in issuing
the CUI Shares to Stockholder, CUI is relying on the accuracy and completeness
of the representations and warranties of Stockholder in this Section 3.2.
(b) Stockholder is acquiring the CUI Shares and the CUI Note for
his own account, and not as an nominee or agent for any other persons or
entities, and for investment and not with a view to distribution or resale
thereof.
(c) Stockholder acknowledges that he has been informed and
understands that no public market for the CUI Shares exists and that there can
be no assurance that any such market may develop or exist in the future and,
even if a public market does develop, that the CUI Shares may not be sold or
transferred except in compliance with the 1933 Act or any exemption thereunder
and there is no assurance that any exemption from registration, including Rule
144 under the 1933 Act will become available to permit resales of the CUI
Shares.
(d) Stockholder has been furnished with such information regarding
CUI and the CUI Shares as he has requested of CUI and has had an opportunity to
ask questions of the officers of CUI regarding, and to become informed about,
CUI and its business and its consolidated financial condition and results of
operations.
(e) Stockholder is an "Accredited Investor" as such term is
defined in Regulation D under the 1933 Act.
(f) Stockholder acknowledges and agrees that (i) until the CUI
Shares become eligible for resale under Rule 144(k) under the 1933 Act, any
proposed sale or other transfer or disposition of any of the CUI Shares, other
than pursuant to an effective registration statement under the 1933 Act, may not
be made unless and until Stockholder has furnished to CUI an opinion of counsel,
reasonably acceptable to CUI and its counsel, to the effect that the proposed
sale or other transfer or disposition is exempt from registration under the 1933
Act, and (ii) the CUI Shares will be subject to the Stockholders Agreement
referred to in Section 1.5 hereof and, until the Stockholders Agreement has been
terminated (A) no sale or other disposition of the CUI Shares may be made except
in compliance therewith and (B) the CUI Shares may be required to be sold in one
or more transactions involving sales of shares of CUI initiated by certain other
of the CUI Stockholders, all as more fully provided in the Stockholders
Agreement. Stockholder has read and understands the Stockholders Agreement.
(g) Stockholder acknowledges and agrees that the certificate
representing the CUI Shares shall contain restrictive legends in the forms set
forth in the form of Stockholders Agreement attached hereto as Exhibit G or
restrictive legends that are substantially similar thereto, and that the CUI
Note shall contain the legends set forth on the form of such Note attached
hereto as Exhibit C.
3.3 Acknowledgements Regarding CUI Representations. Stockholder
acknowledges and agrees that (a) neither CUI nor any of its officers, directors,
employees or agents has made, and none of them is making, any representations or
warranties to the Company or the Stockholder with respect to (i) the federal,
state or local income or other tax consequences to the Company or the
Stockholder of the consummation of the transactions contemplated hereby, or (ii)
the future performance of CUI; and (b) in entering into this Agreement, and the
Stockholders Agreement and Non-Competition Agreement, he is not relying on any
statements or representations or warranties of CUI, or any representations or
warranties made or purported to have been made by any officer, director,
stockholder, employee or agent of CUI, other than the express representations
and warranties of CUI contained in this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXX
XXX hereby represents and warrants to the Company and the Stockholder
that, except as set forth in the written disclosure schedule delivered on or
prior to the date hereof by CUI to the Company that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV (the "CUI Disclosure Schedule"):
4.1 Organization and Qualification; Subsidiaries. CUI is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority to own, lease and operate the properties it purports to own, and to
operate or lease and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and Approvals would not have a Material Adverse
Effect (as hereinafter defined) on CUI. CUI is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not have a Material Adverse Effect. The term "Material
Adverse Effect," when used in connection with the CUI or any of its
subsidiaries, means any change, effect or circumstance that is materially
adverse to the business, assets, financial condition, results of operations or
prospects of the CUI and its subsidiaries, taken as a whole, other than any such
changes, circumstances or effects that are set forth or described in the CUI
Disclosure Schedule.
4.2 Certificate of Incorporation and By-Laws. CUI has heretofore
furnished to the Company and the Stockholder a complete and correct copy of its
Certificate of Incorporation and By-Laws, as amended to date. Such Certificate
of Incorporation and By-Laws are in full force and effect. CUI is not in
violation of any of the provisions of Certificate of Incorporation or By-Laws.
4.3 Capitalization. As of the date hereof, the authorized capital stock
of CUI consists of 30,000,000 shares of Common Stock, par value $.001 per share.
On consummation of the transactions contemplated by this Agreement and the Other
Contributions Agreements, there will be (i) a total of 19,000,000 fully paid and
nonassessable shares of Common Stock that will be issued and outstanding, which
will include the CUI Shares being issued under this Agreement; and (ii) ___
shares of Common Stock reserved for issuance on the exercise of stock options
(either granted or to be granted in the future). Except as set forth in Section
4.3 of the CUI Disclosure Schedule, as of the date of hereof there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of CUI or
obligating CUI to issue or sell any shares of capital stock of, or other equity
interests in, CUI. There are no obligations, contingent or otherwise, of CUI to
repurchase, redeem or otherwise acquire any of the capital stock of CUI.
4.4 Power and Authority. CUI has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by CUI and the consummation by CUI of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of CUI, and no other corporate
proceedings on the part of CUI are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by CUI and, assuming due authorization,
execution and delivery by the Company and Stockholder, constitutes a legal,
valid and binding obligation of CUI enforceable against it in accordance with
its terms, except as the enforceability thereof may be subject to or limited by
(i) bankruptcy, insolvency, reorganization, arrangement, moratorium, or other
similar laws
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relating to or affecting rights of creditors, and (ii) general equitable
principles, regardless of whether the issue of enforceability is considered in a
proceeding in equity or at law.
4.5 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by CUI does
not, and the performance of this Agreement by CUI will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws of CUI, (ii) conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
CUI or by which its properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or impair CUI's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation, or result in the creation
of a lien or encumbrance on any of the properties or assets of CUI pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which CUI is a party or
by which CUI or its or properties are bound or affected, except in any such case
for any such conflicts, violations, breaches, defaults or other occurrences that
would not have a Material Adverse Effect on CUI.
(b) The execution and delivery of this Agreement by CUI does
not, and the performance of this Agreement by CUI will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the 1933 Act and any applicable state
securities laws, and (ii) where the failure to obtain such consents, approvals,
authorization or permits, or to make such filings or notifications, would not
prevent or delay consummation of the transactions contemplated hereby, or
otherwise prevent CUI from performing its obligations under this Agreement, and
would not have a Material Adverse Effect.
4.6 Financial Statements; Liabilities.
(a) CUI has furnished to the Company and Stockholder unaudited
financial statements of Professional Coin Grading Service, Inc. ("PCGS"), which
is CUI's predecessor company. Such financial statements are comprised of a
balance sheet of PCGS as of June 30,1998 and related statements of income, cash
flows and stockholders equity for the year then ended, and an unaudited balance
sheet as of, and a related unaudited statement of income of PCGS for the six
months ended, December 31, 1998, all of which have been prepared by PCGS
(collectively, the "PCGS Financial Statements"). Except as otherwise set forth
in Section 4.6 of the CUI Disclosure Schedule or in the footnotes contained in
the PCGS Financial Statements, such Financial Statements fairly present, in all
material respects, the financial position of PCGS as at June 30, 1998 and
December 31, 1998, respectively, and the respective results of operations of
PCGS and changes in cash flows and stockholders equity for the year and six
months ended on June 30, 1998 and December 31, 1998, respectively.
(b) No Undisclosed Liabilities. Except as is disclosed in
Section 4.6 of the CUI Disclosure Schedule, neither CUI nor PCGS has any
liabilities (absolute, accrued, contingent or otherwise), except (a) liabilities
that individually and in the aggregate are adequately provided for in the PCGS
balance sheet (including any related notes thereto) as of December 31, 1998
included in the PCGS Financial Statement (the "1998 PCGS Balance Sheet"), (b)
non-material liabilities which were incurred in the ordinary course of business
and were not required under generally accepted accounting principles to be
reflected on the 1998 PCGS Balance Sheet, or which were incurred after December
31, 1998 in the ordinary course of business and consistent with past practice
and would not be required, under generally
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accepted accounting principles, to be reflected on a PCGS balance sheet prepared
in accordance with GAAP.
4.7 Absence of Material Adverse Changes. Except as is disclosed in
Section 4.7 of the CUI Disclosure Schedule, since December 31, 1998, there has
not been (i) a change in the consolidated financial condition or consolidated
results of operations or business of PCGS or (ii) any action or legal proceeding
that has been brought or is known by CUI to have been threatened against PCGS,
or (iii) any other event known to CUI, that has had or is reasonably expected to
have a Material Adverse Effect on CUI (assuming that CUI's acquisition of PCGS
is consummated concurrently with the Closing).
4.8 Restrictions on Business Activities. To the best knowledge of CUI,
there is no material agreement, judgment, injunction, order or decree binding
upon CUI or any of its subsidiaries which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any material business
practice of CUI or any of its subsidiaries, any acquisition of property by CUI
or the conduct of business by CUI or any of its subsidiaries as currently
conducted or as proposed to be conducted by CUI, except for any prohibition or
impairment as would not have a Material Adverse Effect on CUI.
4.9 Related Party Transactions. Except for employment agreements or
relationships that CUI has with its officers and employees, any agreements or
transactions that would not have a Material Adverse Effect on CUI and any
agreements or transactions that are set forth in Section 4.9 of the CUI
Disclosure Schedule, CUI is not a party to any agreement or transaction with any
of its officers, directors, stockholders or employees, or to its knowledge, any
of their respective relatives or affiliates. To CUI's knowledge, no officer,
director, stockholder or employee of CUI, or any relative or affiliate thereof,
owns any interest in any competitor, lessor, lessee or customer or supplier of
CUI.
4.10 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of CUI.
4.11 Full Disclosure. No representation or warranty of CUI contained in
this Agreement and no statement contained in any certificate or schedule
furnished or to be furnished by CUI to the Company in, or pursuant to the
provisions of, this Agreement, including without limitation the CUI Disclosure
Schedule, contains or will contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
ARTICLE V
ACTIONS BEFORE AND AFTER THE CLOSING
5.1 Conduct of Business by the Company Pending the Closing. The Company
and Stockholder jointly and severally covenant and agree that, during the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing, the Company (i) shall conduct its
business only, and shall not take any action except, in the ordinary course of
business and consistent with past practice; and (ii) shall use reasonable
commercial efforts to preserve substantially intact the business organization of
the Company, to keep available the services of the present officers, employees
and consultants of the Company and to preserve the present relationships of the
Company with customers, suppliers and other persons with which the Company has
significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, the Company shall not, either directly or indirectly,
do or
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propose to do any of the following without the prior written consent of CUI,
which consent shall not be unreasonably withheld:
(a) amend or otherwise change its Articles of Incorporation or
By-Laws;
(b) sell, pledge, dispose of, or permit the imposition or
existence of any Liens or Encumbrances on, any of the Contributed Assets or sell
or dispose of or encumber any of the other assets of the Company if such sale,
disposition or encumbrance would adversely affect CUI's ability, after the
Closing, to conduct the Business as currently conducted or would interfere with
the consummation of the transactions contemplated hereby;
(c) Take any of the following actions: (i) acquire (by merger,
consolidation, or acquisition of stock or assets) any corporation, limited
liability company, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money or issue any debt
securities that could result in the imposition of any liens, mortgages, security
interests, claims, charges or encumbrances on any of the Contributed Assets or
the Business or could interfere with the consummation of the transactions
contemplated hereby or subject CUI or any of its subsidiaries to any
liabilities; (iii) enter into or amend any Material Contract except where the
entry into the Contract or the amendment thereto would not have a Material
Adverse Effect on the Company or increase the liabilities thereof; or (iv)
authorize any capital expenditures or purchase of fixed assets which are, in the
aggregate, in excess of $10,000;
(d) Increase the compensation or employee benefits payable or to
become payable to its officers, directors or employees or independent
contractors, except for increases in salary or wages of employees (other than
officers) of the Company in accordance with past practice, or grant any
severance to termination pay to, or enter into or amend or terminate any
employment or severance agreement with any director, officer or other employee
of the Company or establish, adopt, enter into or amend any collective
bargaining agreement or any Company Employee Plans (as hereinabove defined) or
other plan, agreement, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers or employees, except, in each case, as may
be required by law;
(e) Take any action to change accounting policies, principles,
practices or procedures (including, without limitation, procedures with respect
to revenue recognition, payments of accounts payable and collection of accounts
receivable);
(f) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), if such payment, discharge or satisfaction would require the
disposition or encumbrance of any of the Contributed Assets, adversely affect
the Business or interfere with the consummation of the transactions contemplated
hereby.
(g) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (f) above.
The Company and Stockholder also each agree, jointly and severally,
that neither of them will take any action which would (i) make any of their
representations or warranties contained in this Agreement untrue or incorrect or
(ii) prevent or interfere with the performance by the Company or Stockholder of
any of their respective covenants contained in this Agreement.
5.2 No Solicitation. During the period from the date hereof and
continuing until the earlier of the completion of the Closing or termination of
this Agreement:
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(a) The Company shall not directly, or indirectly through any
officer, director, employee, representative or agent, and the Stockholder shall
not directly, or indirectly through any agent or representative:
(i) solicit, initiate or encourage the initiation of
any inquiries or proposals regarding any merger, sale of substantial
assets, sale of shares of capital stock (including without limitation
by way of a tender offer) or similar transactions involving the Company
or the Company Shares (any of the foregoing inquiries or proposals
being referred to herein as an "Acquisition Proposal"),
(ii) engage in negotiations or discussions concerning
any Acquisition Proposal, (iii) provide any nonpublic information to
any person relating to the Company or its business or any of the
transactions contemplated hereby, or
(iv) enter into any agreement or understanding,
written or oral, relating to any Acquisition Proposal.
The Company and Stockholder also shall immediately cease and cause to be
terminated any existing discussions or negotiations that either of them may be
having with any person (other than CUI) with respect to any Acquisition Proposal
or which could conceivably lead to the making of an Acquisition Proposal. The
Company and the Stockholder agree not to release any third party from the
provisions of any confidentiality agreement that such third party may have with
the Company or Stockholder.
(b) Each of the Company and Stockholder shall notify CUI
immediately after receipt by either of them of any Acquisition Proposal or any
request for nonpublic information relating to, or for access to the properties,
books or records of, the Company by any person or entity. Such notice to CUI
shall be made orally and in writing.
(c) The Company shall ensure that the officers, directors and
employees of the Company and any advisor or representative retained by the
Company are aware of and will comply with the restrictions described in this
Section 5.2.
5.3 Access to Information. During the period from the date hereof and
continuing until the earlier of the completion of the Closing or termination of
this Agreement, each of the Company and CUI, upon reasonable notice, and subject
to the provisions of Section 5.9 hereof, shall each (i) afford to the officers,
employees, accountants, counsel and other representatives of the other,
reasonable access, during the period from the date hereof to the earlier of the
Closing or the termination of this Agreement, to all its properties, books,
contract, commitments and records (ii) furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request, and (iii) make available to the other the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either CUI or the Company may reasonably request.
5.4 Consents; Approvals. The Company, Stockholder and CUI shall each
use their best reasonable efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all governmental and
regulatory rulings and approvals), and the Company, Stockholder and CUI shall
make all filings (including, without limitation, all filings with governmental
or regulatory agencies) required in connection with the authorization, execution
and delivery of this Agreement by the Company, the Stockholder and CUI and the
consummation by them of the transactions contemplated hereby. The Company, the
Stockholder and CUI shall furnish all information required to be included in
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any applications or other filings to be made pursuant to the rules and
regulations of any governmental body in connection with the transactions
contemplated by this Agreement.
5.5 Obligations Being Assumed; Obligations and Liabilities Not Being
Assumed.
(a) Assumed Contractual Obligations. CUI hereby agrees to
assume only those executory obligations arising from or after the Closing Date
under the Assigned Contracts listed in Exhibit B hereto (the "Assumed
Contractual Obligations"); provided, however, that CUI shall not be obligated to
assume, and CUI shall not have any liability for or in connection with, any
Assumed Contractual Obligation that is in default as of the Closing Date or as
to which there exists as of the Closing Date an event or circumstance that, with
the passage of time or the giving of notice, or both, would give rise to a
default thereunder.
(b) Liabilities Not Being Assumed. Except for the Assumed
Contractual Obligations, the Company and the Stockholder agree that CUI shall
not be obligated to assume or perform or discharge, and that CUI will not be
assuming, performing or otherwise discharging, any liabilities or obligations of
the Company, whether known or unknown, fixed or contingent, matured or
unmatured, certain or uncertain, that have arisen prior hereto or may arise
between the date hereof and the Closing or which may arise after the Closing out
of the conduct of any business or other activities by the Company (collectively,
the "Retained Liabilities"). The Company and Stockholder jointly and severally
covenant and agree that the Company shall be responsible for performing and
satisfying, and shall perform and satisfy, the Retained Liabilities, at the
Company's sole expense, and without liability, cost, loss or expense of or to
CUI. The Retained Liabilities shall include, but shall not be limited to, any
and all of the following obligations and liabilities of the Company:
(i) Taxes. All Taxes (as defined in Section 9.2
hereof) that have arisen prior to the Closing or may arise thereafter
out of any business or other operations conducted by the Company,
either prior to or after the Closing Date.
(ii) Liens and Encumbrances. Any Liens or
Encumbrances on any of the Contributed Assets or any other assets of
the Company.
(iii) Monetary Obligations. Any accounts or notes
payable and obligations for borrowed money or purchase money
indebtedness of the Company.
(iv) Claims and Legal Proceedings. Any claims,
demands, actions, suits or legal proceedings that have been asserted or
threatened prior to the Closing against the Company, the Business or
the Contributed Assets or which may be threatened or asserted hereafter
against the Contributed Assets, the Business or CUI that arises in any
way from or in connection with the conduct or operation of the Business
prior to the Closing, or any other business or non-business activities
of the Company conducted prior hereto or hereafter.
(v) Contingent Liabilities. Any liability,
deficiency, penalty, cost or expense arising out of the sale of any
currency or the conduct of the Business by the Company or any other
activities of the Company, whether or not disclosed in the Company's
Financial Statements (as hereinafter defined) or in the Company
Disclosure Schedule.
(vi) Transaction Related Liabilities. Any liabilities
of the Company that may arise out of the consummation of this
Agreement, or actions that may be taken by the Company or Stockholder
in connection therewith, including, but not limited to, any liabilities
or
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obligations for accrued but unpaid salaries, vacation, and holiday and
such pay and any liabilities or obligations that may arise under any
employment, consulting, independent contractor or severance agreements
or arrangements (whether written or oral) or any bonus or employee
benefit programs or arrangements between the Company and any of its
employees or independent contractors.
(c) Indemnification. In furtherance of the foregoing covenants
of the Company and Stockholder, the Company and Stockholder agree that, from and
after the Closing, they shall jointly and severally indemnify and hold harmless
CUI and its subsidiaries, and their respective officers, directors,
stockholders, employees and agents (other than the Stockholder himself)
(collectively, the "Indemnified Parties"), and the respective successors, heirs
and assigns of the Indemnified Parties, from and against (i) the Retained
Liabilities, (ii) any breach of or default with respect to any of the
representations and warranties of the Company or Stockholder contained in this
Agreement, and (iii) all costs and expenses, including reasonable attorneys and
accountants and expert witness fees and disbursements that are incurred by any
of the Indemnified Parties, or their successors, heirs or assigns, in connection
with the prosecution or defense of any action or proceeding brought by or
against any of the Indemnified Parties by reason of the Company's failure to
have discharged or paid any of the Retained Liabilities or which assert claims
that, if established, would evidence that one or more representations or
warranties of the Company or the Stockholder contained in this Agreement were
untrue either when made or at the time of the Closing.
5.6 Effective Date. If the transactions contemplated by this Agreement
are consummated, then, for accounting and other recordkeeping purposes, the
Closing shall be deemed to have occurred as of February 5, 1999 and all auction
and other sales of Rare Currencies by the Company that occur between February 5,
1999 and the actual Closing Date shall be for the account of CUI. In addition,
and notwithstanding anything to the contrary contained elsewhere in this
Agreement, all cash generated by the Company from such sales of Rare Currencies
shall be paid to CUI and shall not constitute a Retained Asset and shall not be
retained by the Company. In furtherance thereof, the Company shall furnish CUI
with all records and reports relating to all auction and other sales of Rare
Currencies that may occur between February 5, 1999 and the Closing Date.
5.7 Notification of Certain Matters. The Company or the Stockholder
shall give prompt notice to CUI, and CUI shall give prompt notice to the
Company, of (i) the occurrence or nonoccurrence of any event which would be
likely to cause any representation or warranty made by such party in this
Agreement to be materially untrue or inaccurate, or (ii) any inability or
failure of the Company, the Stockholder or CUI, as the case may be, materially
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by hereunder; provided, however, that the delivery of any
notice pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
5.8 Further Action. On the terms and subject to the conditions hereof,
each of the parties hereto shall use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement. From
and after the Closing, each party shall take such actions and execute such
documents and instruments as any other party may reasonably request to better
evidence or effectuate the transactions contemplated by this Agreement or the
Exhibits hereto. Without limiting the generality of the foregoing, the Company
and the Stockholder shall approve and, within five (5) business days of the
Closing shall cause to be
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filed, an amendment to the Company's Articles of Incorporation changing its name
to a name this is not confusing similar to Xxx X. Xxxxxx Rare Coins or any
variant thereof that combines or associates the name Xxx Xxxxxx together with
any currency or other Collectibles.
5.9 Confidential Information. Each party acknowledges that it or any of
its officers, directors, employees, agents or advisors ("Representatives") may
be given, by one of the other parties hereto (a "disclosing party") or any of
such disclosing party's Representatives, access to various items of proprietary
and confidential information of the disclosing party in the course of
investigations and negotiations prior to Closing. Each party agrees that
confidential information of any disclosing party furnished or delivered to the
other party (the "receiving party") or to any of the receiving party's
Representatives shall be kept strictly confidential by the receiving party and
by its Representatives and shall not be used for any purpose other than to
facilitate the consummation of the transactions contemplated herein.
Confidential information shall include any proprietary business or other
information which is delivered (orally or in writing) or to which access is
given by a disclosing party or any of its Representatives to the receiving party
or any of its Representatives, and any such information that is included in or
incorporated into any notes, analyses, memoranda, projections or other documents
that are prepared by the receiving party or any of its Representatives, unless
such information (a) is already of public knowledge, or (b) becomes of public
knowledge through no fault, action or inaction of the receiving party or its
Representatives, or (c) is demonstrated convincingly by the receiving party to
have been known by the receiving party, or any of its Representatives, prior to
the disclosure of such information by the disclosing party to the receiving
party, unless such knowledge was acquired from a person who the receiving party
or its Representatives knew or reasonably should have known was subject, at the
time of such disclosure, to a fiduciary or other duty of non-disclosure to the
disclosing party. Except as permitted by Section 5.9, no party hereto, nor its
respective Representatives, shall intentionally disclose any confidential
information of any of the other parties to any third person; provided, however,
that such information may be disclosed (i) with the written consent of the other
parties hereto, (ii) in applications or requests required to be made to obtain
licenses, permits, approvals or consents needed to consummate the transactions
contemplated herein, (iii) to the professional advisors of each party hereto who
need to know such information in connection with the consummation of the
transactions contemplated hereby, or (iv) pursuant to court order or subpoena,
provided, however, that if any receiving party or any of its Representatives is
served with a court order or subpoena that would require the disclosure of any
of the confidential information of a disclosing party, the receiving party or
such Representative so served (as the case may be) shall promptly, but in any
event within three (3) days thereafter, notify the disclosing party thereof and
shall provide reasonable cooperation, at the disclosing party's expense, with
any efforts that the disclosing party may undertake to quash such court order or
subpoena or obtain a protective order with respect to the disclosure and use of
such confidential information. The restrictions and obligations contained in
this Section 5.9 shall survive any termination of this Agreement; provided,
however, that, if the transactions contemplated hereby are consummated, the
obligations of CUI and any subsidiaries thereof under this Section 5.9 shall
terminate, but all of the obligations of the Company and the Stockholder under
this Section 5.9 shall survive and shall continue in full force and effect at
all times after the Closing. Notwithstanding the foregoing, however, following
the Closing Stockholder may use Confidential Information for the sole purpose of
procuring Rare Currencies which, for purposes of any subsequent sale or
disposition of value, he is obligated to utilize the auction or selling services
of CUI or any subsidiary thereof.
ARTICLE VI
CONDITIONS PRECEDENT
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6.1 Conditions to Obligations of Each Party to Consummate Transactions.
The performance by each party of its respective obligations under this Agreement
shall be subject to the satisfaction, at or prior to the Closing Date, of each
of the following conditions unless waived in writing by such party:
(a) Absence of Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect, nor shall any proceeding brought by any administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; and there shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the transactions contemplated hereby which
makes their consummation illegal.
(b) Governmental Actions. There shall not have been instituted,
pending or threatened, in writing, any action or proceeding (or any
investigation or other inquiry that might result in such an action or
proceeding) by any governmental authority or administrative agency before any
governmental authority, administrative agency or court of competent
jurisdiction, nor shall there be in effect any judgment, decree or order of any
governmental authority, administrative agency or court of competent
jurisdiction, in either case, seeking to prohibit or limit CUI, following the
Closing, from exercising any of the material rights and privileges pertaining to
its ownership of the Contributed Assets or the ownership or conduct of the
Business.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained by CUI or the Company or the
Stockholder for the authorization, execution and delivery of this Agreement and
the consummation by each such party of the transactions contemplated hereby
shall have been obtained by CUI, the Company or the Stockholder (as the case may
be), except where the failure to receive such consents, waivers, approvals,
authorizations or orders could not reasonably be expected to have a Material
Adverse Effect on the Business or CUI.
(d) Consummation of Other Transactions. The transactions
contemplated by the Other Contribution Agreements shall have been consummated at
or about the same time as the Closing hereunder.
6.2 Additional Conditions to Obligations of CUI. The obligations of CUI
to consummate its acquisition of the Business and the Contributed Assets and to
perform its other obligations under this Agreement also are subject to the
following conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Company and Stockholder contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date, except for
(i) changes contemplated by this Agreement or by the Company Disclosure
Schedule, and (ii) those representations and warranties which address matters
only as of a particular date (which shall have been true and correct as of such
date, and CUI shall have received a certificate to such effect signed by the
President of the Company and the Stockholder.
(b) Performance of Covenants. The Company and the Stockholder shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it or
him (as the case may be) on or prior to the Closing Date, including the
execution and delivery by the Company of its Non-Competition Agreement and the
execution and delivery by Stockholder of the Stockholders Agreement and the
Stockholder's Non-
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Competition Agreement, and CUI shall have received a certificate to such effect
signed by the President of the Company and the Stockholder.
(c) Additional Instruments. CUI shall have received the
Closing Documents listed on Exhibit I hereto and such other instruments and
documents as CUI or its counsel reasonably deems to be necessary.
6.3 Additional Conditions to Obligations of the Company and
Stockholder. The obligation of the Company and Stockholder to consummate their
respective obligations under this Agreement is also subject to the following
conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of CUI contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date, except for (i)
changes contemplated by this Agreement or by the CUI Disclosure Schedule, and
(ii) those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date, and the
Stockholder shall have received a certificate to such effect signed by the
President of CUI.
(b) Agreements and Covenants. CUI shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and the Stockholder shall have received a certificate to such effect
signed by the President of CUI.
(c) Employment Agreements. At the Closing, CUI or a
wholly-owned subsidiary thereof that will operate the Business following the
Closing, shall have entered into (i) an employment agreement, substantially in
the form of Exhibit J hereto, with the Stockholder (the "Stockholder Employment
Agreement") and (ii) an employment agreement with Xxxxxxx Xxxxxx (the "X. Xxxxxx
Employment Agreement"), both of which shall become effective on consummation of
the contribution and transfer of the Contributed Assets to CUI as contemplated
by this Agreement.
(d) Additional Instruments. Stockholder shall have received
the additional Closing Documents listed on Exhibit I hereto and such other
instruments and documents as Stockholder or its counsel reasonably deems to be
necessary.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the transactions
herein contemplated may be abandoned at any time prior to the Closing:
(a) By mutual written consent of CUI and the Stockholder; or
(b) By CUI, if any of the conditions to its obligations set forth
in Section 6 of this Agreement shall not have been satisfied, or waived by CUI
in writing, prior to March 12, 1999;
(c) By the Company, if any of the conditions set forth in Section 6
of this Agreement to the obligations of the Company or Stockholder shall not
have been satisfied, or waived in writing by the Company or Stockholder, prior
to March 12, 1999;
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Provided, that in each of the foregoing cases the party so terminating
is not in breach of any of its material obligations or representations or
warranties under this Agreement.
Notwithstanding anything to the contrary contained elsewhere in this Agreement,
if a party hereto has breached this Agreement (a "Breaching Party") and such
breach is of a nature that it is susceptible of cure, and the other party
determines to terminate this Agreement by reason thereof, such other party shall
give prompt written notice of such termination to the Breaching Party and such
intended termination shall not become effective provided that the Breaching
Party effectuates a cure of such breach by the earlier of (i) the 30th day
following such notice of termination or (ii) March 12, 1999.
7.2 Procedure Upon Termination. Any termination and
abandonment by CUI or the Stockholder, or both, pursuant to Section 7.1 hereof,
shall be effective on written notice thereof from the terminating party to the
other parties and upon any such termination:
(a) Each party will redeliver all documents, workpapers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) The obligations of confidentiality set forth in
Section 5.9 hereof shall continue despite such termination; and
(c) The parties shall be relieved of any obligation to
consummate the transactions contemplated hereby, but none of the parties shall
be relieved of any liability for its breach or default under this Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Regardless of any due diligence or other investigation, either prior to
or after the Closing, or any verification or approval by any party hereto or by
anyone or on behalf of any party hereto, all of the representations and
warranties set forth in this Agreement or in any certificates delivered pursuant
hereto shall remain in full force and effect and shall survive the Closing until
the expiration of three (3) years from the Closing Date, except that (i) the
representations and warranties of the Company and the Stockholder relating to
Taxes shall survive until six (6) months following the expiration of the
statutory limitations period applicable to such Taxes, (ii) the representations
and warranties of the Company and Stockholder contained in Sections 2.4 and
2.12, the representations and warranties of the Stockholder contained in Section
3.1 and the representations and warranties of CUI contained in Sections 4.3 and
4.4, shall survive for a period of seven (7) years following the Closing. All
covenants which by their terms require performance or compliance following the
Closing, including the obligations of the Company and Stockholder under Section
5.5, shall remain in full force and effect and shall survive the Closing until
they have been fully performed and discharged; provided, however, that the
covenants of the Company and Stockholder under Paragraphs 5.5(b) and 5.5(c) with
respect to Taxes that constitute Retained Liabilities shall survive until six
(6) months following the expiration of the statutory limitations period
applicable to the payment of Taxes.
ARTICLE IX
MISCELLANEOUS
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9.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the addresses set forth on Exhibit K hereto or sent by electronic
transmission, with confirmation received, to the telecopy numbers or E-Mail
addresses specified on that Exhibit (or at such other address or telecopy number
for a party as shall be specified hereafter by like notice).
9.2 Interpretation and Certain Definitions. This Agreement is the
result of arms'-length negotiations between the parties hereto and no provision
hereof, because of any ambiguity found to be contained therein or otherwise,
shall be construed against a party by reason of the fact that such party or its
legal counsel was the draftsman of that provision. Unless otherwise indicated
elsewhere in this Agreement, (a) the term "or" shall not be exclusive, (b) the
term "including" shall mean "including, but not limited to," and (c) the terms
"herein," "hereof," "hereto," "hereunder" and other terms similar to such terms
shall refer to this Agreement as a whole and not merely to the specific section,
subsection, paragraph or clause where such terms may appear. In addition, for
purposes of this Agreement, the term:
(a) "business day" means any day other than a day on which
banks in California or Kansas are required or authorized to be closed.
(b) "Collectibles" means rare or valuable coins, stamps,
sports cards, sports memorabilia, comic books, movie posters, items autographed
by recording artists, or sports, movie, television or other celebrities,
game-used and other products or items the value of which is greater than the
customary retail price of similar items or products because they are associated
with a recording artist, or sports, movie, television or other celebrities or a
well-known event and other products or items (such as antiques) which derive
their value largely from their uniqueness or the limited quantity or
availability thereof.
(c) "control" (including the terms "controlled by" and "under
common control with") means possession, directly or indirectly or as trustee or
executor, or the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise.
(d) "person" means an individual, corporation, limited
liability company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934).
(e) "Tax" or "Taxes" shall mean taxes, fees, levies, duties,
tariffs, imposts, and governmental impositions or charges of any kind in the
nature of (or similar to) taxes, payable to any federal, state, local or foreign
taxing authority, including (without limitation) (i) income, franchise, profits,
gross receipts, ad valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto.
9.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto, provided, however, the
signature of the Company shall not be required if such instrument has been
signed by Stockholder.
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9.4 Waiver. At any time prior to the Closing, the Stockholder, on
behalf of himself and the Company, may with respect to CUI and CUI may with
respect to the Stockholder and the Company (i) extend the time for the
performance of any of the obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto by the other, or (c) waive compliance with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
9.5 Headings. The section, subsection and any paragraph headings
contained herein are for the purpose of convenience only and are not intended to
define, limit or affect, and shall not be considered in connection with, the
interpretation of any of the terms or provisions of this Agreement.
9.6 Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by reason of any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect, unless such invalidity, illegality or unenforceability
would prevent consummation of the material transactions contemplated hereby or
would have a Material Adverse Effect on the Business or CUI.
9.7 Entire Agreement. This Agreement (inclusive of the Exhibits hereto
and the Company and CUI Disclosure Schedules) constitutes the entire agreement
and supersedes all prior agreements and undertakings, both oral and written,
among the parties, or any of them, with respect to the subject matter of this
Agreement and the Exhibits hereto.
9.8 Assignment. This Agreement shall not be assigned voluntarily by any
of the parties nor by operation of law or otherwise.
9.9 Parties In Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.5 (which is intended to be for the benefit of the Indemnified Parties
and the others specifically referenced therein as beneficiaries of the
agreements contained in Section 5.5, and may be enforced by such Indemnified
Parties and other persons).
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.11 Governing Law; Jurisdiction over Legal Actions. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of Delaware applicable to contracts executed and fully performed within
the State of Delaware. In the event any party hereto is required to initiate any
legal action or proceeding to enforce its rights hereunder, such action or
proceeding shall be brought and maintained exclusively in the Superior Court for
the County of Orange, in California and each party agrees to accept, and not to
challenge, the jurisdiction of such court over the parties and the subject
matter of such action or proceeding or the convenience of the forum and to
accept and not to challenge the adequacy of service by certified or registered
mail. The prevailing party in any such action or
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proceeding shall be entitled to recover its reasonable attorneys fees and
disbursements, expert witness fees and disbursements and other costs of suit
from the non-prevailing party. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH PARTY HEREBY EXPRESSLY WAIVES ITS RIGHT TO A JURY TRIAL IN ANY SUCH
ACTION OR PROCEEDING, IRRESPECTIVE OF WHICHEVER PARTY MAY BRING ANY SUCH ACTION
OR PROCEEDING.
9.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
(Signatures follow on next page)
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IN WITNESS WHEREOF, each of CUI and the Company has caused this
Agreement to be executed by its respective officers thereunto duly authorized,
and Stockholder has executed this Agreement, as of the date first written above.
COLLECTORS UNIVERSE, INC.
By: /s/ Xxxxx Xxxx
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Xxxxx Xxxx, Chairman
XXX X. XXXXXX XXX X. XXXXXX RARE COINS, INC.
/s/ Xxx X. Xxxxxx By: /s/ Xxx X. Xxxxxx
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Xxx X. Xxxxxx Xxx X. Xxxxxx, President
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