EXHIBIT 10.15
ASSET PURCHASE AGREEMENT
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AGREEMENT made this 8th day of October, 1997 among Pacific Title and Art
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Studio, a corporation organized under the laws of the State of California
("Seller"), Pacific Title and Mirage, Inc., a Delaware corporation ("PTM"),
Safeguard Scientifics, Inc., a corporation organized under the laws of the State
of Pennsylvania ("Safeguard"), and Mirage Technologies, Limited Partnership, a
Delaware limited partnership (PTM, "Mirage" and, together with Safeguard,
"Purchaser").
BACKGROUND
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A. Seller is engaged in the business of creating titles and effects using
both optical processes (the "Optical Business") and digital processes (the
"Digital Business"). (The Optical Business and the Digital Business are
conducted as a single business and are referred to individually and
collectively herein as the "Business".) Seller also is engaged in the film
archive business, which is not included in this purchase and sale.
B. Purchaser desires to purchase, and Seller desires to sell, certain
assets of Seller used in carrying out the Business. In connection with such
purchase and sale, Purchaser also will assume certain liabilities associated
with the Business.
C. Concurrently with the purchase thereof, Purchaser shall assign and
transfer (or shall cause Seller to assign and transfer) the Business and all
rights and liabilities under this Agreement to PTM.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, covenants, representations and warranties made in this Agreement,
Purchaser and Seller, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
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Section 1.1. Definitions. For convenience certain terms in this Agreement
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shall have the following meanings (such terms as well as any other terms defined
elsewhere in this Agreement shall be equally applicable to both the singular and
plural terms defined), respectively:
"Accounts Receivable" shall mean all of Seller's accounts receivable and
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notes receivable created or arising in respect of the sale of services, products
or other assets of the Business.
"Adjusted Cash" shall have the meaning set forth in Section 3.5 hereof.
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"Affiliate" shall mean, as to any specified person, (a) any other person
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controlling, controlled by or under common control with such specified person,
(b) any officer, director or partner of such specified person, (c) any other
person of which such specified person is an officer, employee, agent, director,
shareholder or partner or (d) any member of the Family Group of such specified
person or of any individual who is an Affiliate of such specified person by
reason of clause (a) or (b) of this definition. The term "control," with respect
to any person, means possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities or a partnership interest, by
contract or otherwise. "Family Group" means, as to any individual, such
individual's spouse, ancestors, lineal descendants and trusts for the benefit of
any of the foregoing, provided that all the income beneficiaries and
remainderman of any such trust are such individual's spouse, ancestors or lineal
descendants.
"Assumed Liabilities" shall mean the accrued liabilities and
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obligations of Seller to be assumed by Purchaser hereunder pursuant to Section
2.3.
"Xxxx of Sale and Assumption" shall mean the Xxxx of Sale and
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Assumption of Liabilities referred to in Section 3.2(a) hereof evidencing and
effecting the assignment by Seller of the Purchased Assets to Purchaser and the
assumption by Purchaser of the Assumed Liabilities.
"Business" shall have the meaning assigned to such term in Recital A
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hereof.
"California Code" shall have the meaning assigned to such term in
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Section 4.6(i) hereof.
"Cash" shall mean all of Seller's cash and cash equivalents as shown
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on Seller's books and records.
"Casualty" shall have the meaning assigned to such term in Section
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6.5(a) hereof.
"CERCLA" shall have the meaning assigned to such term in Section 4.12
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hereof.
"Condemnation" shall have the meaning assigned to such term in Section
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6.5(b) hereof.
"Closing" shall mean the consummation of the transactions contemplated
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to occur hereunder on the Closing Date pursuant to Article III hereof.
"Closing Date" shall have the meaning assigned to such term in Section
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3.1 hereof.
"Commitment" shall mean, collectively, the Chicago Title Preliminary
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Title Report for the Real Property, dated June 19, 1997, as supplemented June
26, 1997 and August 21, 1997 and as modified by the letter to Chicago Title
Company attached hereto as Schedule 1.1.
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"Condition" shall mean the assets, liabilities, business, prospects,
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operations, results of operations or condition (financial or otherwise) of the
Business or the Purchased Assets, considered in the aggregate.
"Contract" shall have the meaning assigned to such term in Section
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4.16 hereof.
"Digital Business" shall have the meaning assigned to such term in
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Recital A hereof.
"Dispute" shall have the meaning assigned to such term in Section 13.5
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hereof.
"Divisional Statements" shall have the meaning assigned to such term
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in Section 4.9 hereof.
"Equipment" shall mean all of Seller's furniture, fixtures, machinery,
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equipment, motor vehicles, office equipment, computers, tools and
replacement parts, wherever located, used by Seller in the operation of the
Business, all of the Equipment on the date hereof being listed on Schedule
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4.6(c) hereof.
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"Employment Agreements" shall mean the respective Employment
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Agreements or Consulting Agreement contemplated by Section 2.5 hereof.
"Environmental Laws" shall have the meaning assigned to such term in
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Section 4.12 hereof.
"Excluded Assets" shall mean the following assets which are expressly
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excluded from the Purchased Assets: (A) the corporate seal, certificate of
incorporation, minute books, stock books, tax returns or other records having to
do with the corporate organization of Seller, (B) the rights which accrue or
will accrue to Seller under this Agreement, (C) the rights to any of Seller's
claims existing at the Closing for any federal, state or local income tax
refunds, (D) any life insurance policies maintained by Seller, other than life
insurance policies maintained by Seller on the lives of Xxxxx Xxxxxxx, Xxx Xxxxx
and Xxxxxxx Xxxxxx, (E) any workers' compensation, general liability, property
and casualty and errors and omissions insurance policies, (F) any claims and
rights against third parties (including insurance carriers) to the extent they
do not relate to the Business, (G) claims for refunds of taxes and other
governmental charges to the extent such refunds relate to periods ending on or
prior to the Closing Date, (H) Cash in an amount equal to the principal balance
of and all unpaid interest on the Notes, (I) the beach house located at 00000
Xxxxxxx Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000, together with all furniture and
furnishings thereof, (J) all glass art and memorabilia, except for certain items
to be designated by Seller and delivered to Purchaser within seven days
following the Closing, and (K) all assets used by Seller exclusively in the
business conducted by its archives division.
"Financial Statement Date" and "Financial Statements" shall have the
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meanings assigned to such terms in Section 4.9(a) hereof.
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"Financing Source" shall mean such financial institution as may
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provide Purchaser with funds to enable it to pay the Purchase Price.
"Hazardous Substances" means any toxic or hazardous gaseous, liquid,
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solid or other material or waste that pose a hazard to the environment or human
health or safety including (i) any "hazardous substances" as defined by the
federal Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S)(S) 9601 et seq., and by the Xxxxxxxxx-Xxxxxxx-Xxxxxx Hazardous
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Substance Act, California Health and Safety Code (S)(S) 25340 et seq., (ii) any
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"extremely hazardous substance", "hazardous chemical" or "toxic chemical" as
those terms are defined by the federal Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. (S)(S) 11001 et seq., and by California Health and
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Safety Code (S)(S) 25500 et seq,. (iii) any "hazardous waste" as defined under
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the federal Solid Waste Disposal Act, as amended by the Resource Conversation
and Recovery Act, 42 U.S.C. (S)(S) 6901 et seq., and under California Hazardous
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Waste Control Law, Health and Safety Code (S)(S) 25100 et seq., (iv) any
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"pollutant," as defined under the federal Water Pollution Control Act, 33
U.S.C. (S)(S) 1251 et seq., California Water Quality Act, California Water Code
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(S)(S) 13000 et seq., California Safe Drinking Water and Toxics Act, Health and
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Safety Code (S)(S) 24249.5 et seq., (v) any "hazardous substance emissions" or
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"air toxics emissions" as defined under the Clean Air Act, 42 U.S.C. (S)(S) 7401
et seq., and California Health and Safety Code (S)(S) 7401 et seq., and
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California Health and Safety Code (S)(S) 39608 et seq., (S)(S) 40150 et seq.,
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(S)(S) 40501 et seq., and all South Coast Air Quality Management Districts Rules
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and Regulations, and (vi) any regulated substance or waste under any laws or
court or administrative orders by any federal, state or local governmental
authorities concerning protection of the environment, all as of the date hereof.
"HSR Act" shall mean Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
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1976, as amended, and the rules and regulations promulgated thereunder.
"Intellectual Property and Information" shall mean all the following
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used by Seller in the operation of the Business: patents, applications for
patents, trademarks, trademark registrations, applications for trademark
registrations, trade names, service marks, service xxxx registrations,
applications for service xxxx registrations, copyrights, copyright
registrations, applications for copyright registrations, computer programs,
trade secrets, product related artwork (except for glass memorabilia) and know-
how.
"Inventory" shall mean all of Seller's packaging, finished goods,
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spare parts, work in process, stockroom inventory and raw materials, wherever
located, used by Seller in the operation of the Business, or which are offered
for sale in the ordinary course of the Business.
"Knowledge" shall have the meaning assigned to such term in Section
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13.2 hereof.
"Landlord" shall mean 5055 Wilshire Limited Partnership.
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"Lease" shall mean that certain 5055 Wilshire Office Lease between
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Landlord and Seller dated March 11, 1993, as amended by First Amendment to
Office Lease dated November 4, 1994, and by an unexecuted Second Amendment to
Office Lease dated as of November 4, 1994.
"Leased Real Property" shall mean the real property leased by Seller
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in a portion of the property known as 0000 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, XX
00000 and used in the operation of the Business.
"Leasehold Improvements and Fixtures" shall mean all of the
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leasehold improvements, fixtures and appurtenances owned by Seller and attached
to the Leased Real Property.
"Legal Expenses" shall have the meaning assigned to such term in
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Section 11.1(a) hereof.
"Liabilities" shall mean any and all obligations or liabilities of any
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nature whatsoever, express or implied, matured or unmatured, disputed,
liquidated, unliquidated, absolute, fixed or contingent, known or unknown.
"Lien" shall mean any mortgage, lien, security interest, pledge,
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encumbrance, restriction on transferability, default of title, charge or claim
of any nature whatsoever or any property or property interest, including without
limitation any easement or other exception to title.
"Notes" shall mean the notes payable to Xxxxxx X. Xxxxxxx, as Trustee
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of the Xxxxxx Xxxxxxx Revocable Trust, u/t/d dated March 22, 1994, and to Xxxxxx
X. Xxxxxxx, as Trustee of the Xxxxxxx X. Xxxxxxx Trust, as set forth in the
Financial Statements, in the aggregate unpaid principal balance of $2,050,000.
"Optical Business" shall have the meaning assigned to such term in
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Recital A hereof.
"Permitted Liens" shall mean those Liens for taxes not yet due and
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payable and those Liens identified on Schedule 4.5 hereto that will remain as
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Liens against or affecting the Purchased Assets following the Closing.
"Prepaid Items" shall mean all of Seller's prepaid expenses expended
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for the benefit of the Business, including but not limited to advances and
deposits, all of the Prepaid Items listed on the Preliminary Balance Sheet
subject to change therefrom in the ordinary course of business.
"Preliminary Balance Sheet" shall mean an unaudited balance sheet of
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the Business for the eight-month period ended August 31, 1997 previously
delivered by Seller.
"Purchase Price" shall mean Fifteen Million Eight Hundred Thousand
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Dollars ($15,800,000).
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"Purchased Assets" shall mean all the assets relating to the Business,
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including without limitation the Accounts Receivable, Cash in excess of
principal and interest due on the Notes (adjusted as provided in Section 3.5
hereof), Equipment, Intellectual Property and Information, Inventory, Leasehold
Improvements and Fixtures, Prepaid Items, Real Property and Rights and Other
Property, all as existing on the Closing Date, but excluding the Excluded
Assets.
"Purchaser" shall mean jointly and severally (but subject to the
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provisions of Section 2.8 hereof), PTM, Safeguard and Mirage.
"Real Property" shall mean the real property owned by Seller and used
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in the operation of the Business, located at 0000 Xxxxx Xxxxxx Xxxxxxxxx xx Xxx
Xxxxxxx, Xxxxxxxxxx, and generally described on Schedule 4.6(e) hereto, together
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with all buildings, structures and improvements of every nature located thereon
and all appurtenances, rights, and hereditaments pertaining thereto.
"RCRA" shall have the meaning set forth in Section 4.12 hereof.
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"Rights and Other Property" shall mean all of Seller's assets arising
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from or used in connection with the Business, other than the Excluded Assets,
not included in the Accounts Receivable, Cash, Equipment, Intellectual Property
and Information, Inventory, Leasehold Improvements and Fixtures, Prepaid Items
and Real Property which are used in the Business, including, without
limitation, all of the following which relate to the Business: Seller's rights
under the agreements identified in Section 2.3 hereof, executed originals of
such agreements (if available in the files of or otherwise reasonably available
to Seller), rights of offset, credits, claims against third parties for refunds
in respect of the Business or the Purchased Assets, causes of action, judgments,
proceeds of insurance in respect of damage to or destruction of loss of assets
included within the Business or the Purchased Assets, going concern value,
goodwill, rights in the name "Pacific Title and Art Studio," "Pacific Title
and Arts" or any variation thereof (subject to Section 13.7 hereof), contract
rights, purchase orders, sales orders, warranties and licenses received from
manufacturers and sellers of Equipment and Inventory, vendor and customer
records, shipping records, franchises, licenses, permits, consents, approvals,
certificates of public convenience, waivers and authorizations for the operation
of the Business, (to the extent assignable), technical information, telephone
numbers, rights, files, books and records (whether in hard copy or magnetic
form), sales and product brochures and catalogs and other sales literature and
materials, in each case to the extent on hand or obtainable with reasonable
commercial effort.
"Seller" shall mean Seller and its Affiliates.
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"Seller Documents" shall mean the Xxxx of Sale and Assumption, Grant
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Deed, and other documents of Seller described in Section 3.2(a) hereof.
"Settlement Date" shall have the meaning set forth in Section 3.5(a)
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hereof.
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"Solvent" shall mean, with respect to any entity, that as of the date of
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determination:
(a) the then fair salable value of the property of such entity is
(i) greater than the then total amount of liabilities (whether matured,
unmatured, disputed, liquidated, unliquidated, absolute, fixed or contingent) of
such entity ("Obligations") and (ii) greater than the amount that will be
required to pay such entity's probable liability on such Obligations as they
become absolute and matured;
(b) such entity's capital is not unreasonably small to carry on such
entity's business as theretofore operated and all businesses in which such
entity is about to engage;
(c) such entity (i) is then able to pay its liabilities, existing and
capable of being enforced, in the ordinary course of business; (ii) will be able
to continue to pay such entity's Obligations as they mature in the ordinary
course of business; and (iii) does not intend or reasonably believes that it
will incur Obligations beyond its ability to pay as such Obligations mature; and
(d) the value of such entity's total assets is in excess of such
entity's total liabilities with both assets and liabilities being stated and
classified in accordance with generally accepted accounting principles.
"Survey" shall mean the land title survey of the Real Property,
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prepared by one or more duly licensed land surveyors at the expense of Purchaser
acceptable to the applicable Title Company and Purchaser.
"Title Company" shall mean Chicago Title Company.
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"Title Company" shall mean Owner's ALTA Policy of Title Insurance -
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1970 Form B issued by the Title Company, in an amount mutually agreed upon
(which amount shall be the portion of the Purchase Price allocated to the Real
Property pursuant to Section 2.4 hereof), and insuring Purchaser's title to the
Real Property, subject only to the Permitted Liens.
"Warranty Work" shall mean corrective work performed under a new or
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existing purchase orders and requests for the issuance of credit memorandums.
ARTICLE II
SALE AND PURCHASE OF ASSETS: PURCHASE PRICE
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Section 2.1. Sale and Purchase of Purchased Assets. Subject to the terms
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and conditions contained in this Agreement, at the Closing on the Closing Date,
Seller shall sell, assign, transfer and deliver to Purchaser and Purchaser shall
purchase from Seller, free and clear of all Liens other than Permitted Liens,
all of the Purchased Assets.
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Section 2.2. Payment of Purchase Price. At the Closing, Purchaser shall pay
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to Seller, by wired funds to an account designated by Seller, an amount equal to
the Purchase Price, together with such other sums (if any) as may be required by
this Agreement. In addition, Purchaser will assume at the Closing and agree to
pay, discharge or perform, as appropriate, the Assumed Liabilities. Except as
specifically provided in Section 2.3 hereof, Purchaser shall not assume or be
responsible for any Liabilities of Seller.
Section 2.3. Assumption of Specified Liabilities: Excluded Liabilities.
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(a) At the Closing, and except as otherwise specifically provided in
this Section 2.3, Purchaser shall assume and agree to pay, discharge or perform,
as appropriate, and in accordance with their respective terms and conditions,
the following Liabilities of Seller, referred to collectively herein as the
"Assumed Liabilities":
(i) all Liabilities of Seller incurred in operating the
Business existing as of the Financial Statement Date, but only if and to
the extent that the same are accrued or reserved for on the balance sheet
included in the Divisional Statements or reflected in the notes to the
Financial Statements pertaining to the Business and have not been paid or
discharged prior to the Closing hereunder;
(ii) all Liabilities of Seller arising in the ordinary course of
its operation of the Business between the Financial Statement Date and the
Closing Date, including Warranty Work, to the extent that the same have not
been paid or discharged prior to the Closing hereunder, except such, if
any, as fall within any of the categories described in subparagraphs
(iii)(A) and (B) hereof;
(iii) all Liabilities of Seller in respect of the agreements,
contracts, commitments and leases which are identified in Section 4.16
hereof or are not required to be identified in accordance with the
provisions of such section, except that Purchaser shall not assume or agree
to pay, discharge or perform any:
(A) Liabilities of the aforesaid character existing as of
the Financial Statement Date and which under generally accepted
accounting principles are or should have been accrued or reserved for
on a balance sheet or reflected in the notes thereto as a liability or
obligation, if and to the extent that the same were not accrued or
reserved for on the balance sheet included in the Financial Statements
or reflected in the notes thereto; and
(B) Liabilities arising out of any breach or failure to
perform by Seller prior to Closing of any agreements, contracts and
leases identified in Section 4.16 hereof or not required to be
identified in accordance with the provisions of such section, except
for Warranty Work.
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(iv) all liabilities of Seller in connection with the Employment
Agreements described in Section 2.5 hereof and for all employee related
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obligations described in Section 2.6;
(v) all liabilities of Seller for work in process; and
(vi) all sales tax liability, if any, associated with the
purchase and sale of the Purchased Assets.
(b) Purchaser's obligations in connection with its assumption of the
Assumed Liabilities are absolute and unconditional and shall be performed by
Purchaser without any right of set off for claims asserted by Purchaser against
Seller. Notwithstanding the foregoing, Purchaser is entitled to pursue
separately against Seller any and all rights Purchaser may have under or arising
from this Agreement for a breach by Seller of any representation, warranty,
covenant or agreement contained in this Agreement.
(c) Except to the extent provided in Section 2.3(a) hereof, Purchaser shall
not assume or incur any Liability under this Section 2.3 or otherwise for the
following, referred to collectively herein as the "Excluded Liabilities":
(i) in respect of Seller or any claim, regardless of when made or
asserted, (excluding Warranty Work) which arises out of or is based upon
negligence, strict liability or any express or implied representation,
warranty, agreement or guarantee made by Seller, or alleged to have been
made by Seller, or which is imposed or asserted to be imposed by operation
of law, in connection with any product designed, manufactured, sold, shipped
or installed by or on behalf of Seller or for any service performed by or on
behalf of Seller, including without limitation any claim relating to the
repair or replacement of any such product and any claim seeking recovery for
property damage, consequential damage, lost revenue or lost income or
personal injury;
(ii) in respect of any federal, state or local income or other tax
payable with respect to the business, assets, properties or operations of
Seller for any period prior to the Closing Date or incident to or arising as
a consequence of the negotiation or consummation by Seller of this Agreement
and the transactions contemplated hereby; provided that Purchaser shall be
obligated to pay any sales tax liability associated with the purchase and
sale of the Purchased Assets;
(iii) any liability relating to the transportation of Hazardous
Materials by Seller prior to the Closing (the parties acknowledge that for
purposes of this Section 2.3(c)(iii), Hazardous Substances shall include
substances which are deemed to be Hazardous Substances following the date
hereof);
(iv) any liability in connection with that certain litigation
captioned Xxxxxx x. Pacific Title and Art Studio, U.S. District Court No.
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95-6173DT, or Xxxxx v. Pacific Title
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and Art Studio, Los Angeles Superior Court No. EC019235, or arising from the
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underlying subject matter of claims made in either such suit; and
(v) any liability in connection with the workers' compensation claim
filed by Xxxx Xxxxxxxx or arising from the underlying subject matter of such
claim.
Section 2.4. Allocation of Purchase Price. Seller and Purchaser agree that
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the Purchase Price shall be allocated among the Purchased Assets in a manner
agreed upon by the parties following the preparation of a balance sheet of the
Business as of the Closing Date. Seller and Purchaser agree that each will
report the federal income tax consequences of such purchase and sale
contemplated hereby in a manner consistent with such allocation and such
negotiations.
Section 2.5. Employment of Seller's Employees.
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(a) Purchaser shall offer employment or consulting arrangements to
the executives of Seller set forth on Schedule 2.5 in accordance with the
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Employment Agreements. The Employment Agreements shall be in a form mutually
acceptable to Purchaser and such executives (to be evidenced by letters from
such executives and Purchaser). In addition, (i) Purchaser expressly shall
assume all obligations under the existing Employment Contracts set forth in
Schedule 2.5, and (ii) Purchaser shall offer substantially comparable
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employment to all other employees of Seller employed in connection with the
Business on the Closing Date. Purchaser shall recognize all vacation, sick or
personal leave accrued through the Closing Date by any employee of Seller
employed by Purchaser following Closing.
(b) Prior to the Closing, Purchaser shall perform any action and
execute any agreements or other documents necessary to become a signatory to
each and every union and local union agreement applicable to the Business to
which Seller is a party. At the request of Seller, and prior to the Closing
Date, Purchaser shall attend and participate in one or more meetings between
Seller and representatives of the applicable union and local unions that may be
called for the purpose of "Effects Bargaining," as prescribed by law. For
purposes of this Section 2.5(b), the term "Effects Bargaining" shall mean
negotiations with the relevant unions as required by the National Labor
Relations Act in order to bargain concerning the impact of the transactions
contemplated hereby, if any, on the terms and conditions of employment of union-
represented employees.
(c) Promptly upon execution of this Agreement Seller shall provide
notice to the applicable labor unions/collective bargaining units for its
employees of the pending sale of the Business. Purchaser shall use reasonable
efforts to continue (in separate subsidiaries) the application of any union
health and welfare and pension benefits presently being provided to nonunion
employees of Seller.
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Section 2.6. Severance and Other Payments to Employees of Seller.
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(a) Purchaser shall reimburse Seller for all amounts paid to
employees of Seller who (i) perform functions related to the Business, (ii) who
are employed by Seller as of the Closing, and (iii) elect not to become
employees of Purchaser following the Closing (including all amounts required to
be paid for accrued vacation, sick leave and personal days); provided, however,
that Purchaser shall not be obligated to reimburse Seller for any wages paid to
any such employee for current payroll periods ending as of the Closing Date.
(b) Purchaser shall indemnify Seller for any amounts required to
be paid to employees of Seller as of the Closing who become employees of
Purchaser following the Closing on account of vacation, sick leave or personal
days accrued through the Closing.
(c) Purchaser shall indemnify Seller for any severance or other
benefits required to be paid to employees of Seller as of the Closing pursuant
to any collective bargaining agreement as a result of the transactions
contemplated by this Agreement.
(d) Promptly following the end of Purchaser's first fiscal year
(but not later than January 31, 1998) Purchaser shall pay to employees of Seller
who become employees of Purchaser bonus compensation in an aggregate amount at
least equal to the amount of bonus compensation accrued through the date of
Closing; provided that Purchaser shall not be obligated to pay any bonus
compensation to any person who is not employed by Purchaser as of the end of
Purchaser's fiscal year.
(e) The indemnification provisions of Section 11.1(c) through
(f) shall apply to indemnification provided by Sections 2.6(b) and (c) hereof.
Section 2.7. Purchaser Not Assuming Employee Benefit Plans. Purchaser shall
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not assume the assets, liabilities nor sponsorship of any of Seller's "employee
benefit plans," as such term is defined in Section 3(3) of ERISA. Without
limiting the foregoing, the following terms and conditions shall apply.
(a) Defined Benefit Pension Plan. Purchaser shall not assume the
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assets, liabilities or sponsorship of the Pacific Title and Art Studio Defined
Benefit Pension Plan, which pension plan previously has been terminated.
(b) 401(k) Profit Sharing Plan. Purchaser shall not assume the
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assets, liabilities or sponsorship of the Pacific Title and Art Studio 401(k)
Profit Sharing Plan.
(c) Welfare Benefit Plans. Purchaser shall not assume the assets,
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liabilities nor sponsorship of any of the welfare benefit plans (within the
meaning of Section 3(l) of ERISA) maintained by Seller and listed on Schedule
2.7(c).
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(d) Cooperation. Seller and Purchaser shall provide each other
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with all information as the other may reasonably request from time to time in
order to implement the foregoing provisions and as is necessary or appropriate
to administer their respective employee benefit plans.
Section 2.8. Joint and Several Liability. Prior to the Closing, each of
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PTM, Safeguard and Mirage, which collectively constitute the Purchaser
hereunder, shall be jointly and severally liable for the performance of
Purchaser's obligations hereunder. Following the Closing Safeguard and Mirage
shall have no further obligations or liabilities under this Agreement;
provided that Safeguard and Mirage shall remain liable for any breaches of any
representations or warranties made by them prior to the Closing.
ARTICLE III
CLOSING
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Section 3.1. General. Unless otherwise agreed to by the parties hereto, but
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subject to Section 12.1(g), the closing under this Agreement (the "Closing")
will be held at the offices of Christensen, Miller, Fink, Jacobs, Xxxxxx, Xxxx &
Xxxxxxx, LLP, 2121 Avenue of the Stars, 00xx Xxxxx, Xxx Xxxxxxx, XX 00000
commencing at 10:00 a.m. on the date which is three business days after
satisfaction of the conditions set forth in Articles VII and VIII hereof, or
such other date and time as shall be mutually agreed to in writing by Purchaser
and Seller (the "Closing Date"):
Section 3.2. Delivery. At the Closing and as a condition to Closing:
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(a) Seller will deliver or cause to be delivered to Purchaser:
(i) Xxxx of Sale and Assumption, duly executed by Seller,
substantially in the form attached hereto as Exhibit A, and such other
---------
instruments of transfer, sale and assignment (including certificates of title in
respect of the motor vehicles included within the Purchased Assets) as shall be
reasonably necessary to vest in Purchaser good title to, or to assign and
transfer to Purchaser all of Seller's right, title and interest in, the
Purchased Assets; and
(ii) Grant Deed conveying the Real Property to a
subsidiary of PTM designated by Purchaser prior to the Closing, subject only to
the Permitted Liens, duly executed and acknowledged by Seller and in proper form
for recording;
(iii) a cashier's check in an amount equal to the Cash;
(iv) All other agreements, certificates, consents, approvals
and documentary evidence reasonably required to be delivered pursuant to
Seller's obligations hereunder.
12
(b) Purchaser will deliver to Seller:
(i) payment of the Purchase Price;
(ii) Xxxx of Sale and Assumption evidencing and effecting the
assumption by Purchaser of the Assumed Liabilities; and
(iii) all other agreements, certificates, consents, approvals
and documentary evidence reasonably required to be delivered pursuant to the
Purchaser's obligations hereunder.
Section 3.3. Expenses. Except as provided by Schedule 3.3, each party
----------- -------- ------------
shall be responsible for the payment of costs it has incurred and will incur in
connection with the execution and delivery of this Agreement and consummation of
the transactions contemplated hereby; provided, however, that (a) Purchaser
shall pay (i) the filing-fee required from an "acquiring person" in connection
with filing of a notice (if any) under the HSR Act; (ii) the Survey costs; (iii)
the difference in cost of premium between obtaining an ALTA title insurance
policy rather than a CLTA title insurance policy and (iv) any sales taxes
associated with the transactions contemplated by this Agreement; and (b) Seller
shall pay (i) the costs of obtaining a CLTA title insurance policy and (ii) the
real estate transfer taxes in connection with sale of the Real Property.
Section 3.4. Subsequent Documentation. Seller shall at any time and from
----------- ------------------------
time to time upon the reasonable request of Purchaser execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, all such further
assignments and instruments of sale and transfer as may be reasonably required
for the better assigning, transferring and confirming to Purchaser or its
successors and assigns, or for aiding and assisting Purchaser or its successors
and assigns in collecting and reducing to possession, any or all of the
Purchased Assets.
Section 3.5. Post Closing Adjustments to Cash.
----------- --------------------------------
(a) On the sixtieth (60th) day following the Closing (or such other date as
the parties shall agree)(the "Settlement Date")the following adjustments shall
be made to Cash:
(i) Purchaser shall receive a credit for an amount equal to the legal
and accounting fees incurred by Seller subsequent to June 4, 1997 which
related to the transactions contemplated by this Agreement and which were
paid prior to the Closing.
(ii) Seller shall receive a credit for an amount equal to the
difference between the cost of the premium of the Title Policy and the
premium of a CLTA title insurance policy.
(iii) Purchaser shall receive a credit for an amount equal to the real
estate transfer taxes paid by Seller in connection with the transfer of the
Real Property.
13
(iv) Seller shall receive a credit for amounts paid by Seller
pursuant to Section 2.6(a) hereof.
(v) Purchaser shall receive a credit of an amount equal to premiums
of the insurance policies obtained by Seller pursuant to Section 6.10
hereof, and
(vi) Seller shall receive a credit for federal and state income taxes
attributable to income of the Seller through October, 1997 (such taxes shall
be calculated at the rate of 48.5% of Seller's income through October,
1997), less the amount of distributions shown on Schedule 4.15 as made for
-------------
the purposes of taxes.
(b) The parties intend that following the adjustments to Cash set forth in
Section 3.5(a) have been made ("Adjusted Cash") Seller shall receive 20% of the
Adjusted Cash and Purchaser shall receive 80% of the Adjusted Cash. If the Cash
delivered to Purchaser at the Closing shall be in excess of 80% of the Adjusted
Cash, Purchaser shall pay such excess to Seller on the Settlement Date. If the
Cash delivered to Purchaser at the Closing shall be less than 80% of the
Adjusted Cash then Seller shall pay to Purchaser an amount equal to the
difference between such amounts; provided that the amount required to be paid by
Seller shall be reduced by the amount by which, if any, that the principal and
interest owing on the Notes as of the Closing exceeded the amount of Cash on the
Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RESPECTING SELLER
------------------------------------------------
Seller represents and warrants to Purchaser as follows:
Section 4.1. Organization and Qualification. Seller is a corporation duly
----------- -------------------------------
organized, validly existing and in good standing under the laws of the State of
California and is duly qualified and in good standing as a foreign
corporation authorized to transact business and to own and lease property in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it requires such
qualification in order to avoid liability or disadvantage. All of such
jurisdictions are listed Schedule 4.1.
------------
Section 4.2. Due Authorization. The execution and delivery of this Agreement
------------ ------------------
by Seller and the sale of the Purchased Assets and performance of the
obligations of Seller contemplated hereby and by the Seller Documents have been
duly and validly authorized by all necessary corporate and shareholder action.
Seller has the right, power and authority to enter into and perform this
Agreement and the Seller Documents, and this Agreement constitutes, and the
Seller Documents will, upon their execution, constitute, the valid and binding
obligations of Seller, enforceable against Seller in accordance with their
terms, except as enforceability thereof may be limited by general equitable
principles and by laws affecting the rights of creditors generally.
14
Section 4.3. Conflict with Other Instruments: Absence of Restrictions.
----------- --------------------------------------------------------
Except as described in Schedule 4.3, the execution, delivery and performance of
------------
this Agreement and the Seller Documents by Seller will not contravene any
provision of Seller's articles of incorporation or by-laws and will not result
in a breach of, or constitute a default under, any agreement or other document
to which Seller is a party or by which Seller is bound, or any decree, order or
rule of any domestic or foreign court or governmental agency or any provision of
applicable law which is binding on Seller or on any of the Purchased Assets, or
result in the creation or imposition of any Lien, on any of the Purchased Assets
or give to others any interest or rights therein or create in any third party
the right to modify, terminate or accelerate (or to make a claim for damages in
respect of) any material instrument or material contract to which Seller is a
party or by which Seller is bound. To the Knowledge of Seller, except as
described in Section 4.3, the execution, delivery and performance of this
Agreement and the Seller Documents by Seller will not adversely affect the
performance by third parties under any material supply contracts and
distribution agreements or other material contracts to which Seller is a party.
Section 4.4. Government and Third-Party Approvals. Except as listed on
----------- ------------------------------------
Schedule 4.4, no consent by, approval or authorization of or filing,
------------
registration or qualification with any federal, state or local authority, or any
foreign governmental authority, or any corporation, person or other entity
(including any party to any contract or agreement with Seller) is required (a)
for the execution, delivery or performance of this Agreement or the Seller
Documents by Seller, (b) in connection with Seller's consummation of the
transactions contemplated hereby and thereby or (c) in order to vest in
Purchaser good and marketable title in and to all of the Purchased Assets upon
the Closing.
Section 4.5. Title to Purchased Assets and Related Matters. Except as
----------- ---------------------------------------------
described in Schedule 4.5, Seller has good, valid and marketable title to all of
------------
its assets constituting the Purchased Assets, whether tangible or intangible,
and whether consisting of real or personal property (excluding for purposes of
this Section 4.5 leasehold interests as to assets that are leased by Seller and
license rights as to assets that are licensed to Seller), and all such Purchased
Assets are held free and clear of all mortgages, liens, pledges, claims,
charges, security interests or other encumbrances or limitations of any nature
whatsoever, except the Permitted Liens and Liens for current taxes and
assessments not in default. Except as described in Schedule 4.5, the instruments
------------
of transfer to be executed by Seller at the Closing will be effective to
transfer to Purchaser good, valid and marketable title to, and assign to
Purchaser all of Seller's right, title and interest in and to, such Purchased
Assets.
Section 4.6. Other Representations Regarding Purchased Assets.
----------- ------------------------------------------------
(a) Accounts Receivable. Except as set forth on Schedule 4.6(a),
------------------- ---------------
all of the Accounts Receivable as of the Preliminary Balance Sheet Date are
reflected on the Preliminary Balance Sheet. Except as set forth on Schedule
--------
4.6(a), the Accounts Receivable listed on the Preliminary Balance Sheet (i) have
------
arisen in the ordinary course of business of Seller; and (ii) represent bona
fide obligations due to Seller arising in the ordinary course of the Business.
The Preliminary Balance Sheet includes bad debt and warranty reserves which are
adequate in view
15
of the Company's past practice and experience, without regard to the
transactions contemplated hereby.
(b) Equipment. The items of Equipment listed on Schedule 4.6(b) are,
--------- ---------------
and on the Closing Date will be, in good working order. The Equipment includes
all of the motor vehicles and other machinery and equipment currently used in
the operation of the Business.
(c) Work in Process. All work in process has been performed in a good
---------------
and xxxxxxx like manner in accordance with the Seller's past practices.
(d) Leased Real Property: Leasehold Improvements.
--------------------------------------------
(i) The Leased Real Property is leased from Landlord pursuant to
the Lease, a true and correct copy of which has been delivered to
Purchaser. Seller has not subleased any portion of the Leased Real Property
or assigned or conveyed any interest therein or in the Lease to any third
party. The Lease is in full force and effect and constitutes the valid and
binding agreement of Seller and, to Seller's Knowledge, Landlord. Except as
disclosed in Schedule 4.6(d), neither Seller nor, to Seller's Knowledge,
---------------
Landlord is in default under the Lease and no event or condition has
occurred or exists which, with the passage of time, the giving of notice or
both, would cause either Seller or, to Seller's Knowledge, Landlord to be
in default thereunder.
(ii) The Leasehold Improvements are, and on the Closing Date will
be, in good working order. The Leasehold Improvements include all of the
leasehold improvements, fixtures and appurtenances currently used by Seller
in operating the Business.
(e) Real Property.
-------------
(i) Seller has previously delivered to Purchaser or permitted
Purchaser access to copies of (A) the real estate property tax assessments
and tax bills for all of the lots comprising the Real Property for the
three-year period ending December 31, 1996, (B) any architectural drawings,
plans, specifications, site plans and as-built surveys relating to any of
the Real Property on hand at Seller's premises and (C) any engineering plans
and reports, soil and substrata studies, utility schemes, landscape plans
and other studies covering, relating to, affecting or concerning the
physical condition and operation of any Real Property on hand at Seller's
premises.
(ii) Except as set forth on Schedule 4.6(e), there are no leases,
---------------
tenancies, licenses or other rights of occupancy or use for any portion of
the Real Property, and no person other than Seller occupies or uses any
portion of the Real Property.
16
(iii) There are no pending or, to Seller's Knowledge, threatened,
condemnations, eminent domain or similar proceedings, or assessments or
betterments, which could adversely affect any part of the Real Property.
(iv) Except as set forth on Schedule 4.6(e) to Seller's
---------------
Knowledge, the buildings and improvements constituting a part of the Real
Property, and the operation or maintenance thereof as operated and
maintained, do not contravene any current zoning or building law or
ordinance or other administrative regulation or violate any restrictive
covenant or any provision of federal, state or local or foreign law. Except
as set forth on Schedule 4.6(e), to Seller's Knowledge, there is no
---------------
outstanding notice of violation, order or citation against Seller under any
law, ordinance, governmental rule or regulation relating to any of the Real
Property, and all of the plants, buildings and structures constituting a
part of the Real Property are in good operating condition and in a state of
good maintenance and repair sufficient for the operation of the Business in
the manner now operated.
(f) Intellectual Property and Information. Except as disclosed on
-------------------------------------
Schedule 4.6(f), the Intellectual Property and Information includes all of
---------------
Seller's intellectual property rights which are used in operating the Business.
Seller owns exclusively or has a valid right to use the Intellectual Property
and Information being used to conduct the Business and the conduct of its
Business does not and, to Seller's Knowledge, will not conflict with or infringe
upon the intellectual property rights of others. A complete list of licenses
other than standardized shrink wrap software licenses is attached hereto as
Schedule 4.6(f). Except as set forth on Schedule 4.6(f), no claim is pending
--------------- ---------------
or, to the best of Seller's Knowledge, threatened against Seller and/or its
officers, employees and consultants to the effect that any such Intellectual
Property and Information owned or licensed by Seller, or which Seller otherwise
has the right to use, is invalid or unenforceable by Seller. Except pursuant to
the terms of any licenses specified on Schedule 4.6(f), Seller has no obligation
---------------
to compensate any person or entity for the use of any such Intellectual Property
and Information, and Seller has not granted any person or entity any license or
other right to use any of the Intellectual Property and Information of Seller,
whether requiring payment of royalties or not.
To Seller's actual knowledge (without independent inquiry), no employee of
Seller is subject to any contractual or legal restrictions which might interfere
with their use of their best efforts to promote the interests of Seller.
To Sellers' Knowledge, no employee or consultant of Seller has used any
trade-secrets or confidential information of any other person in the course of
their work for Seller. To Seller's Knowledge, Seller is the exclusive owner of
all right, title and interest in its Intellectual Property and Information as
purported to be owned by it. Neither Seller nor, to Seller's Knowledge, any of
its employees or consultants has received notice of and to Seller's Knowledge
there are no claims that Seller's Intellectual Property and Information or the
use or ownership thereof by Seller infringes, violates or conflicts with any
right of any third party.
17
(g) Electronic Data Processing Equipment. The Purchased Assets include
------------------------------------
all of the electronic data processing equipment and software currently used by
Seller in operating the Business.
(h) Generally. The assets constituting the Purchased Assets constitute
---------
all of the assets of Seller used in carrying out the Business, and the assets
constituting the Purchased Assets constitute all of the assets set forth on the
Preliminary Balance Sheet, to the extent required to be disclosed thereon (other
than such assets as Seller shall have disposed of since December 31, 1996 in the
ordinary course of business consistent with past practices).
Section 4.7. Conduct of Business. Except as set forth in Schedule 4.7,
----------- ------------------- ------------
between December 31, 1996 and the date hereof, Seller has conducted the
Business only in the ordinary course and in a manner consistent with its past
practices, including, without limitation, its distributions to shareholders.
Section 4.8. Solvency. Seller is Solvent.
------------ --------
Section 4.9. Additional Information.
----------- ----------------------
(a) Financial Statements. Seller has heretofore provided
---------------------
Purchaser with (i) the financial statements of Seller (the "Financial
Statements") for its fiscal year ended December 31, 1996 (the "Financial
Statement Date"), consisting of a balance sheet, a statement of operations, a
statement of shareholder's equity and retained earnings and a statement of cash
flows, together with an unqualified opinion thereon of Deloitte & Touche, LLP,
and (ii) unaudited statements of profit and loss for the Optical Business and
the Digital Business together with a segregated balance sheet of the Business
(together, the "Divisional Statements") for the twelve-month period ending on
the Financial Statement Date. The Financial Statements were prepared in
accordance with generally accepted accounting principles and practices
consistently applied throughout the periods reported upon and fairly and
accurately present the financial condition and the results of the operations of
Seller as at the Financial Statement Date and for the periods presented therein.
The Divisional Statements fairly and accurately present the financial condition
and the results of operations of the Business as at the Financial Statement Date
and for the periods presented therein. The parties acknowledge and agree that
the Financial Statements include the Archive Business, the assets and operations
of which are not included in the Purchased Assets.
(b) Absence of Liabilities. Except as disclosed in Schedule
---------------------- --------
4.9(b), on the Financial Statement Date, Seller had no material Liabilities
------
relating to or respecting the Business or the Purchased Assets except as and to
the extent reflected in the Divisional Statements, the notes to the Financial
Statements or in this Agreement or in any Schedule hereto. Seller has no
material Liabilities relating to or respecting the Business or the Purchased
Assets and no basis for any such Liability exists other than (i) any Liability
reflected in the Divisional Statements, the notes to the Financial Statements,
the Preliminary Balance Sheet, in this Agreement or in any Schedule hereto or
(ii) any Liability arising since the Financial Statement Date in the ordinary
course of business of Seller and in compliance with the covenants and agreements
of Seller herein contained.
18
(c) Intra-company Relationships. All services rendered or any Affiliate
---------------------------
of Seller to the Business have been recorded in the accounts of the Business at
their full value. All goods sold by Seller or any Affiliate of Seller to the
Business, and all goods sold by the Business to Seller or any Affiliate of
Seller, have been accounted for as if they were transferred in arm's length
transactions. There is no rental charged by Seller to the Business for any real
property. Seller and its Affiliates have provided no services to the Business
for value except as employees since the Financial Statement Date except as, and
to the extent, set forth on Schedule 4.9(c).
---------------
(d) Preliminary Balance Sheet. The Preliminary Balance Sheet fairly and
-------------------------
accurately presents the financial condition of the Business as at August 31,
1997. The Preliminary Balance Sheet was prepared in a manner consistent with the
manner by which the Divisional Statements were prepared.
Section 4.10. Permits and Approvals. Schedule 4.10 contains a true and
------------- --------------------- -------------
correct description of all material licenses, permits, approvals,
authorizations, consents and registrations ("Permits") pertaining to the
Business and the Purchased Assets issued in favor of Seller. Such Permits
include all Permits necessary or required to operate the Business in accordance
with the provisions of applicable law, except such Permits the absence of which
will not materially adversely affect the Business or the Condition. Except as
set forth in Schedule 4.10, all of such Permits are in full force and effect,
-------------
and the Business is currently being operated in compliance with the terms of
each of the Permits. Except as set forth in Schedule 4. 10, (a) all such Permits
--------------
are transferable to Purchaser and, upon consummation of the transactions
provided for herein, Purchaser will receive all right and benefit to such
Permits, and (b)Purchaser will not be required, prior to or following the
Closing, to file, apply for or obtain any other license, permit, approval,
authorization, consent or registration in order to own and operate the Purchased
Assets and the Business as currently owned and operated by Seller.
Section 4.11. Compliance with Law. Except as set forth in Schedule 4.11 and
------------ ------------------- -------------
except as to matters covered by Section 4.12, Seller has complied with each, and
is not in violation of any, material law, ordinance or governmental rule or
regulation to which the Business or the Purchased Assets are subject and has not
failed to obtain, or to adhere to the requirements of, any material license,
permit, approval, authorization, consent or registration necessary to the
ownership of the Purchased Assets or the operation of the Business.
Schedule 4.12. Compliance with Environmental Laws. Except as disclosed in
-------------- -----------------------------------
Schedule 4.12 with respect to the Business and the Purchased Assets, to Seller's
-------------
Knowledge: (a) Seller has complied with each, and is not in violation of any,
federal, state or local law, statute, regulation, permit, provision or
ordinance, relating to the use, generation, handling, storage, transportation,
release, treatment or disposal of Hazardous Substances (the "Environmental
Laws"); (b) Seller has obtained and complied with all necessary permits and
other approvals, including interim status under the Resource Conservation and
Recovery Act, as amended ("RCRA"), necessary to store, treat, dispose of and
otherwise handle Hazardous Substances; (c) there are no locations at any
facilities owned, leased or operated by Seller where Hazardous Substances have
entered into the soil, surface water or groundwater; and (d) there are no
on-site or off-site locations to which Seller
19
has transported Hazardous Substances or arranged for their transportation from
facilities owned, leased or operated by Seller, which site is the subject of any
federal, state or local enforcement action or other investigation under any
Environmental Law, which may lead to claims against Seller or Purchaser for
clean-up costs, remedial work, damages to natural resources or for personal
injury claims, including, but not limited to, claims under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"). Except as disclosed in Schedule 4.12, to Seller's Knowledge, no
-------------
polychlorinated biphenyls or substances containing polychlorinated biphenyls are
present on facilities owned, leased or operated by Seller in connection with the
Business or the Purchased Assets, and no asbestos is present on facilities
owned, leased or operated by Seller in connection with the Business or the
Purchased Assets. To Seller's Knowledge, no portion of the Purchased Assets
constitutes any of the following "environmentally sensitive areas": (1) a
wetland or other "water of the United States" for purposes of Section 404 of the
federal Clean Water Act, 33 U.S.C. (S)1344, or any similar area regulated under
any state law; (2) a l00-year floodplain; or (3) a portion of the coastal zone
for purposes of the federal Coastal Zone Management Act, 16 U.S.C. (S)(S)1451-
1464.
Section 4.13. Additional Environmental Disclosures. To Seller's Knowledge,
------------- ------------------------------------
Schedule 4.13 hereto contains lists or summary descriptions of the following
-------------
insofar as they affect or relate to facilities owned, leased or operated by
Seller and pertain to the Business or the Purchased Assets:
(a) All notices given by Seller to any governmental body or
official about discoveries of problems associated with Hazardous Substances at
facilities owned, leased or operated by Seller, including copies of all spill
reports, all reports submitted by Seller pursuant to environmental permits,
information supplied in response to inquiries from federal, state or local
agencies, and any requests submitted to Seller by the United States Justice
Department, the United States Environmental Protection Agency or state agencies
pursuant to CERCLA or RCRA regarding the hazardous wastes or hazardous
substances Seller has generated in the past and where those wastes and
substances are disposed; and
(b) All underground storage tanks located on facilities owned,
leased or operated by Seller.
Section 4.14. Litigation. Except as set forth in Schedule 4.14, no
------------ ---------- -------------
litigation, arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to Seller's Knowledge, threatened against Seller with respect to the
Business or any of the Purchased Assets or the transactions contemplated by this
Agreement or the Seller Documents, and Seller knows of no basis for any such
litigation, arbitration, investigation or proceeding. Seller is not a party to
or subject to the provisions of any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory official, body or
authority which affects the Business or the Purchased Assets or their operation.
20
Section 4.15. Absence of Changes. Except as set forth in Schedule 4.15,
------------ ------------------ -------------
between the Financial Statement Date and the date hereof there has not been, and
between the date hereof and the Closing Date there will not be:
(a) Any material change in the Condition, except changes in the
ordinary course of business, which in the aggregate have not been or will not be
prior to the Closing materially adverse to the Business or the Purchased Assets;
(b) Any damage, destruction or loss relating to the Business or
the Purchased Assets, whether or not covered by insurance or any other event or
condition which has had a material adverse effect, in the aggregate, on the
assets included within the Purchased Assets or on the Condition;
(c) Any claims relating to the Business or the Purchased Assets
not covered by applicable policies of liability insurance within the maximum
insurable limits of such policies;
(d) Any cancellation of purchase orders relating to the Business
for customer work in excess of $50,000 for any single customer;
(e) Any deterioration in the financial or competitive
prospects of Seller;
(f) Any declaration, setting aside or payment of any dividend or
other distribution in respect of any of Seller's shares of stock, or any direct
or indirect redemption, purchase or other acquisition of any such shares; or
(g) Any increase in the compensation payable or to become payable
by Seller to any of its officers, employees or agents, or any known payment or
arrangement made to or with any thereof.
Section 4.16 Contracts, Leases, Etc. Except as set forth in Schedule 4.16,
------------ ----------------------- -------------
Seller is not, with respect to the Business or the Purchased Assets, a party to
any currently effective written or oral:
(a) agreement, contract or commitment with any present or former
shareholder, director, officer, employee or consultant or for the employment of
any person, including any consultant;
(b) agreement, contract, commitment or arrangement with any labor
union or other representative of employees;
(c) agreement, contract or commitment for the future purchase of,
or payment for, supplies or products which obligates Seller to purchase supplies
or products not limited as to quantity or at a specified price which has a
remaining term of more than six months and which is not cancelable on 30 days
notice or less without penalty; or for the performance of services by a
21
third party which involves in any one case $10,000 and is not cancelable on 30
days notice or less without penalty;
(d) agreement, contract or commitment to sell or supply products
or to perform services which obligates Seller to sell products or perform
services on terms not limited as to quantity but limited as to price involves in
any one case payments of $l0,000 and is not cancelable on 30 days notice or
less without penalty;
(e) representative, distribution, purchase or sales agency
agreement, contract or commitment;
(f) lease under which Seller is either lessor or lessee which
obligates annual payments in excess of $5,000 individually or $25,000 in the
aggregate;
(g) note, debenture, mortgage, pledge, charge, security
agreement, bond, conditional sale agreement, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for
borrowing or lending of money (including, without limitation, loans to or from
officers, directors or any member of their immediate families), agreement or
arrangements for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person;
(h) agreement, contract or commitment for any charitable or
political contribution;
(i) agreement, contract or commitment for any capital expenditure
in excess of $10,000;
(j) agreement, contract or commitment limiting or restraining it
from engaging or competing with any person or entity in any business similar to
the Business;
(k) license, franchise, distributorship or other similar
agreement, including those which relate in whole or in part to any patent,
trademark, trade name, service xxxx or copyright or to any ideas, technical
assistance or other know-how of or used by it in the operation of the Business,
which contemplates payments by Seller in excess of $10,000 per agreement.
(l) profit sharing, stock purchase, stock option, pension,
retirement, long-term disability, hospitalization, insurance or similar material
plans providing employee benefits;
(m) other agreement, contract or commitment not made in the
ordinary course of business which contemplates payments by Seller in excess of
$10,000 in any 12-month period.
All of the foregoing agreements, contracts, commitments, leases and other
documents and undertakings are sometimes herein referred to as the "Contracts."
22
Except as set forth in Schedule 4.16, to Seller's Knowledge, each of the
-------------
Contracts is valid and enforceable in accordance with its terms; the parties
thereto are in compliance with the provisions thereof; no party is in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein; no event has occurred which
with or without the giving of notice or lapse of time, or both, would constitute
a material default thereunder; and Seller's rights under the Contracts listed on
Schedule 4.16 are transferable by Seller to Purchaser without restriction
-------------
(except for those contracts as to which the approvals and consents listed on
Schedule 4.4 apply).
------------
Section 4.17. Relationship With Customers and Suppliers. Except as set
------------ -----------------------------------------
forth on Schedule 4.17, Seller has used its reasonable business efforts to
-------------
maintain, and currently maintains, good working relationships with all of its
customers and suppliers of the Business. Neither Seller, nor any representative,
agent or employee of Seller, has paid any bribe or kickback to any customer or
to any representative, agent or employee of any customer. None of the ten
customers of Seller who, in the aggregate, for the fiscal year ended December
31, 1996, were the largest dollar volume customers of products sold by Seller
with respect to the Business has given Seller notice terminating, canceling or
to Seller's Knowledge threatening to terminate or cancel any contract or
relationship with Seller. None of the ten suppliers of Seller who, in the
aggregate, for the fiscal year ended December 31, 1996, were the largest dollar
volume suppliers of supplies used by Seller with respect to the Business has
given Seller notice terminating, canceling or to Seller's Knowledge threatening
to terminate or cancel any contract or relationship with Seller.
Section 4.18. Taxes. Seller has accurately prepared and duly and timely
------------ -----
filed with the appropriate governmental agencies (federal, state, local and
foreign) all tax and other returns required to be filed by it. Seller has paid,
or has made sufficient provision for the payment of, all taxes shown by such
returns to be required (a) to be paid by it for all fiscal and other applicable
tax periods which have ended or (b) to be accrued for the portion of the current
fiscal or other current applicable tax period up to the day prior to the Closing
Date. No deficiencies for any taxes have been asserted in writing or assessed
against Seller which remain unpaid.
Section 4.19. Employees. Schedule 4.19 lists each of the employees of
------------ --------- -------------
Seller providing services to the Business (collectively, the "Employees") and
(a) the base salary or hourly rate, as currently in effect, for each of such
Employees, (b) the bonus arrangements, if any, currently in effect for each of
the Employees, (c) the commission arrangements, if any, currently in effect for
each of the Employees and (d) the date on which the most recent salary increase
went into effect for each of the Employees and the amount of each such increase.
Except as limited by individual written contracts with employees listed on
Schedule 2.5 or the Employment Agreements or, with respect to labor union
------------
affiliates, the terms of applicable collective bargaining agreements, all
Employees of Seller are "at will."
Section 4.20. Strikes, Picketing, etc; Overtime, Back Wage, Vacation,
---------------------------------------------------------------------
Discrimination, and Occupational Safety Claims. Except as set forth in Schedule
---------------------------------------------- --------
4.20, there has been no strike, slowdown, picketing, work stoppage or labor
----
dispute by any union or other group of employees of Seller in connection with
the Business for the past three years, and to Seller's Knowledge, no
23
such action or dispute has been threatened during such period. No union has
asserted jurisdiction over the Digital Business or otherwise maintained that any
collective bargaining agreement binding Seller with respect to the Optical
Business binds Seller in its operation of or employment of persons in connection
with the Digital Business nor has any labor union indicated any intent to do so.
No union has invoked with respect to Seller the technological change provisions
set forth in its collective bargaining agreement with Seller or to Seller's
Knowledge indicated any intent to do so. Neither Seller nor any agent or
representative of Seller has (a) made any loan or given anything in value,
directly or indirectly, to any officer, official, agent or representative of any
labor union or group of employees (other than regular salaries and wages) or
(b) paid any illegal bribe or kickback to any union or to any representative,
agent or employee of any union. To Seller's Knowledge, except as set forth on
Schedule 4.20, no person or party has asserted or threatened to assert any claim
-------------
against Seller pursuant to the grievance procedures established under any
agreement between Seller and any union. To Seller's Knowledge, except as set
forth in Schedule 4.20, there are no outstanding claims against Seller (whether
-------------
under federal, state or foreign law, under any employment agreement, union labor
contract or otherwise) asserted by any present or former employee of Seller on
account of or for (a) overtime pay, other than overtime pay for work done during
the current payroll period; (b) wages or salary for any period other than the
current payroll period; (c) any amount of vacation pay or pay in lieu of
vacation time, other than vacation time or pay in lieu thereof earned in or in
respect of the current fiscal year; or (d) any violation of any statute,
ordinance or regulation relating to minimum wages or maximum hours of work. To
Seller's Knowledge, except as set forth in Schedule 4.20, no person or party has
-------------
asserted or threatened to assert any claims against Seller under or arising out
of any statute, ordinance or regulation relating to discrimination or
occupational safety in employment or employment practices (including, without
limitation, the Occupational Safety and Health Act of 1970, as amended, the Fair
Labor Standards Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, or the Age Discrimination in Employment Act of 1967, as amended), in
connection with the Business.
Section 4.21. Pension and Other Employee Benefit Plans. There is set forth
------------ ----------------------------------------
or identified in Schedule 4.21 all of the plans, funds, policies, programs,
-------------
arrangements or understandings sponsored or maintained by Seller with respect to
the Business which provide any employee of Seller (or any dependent or
beneficiary of any such employee) with (a) retirement benefits; (b) severance or
separation from service benefits; (c) incentive, performance, stock, share
appreciation or bonus awards; (d) health care benefits; (e) disability income or
wage continuation benefits; (f) supplemental unemployment benefits; (g) life
insurance, death or survivor's benefits; (h) accrued sick pay or vacation pay;
or (i) any other type of material benefit offered under any arrangement subject
to characterization as an "employee benefit plan" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and not excepted by Section 4 of ERISA (the foregoing being
collectively called "Employee Benefit Plans"). Except as set forth on Schedule
--------
4.21, none of such Employee Benefit
----
Plans is an "employee benefit pension plan" or a "pension plan" as defined in
Section 3(2) of ERISA. As to any Employee Benefit Plan identified in Schedule
--------
4.21, each of the following is true: (i) all amounts due from Seller as
----
contributions to the date hereof have been paid or accrued on their books;
(ii) Seller and any Affiliated Company (as hereinafter defined) have performed
or satisfied
24
all material obligations required to be performed or satisfied by them under,
and are not in default under or in violation of, any Employee Benefit Plan and,
to Seller's Knowledge, no other party is in default thereunder or in violation
thereof; (iii) Seller and any Affiliated Company are in compliance in all
material respects with the requirements (including reporting and disclosure
requirements applicable to them) prescribed by all statutes, orders or
governmental rules or regulations applicable to the Employee Benefit Plans,
including, but not limited to, ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"); (iv) neither Seller nor any Affiliated Company or any
other "disqualified person" or "party in interest" (as defined in Section 4975
of the Code and Section 3(14) of ERISA, respectively) has engaged in any non-
exempt "prohibited transaction," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, which could subject any Employee Benefit Plan (or
its related trust), Seller or any Affiliated Company, Purchaser, any
shareholder, officer, director, partner or employee of Seller, any Affiliated
Company or Purchaser, or any trustee, administrator or other fiduciary of any
Employee Benefit Plan to the tax or penalty imposed under Section 4975 of the
Code or Section 502(i) of ERISA or any other material liability including civil
liability under Title I of ERISA; and (v) there are no material actions, suits
or claims pending (other than routine claims for benefits) or, to Seller's
Knowledge, threatened, against any Employee Benefit Plan or against the assets
of any Employee Benefit Plan. For purposes of this Section 4.21, "Affiliated
Company" shall mean any member (whether or not incorporated) of a group which is
part of a controlled group of corporations or under common control (within the
meaning of the regulations promulgated under Section 414 of the Code) and of
which Seller is a member. Except as set forth on Schedule 4.21, Seller does not
-------------
maintain or participate in, and has never maintained or participated in, any
"multiemployer plans" as defined in Section 3(37) of ERISA.
Section 4.22. Contracts with Affiliates. Except as set forth in Schedule
------------ ------------------------- --------
4.22, there are no contracts, obligations or arrangements between Seller and any
----
director, officer, shareholder or employee of Seller or any Affiliate of any
such person applicable to the Business or the Purchased Assets.
Section 4.23. Statements and Other Documents Not Misleading. To Seller's
------------ ---------------------------------------------
Knowledge, neither this Agreement, including all Schedules, nor any other
financial statement, document or other instrument heretofore or hereafter
furnished by Seller to Purchaser in connection with the transactions
contemplated hereby contains or will contain any untrue statement of any
material fact or omits or will omit to state any material fact required to be
stated in order to make such statement, document or other instrument not
misleading. To Seller's Knowledge there is no fact which may materially
adversely affect the Condition which has not been set forth in this Agreement,
the Schedules or the other documents furnished to Purchaser on or prior to the
date hereof in connection with the transactions contemplated hereby.
Section 4.24. Investment Company. Seller is not an "investment company" or
------------ ------------------
a company "controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended.
25
ARTICLE V
REPRESENTATIONS AND WARRANTIES RESPECTING PURCHASER
---------------------------------------------------
Purchaser represents and warrants to Seller as follows:
Section 5.1 Organization.
----------- ------------
(a) Safeguard is a corporation duly organized, validly existing and in good
standing under the laws of the State of Pennsylvania and is duly qualified and
in good standing as a foreign corporation authorized to transact business and to
own and lease property in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties owned or leased
by it requires such qualification in order to avoid liability or disadvantage.
All of such jurisdictions are listed on Schedule 5.1.
------------
(b) Mirage is a limited partnership duly formed, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified and
in good standing as a foreign limited partnership authorized to transact
business and to own and lease property in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
owned by it requires such qualification in order to avoid liabilities or
disadvantage. All of such jurisdictions are listed on Schedule 5.1.
------------
(c) PTM is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is qualified and in good
standing as a foreign corporation authorized to transact business and to own and
lease property in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties owned or leased
by it requires such qualification in order to avoid liability or disadvantage.
All such jurisdiction are listed on Schedule 5.1.
------------
Section 5.2. Due Authorization. The execution and delivery of this
------------ -----------------
Agreement by each of PTM, Safeguard and Mirage and the purchase of the Purchased
Assets and performance of the respective obligations of PTM, Safeguard and
Mirage contemplated hereby and by the Xxxx of Sale and Assumption have been duly
and validly authorized by all necessary corporate and partnership action,
respectively, of PTM, Safeguard and Mirage. PTM, Safeguard and Mirage each have
the right, power and authority to enter into and perform this Agreement and the
Xxxx of Sale and Assumption, and this Agreement constitutes the valid and
binding obligations of PTM, Safeguard and Mirage, respectively, enforceable
against PTM, Safeguard and Mirage in accordance with their terms, except as
enforceability thereof may be limited by general equitable principles or by laws
affecting the rights of creditors generally. The Xxxx of Sale and Assumption
will, upon its execution by PTM, constitute the valid and binding obligation of
PTM, enforceable against PTM in accordance with its terms, except as
enforceability thereof may be limited by general equitable principles or by laws
affecting the rights of creditors generally.
Section 5.3. Conflict With Other Instruments. The execution, delivery and
----------- -------------------------------
performance of this Agreement by PTM, Safeguard and Mirage and the Xxxx of Sale
and Assumption by PTM
26
will not contravene any provision of PTM's certificate of incorporation or
bylaws, Safeguard's articles of incorporation or by-laws or Mirage's certificate
of limited partnership or limited partnership agreement and will not result in a
breach of, or constitute a default under, any agreement or other document to
which any of PTM, Safeguard or Mirage is a party or by which any of them is
bound, or any decree, order or rule of any domestic or foreign court or
governmental agency or any provision of applicable law which is binding on PTM,
Safeguard or Mirage, as the case may be, or create in any third party the right
to modify, terminate or accelerate (or to make a claim for damages in respect
of) any material instrument or material contract to which PTM, Safeguard or
Mirage is a party or by which any of them is bound.
Section 5.4. Government and Third-Party Approvals. Except as set forth on
----------- -------------------------------------
Schedule 5.4, no consent by, approval or authorization of or filing,
------------
registration or qualification with any federal, state or local authority, or any
foreign governmental authority, or any corporation, person or other entity
(including any party to any contract or agreement with PTM, Safeguard or Mirage)
is required (a)for the execution, delivery or performance of this Agreement by
PTM, Safeguard and Mirage or the Xxxx of Sale and Assumption by PTM, (b)in
connection with the consummation of the transactions contemplated hereby and
thereby, by PTM, Safeguard and Mirage or (c) in order to vest in PTM good and
marketable title to all of the Purchased Assets upon Closing.
Section 5.5. Litigation. No litigation, arbitration investigation or
----------- ----------
other proceeding of or before any court arbitrator or governmental or
regulatory official, body or authority is pending or, to the Knowledge of PTM,
Safeguard or Mirage, threatened against PTM, Safeguard or Mirage with respect to
the Business or any of the Purchased Assets or the transactions contemplated by
this Agreement or the Xxxx of Sale and Assumption, and neither PTM, Safeguard or
Mirage have Knowledge of any basis for such litigation, arbitration,
investigation or proceeding.
Section 5.6. Solvency. Assuming that Seller's representations and
----------- --------
warranties in Sections 4.5, 4.6, 4.8, 4.9 and 4.15 are true, complete and
correct, as of the Closing Date, any assignee at the Closing of Purchaser's
rights will be Solvent. Safeguard is Solvent.
Section 5.7. Financing. Purchaser has, or has obtained commitments for,
----------- ---------
sufficient financing to pay the Purchase Price and perform its obligations
hereunder.
Section 5.8. HSR Act. The equity interest of the Purchaser is owned by
----------- -------
persons such that a notification and report form will not be required to be
filed under the HSR Act in order to consummate the transactions contemplated by
this Agreement.
27
ARTICLE VI
CERTAIN COVENANTS AND OTHER MATTERS
-----------------------------------
Section 6.1 Corporate Examinations and Investigations
----------- -----------------------------------------
(a) Between the date hereof and the Closing Date, Seller agrees
to cooperate (and to cause its officers, employees, consultants, agents,
attorneys and accountants to cooperate) fully with Purchaser and the Financing
Source and with their respective counsel, accountants and representatives in the
conduct of their due diligence investigation of the Business from legal,
environmental, insurance, valuation and solvency perspectives and, in connection
with such due diligence investigation, to grant to Purchaser and the Financing
Source and such representatives access to the properties, records, and, with the
prior consent of Seller (which shall not be unreasonably withheld), employees,
customers, creditors, vendors and suppliers of the Business. Purchaser will use
its best efforts to complete its due diligence investigation as promptly as
reasonably practicable. Except as set forth in Section 6.1(b) hereof, no
investigation by Purchaser shall diminish any of the representations,
warranties, covenants or agreements of Seller under this Agreement or reduce
Purchaser's right to pursue such remedies at law or hereunder as it would
otherwise have in the absence of having conducted such investigation.
(b) Between the date hereof and the Closing Date, if Purchaser or
Seller discovers that any representation, warranty or covenant of Seller made
herein is not true, complete or correct, Purchaser or Seller (as the case may
be) will promptly notify the other party of such breach. Seller covenants and
agrees to use its best efforts to cure any such breach, but if Seller fails or
is unable to effect a cure thereof, the Purchaser shall either (i) waive such
breach and Close or (ii) terminate this Agreement without liability on the part
of either party to the other.
Section 6.2. Restriction on Certain Discussions and Actions. Seller
----------- ----------------------------------------------
agrees that until the Closing Date or until termination of this Agreement
pursuant to Article XII it will refrain, and will direct and cause its officers,
directors, Affiliates, employees, attorneys, accountants and other agents and
representatives to refrain, from taking any action, directly or indirectly, to
solicit, encourage, initiate or participate in any way in discussions or
negotiations with, or furnish any information with respect to the Business or
the Purchased Assets to, any person or other entity (other than Purchaser and
its representatives) in connection with any possible or proposed sale of capital
stock, sale of a substantial portion of the assets, merger or other business
combination involving the Business or the acquisition of a substantial equity
interest in the Business or the Purchased Assets or any similar transaction
involving the Business or the Purchased Assets; provided, however, nothing
contained herein shall preclude Seller from providing any notice or otherwise
obtaining any consent, approval or transfer of any Permit. Seller agrees that it
will not (without Purchaser's prior written consent) disclose this Agreement or
the matters referred to herein to any other prospective acquirer of the Business
until the Closing Date or until termination of this Agreement pursuant to
Article XII.
28
Section 6.3. [Reserved]
Section 6.4. Title Policy. Within 20 days following the Closing Date,
----------- ------------
Seller shall cause the Title Company to issue the Title Policy.
Section 6.5. Casualty and Condemnation.
----------- -------------------------
(a) If any of the Purchased Assets, or any portion thereof or any
personal property located thereon, is lost, stolen or damaged or destroyed by
fire or any other casualty (a "Casualty"), Seller shall promptly give notice of
the same to Purchaser. Purchaser have the right to terminate this Agreement by
giving notice thereof to Seller within 15 days after receipt of Seller's notice
under this Section 6.5(a) of the occurrence of a Casualty. If Purchaser
terminates this Agreement pursuant to this Section 6.5(a), this Agreement shall
become null and void, and Seller and Purchaser shall thereupon have no further
liabilities or obligations under this Agreement. If Purchaser does not terminate
this Agreement pursuant to this Section 6.5(a), Purchaser be entitled to the
benefits of all insurance proceeds and claims relating to any such Casualty, and
Seller shall at or prior to Closing assign to Purchaser (without recourse or
warranty) all such insurance proceeds and claims. Seller shall inform Purchaser
of any negotiations with respect to insurance claims involving any Casualty,
will permit Purchaser to take part therein, and will not settle any such claims
without Purchaser's prior written consent. Purchaser shall not be entitled to a
diminution of the Purchase Price to the extent the insurance proceeds from such
Casualty are less than the fair market value of the Purchased Assets subject to
the Casualty.
(b) If any authority having the right of eminent domain shall
commence negotiations or shall commence legal action for the damaging, taking or
acquiring of any of the Purchased Assets, either temporarily or permanently, by
condemnation or by exercise of the right of eminent domain ("Condemnation"),
Seller shall promptly give notice of the same to Purchaser. Purchaser shall have
the right to terminate this Agreement by giving notice thereof to Seller within
15 days after receipt of Seller's notice under this Section 6.5(b). If Purchaser
terminates this Agreement pursuant to this Section, this Agreement shall become
null and void, and Seller and Purchaser shall thereupon have no further
liabilities or obligations under this Agreement. If Purchaser does not so
terminate this Agreement pursuant to this Section 6.5(b), Purchaser shall be
entitled to the benefits of all awards, claims, settlement proceeds and other
proceeds payable by reason of any such Condemnation, and Seller shall assign to
Purchaser (without recourse or warranty) all awards, claims, settlement
proceeds, or other proceeds payable by reason of any such Condemnation. In the
event of any negotiations with respect to any Purchased Asset with any authority
regarding settlement on account of damaging, taking or acquiring in lieu of
condemnation or eminent domain, Seller will inform Purchaser of all such
negotiations, will permit Purchaser to take part therein, and will not enter
into any settlements thereof without Purchaser's prior written consent.
Purchaser shall not be entitled to a diminution of the Purchase Price to the
extent the proceeds from such Condemnation are less than the fair market value
of the Purchased Assets subject to the Condemnation.
29
Section 6.6. Conduct of Business Prior to the Closing. Between the date of
----------- ----------------------------------------
this Agreement and the Closing, with respect to the Business and except as
provided in Schedule 6.6:
------------
(a) Seller shall conduct its business, operations, activities and
practices (including, without limitation, its maintenance and management of
Cash) in the usual and ordinary course, consistent with its past practices;
(b) Seller shall not take or suffer or permit any action which
would render untrue any of the representations or warranties of Seller herein
contained, and Seller shall not omit to take any action the omission of which
would render untrue any such representation and warranty;
(c) Seller shall use reasonable efforts to preserve its business
organization intact, keep available to itself and to Purchaser the present
services of its employees (subject to paragraph (d) hereof); preserve for itself
and Purchaser the goodwill of Seller's suppliers and customers and others with
whom business relationships pertaining to the Business exist; maintain its
tangible property pertaining to the Business in the same condition as it now
exists, ordinary wear and tear excepted; maintain all insurance policies in
force at the date hereof in full force and effect; and maintain in full force
and effect all agreements, licenses, permits, authorizations and approvals
necessary for the operation of the Business;
(d) Seller shall not grant or otherwise make, or agree to grant
or otherwise agree to make, any increase in the compensation payable or to
become payable by it to any employees of the Business.
(e) Seller shall not sell or dispose of any of its assets used in
the operation of the Business (otherwise than in the ordinary course of business
consistent with past practice);
(f) Seller shall not make any capital expenditures in excess of
$50,000 in any single instance.
(g) Seller shall not make any distributions to its shareholders;
(h) Seller shall not enter into any agreement not in the ordinary
course of business; and
(i) Seller shall not cancel, waive or modify any claims or rights
owned by or running in favor of it outside the ordinary course of business,
which claims or rights will be transferred to Purchaser.
Section 6.7. Notice to Purchaser. Seller covenants and agrees to provide
----------- -------------------
Purchaser with immediate notice of any occurrence which could adversely affect
the Condition.
30
Section 6.8. Consents; Further Assurances. Consistent with the terms and
----------- ----------------------------
conditions hereof, each party hereto will use its best efforts to execute and
deliver such other documents and take such other actions as reasonably requested
by the other party to fulfill the conditions precedent to the obligation of the
other party to consummate the purchase and sale of the Purchased Assets and
assumption of the Assumed Liabilities, or as the other party hereto may
reasonably request in order to carry out this Agreement and the transactions
contemplated hereby. Purchaser and Seller shall use their best efforts and will
cooperate with each other to the extent reasonably necessary to obtain all
Permits, consents, approvals and waivers, if any, from third parties required to
consummate the transactions contemplated hereby or which, if not obtained, would
materially adversely affect the Condition or the operation of the Purchased
Assets.
Section 6.9. Insurance. Prior to the Closing Seller shall obtain an
----------- ---------
insurance policy containing environmental risk coverage naming Purchaser as
beneficiary. Such policy shall provide at least $3 million of coverage, have a
term of at least five (5) years and otherwise be in a form reasonably
satisfactory to Purchaser. Purchaser acknowledges that the form of policy
previously delivered by Seller is satisfactory. Seller shall pay the cost of
such insurance policy. Seller may, at its option and at its expense, obtain its
own insurance policy.
ARTICLE VII
CONDITIONS TO THE OBLIGATION OF PURCHASER
-------------------------------------------
The obligation of Purchaser to proceed with the Closing under this
Agreement is subject to the satisfaction, on or prior to the Closing, of each of
the following conditions, each of which may be waived by Purchaser:
Section 7.1. Representations and Warranties True. The representations and
----------- ----------------------------------
warranties of Seller contained in this Agreement and the information contained
in the Schedules to this Agreement and any closing documents delivered by Seller
in connection with this Agreement shall have been true and correct in all
respects when made and shall be true and correct in all respects at the Closing
Date as though made at such time, and Seller shall have delivered to Purchaser a
certificate to that effect signed by its President.
Section 7.2. Performance of Obligations. The obligations of Seller to be
----------- --------------------------
performed by it on or before the Closing pursuant to the terms of this Agreement
shall have been duly performed and complied with in all respects and, at the
Closing, Seller shall have delivered to Purchaser a certificate to that effect
signed by its President.
Section 7.3. Consents and Permits. All Permits, consents, approvals and
----------- --------------------
waivers from third parties (including, without limitation, lenders) and
government agencies required to consummate the transactions contemplated hereby,
as specified on Schedules 4.4 and 4.10 hereof, shall have been obtained by or
-------------
transferred to Purchaser or its Affiliate.
31
Section 7.4. No Material Change. There shall be no actual material adverse
----------- ------------------
change to the Condition, the Business or the Purchased Assets since subsequent
to the Preliminary Balance Sheet Date.
Section 7.5. Absence of Litigation. Except as set forth in Schedule 4.14,
----------- --------------------- -------------
there shall not be any litigation or proceeding, pending or threatened
(including, without limitation, any litigation or proceeding arising under
antitrust or securities laws), to restrain or invalidate the sale and purchase
of the Purchased Assets or the other transactions contemplated herein, and no
material action or proceeding shall be pending or, to the best of Seller's
knowledge, threatened against Seller or the Purchased Assets, at law or in
equity, before any federal or state court or governmental commission or in
arbitration or by or before any administrative agency, which action or
proceeding would adversely affect the Condition, nor shall any judgments,
consents, injunctions or any other judicial or administrative mandates be
outstanding against Seller which would adversely affect the Condition.
Section 7.6. Certified Resolutions. Purchaser shall have received a
----------- ---------------------
certified copy of the resolutions of the Board of Directors and of the
shareholders of Seller authorizing and approving the execution and delivery of
this Agreement and the Seller Documents and the consummation of the transactions
contemplated herein and therein.
Section 7.7. Certificate of Good Standing; Tax Lien Certificate. Purchaser
----------- --------------------------------------------------
shall have received a good standing certificate of Seller dated not more than
ten days prior to the Closing Date from the Secretary of State of the State of
California. Purchaser shall have received a tax clearance certificate dated not
more than 30 days prior to the Closing Date from the applicable officials of
the State of California evidencing that Seller has no outstanding liability for
delinquent taxes.
Section 7.8. Execution of Noncompetition Agreement
----------- -------------------------------------
(a) Seller shall have executed and delivered this Agreement and the
Seller Documents.
(b) Each of Seller's shareholders shall have executed and delivered an
Agreement and Covenant Not to Compete, substantially in the form attached hereto
as Exhibit B.
---------
Section 7.9. Absence of Liabilities. On the Closing Date, there shall be
----------- ----------------------
no Liabilities relating to or respecting the Business or the Purchased Assets,
except for Assumed Liabilities, except for such other liabilities as are
disclosed by this Agreement or any Schedule hereto and except for such
contractual obligations as may arise on and after the Closing Date under the
agreements listed on Schedule 4.16, as evidenced by a certificate to such effect
-------------
signed by the President of Seller and containing such supporting documentation
as Purchaser shall request.
Section 7.10. Completion of Environmental Remediation. Purchaser shall be
------------ ---------------------------------------
satisfied that all 1, 1, 1-trichloroethane owned by Seller is stored with
persons possessing all permits required for the storage of such 1, 1, 1-
trichloroethane.
32
Section 7.11. Delivery of Specified Documents. Seller shall have delivered
------------ -------------------------------
to Purchaser all of the documents and instruments specified in Section 3.2
hereof on or prior to the Closing Date.
Section 7.12. Employment Agreements. Purchaser shall have entered into the
------------ ---------------------
Employment Agreements with each of the employees listed on Schedule 2.5 to
------------
receive new Employment Agreements.
Section 7.13. Landlord Consent. The Landlord shall have consented to the
----------- ----------------
assignment of the Lease and confirmed that Seller is not in default under the
Lease.
ARTICLE VIII
CONDITIONS TO THE OBLIGATION OF SELLER
--------------------------------------
The obligation of Seller to proceed with the Closing under this Agreement
is subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, each of which may be waived by Seller:
Section 8.1. Representations and Warranties True. The representations and
----------- ----------------------------------
warranties of Purchaser contained in this Agreement and the information in the
Schedules to this Agreement and any closing documents delivered by Purchaser in
connection with this Agreement shall have been true and correct in all respects
when made and shall be true and correct in all respects at the Closing Date
as though made at such time and, at the Closing, Purchaser shall have delivered
to Seller a certificate to that effect signed by its President.
Section 8.2. Performance of Obligations. Each of the obligations of
----------- --------------------------
Purchaser to be performed by it on or before the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with in all
respects and, at the Closing, Purchaser shall have delivered to Seller a
certificate to that effect signed by its President or another authorized
officer.
Section 8.3. Certified Resolutions. Purchaser shall have received a
----------- ---------------------
certified copy of the resolutions of the Board of Directors of Seller
authorizing and approving the execution and delivery of this Agreement and the
Seller Documents and the consummation of the transactions contemplated herein
and therein.
Section 8.4. Absence of Litigation. There shall not be any litigation or
----------- ---------------------
proceeding, pending or threatened (including, without limitation, any litigation
of proceeding arising under antitrust or securities laws), to restrain or
invalidate the sale and purchase of the Purchased Assets or the other
transactions contemplated herein which would, in the judgment of Seller, made in
good faith, involve expense or lapse of time that would be materially adverse to
the interests of Seller.
33
Section 8.5. Execution of Certain Agreements. Purchaser shall have
----------- -------------------------------
executed and delivered this Agreement and PTM shall have executed and delivered
the Xxxx of Sale and Assumption and the Employment Agreements.
Section 8.6. Landlord Consent. Landlord shall have consented to the
----------- ----------------
assignment of the Lease and confirmed that Seller is not in default under the
Lease.
Section 8.7. Employment Agreements. Purchaser shall have entered into the
----------- ---------------------
Employment Agreements with each of the employees listed on Schedule 2.5 to
------------
receive new Employment Agreements.
ARTICLE IX
POST-CLOSING COVENANTS OF SELLER
--------------------------------
Section 9.1. Books and Records of Seller. Following the Closing, Seller
----------- ---------------------------
agrees to permit Purchaser and its representatives to inspect the books and
records of Seller not included in the Purchased Assets insofar as they relate to
the Purchased Assets during regular hours and at no expense to Seller in order
for Purchaser and such representatives to obtain information relevant to the
Closing Date Balance Sheet and to Purchaser's tax returns, third party claims or
litigation involving Purchaser, or as otherwise reasonably required for the
conduct of Purchaser's business. Seller agrees to maintain such books and
records insofar as they relate to the Purchased Assets for a period of three
years after the Closing Date.
Section 9.2. Payment of Seller's Liabilities. Following the Closing,
----------- -------------------------------
Seller shall pay, perform and discharge as they become due, and in accordance
with their respective terms and conditions, all Liabilities other than any
Assumed Liabilities and other than any performance obligations of Seller under
the agreements listed on Schedule 2.3 hereof expressly assumed by Purchaser to
------------
the extent provided in Section 2.3 hereof.
Section 9.3. Covenant Not to Compete.
----------- -----------------------
(a) Seller will not, for a period of five years following the
Closing Date (the "Restricted Period"), compete, directly or indirectly, with
Purchaser in any business that creates titles, or optical, digital or other
effects, in the entertainment industry. The foregoing prohibition against
competition shall apply to any area within the Southern California region and,
in addition, to any area within a circle having a radius of one hundred
(100) miles surrounding San Francisco, California, or any location from which
Seller has, prior to the Restricted Period, maintained an office, manufacturing
or assembly plant, warehouse or otherwise engaged in business or any location at
which Seller has planned, prior to the Restricted Period, to open a
manufacturing or assembly plant, warehouse or other place of business, but only
if such office, manufacturing or assembly plant, warehouse or other place of
business was planned to be related to the business of creating titles and
effects in the entertainment industry.
34
(b) Seller shall be deemed to be competing as described in
paragraph (a) hereof if Seller shall engage, directly or indirectly, in any of
the business covered thereby, whether for its own account or that of any other
person, firm, corporation, partnership or other business entity, and whether its
participation shall be as a stockholder, general or limited partner, or investor
possessing an ownership interest exceeding one percent (1%) in any such entity,
or as a principal agent, lender or in any other capacity.
(c) During the Restricted Period, Seller shall not, directly or
indirectly: (1) solicit, divert, take away or induce customers (wherever
located) of Purchaser to avail themselves of the services or products of others
which are competitive with any of Purchaser's services or products or (2)
solicit, employ or in any other fashion hire any employee of Purchaser unless
such person shall have been discharged by Purchaser, or otherwise induce any
employee of Purchaser to leave the employ of Purchaser.
Seller expressly acknowledges that damages alone will be an
inadequate remedy for any breach or violation of any of the provisions of this
Section 9.3, and that Purchaser, in addition to all other remedies available at
law or hereunder, shall be entitled, as a matter of right, to injunctive relief,
including specific performance, with respect to any such breach or violation, in
any court of competent jurisdiction. If any of the provisions of this Section
9.3 are held to be in any respect an unreasonable restriction upon Seller, then
they shall be deemed to extend only over the maximum period of time, geographic
area or range of activities as to which they may be enforceable. In the event
that Seller shall be in violation of the restrictive covenants in this Section
9.3, then the Restricted Period shall be extended for a period of time equal to
the period of time during which such breach shall occur; and, in the event that
Purchaser should be required to seek relief from such breach in any court, board
of arbitration or other tribunal, then the Restricted Period shall be extended
for the period of time required for the pendency of such proceedings, including
all appeals.
Section 9.4. Confidential Information. Unless otherwise agreed to in
----------- ------------------------
writing by Purchaser or as otherwise required by law, Seller agrees for itself,
its agents and employees to keep confidential and not to disclose, reveal or use
for a period of five (5) years from and after the Closing Date, any Confidential
Information, as such term is defined pursuant to that certain Nondisclosure
Agreement dated as of March 13, 1997 by and between Seller and Safeguard,
respecting Purchaser or the Business.
Section 9.5. Further Assurances. Seller shall cooperate with Purchaser
----------- -----------------
(and its designee) as may reasonably be required to assure the transfer of the
Purchased Assets to Purchaser (or its designee) including, without limitation,
assisting Purchaser (or its designee) to obtain such consents to assignment or
transfer not obtained prior to the Closing Date and waived by Purchaser in
connection with the Closing.
Section 9.6. Sales and Use Tax. During the 12-month period from and after
----------- -----------------
the Closing Date, Seller shall make no more than one sale of "tangible personal
property" within the meaning of the California Code.
35
ARTICLE X
POST-CLOSING COVENANTS OF PURCHASER
-----------------------------------
Section 10.1. Books and Records of Purchaser. Following the
----------- ------------------------------
Closing, Purchaser agrees to permit Seller and its representatives to inspect
the books and records of Purchaser included in the Purchased Assets during
regular business hours and at no expense to Purchaser in order for Seller and
such representatives to obtain information relevant to the Closing Date Balance
Sheet and to Seller's tax returns, third party claims or litigation involving
Seller, or as otherwise reasonably required for the conduct of Seller's
business. Purchaser agrees to maintain such books and records insofar as they
relate to the Purchased Assets for a period of five years after the Closing
Date.
Section 10.2. Confidential Information. Unless otherwise agreed to in
------------ ------------------------
writing by Seller or as otherwise required by law, Purchaser agrees for itself,
its agents and employees to keep confidential and not to disclose, reveal or use
for a period of five (5) years from and after the Closing Date, any Confidential
Information, as such term is defined pursuant to that certain Nondisclosure
Agreement dated as of March 13, 1997 by and between Seller and Safeguard,
respecting Seller (except such Confidential Information pertaining to the
Business as may have been purchased by Purchaser pursuant to this Agreement and
that Purchaser elects to disclose).
Section 10.3. Payment of Assumed Liabilities. Following the Closing,
------------ ------------------------------
Purchaser shall pay, perform and discharge all Assumed Liabilities as they
become due and in accordance with their terms and conditions.
Section 10.4 Access to Accounting Systems and Human Resources. Following
------------ ------------------------------------------------
the Closing Purchaser shall make available to Seller, at mutually agreeable
times and for mutually agreeable compensation, Xxxxx Xxxxxx and other accounting
and human resources personnel.
Section 10.5. Lease. No later than January 11, 1998, Purchaser shall
------------ -----
either (i) have caused the Landlord to release Seller from all liability under
the Lease, or (ii) exercised the right to terminate the Lease as provided
therein and paid the termination fee set forth in the Lease. Within three
(3) business days of the date Purchaser demonstrates its compliance with either
clause (i) or (ii) Seller shall pay Purchaser $l00,000.
Section 10.6. Further Assurances. Purchaser shall cooperate with Seller
------------ ------------------
(and its designee) as may reasonably be required to assure the assumption by
Purchaser of the Assumed Liabilities as provided herein or in the Xxxx of Sale
and Assumption Agreement.
36
ARTICLE XI
INDEMNIFICATION; EXPENSES
-------------------------
Section 11.1. General Indemnification.
------------ -----------------------
(a) Seller hereby agrees to (i) indemnify, defend and hold
harmless PTM, Safeguard and Mirage (and any assignee) and each of its directors,
officers, employees and agents from and against any and all losses, damages,
liabilities, costs and claims arising out of, based upon or resulting from (A)
any inaccuracy of any representation or warranty of Seller which is contained in
or made pursuant to this Agreement, (B) any breach by Seller of any of its
agreements or obligations contained in or made pursuant to this Agreement, and
(C) any liability of Seller that is not assumed by Purchaser as provided by this
Agreement; and (ii) reimburse PTM, Safeguard and Mirage (and any assignee) and
each of its directors, officers, employees, and agents for any and all fees,
costs and expenses of any kind related thereto (including, without limitation,
any and all Legal Expenses). As used in this Section 11.1, "Legal Expenses" of a
person shall mean any and all reasonable out-of-pocket fees, costs and expenses
of any kind incurred by such person and its counsel in investigating, preparing
for, defending against or providing evidence, producing documents or taking
other action with respect to any threatened or asserted claim.
(b) Purchaser hereby agrees to (i) indemnify, defend and hold
harmless Seller and each of its directors, officers, employees, affiliates,
agents and shareholders from and against any and all losses, damages,
liabilities, costs and claims arising out of, based upon or resulting from (A)
any inaccuracy of any representation or warranty of Purchaser which is contained
in or made pursuant to this Agreement, (B) any breach by Purchaser of any of its
agreements or obligations contained in or made pursuant to this Agreement, and
(C) any liability of Seller which Purchaser assumes as provided by this
Agreement; and (ii) reimburse Seller and each of its directors, officers,
employees, affiliates and agents for any and all fees, costs and expenses of
any kind related thereto (including, without limitation, any and all Legal
Expenses).
(c) Promptly after receipt by any person entitled to indemnification
under this Section 11.1 (an "indemnified party") of notice of the threat of the
commencement or the commencement of any action in respect of which the
indemnified party will seek indemnification hereunder, the indemnified party
shall so notify in writing the person(s) from whom indemnification hereunder is
sought (collectively, the "indemnifying party"), but any failure so to notify
the indemnifying party shall not relieve any such indemnifying party from any
liability that it may have to the indemnified party under this Section 11.1
except to the extent that the indemnifying party's ability to defend such claim
is materially prejudiced by the failure to give such notice. The indemnifying
party shall be entitled to participate in the defense of such action and to
assume control of such defense; provided, however, that:
-------- -------
(i) the indemnified party shall be entitled to participate
in (but not control) the defense of such claim and to employ counsel at its own
expense to assist in the handling of such claim;
37
(ii) the indemnifying party shall obtain the prior written
approval of the indemnified party before entering into any settlement of such
claim or ceasing to defend against such claim, which approval shall not be
unreasonably withheld or delayed except that it shall not be unreasonable to
withhold or delay approval if, pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief would be imposed against the
indemnified party;
(iii) the indemnifying party shall not consent to the entry
of any judgement or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release from liability in respect of such claim; and
(iv) the indemnifying party shall not consent to the entry
of any judgment or enter into any settlement of any claim to the extent the
claim seeks an order, injunction or other equitable relief against the
indemnified party without the written consent of the indemnified party which may
be withheld in the sole discretion of the indemnified party.
(d) At any time, the indemnified party may assume control of the
defense of any such action by written notice to the indemnifying party. After
such written notice by the indemnifying party to the indemnified party of its
election to assume control, the indemnifying party shall have no further
liability to the indemnified party pursuant to this Section 11.1.
(e) If the indemnifying party does not assume control of the
defense of such claims as provided in this Section 11.1, the indemnified party
shall have the right to defend such claim in any manner as it may deem
appropriate at the cost and expense of the indemnifying party, and the
indemnifying party will promptly reimburse the indemnified party thereof in
accordance with this Section 11.1. The reimbursement of fees, costs and expenses
required by this Section 11.1 shall be made by periodic payments during the
course of the investigation or defense, as and when bills are received or
expenses incurred.
(f) Subject to Section 11.1(g), any other provision hereof to the
contrary notwithstanding, the parties agree that the representations and
warranties of the parties contained in this Agreement and in any certificates
delivered pursuant to this Agreement shall survive for a period of twenty-four
months after the Closing Date, regardless of any investigation made by either
party prior to the date hereof or prior to the Closing Date but subject to the
applicable provisions of Section 6.1(b). Purchaser and Seller shall only be
entitled to indemnification under Section 11.1(a)(i)(A) or 11.1(b)(i)(A) if a
written notice describing the claim for which indemnification is sought is
signed by the President or any Vice President of Purchaser or Seller, as the
case may be, and is submitted to Seller or Purchaser, as the case may be, not
later than twenty-four months following the Closing Date. Any claim for
indemnification pursuant to, Section 11.1(a)(i)(A) or Section 11.1(b)(i)(A) not
made prior to the expiration of such twenty-four month period shall expire
automatically without notice or demand and shall be of no further force and
effect.
(g) Notwithstanding the foregoing, representations and
warranties, concerning:
38
(i) tax matters shall survive until, and Purchaser or
Seller, as the case may be, shall be entitled to indemnification if written
notice is submitted prior to, expiration of the applicable statute of
limitations for such claim; and
(ii) representations and warranties concerning
environmental matters shall survive for a period of five years from the Closing
Date, and Purchaser shall be entitled to indemnification if written notice is
submitted prior to the end of such five-year period.
(h) Notwithstanding any provisions herein to the contrary:
(i) neither party shall be liable to the other party for
any misrepresentation, breach of any warranty or failure to fulfill any covenant
or agreement herein if such other party shall have had actual knowledge of the
facts upon which such misrepresentation, breach or failure is based at or prior
to the Closing Date;
(ii) the liability of either party computed otherwise in
accordance with this Article XI shall be limited to the after-tax consequence to
the indemnified party (or the affiliated group of which such indemnified party
is a member) of any such damage, loss, liability, deficiency cost or expense
suffered or incurred by such indemnified party;
(iii) neither party shall have any liability to the other
party for misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement to be performed at or prior to the Closing Date except
pursuant to this Article XI; and
(iv) neither party shall have any liability to the extent
such liability is covered by insurance of the other party; and
(v) there shall be no liability of either party to the
other party unless claims in excess of $50,000 calculated separately for Seller
and Purchaser, in the aggregate, of either party against the other party shall
have arisen, in which event the liability shall exclude the first $50,000 in
claims.
ARTICLE XII
TERMINATION; SURVIVAL; EXPENSES
-------------------------------
Section 12.1. Termination. This Agreement may be terminated prior to the
----------- -----------
Closing as follows:
(a) at the election of Purchaser, if any one or more of the
conditions set forth in Article VII to its obligation to proceed with the
Closing has not been fulfilled on or prior to the Closing Date;
39
(b) at the election of Seller, if any one or more of the
conditions set forth in Article VIII to its obligation to proceed with the
Closing has not been fulfilled on or prior to the Closing Date;
(c) at the election of Purchaser, (i) if Seller has breached, or
Purchaser reasonably believes that Seller has breached, any representation,
warranty, covenant or agreement contained in this Agreement, which breach cannot
be or is not cured by the Closing Date or (ii) as provided in Sections 6.1, 6.3,
6.4 or 6.5 hereof;
(d) at the election of Seller, (i) if Purchaser has breached, or
Seller reasonably believes that Purchaser has breached, any representation,
warranty, covenant or agreement contained in this Agreement, which breach cannot
be or is not cured by the Closing Date or (ii) as provided in Section 6.1, 6.3,
6.4 or 6.5 hereof;
(e) at the election of Purchaser or Seller, if any legal
proceeding is commenced or threatened by any governmental or regulatory body or
other person (other than Purchaser or Seller) directed against the consummation
of the Closing and either Purchaser or Seller, as the case may be, reasonably
and in good xxxxx xxxxx it impractical or inadvisable to proceed in view of such
legal proceeding or threat thereof, taking into account the potential expense
and delay likely to be involved;
(f) at any time on or prior to the Closing Date, by mutual
written consent of Purchaser and Seller; or
(g) at the election of Purchaser or Seller, if the Closing has
not occurred on or prior to October 31, 1997; provided that a party may not
terminate this Agreement if such party's failure to perform its obligations has
directly or indirectly caused the Closing not to have occurred.
Section 12.2. Survival.
------------ --------
(a) Except as set forth in this Section 12.2, if this Agreement
is validly terminated pursuant to Section 12.1 and the transactions contemplated
hereby are not consummated as described above, this Agreement shall become void
and be of no further force and effect and with respect to this Agreement no
party hereto shall have any liability to any other party hereto.
(b) Notwithstanding Section 12.2(a), if Purchaser terminates this
Agreement because any of the conditions contained in Sections 7.1 or 7.2 have
not been satisfied or if Seller terminates this Agreement because any of the
conditions contained in Sections 8.1 or 8.2 have not been satisfied then the
terminating party shall have the right to pursue all of its legal remedies for
breach of contract and damages; provided, that if the Agreement is terminated
--------
after compliance with the provisions of Section 6.1(b) hereof, no party shall be
liable to the other party upon such termination.
40
(c) Notwithstanding Section 12.2(a), if this Agreement is validly
terminated pursuant to Section 12.1 and the transactions contemplated hereby are
not consummated as described above, the provisions of Section 6.2 relating to
the obligation of Purchaser to keep confidential and not to use certain
information obtained by it from Seller and to return documents and copies
thereof to Seller and the provisions of Section 12.3 relating to responsibility
for expenses shall survive.
Section 12.3. Expenses if No Closing. If the Closing does not occur and
------------ ----------------------
the transactions contemplated hereby are not consummated, then, subject to the
right of a non-defaulting party to recover damages, costs and expenses from a
defaulting party pursuant to Section 12.2 and except as provided in Section 3.3,
all costs and expenses incurred in connection with this Agreement shall be paid
by the person incurring such expenses; i.e., by Purchaser if incurred by
Purchaser and by Seller if incurred by Seller.
ARTICLE XIII
GENERAL
-------
Section 13.1. No Tax Representations. Seller and Purchaser agree that no
------------ ----------------------
representation or warranty has been made by them as to the tax consequences of
the transactions contemplated by this Agreement or the results of the allocation
of the amount of; or the consideration comprising, the Purchase Price, that each
is engaging separate counsel with respect to such tax consequences, and that
each is assuming its own respective tax liability, if any, arising out of this
Agreement or the consummation of the transactions contemplated hereunder.
Section 13.2. Regarding the Representations and Warranties.
------------ --------------------------------------------
(a) Independence. Each of the representations and warranties made
------------
by Seller in Article IV is independent of the other representations and
warranties made therein, and each of the representations and warranties made by
Purchaser in Article V is independent of the other representations and
warranties made therein.
(b) Knowledge Qualification. Whenever a representation or
-----------------------
warranty is made herein based on the knowledge of Seller or Purchaser (as the
case may be), such representation or warranty is made based on the actual
knowledge of Seller or Purchaser (as the case may be) including any officer,
director or responsible employee thereof, and on the knowledge which Seller or
Purchaser (as the case may be) would have had if it had conducted a diligent
inquiry into the subject matter of the representation or warranty.
Section 13.3. Binding Effect and Assignment. This Agreement shall be
------------ -----------------------------
binding upon and inure to the benefit of and be enforceable by each of the
parties and their respective successors and assigns. This Agreement may not be
assigned by either party without the prior written consent of the other party.
41
Section 13.4. Waiver. Any term or provision of this Agreement may be
------------ ------
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party.
Section 13.5. Dispute Resolution.
------------ ------------------
(a) Good-Faith Negotiations. If any dispute arises under this
-----------------------
Agreement, the Seller Documents or any other agreement executed in connection
herewith, or with respect to the breach, termination or validity hereof or
thereof, including the arbitrability of any such dispute (a "Dispute") that is
not settled promptly in the ordinary course of business, the parties shall seek
to resolve any such Dispute between them, first, by negotiating promptly with
each other in good faith in face-to-face negotiations. These face-to-face
negotiations shall be conducted by the respective designated senior management
representative of each party. If the parties are unable to resolve the Dispute
between them through these face-to-face negotiations, within 20 business days
(or such period as the parties shall otherwise agree) following the date of
notification (the "Notice Date") by one party to the other(s) of the existence
of such dispute, then any such disputes shall be resolved in the following
manner.
(b) Mediation. The parties shall endeavor to resolve any Dispute
---------
by mediation under the procedures established by the Judicial Arbitration and
Mediation Service ("JAMS").
(c) Resolution of Disputes.
----------------------
(i) Any Dispute which has not been resolved by mediation
as provided herein within 45 days of the Notice Date, shall be settled by
the appointment of an arbitrator, who shall be a retired judge of the Superior
Court of Los Angeles, or of the U. S. District Court, in accordance with the
procedures of the JAMS and otherwise strictly in accordance with the terms of
this Agreement and the substantive law of the State of California including law
in respect of any statute of limitations. The arbitration shall be conducted in
Los Angeles, California at a location designated by the arbitrator. The
arbitrator is not empowered to award damages in excess of compensating damages
and each party hereby irrevocably waives any right to recover such damages with
respect to any such dispute. The prevailing party shall be entitled to the costs
of arbitration, including attorney's fees. Judgment upon the arbitrators' award
may be entered and enforced in any court of competent jurisdiction.
(ii) Neither party shall be precluded hereby from securing
equitable remedies in courts of any jurisdiction, including, but not limited to,
temporary restraining orders and preliminary injunctions to protect its rights
and interests but shall not be sought as a means to avoid or stay arbitration of
a Dispute.
(iii) Each party is required to continue to perform its
obligations under this contract pending final resolution of any dispute arising
out of or relating to this contract, unless to do so would be impossible or
impracticable under the circumstances.
42
Section 13.6 Notices. All notices, requests, demands, waivers, consents,
------------ -------
approvals, or other communications which are required or permitted hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
reputable overnight courier service (such as Federal Express), sent by
telecopier with the original sent by first class U. S. mail, or sent by
registered or certified mail, return receipt requested, postage prepaid, to the
addresses set forth below:
If to Purchaser, to:
Safeguard Scientifics, Inc.
000 Xxxxx Xxxx Xxxxx
Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Vice President and Senior Corporate Counsel
Phone: (000) 000-0000
Fax: (000) 000-0000
And to:
Mirage Technologies, Limited Partnership
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxx or Xxxxxxx Xxxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Christensen, Miller, Fink, Jacobs, Xxxxxx,
Weil & Xxxxxxx, LLP
2121 Avenue of the Stars, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
And to:
Xxxxxxxxx, Xxxxxx & Xxxxxxx
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
43
If to Seller:
Pacific Title and Art Studio, Inc.
0000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX
Attention: Xxxxx Xxxxxxx, President
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Loeb & Loeb, LLP
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx, Esq.
Phone: (000) 000-0000
Fax (000) 000-0000
or to such other address or telecopier number as the party entitled to receive
such notice may, from time to time, specify in writing to the other party.
Section 13.7. Use of Name. Seller shall change its corporate name, Pacific
------------ -----------
Title and Art Studio, Inc., promptly after the Closing Date to one that is
distinctly different in sound and appearance from its present name; provided,
--------
however, that Seller shall be entitled to conduct the business of the archive
-------
division under the name "Pacific Title Archives," including, without limiting
the generality of the foregoing, use of such name on its letterhead,
advertising, and on all other materials related to the archive division. Neither
Seller nor any of its Affiliates will use the name Pacific Title and Art Studio,
Inc., except as expressly described in the above proviso.
Section 13.8. Commissions. Each party shall be responsible for paying a11
------------ -----------
commissions and finder's fees which are required to be paid by it as a result of
the transactions contemplated by this Agreement.
Section 13.9. Governing Law. This Agreement shall be governed as to its
------------ -------------
validity, interpretation and effect by the laws of the State of California,
without regard to conflicts of laws principles. Each party (i) irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of California located in the County of Los Angeles and the courts
of the United States of America located in Los Angeles County, California (the
"California Courts"), for any litigation arising out of or relating to matters
not subject to Section 13.5, (ii) waives any objection to the laying of venue of
any such litigation in the California Courts and (iii) agrees not to plead or
claim in any California Court that such litigation brought therein has been
brought in an inconvenient forum.
44
Section 13.10. No Third Party Beneficiaries. Notwithstanding anything
------------- ----------------------------
to the contrary contained herein, no provision of this Agreement is intended to
benefit any person other than the signatories hereto and the two wholly-owned
Subsidiaries of PTM, nor shall any such provision be enforceable by any other
person.
Section 13.11 Severability. Any provision of this Agreement which is
------------- ------------
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 13.12 Schedules. All Schedules referred to in this Agreement are
------------- ---------
intended to be and are specifically incorporated by reference herein.
Section 13.13 Section Headings. All section headings herein have been
------------- ----------------
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 13.14 Contents of Agreement. This Agreement sets forth the entire
------------- ---------------------
understanding of the parties hereto with respect to the transaction contemplated
hereby and shall not be amended or terminated except by a written instrument
duly executed by each of the parties hereto. Any and all prior agreements,
including without limitations, the letter of intent dated June 4, 1997 or
contemporaneous agreements or understandings between the parties regarding the
subject matter hereof are superseded in their entirety by this Agreement.
Section 13.15 Counterparts. This Agreement may be executed in two or more
------------- ------------
fully executed counterparts, each of which shall be deemed an original, but all
of such counterparts together shall constitute but one and the same instrument.
Section 13.16 Public Announcements. The parties agree that there will be
------------- --------------------
no press release or other public statement issued by any party relating to this
Agreement or the transactions contemplated hereby unless required by law. If
Purchaser determines that it is required by law to file this Agreement with the
SEC, it shall at a reasonable time before making any such filing, consult with
Seller regarding such filing and seek confidential treatment for such portion of
the Agreement as may be requested by Seller.
45
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PACIFIC TITLE AND ART STUDIO
By: /s/ Xxxxx X. Xxxxxxx
----------------------
Name: Xxxxx X. Xxxxxxx
----------------------
Title: President
----------------------
PACIFIC TITLE AND MIRAGE, INC.
By: /s/ Xxxx Xxxxx
----------------------
Name: Xxxx Xxxxx
----------------------
Title: President
----------------------
SAFEGUARD SCIENTIFICS, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------
Name: Xxxxxx X. Xxxxxx
----------------------
Title: Chairman
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MIRAGE TECHNOLOGIES,
LIMITED PARTNERSHIP
By: Mirage Technologies, Inc., General Partner
By: /s/ Xxxx Xxxxx
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Name: Xxxx Xxxxx
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Title: Co-Chairman
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46
SCHEDULE 2.1
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EXCLUDED ASSETS
In addition to the items listed 3s within the definition for
"Excluded Assets" in Section 1.1 of the Agreement, the following shall be
excluded from the Purchased Assets:
a. Seller's line of credit with California United Bank;
b. Israeli government bonds valued at approximately $11,000 held
by Seller;
C. Seller's one-third share in season passes to all events held at
the Great Western Forum (April 1997-April 1998); and
d. Seller's duplicate set of Accountmate Software purchased prior
to the. Closing from Sourcemate Information Systems, Inc. for
use by the Archives Division.
XXXX OF SALE AND
ASSUMPTION OF LIABILITIES
Pursuant to and in accordance with the Asset Purchase Agreement dated
October , 1997 (the "Agreement") by and among PACIFIC TITLE AND ART STUDIO, a
--
California corporation, ("Assignor") SAFEGUARD SCIENTIFICS, INC., a Pennsylvania
corporation ("Safeguard"), and MIRAGE TECHNOLOGIES, L.P., a Delaware limited
partnership ("Mirage," and collectively with Safeguard, "Purchaser") and for
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Assignor hereby assigns, transfers, grants, sets over and delivers
unto PACIFIC TITLE AND MIRAGE, INC., a Delaware corporation ("Assignee"), all
of Assignor's right, title, interest, power and privilege in and to the
following property (the "Purchased Assets") pertaining to the Business (as
defined in the Agreement). Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in the Agreement.
All the assets relating to the Business, including without limitation
the Accounts Receivable, Cash in excess of principal and interest due on the
Notes (subject to adjustment as provided in the Agreement), Equipment,
Intellectual Property and Information, Inventory, Leasehold Improvements and
Fixtures, Prepaid Items, Real Property and Rights and Other Property, all as
existing on the Closing Date, but excluding the Excluded Assets.
Notwithstanding the assignment and conveyance made in the foregoing
paragraph, in the event that the assignment attempted to be made thereunder
requires the approval of any person, governmental authority or entity to be
effective, as specified in the Agreement or in any Schedule thereto, then such
asset shall be temporarily excluded from the aforesaid conveyance and
assignment; provided, however, that in such event, Assignor shall, to the
greatest extent permitted under applicable law, hold such asset for the
exclusive use and benefit of Assignee until such consent has been obtained; and
provided, further, that without consideration Assignor shall execute such other
documents and shall take such other actions as shall be reasonably necessary to
transfer the benefits of such asset to Assignee. Upon obtaining consent or upon
written notice to Assignor from Assignee so electing (notwithstanding the
absence of such consent) no further conveyance or assignment shall be required,
but such right, title and interest shall automatically and with no further
action or consideration therefor become fully and completely vested in Assignee
by virtue of this Xxxx of Sale and Assumption of Liabilities.
Assignee hereby accepts the foregoing assignments and assumes and agrees to
be responsible for the Assumed Liabilities (as defined in the Agreement). It is
understood and agreed that Assignee shall not assume, pay or be responsible for
any other obligation, duty, debt or liability of Assignor, including without
limitation the Excluded Liabilities.
1.
EXHIBIT A
The representations, warranties and covenants made in the Agreement (a) by
Assignor with respect to the Purchased Assets conveyed hereby and (b) by
Purchaser with respect to the Assumed Liabilities assumed hereby, are in each
case hereby reaffirmed and restated as if set forth in full herein.
Assignor hereby binds Assignor, its successors and assigns to warrant and
defend the title to the Purchased Assets unto Assignee, its successors and
assigns, against every person whomsoever lawfully claiming or to claim such
Purchased Assets or any part thereof in violation of any representation or
warranty of Seller under the Agreement.
Nothing in this Xxxx of Sale and Assumption of Liabilities shall be deemed
to supersede or modify any of the obligations, agreements, covenants,
representations or warranties of Assignor or Purchaser contained in the
Agreement. If any conflict exists between the terms of this Xxxx of Sale and
Assumption of Liabilities and the Agreement, the terms of the Agreement
shall control.
This Xxxx of Sale and Assumption of Liabilities shall bind and inure to the
benefit of the parties hereto and their respective successors, legal
representatives and assigns. This Xxxx of Sale and Assumption of Liabilities is
effective as of 12:0l a.m. on October , 1997.
--
IN WITNESS WHEREOF, Assignor and Assignee have caused this Xxxx of Sale and
Assumption of Liabilities to be executed by their duly authorized
representatives.
Assignor: PACIFIC TITLE AND ART STUDIO
By: -------------------------
Name: -------------------------
Title:-------------------------
Assignee: PACIFIC TITLE AND MIRAGE, INC.
By: -------------------------
Name: -------------------------
Title:-------------------------
2.
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT is entered into as of October , 1997,
--
by and between the undersigned individual shareholder ("Shareholder") of PACIFIC
TITLE AND ART STUDIO, a California corporation ("Seller"), and PACIFIC TITLE AND
MIRAGE, INC., a Delaware corporation ("Owner"), and is made with reference to
the following facts:
RECITALS
A. Reference is made to that certain Asset Purchase Agreement dated
October , 1997 (the "Purchase Agreement") entered into among Seller, Owner,
--
Safeguard Scientifics, Inc., a Pennsylvania corporation ("Safeguard"), and
Mirage Technologies, L.P., a Delaware limited partnership ("Mirage," and
collectively with "Safeguard" and "Owner," "Purchaser"). Capitalized terms used
and not otherwise defined herein have the meanings assigned to such terms in the
Purchase Agreement.
B. Pursuant to the Purchase Agreement, Seller agreed to sell and
Purchaser agree to purchase the Purchased Assets of the Business.
C. Concurrently with Closing of the Purchase Agreement, Purchaser,
assigned and conveyed the Purchased Assets to Owner, its subsidiary.
D. Pursuant to Section 7.8 of the Purchase Agreement, it is a
condition to Purchaser's obligations under the Purchase Agreement that
Shareholder enter into an agreement not to compete with the owners of the
Business.
NOW, THEREFORE, in consideration of the covenants contained in the
Purchase Agreement and herein, and the benefits to be obtained by Shareholder
as a result of the Purchase Agreement, the parties hereto agree as follows:
AGREEMENT
1. Shareholder agrees, individually, on behalf of Shareholder's spouse
and as trustee for any trusts as to which Shareholder acts as trustee, that for
a period (the "Non-Compete Term")of [five years] from and after the date hereof,
Shareholder will not own, acquire, or have any other financial interest, direct
or indirect (including financial interests held by Shareholder's spouse or by
trusts for which Shareholder acts as trustee) in any business that creates
titles, or optical, digital or other effects, in the entertainment industry
within the Non-Compete Area (as hereinafter defined). For purposes hereof, the
"Non-Compete Area" shall mean
1.
EXHIBIT B
any area within the Southern California region and, in addition, to any area
within a circle having a radius of one hundred (100) miles surrounding San
Francisco, California, or any location from which Seller has, prior to the
Restricted Period, maintained an office, manufacturing or assembly plant,
warehouse or otherwise engaged in business or any location at which Seller has
planned, prior to the Restricted Period, to open a manufacturing or assembly
plant, warehouse or other place of business, but only if such office,
manufacturing or assembly plant, warehouse or other place of business was
planned to be related to the business of creating titles and effects in the
entertainment industry.
2. Except as provided in Section 4 hereof, Shareholder shall be
deemed to be competing as described in Section 1 hereof if, during the Non-
Compete Term, Shareholder shall engage, directly or indirectly, in any of the
businesses covered thereby, whether for its own account or that of any other
person, firm, corporation, partnership or other business entity, and whether its
participation shall be as a stockholder, general or limited partner, or investor
possessing an ownership interest exceeding one percent (1%) in any such entity,
or as a principal, agent, lender or in any other capacity.
3. Except as provided in Section 4 hereof, during the Non-Compete
Term, Shareholder shall not, directly or indirectly: (a)solicit,
divert, take away or induce customers (wherever located) of Owner to avail
themselves of the services or products of others which are competitive with any
of Owner's services or products or (b) solicit, employ or in any other fashion
hire any employee of Owner unless such person shall have been discharged by
Owner, or otherwise induce any employee of Owner to leave the employ of Owner.
4. Notwithstanding Section 2 and 3 hereof, any activity expressly
permitted pursuant to the terms of any employment or consulting agreement
between Shareholder and the Company or Shareholder's spouse and the Company, as
the case may be, shall be permitted under this Agreement during the term and
otherwise as provided in such employment or consulting agreement.
5. Shareholder expressly acknowledges that damages alone will be an
inadequate remedy for any breach or violation of any of the provisions hereof,
and that Owner, in addition to all other remedies available at law or hereunder,
shall be entitled, as a matter of right, to injunctive relief, including
specific performance, with respect to any such breach or violation, in any
court of competent jurisdiction. This provisions shall not construed as a waiver
of any other rights or remedies which Owner may have for damages or otherwise.
6. If any of the provisions of this agreement are held to be in any
respect an unreasonable restriction upon Shareholder, then they shall be deemed
to extend only over the maximum period of time, geographic area or range of
activities as to which they may be enforceable. In the event that Shareholder
shall be in violation of the restrictive covenants in this
2.
agreement, then the Non-Compete Term shall be extended for a period of time
equal to the period of time during which such breach shall occur; and, in the
event that Owner should be required to seek relief from such breach in any
court, board of arbitration or other tribunal, then the Non-Compete Term shall
be extended for the period of time required for the pendency of such
proceedings, including all appeals.
7. Governing Law. This Agreement should governed as to its validity,
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interpretation and effect by the laws of the State of California, with regard to
conflicts of laws principles. Each party (i) irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State of
California located in the County of Los Angeles and the courts of the United
States of America located in Los Angeles, California (the "California Courts"),
for any litigation arising out of or relating to matters not subject to Section
10, (ii) waives any objection to the laying of venue of any such litigation in
the California courts, and (iii) agrees not to plead or claim in any California
Court that such litigation brought therein has been brought in an inconvenient
forum.
8. Counterpart Execution. This Agreement may be executed in
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counterparts, each of which shall be deemed an original and all of which
together shall constitute one agreement.
9. Binding Agreement: Assignment. This Agreement shall be binding
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upon and inure to the benefit of the parties hereto and their respective
permitted successor and assigns. This Agreement may not be assigned by either
party without the prior written consent of the other party; provided, however,
that this Agreement may be assigned by Owner to any majority owned subsidiary,
including without limitation, assignment of all of the rights and duties
relating to the Optical Business to Optical Sub and assignment of all of the
rights and duties relating to the Digital Business to Digital Sub.
10. Dispute Resolution.
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(a) Good Faith Negotiations. If any dispute arises under this
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Agreement (a "Dispute") that is not settled promptly in the ordinary course of
business, the parties shall seek to resolve any such dispute between them,
first, by negotiating promptly with each other in good faith in face-to-face
negotiations. These face-to-face negotiations shall be conducted by the
respective designated senior management representative of each party. If the
parties are unable to resolve the Dispute between them through these face-to-
face negotiations, within 20 business days (or such period as the parties shall
otherwise agree) following the date of notification (the "Notice Date") by one
party to the other(s) of the existence of such dispute, then any such disputes
shall be resolved in the following manner.
3.
(b) Mediation. The parties shall endeavor to resolve any
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dispute arising out of or relating to this Agreement by mediation under the
procedures established by the Judicial Arbitration and Mediation Service
("JAMS").
(c) Resolution of Disputes.
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(i) Any Dispute which has not been resolved by
mediation as provided herein within 45 days of the Notice Date, shall be
settled by the appointment of an arbitrator, who shall be a retired judge of the
Superior Court of Los Angeles or of the U.S. District Court, in accordance
with the procedures of the JAMS and otherwise strictly in accordance with the
terms of this Agreement and the substantive law of the State of California
including law in respect of any statute of limitations. The arbitration shall
be conducted in Los Angeles, California at a location designated by the
arbitrator. The arbitrator is not empowered to award damages in excess of
compensating damages and each party hereby irrevocably waives any right to
recover such damages with respect to any Dispute. The prevailing party shall be
entitled to the costs of arbitration, including attorney's fees. Judgment upon
the arbitrators' award may be entered and enforced in any court of competent
jurisdiction.
(ii) Neither party shall be precluded hereby from
securing equitable remedies in courts of any jurisdiction, including, but not
limited to, temporary restraining orders and preliminary injunctions to protect
its rights and interests but shall not be sought as a means to avoid or stay
arbitration of a Dispute.
(iii) Each party is required to continue to perform
its obligations under this contract pending final resolution of any Dispute,
unless to do so would be impossible or impracticable under the circumstances.
4.
IN WITNESS WHEREOF, the parties hereto have executed this Non-
Competition Agreement as of the date first above written.
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(Signature of Shareholder)
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(Type or Print Shareholder's Name)
PACIFIC TITLE AND MIRAGE, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
AGREED AND ACCEPTED:
____________________________
[Spouse Signature]
____________________________
[Print Name]
5.
