STOCK PURCHASE AGREEMENT
AMONG
HMG WORLDWIDE CORPORATION,
HMG-e, INC.,
XXXX XXXX,
XXXX XXXX CONSULTING GROUP, INC.,
and
THE GLADE CORP.
Dated: May 31, 2000
Effective Date: January 1, 2000
TABLE OF CONTENTS
I. SALE AND PURCHASE OF SHARES..............................................................................1
1.1 Agreement to Sell and Purchase..............................................................1
II. PURCHASE PRICE AND OTHER CONSIDERATION...................................................................2
2.1 Sale of MZCG Shares; Purchase Price.........................................................2
2.2 Seller Disclosure Schedule..................................................................2
III. CLOSING; EFFECTIVE DATE..................................................................................2
3.1 Transfer of MZCG Shares; Instruments of Transfer............................................2
3.2 Payment of Purchase Price...................................................................3
3.3 Additional Directors........................................................................3
3.4 Other Deliveries............................................................................3
IV. REPRESENTATIONS AND WARRANTIES OF SELLER.................................................................5
4.2 Capitalization; Title to Shares.............................................................6
4.3 Authorization...............................................................................6
4.4 Acquisition of HMG Stock for Investment.....................................................7
4.5 Effect of Agreement, Etc....................................................................7
4.6 Restrictions; Burdensome Agreements.........................................................7
4.7 Governmental Approvals......................................................................7
4.8 Title to Assets.............................................................................8
4.9 Financial Statements and Information........................................................8
4.10 Accounts Receivable.........................................................................9
4.11 Absence of Certain Changes or Events.......................................................10
4.12 Taxes......................................................................................11
4.13 Contracts Listed; No Default; Certain Agreements...........................................12
4.14 Litigation; Other Third Party Consents; Insurance Claims; Product
Recalls; Customer Complaints..........................................................14
4.15 Compliance with Laws and Regulations.......................................................14
4.16 Governmental Licenses, Permits, Etc........................................................15
4.17 Real Property..............................................................................15
4.18 Environmental Compliance...................................................................15
4.19 Insurance..................................................................................16
4.20 Condition of Assets........................................................................16
4.21 Employees, Labor Matters, Etc..............................................................16
4.22 Employee Agreements........................................................................17
4.23 Business Locations.........................................................................17
4.24 Intellectual Property......................................................................17
4.25 Bank Accounts..............................................................................18
4.26 Selling Materials and Policies.............................................................18
4.27 Warranties.................................................................................18
4.28 Customers and Suppliers....................................................................18
4.29 Brokers....................................................................................19
4.30 Disclosure.................................................................................19
4.31 Other Facts................................................................................19
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V. REPRESENTATIONS AND WARRANTIES OF BUYER AND HMG.........................................................20
5.1 Organization and Standing of Buyer.........................................................20
5.2 Buyer/HMG Authority........................................................................20
5.3 Capitalization.............................................................................20
5.4 HMG Stock; Acquisition of MZCG Shares for Investment.......................................20
5.5 HMG SEC Filings............................................................................20
5.6 Effect of Agreement, Etc...................................................................20
5.7 Governmental Approvals.....................................................................21
5.8 Litigation.................................................................................21
5.9 Brokers....................................................................................21
5.10 Disclosures................................................................................21
5.11 Other Facts................................................................................22
VI. ADDITIONAL COVENANTS OF THE PARTIES.....................................................................22
6.1 Access to Information After Closing........................................................22
6.2 Non-Competition; Non-Disclosure; Confidentiality...........................................22
6.3 Employment Agreement.......................................................................25
6.4 Xxxx Brand; LLC Agreement..................................................................25
6.5 Lock-Up; Piggy-back Registration Rights....................................................25
6.6 Registration Rights Generally..............................................................26
6.7 Permitted Transferees......................................................................27
6.8 Certain Tax and Accounting Matters.........................................................27
VII. INDEMNIFICATION.........................................................................................28
7.1 By Seller..................................................................................28
7.2 By Buyer and HMG...........................................................................28
7.3 Claims Procedure...........................................................................29
7.4 Limitations on Indemnification.............................................................30
7.5 Separate Indemnification...................................................................31
7.6 Sole and Exclusive Remedy..................................................................31
VIII. MISCELLANEOUS...........................................................................................31
8.1 Expenses...................................................................................31
8.2 Survival of Representations, Warranties and Covenants......................................31
8.3 Certain Definitions........................................................................31
8.4 Succession and Assignments; Third Party Beneficiaries......................................32
8.5 Notices....................................................................................32
8.6 Construction...............................................................................33
8.7 Counterparts...............................................................................33
8.8 No Implied Waiver; Remedies................................................................33
8.9 Entire Agreement...........................................................................33
8.10 Headings...................................................................................33
8.11 Severability...............................................................................33
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SCHEDULE A SELLER DISCLOSURE SCHEDULE
SCHEDULE B BUYER DISCLOSURE SCHEDULE
EXHIBIT 2.1(b) EMPLOYEE SHARES
EXHIBIT 3.4(a) EMPLOYMENT AGREEMENT
EXHIBIT 6.4(a) LLC TERM SHEET
EXHIBIT 6.8(a) DISCLOSURE TO EMPLOYEES
EXHIBIT 7.1 PERSONAL INJURY ACTIONS
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated May 31, 2000, by and among HMG
WORLDWIDE CORPORATION, a Delaware corporation ("HMG"), HMG-e, INC., a New York
corporation ("HMG-e" or "Buyer"), XXXX XXXX CONSULTING GROUP, INC., a New York
corporation ("MZCG"), THE GLADE CORP., a New York corporation ("Glade"), and
XXXX XXXX, the sole shareholder and principal of each of Glade and MZCG ("Xxxx"
or "Seller");
W I T N E S S E T H
WHEREAS, Xxxx is the record and beneficial holder of 100 shares of
common stock, no par value, of MZCG, which shares (the "MZCG Shares") constitute
all of the issued and outstanding capital stock of MZCG;
WHEREAS, Xxxx is the record and beneficial holder of 100 shares of
common stock, no par value, of Glade, which shares (the "Glade Shares")
constitute all of the issued and outstanding capital stock of Glade;
WHEREAS, MZCG is in the business of the design and build-out of
residential and commercial interior spaces, and Glade is in the business of
operating a retail store that sells personal care items and related accessories
for the home (the "Business");
WHEREAS, Xxxx wishes to sell, assign, transfer and deliver to Buyer,
and Buyer desires to purchase from Xxxx, all of the MZCG Shares upon the terms
and conditions and for the consideration hereinafter set forth; and
WHEREAS, Buyer and Xxxx desire to form a limited liability company (the
"LLC") to which all or substantially all of the assets of Glade will be
transferred, pursuant to the terms of Section 6.4 hereof and of a term sheet
more fully described therein and attached as Exhibit 6.4 hereto (the "LLC Term
Sheet");
NOW, THEREFORE, in consideration of the premises and the mutual
promises, covenants, representations and warranties made herein and of the
mutual benefits to be derived herefrom, the parties hereto agree as follows:
I.
SALE AND PURCHASE OF SHARES
1.1 Agreement to Sell and Purchase. On the terms and subject to the
conditions set forth in this Agreement, Xxxx hereby agrees to sell to Buyer, and
Buyer agrees to purchase from Xxxx, the MZCG Shares for the purchase price set
forth in Section 2.1 hereof at the closing provided for in Article IV hereof
(the "Closing").
II.
PURCHASE PRICE AND OTHER CONSIDERATION
2.1 Sale of MZCG Shares; Purchase Price.
(a) At the Closing, Xxxx shall deliver to Buyer one or more stock
certificates evidencing the MZCG Shares duly endorsed in blank or accompanied by
stock powers duly endorsed for transfer to Buyer, with all necessary stock
transfer stamps affixed.
(b) At the Closing, HMG shall deliver, as the aggregate purchase price
for the MZCG Shares, to (i) Seller, free and clear of all liens, claims and
encumbrances, 300,000 unregistered shares (the "HMG Shares") of HMG's common
stock, $.01 par value per share ("HMG Stock"), which HMG Shares shall have
certain registration rights as set forth in Sections 6.5 and 6.6 hereof, and
(ii) to current employees of MZCG and/or Glade designated on Exhibit 2.1(b)
hereof (the "Employees") an aggregate of 16,750 additional shares ("Employee
Shares") of HMG Stock (the "Purchase Price"). The number of Employee Shares to
be issued to each Employee shall be as set forth on Exhibit 2.1(b). Xxxx shall
have notified the Employees that the Employee Shares are unregistered shares and
may not be offered, sold, transferred, assigned, exchanged, pledged,
hypothecated or otherwise disposed of unless registered under the Securities Act
and applicable state securities laws or HMG receives an opinion of counsel
satisfactory to HMG that any proposed disposition is exempt from such
registration.
2.2 Seller Disclosure Schedule. Set forth in Section 2.3 of Schedule A
attached hereto (the "Seller Disclosure Schedule") is a true, correct and
complete list of all material assets of each of MZCG and Glade and all material
liabilities of MZCG and Glade not set forth on their respective balance sheets
(each, a "Balance Sheet" and collectively, the "Balance Sheets") included in the
Financial Statements (as defined in Section 4.9(a) hereof).
III.
CLOSING; EFFECTIVE DATE
The Closing of the transactions contemplated by this Agreement shall
take place simultaneously with the signing of this Agreement at the offices of
Xxxxxx Xxxxxx Xxxxxx & Xxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at such time
and date as the parties may mutually agree in writing (the "Closing Date"). For
accounting, tax and other purposes, the purchase and sale of the MZCG Shares
shall be deemed effective as of the opening of business on January 1, 2000 (the
"Effective Date"). The following shall take place at the Closing, all of which
shall be deemed to take place simultaneously:
3.1 Transfer of MZCG Shares; Instruments of Transfer. Xxxx shall
deliver to Buyer, free and clear of all liens, claims and encumbrances, the
stock certificates representing all of the MZCG Shares, with each such
certificate duly endorsed in blank or accompanied by stock powers duly endorsed
for transfer to Buyer, with all necessary stock transfer stamps affixed. Each of
Xxxx and MZCG shall also execute and deliver to HMG-e any and all instruments of
sale,
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transfer, assignment and/or conveyance as HMG-e may reasonably request,
evidencing the transfer of the MZCG Shares and/or ownership of MZCG to Buyer.
3.2 Payment of Purchase Price.
(a) HMG shall issue (i) free and clear of any lien, claim or
encumbrance, one or more stock certificates representing an aggregate of 300,000
shares of unregistered HMG Stock to Seller and (ii) stock certificates
evidencing the Employee Shares to the Employees pursuant to the terms of Section
2.1(b) hereof on account of Xxxx'x sale to Buyer of the MZCG Shares.
(b) Each certificate representing any shares of HMG Stock and each
document or instrument evidencing the Employee Shares issued pursuant to
paragraph (a) of this Section 3.2 shall contain a legend evidencing the
restrictions on transferability applicable to such securities under this
Agreement and/or under applicable federal and state securities laws.
3.3 Additional Directors. Seller hereby agrees that upon Closing, (a)
the Board of Directors of MZCG and Glade shall increase to four (4) and three
(3) members, respectively, (b) the certificate of incorporation of MZCG shall be
amended, (c) the by-laws of each of MZCG and Glade shall be amended to provide
for such increase in the number of directors, (d) each of the following
individuals shall be elected as an additional director of MZCG and Glade: Xxxxxx
Xxxx and Xxxxxx X. Xxxxxxx, (e) Xxxxx Xxxxx shall be elected as an additional
director of MZCG, and (f) Seller shall consent to the actions set forth in the
preceding clauses (a) through (e) as sole shareholder and sole director of each
of MZCG and Glade (the "Amending Consents"). The parties hereby agree to take,
or cause MZCG to take, all other action necessary to effectuate the foregoing,
including, without limitation, the adoption of any amendment to the by-laws
and/or certificate of incorporation of MZCG and adoption of resolutions of its
sole shareholder and director.
3.4 Other Deliveries. The following additional documents shall be
delivered by the respective parties at the Closing:
(a) Seller and/or MZCG and/or Glade shall deliver or cause to be
delivered to Buyer:
(i) the employment agreement, in the form of Exhibit 3.4(a)(i)
hereto dated as of the Effective Date (the "Employment Agreement"), in
accordance with Section 6.3 hereof, signed by Xxxx as the employee and
as President of MZCG;
(ii) a certificate, dated as of the Closing Date, of the
Secretary of MZCG (A) certifying that attached thereto are true,
correct and complete copies of (1) the resolutions of its Board of
Directors and Xxxx as sole shareholder with respect to this Agreement,
the Employment Agreement and the transactions contemplated hereby and
thereby (including the Amending Consents) and (2) its certificate of
incorporation and by-laws, each as amended to date, and (B) certifying
to its fulfillment of the conditions to Closing specified in this
Agreement;
(iii) a certificate, dated as of the Closing Date, of the
Secretary of Glade (A) certifying that attached thereto are true,
correct and complete copies of (i) the resolutions of its Board of
Directors and Xxxx as sole shareholder of Glade with respect to
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this Agreement, the LLC Term Sheet and the transactions contemplated
hereby and thereby and (2) its certificate of incorporation and
by-laws, each as amended to date, and (B) certifying to its fulfillment
of the conditions to Closing specified in this Agreement;
(iv) a Certificate of the Secretary of the State of New York
with respect to each of Glade and MZCG, certifying as to such
corporation's good standing within such jurisdiction;
(v) a certificate, dated as of the Closing Date, of each of
Xxxx, MZCG and Glade certifying as to the fulfillment of their
respective covenants specified in this Agreement signed by Xxxx in his
individual capacity and in his capacity as President and sole
shareholder of each of MZCG and Glade, respectively, and
(vi) originals or, in the case where there is no original in
the possession of MZCG or Xxxx, a fully executed copy, of all material
Commitments and other agreements or commitments of any nature that have
been reduced to writing on in any respect;
(vii) written consents of all third parties necessary to
effectuate the transactions contemplated hereby;
(viii) the LLC Term Sheet, as executed by Seller for himself
and on behalf of Glade;
(ix) all other schedules, exhibits, certificates and documents
contemplated by this Agreement, or as deemed reasonably appropriate and
necessary by HMG-e, HMG or their counsel.
(b) HMG-e shall deliver or cause to be delivered to Seller:
(i) the Employment Agreement in the form of Exhibit 3.4 (a)
hereto dated as of the Effective Date in accordance with the terms of
Section 6.3 hereof, signed by duly authorized officers of Buyer and
HMG;
(ii) stock certificates evidencing (A) the shares of HMG Stock
to be issued to Seller and (B) the Employee Shares, each Employee to
receive the number of shares of HMG Stock set forth opposite such
Employee's name on Exhibit 2.1(b) hereto;
(iii) a certificate, dated as of the Closing Date, of the
Secretary of each of HMG-e and HMG (A) certifying that attached thereto
are true, correct and complete copies of (1) the resolutions of its
Board of Directors with respect to this Agreement, the Employment
Agreement, the LLC Term Sheet and the transactions contemplated hereby
and thereby and (2) HMG-e's certificate of incorporation and by-laws,
each as amended to date, and (B) certifying as to its fulfillment of
the conditions to Closing specified in this Agreement;
(iv) a Certificate of the Secretary of the State of New York
certifying to HMG-e's good standing in such jurisdiction;
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(v) a Certificate of the Secretary of State of Delaware
certifying to HMG's good standing in such jurisdiction;
(vi) a certificate, dated as of the Closing Date, of a duly
authorized officer of HMG-e and a duly authorized officer of HMG
certifying as to the fulfillment by each of them of its respective
covenants specified in this Agreement;
(vii) The LLC Term Sheet, as executed by Buyer and HMG; and
(viii) All other schedules, exhibits, certificates and
documents contemplated by this Agreement, or as deemed reasonably
appropriate and necessary by Seller or his counsel.
IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
Xxxx hereby represents and warrants to HMG and HMG-e as follows, with
the knowledge and understanding that HMG and HMG-e are relying materially on
such representations and warranties:
4.1 Organization; Good Standing, Power, Etc. Each of MZCG and Glade:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York;
(b) is qualified to conduct business as a foreign corporation and is in
good standing under the laws of those jurisdictions set forth in Section 4.1(b)
of the Seller Disclosure Schedule, and is not required to be qualified or
authorized to do business as a foreign corporation in any other jurisdiction by
reason of the nature of the business conducted by it or the properties owned or
leased or operated by it, except where the failure to be so qualified or
authorized to do business would not have a material adverse effect on the
business, operations, assets or liabilities of MZCG and/or Glade;
(c) has all requisite corporate power and authority, licenses, permits
and franchises to:
(i) own or lease and operate its properties and assets; and
(ii) execute, deliver and perform this Agreement, the LLC Term
Sheet and each of the other agreements required to be executed and
delivered by MZCG and/or Glade pursuant hereto and to consummate the
transactions contemplated hereby and thereby. The copies of the
certificate of incorporation and by-laws of each of MZCG and Glade (as
certified by their respective secretaries), each as amended to date and
delivered to HMG-e and HMG at the Closing, are true, correct and
complete copies of these documents as now in effect. Except as
otherwise set forth in Section 4.1(c) of the Seller Disclosure
Schedule, neither MZCG nor Glade owns any capital stock or other equity
in
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any other corporation, company, partnership, business trust, or sole
proprietorship or other entity; and
(d) has no interest, direct or indirect, and has no commitment to
purchase any interest, in any corporation, partnership, company, joint venture
or other business enterprise or entity of any nature.
4.2 Capitalization; Title to Shares. The authorized capital stock of
each of MZCG and Glade, the number and types of shares of capital stock which
are issued and outstanding and the par value thereof are as set forth in Section
4.2 of the Seller Disclosure Schedule. All such shares that are issued and
outstanding are duly authorized, validly issued and outstanding, fully paid and
non-assessable, and owned of record and beneficially by Xxxx, free and clear of
any lien, claim or encumbrance, and were not issued in violation of the
preemptive rights of any Person.
(a) There are no outstanding or authorized options, warrants, rights,
contracts calls, puts, rights to subscribe, conversion rights or other
agreements or commitments to which MZCG and/or Glade is a party or which are
binding upon MZCG and/or Glade providing for the issuance, transfer, disposition
or acquisition of any shares of any class or series of their respective capital
stock. There are no outstanding or authorized equity appreciation, phantom stock
or similar rights with respect to either MZCG or Glade.
(b) Section 4.2(b) of the Seller Disclosure Schedule lists the
directors and officers of each of MZCG and Glade, respectively. The minute book
containing the records of meetings of the shareholders and the Boards of
Directors, the stock certificate book, the stock record book and the books of
account of each of MZCG and Glade are true, correct and complete in all material
respects, and MZCG has previously furnished Buyer with true and complete copies
of such minute books, stock certificate books, stock record books and books of
account, which accurately reflect the ownership of all of the outstanding shares
of the capital stock of MZCG. Xxxx is the sole record and beneficial owner of
all of the MZCG Shares and all of the Glade Shares, and the MZCG Shares are
being transferred by Xxxx hereunder free and clear of any and all liens, claims
and encumbrances. All actions taken by each of MZCG and Glade since its
respective organization and incorporation have been duly authorized by its Board
of Directors and/or shareholders, as required, and subsequently ratified as
necessary.
4.3 Authorization. Each of Xxxx, MZCG and Glade has the full legal
right and power and all authority and approvals required to execute and deliver
this Agreement, the LLC Term Sheet and each of the other agreements, including
the Employment Agreement, to be executed by Xxxx, MZCG, Glade, and/or any of
them in connection with the transactions contemplated hereby, and this
Agreement, the LLC Term Sheet and all such other agreements, including the
Employment Agreement, will constitute, when executed and delivered by Xxxx, MZCG
and/or Glade in accordance herewith, the valid and binding obligations of each
of Xxxx, MZCG, and/or Glade, respectively, enforceable in accordance with their
respective terms, subject to general principles of equity and bankruptcy or
other laws relating to or affecting the rights of creditors generally. The
execution and delivery of this Agreement, the LLC Agreement and the other
agreements, including the Employment Agreement, contemplated hereby and thereby,
and the performance by each of Xxxx, MZCG and Glade of their respective
obligations hereunder and
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thereunder have been duly authorized by the Boards of Directors of MZCG and
Glade and by Xxxx as the sole shareholder of each of MZCG and Glade.
4.4 Acquisition of HMG Stock for Investment. Xxxx is acquiring the HMG
Stock for investment purposes, with no present intention to distribute,
liquidate, transfer or resell such stock in violation of applicable securities
laws, including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").
4.5 Effect of Agreement, Etc. Except as set forth in Section 4.5 of the
Seller Disclosure Schedule, the execution and delivery of this Agreement, the
LLC Agreement, the Employment Agreement and the other agreements contemplated
hereby and thereby and the consummation of the transactions contemplated hereby
and thereby will not:
(a) violate, conflict with or result in the breach of any of the terms
or conditions of, result in modification of the effect of, or otherwise give any
other contracting party the right to terminate, or constitute (or with notice or
lapse of time or both constitute) a default under, any instrument, contract or
other agreement to which MZCG, Glade and/or Xxxx is a party or to which any of
MZCG, Glade and/or Xxxx or any of their respective securities, assets or
properties is or may be bound or subject;
(b) violate any order, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body against or binding upon
MZCG, Glade and/or Xxxx or their respective securities, properties or assets; or
(c) violate any statute or regulation of any jurisdiction as such
statute, law or regulation relates to MZCG, Glade and/or Xxxx.
4.6 Restrictions; Burdensome Agreements. Neither MZCG, Glade nor Xxxx
is a party to any contract, commitment or agreement, and none of their
respective properties or assets is subject to, or bound, or affected by, any
certificate of incorporation, by-laws or other corporate restriction, or, to
Xxxx'x knowledge, any regulation or other restriction of any kind or character,
which would (a) prevent MZCG, Glade and/or Xxxx from entering into this
Agreement, the LLC Agreement or the Employment Agreement or from consummating
any of the transactions contemplated hereby, (b) adversely affect its business,
properties or prospects, its condition, financial or otherwise, or the Business,
or (c) to the actual knowledge of Xxxx, in the future adversely affect the
Business, or any properties or prospects, or the condition, financial or
otherwise, of either MZCG or Glade.
4.7 Governmental Approvals. No governmental approval is required on the
part of any of MZCG, Glade or Xxxx in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
Except as set forth in Section 4.7 of the Seller Disclosure Schedule, no consent
of any third party is required to be obtained by MZCG, Glade or Xxxx in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. Except as otherwise
disclosed in Section 4.7 of the Seller Disclosure Schedule, all such consents
shall have been obtained by the Closing.
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4.8 Title to Assets. Section 4.8 of the Seller Disclosure Schedule
lists all of the material assets of MZCG and Glade used by them in their
respective businesses. Such assets constitute all of the material assets
necessary for the conduct of MZCG's and Glade's respective businesses. Except as
set forth in Section 4.24 of the Seller Disclosure Schedule, MZCG has good and
marketable title to the Service Marks. As between Seller and/or Glade on the one
hand and MZCG on the other hand, MZCG has all rights in and to (i) the "Xxxx"
name and brand and all uses thereof and to (ii) each of the unregistered
tradenames listed on Schedule 4.24 hereto (provided that Seller shall continue
to be able to use his name other than for branding or similar commercial
purposes). To the actual knowledge of each of Seller, MZCG and Glade, no third
party has asserted any rights or made any claims with respect to Seller's name.
Seller hereby agrees to execute and deliver all such documents and instruments
and take all other actions as Buyer may request to effectuate the transfer from
Seller to MZCG of all rights in the "Xxxx" name and brand and the tradenames
described in clause (i) of this paragraph. MZCG is the owner of the registered
domain names listed on Schedule 4.24 hereto. Except with respect to certain
Intellectual Property owned by MZCG described in Section 4.24 of the Seller
Disclosure Schedule and used by Glade in its business, each of MZCG and Glade
has good and marketable title to all assets and properties necessary for the
conduct of its business, and all such assets and properties (a) are free and
clear of all liens, claims, encumbrances and any other rights of third parties,
except as otherwise set forth in Section 4.8 of the Seller Disclosure Schedule,
(b) are reflected as required by GAAP on the respective Balance Sheets included
in their respective Financial Statements (as defined in Section 4.9(a) hereof),
and (c) of MZCG will be transferred to Buyer at the Closing. Except as otherwise
set forth on the Seller Disclosure Schedule, neither the whole nor any material
portion of any of their respective assets or properties is subject to any
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the actual knowledge of MZCG, Glade or Xxxx, has any
condemnation, expropriation or taking been proposed. Each of MZCG and Glade has
a valid leasehold interest in all property of which it is the lessee and each
such interest is the subject of a lease which is valid, binding and enforceable
against MZCG and/or Glade, respectively, and, in accordance with its terms,
subject to general principles of equity and bankruptcy or other laws related to
or affecting creditors' rights generally. Neither of MZCG and Glade nor, to the
knowledge of Seller, any other party to any of such leases is in default in the
performance of any provision thereof. Except as set forth in the Seller
Disclosure Schedule, none of the assets of either of MZCG or Glade is subject to
any restriction that would prevent continuation of the use currently made
thereof or adversely affect the value thereof. Each of MZCG, Glade and Xxxx has
complete and unrestricted power and the unqualified right to sell, assign,
transfer and deliver to Buyer or the LLC (pursuant to the LLC Term Sheet) all
deeds, endorsements, assignments and other instruments to be executed and
delivered to Buyer (or the LLC) by any of MZCG and/or Xxxx at the Closing or by
Glade and/or Xxxx at the closing of the transactions contemplated by the LLC
Term Sheet (the "LLC Closing"). The use by either MZCG or Glade of the real
property leased by it does not materially violate any local zoning or similar
land use laws.
4.9 Financial Statements and Information.
(a) The Seller Disclosure Schedule contains a true, correct and
complete copy of the Balance Sheet of MZCG at December 31, 1999, statement of
income and retained earnings and summary of operations, each for the year ended
December 31, 1999 of MZCG, and the Balance
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Sheet of Glade at December 31, 1999, and the statement of retained earnings and
summary of operations of Glade, each for the year ended December 31, 1999
(collectively, the "Financial Statements"). The Financial Statements have been
compiled by Xxxxxx Xxxxxxx, the accountant to both MZCG and Glade, without
qualification except as set forth therein. The business address of Xx. Xxxxxxx
is 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxx 00000. The Financial
Statements present fairly, in all material respects, the financial position and
results of operations of each of MZCG and Glade as of the dates and periods
indicated, and are prepared in accordance with GAAP consistently applied.
Without limiting the generality of the foregoing, (i) except as set forth in the
Seller Disclosure Schedule, neither Xxxx, MZCG nor Glade has actual knowledge of
any basis for any assertion against either of MZCG, Glade or Xxxx as of December
31, 1999 of any debt, liability or obligation of any nature not fully reflected
or reserved against in their respective Balance Sheets and (ii) neither Xxxx,
MZCG nor Glade has actual knowledge that there is any asset or assets of either
MZCG or Glade the value of which (in the reasonable judgment of Seller) is or
are materially overstated in either of said Balance Sheets.
(b) Unless set forth on the Seller Disclosure Schedule, since December
31, 1999, there has not been any adverse change in the business, financial
condition, operations, results of operations, or, to the actual knowledge of
Xxxx, the future prospects of either of MZCG or Glade. Since such date, each of
MZCG and Glade has conducted its businesses only in the ordinary course.
(c) Neither MZCG nor Glade has any liability (and, to the actual
knowledge of MZCG, Glade and/or Xxxx, there is no basis for any present or
future action, suit, proceeding, hearing, investigation, change, complaint,
claim or demand against any of them giving rise to any liability), except (i) as
set forth in Section 4.9(c) of the Seller Disclosure Schedule; (ii) liabilities
set forth on the Balance Sheet of each of MZCG and Glade dated December 31,
1999, respectively; and (iii) liabilities that have arisen after December 31,
1999 in the ordinary course of business (none of which is material or results
from, arises out of, relates to, is in the nature of, or was caused by any
breach any contract or Commitment, breach of warranty, tort, infringement or
violation of law).
(d) None of the financial or accounting information supplied or to be
supplied by any of MZCG, Glade or Xxxx to HMG or its accountants for inclusion
in HMG's registration statement on Form S-1 and the prospectus contained
therein, as currently being prepared and any amendments thereto and any other
document filed with the SEC and any press release, in each case as of the date
of such information, contains any untrue statement of material fact or omits to
include any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and there has been no material change in any such information
since it was given to HMG, except as otherwise set forth in Section 4.9(d) of
the Seller Disclosure Schedule.
4.10 Accounts Receivable. The accounts receivable of each of MZCG and
Glade as shown on their respective Balance Sheets contained in the Financial
Statements (except those accounts receivable collected since such date) or
disclosed in Section 4.10 of the Seller Disclosure Schedule and such additional
accounts receivable as are reflected in Section 4.10 of the Seller Disclosure
Schedule (which Schedule sets forth the accounts receivable on the books of each
of MZCG and Glade as of a date within three (3) business days of the Closing
Date and
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an aging schedule (to the nearest month) of such receivables have been generated
in the ordinary course of business and reflect a bona fide obligation for the
payment of goods or services provided by each MZCG and Glade, respectively.
4.11 Absence of Certain Changes or Events. Except as set forth in
Section 4.11 of the Seller Disclosure Schedule, since December 31, 1999, neither
MZCG, Glade nor Xxxx has:
(a) incurred any obligation or liability except (i) trade or business
obligations incurred in the ordinary course of its business, none of which is
materially adverse to either MZCG or Glade, (ii) obligations and liabilities
under the Commitments (as defined in Section 4.13(a) hereof) listed in Schedule
4.13 to the extent permitted by such Commitments, respectively, and (iii)
obligations and liabilities under this Agreement;
(b) suffered any adverse change in its financial condition, results of
operations, properties, assets, business, or to the actual knowledge of MZCG,
Glade and/or Xxxx, prospects;
(c) suffered the occurrence of any event or events which, individually
or in the aggregate, have had, or could reasonably be expected to have, an
adverse effect on its financial condition, results of operations, properties or
business, or to the actual knowledge of MZCG, Glade and/or Xxxx, prospects;
(d) incurred any damage, destruction or loss of any of its assets or
properties by fire, storm, or other like or unlike casualty, whether or not
covered by insurance;
(e) experienced any change in the manner in which its business has been
conducted;
(f) undertaken any change in the treatment and protection of its trade
secrets or other confidential information;
(g) experienced any change in any of its business or contractual
relationships with any employee, customer or supplier which could reasonably be
expected to have an adverse effect on its business or, to the actual knowledge
of Xxxx, MZCG and/or Glade, its prospects;
(h) declared, set aside, made or paid any dividend with respect to its
capital stock or otherwise purchased or redeemed any shares of its capital
stock;
(i) incurred, prepaid, forgiven or canceled any indebtedness other than
in the ordinary course of business, which incurrence, prepayment, forgiveness or
cancellation, individually or together with any other indebtedness incurred,
prepaid, forgiven or canceled could have an adverse effect on the business,
assets or properties of MZCG or Glade, except as set forth in Section 4.11(i) of
the Seller Disclosure Schedule;
(j) acquired or disposed of any assets, or entered into any agreement
or arrangement of any nature, except in the ordinary course of business, except
as set forth in Section 4.11(j) of the Seller Disclosure Schedule;
(k) entered into any agreement, whether written or oral, to do any of
the foregoing;
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(l) adopted any change in the accounting principles, methods or
practices or any change in depreciation or amortization policies or rates
utilized by any of MZCG or Glade with respect to their respective businesses
other than those required by any applicable governing authority in conformity
with GAAP, other than any changes, if any, disclosed in Section 4.11(l) of the
Seller Disclosure Schedule;
(m) experienced any strike, material grievance, proceeding or other
labor dispute, or any known union organizational activity or other occurrence,
event or condition of any similar character, including, without limitation, any
one or more occurrences which could result in a claim of discrimination, sexual
harassment or any other violation of New York City, New York State or federal
law, which could reasonably be expected to have an adverse effect any of the
assets or the business of MZCG or Glade; or
(n) experienced any occurrence or occurrences not included in any of
paragraphs (a) through (m) of this Section 4.11 which Xxxx has reason to
believe, based on his actual knowledge, could, individually or in the aggregate,
be expected to result, in any adverse change in the business of MZCG or Glade or
the prospects.
4.12 Taxes.
(a) For purposes of this Agreement, (i) "Tax" (and, with correlative
meaning, "Taxes") shall mean any federal, state, county, local or foreign taxes,
charges, levies, other assessments, or income, charges, alternative or add-on
minimum, business, employment, franchise, occupancy, payroll, property, sales,
transfer, use, value added, withholding or other tax, levy, impost, fee,
imposition, assessment or similar charge together with any related addition to
tax, interest, penalty (civil or criminal) or fine thereon; and (2) "Returns"
shall mean all returns, (including, without limitation, information returns and
other material information), reports and forms relating to Taxes and any and all
amendments to any of the foregoing.
(b) Each of MZCG and Glade (and Xxxx with respect to the business of
MZCG and/or Glade) has duly filed all Returns required to be filed by such
corporation or Xxxx. All such Returns were, when filed, and to the knowledge of
each of MZCG, Glade and Xxxx are, accurate and complete in all material respects
and were prepared in conformity with applicable laws and regulations. Each of
MZCG, Glade and Xxxx has paid or, if not yet due, will pay in full or has
adequately reserved against all Taxes otherwise assessed against it through the
Closing Date. Section 4.12(b) of the Seller Disclosure Schedule sets forth any
such assessed and unpaid Taxes. None of MZCG, Glade nor Xxxx is the beneficiary
of any extension of time within which to file any Returns. No claim has ever
been made by an authority in a jurisdiction where any of MZCG, Glade or Xxxx (in
any way related to the business of either MZCG and/or Glade) does not file
Returns that it or he may be subject to taxation by that jurisdiction. There are
no security interests on any of the assets of any of MZCG, Glade or Xxxx that
arose in connection with the failure (or alleged failure) to pay any Tax.
(c) Except as set forth in Section 4.12(c) of the Seller Disclosure
Schedule, none of MZCG, Glade and/or Xxxx is a party to any pending action or
proceeding by any governmental authority for the assessment of any Tax, and no
claim for assessment or collection of any Tax related to any of MZCG, Glade or
Xxxx has been asserted against MZCG, Glade or Xxxx that has
11
not been paid; and no Return of any of MZCG, Glade or Xxxx is currently under
audit by the Internal Revenue Service or any other governmental authority. There
are no Tax liens on any of the assets of MZCG or Glade (other than the lien of
Taxes not yet due and payable). There is no valid basis, to the knowledge of any
of MZCG, Glade or Xxxx, except as set forth in Section 4.12(c) of the Seller
Disclosure Schedule, for any assessment, deficiency, notice, 30-day letter or
similar intention to assess any Tax to be issued to any of MZCG, Glade or Xxxx
(in any way relating to either MZCG or Glade) by any governmental authority.
(d) All Taxes which either MZCG or Glade (or Xxxx with respect to the
business of MZCG or Glade) is required to collect or withhold have been duly and
timely collected and withheld and have been set aside in accounts for such
purposes, or to the extent required when due, have been duly and timely paid to
the proper governmental authority.
(e) Anything contained herein to the contrary notwithstanding, Seller
hereby agrees to assume all liabilities for any and all Taxes of MZCG arising
with respect to periods on or before the Closing Date, except (i) income Taxes
for the 2000 calendar year, and (ii) all Taxes (other than Sales Taxes) arising
in the ordinary course of business of MZCG between the Effective Date and the
Closing Date that were either not paid by the Closing Date or are payable after
the Closing Date and in either case are identified in Section 4.12(e) of the
Seller Disclosure Schedule or the Balance Sheet of MZCG. Buyer hereby agrees to
pay a maximum of up to $18,866.80 with respect to sales Tax liabilities,
including any and all interest and penalties thereon, which liabilities are
specified in Section 4.12 of the Buyer Disclosure Schedule (the "Maximum Sales
Tax Liability"). Without limiting the generality or effect of the first sentence
of this paragraph (e) Seller shall use his best efforts to have all liabilities
for all sales Tax liabilities (other than the Maximum Sales Tax Liability) set
forth in Section 4.12 of the Seller Disclosure Schedule, including interest and
penalties thereon, removed, paid or reduced.
4.13 Contracts Listed; No Default; Certain Agreements.
(a) Section 4.13(a) of the Seller Disclosure Schedule contains a
complete and correct list, as of the date hereof, of all agreements, contracts
and commitments of the following types, written or oral, to which any of MZCG or
Glade is a party or by which any of them or any of their properties is bound as
of the date hereof: (i) mortgages, indentures, security and/or pledge
agreements, letters of credit, loan agreements and other agreements, guarantees
and instruments relating to the borrowing of money or extension of credit; (ii)
employment, consulting, severance and agency agreements; (iii) collective
bargaining agreements; (iv) bonus, profit-sharing, compensation, stock option,
stock purchase, pension, severance, retirement, deferred compensation or other
plans, trusts or funds for the benefit of employees, officers, agents or,
directors (whether or not legally binding); (v) sales agency, manufacturer's
representative or distributorship agreements; (vi) agreements, orders or
commitments for the purchase of equipment, raw materials, supplies or finished
products exceeding $5,000; (vii) agreements, orders or commitments for the sale
of its services or products exceeding $5,000; (viii) Intellectual Property (as
defined in Section 4.24 hereof), and all licenses thereof, transfer of
technology or know-how and other Intellectual Property rights; (ix)
confidentiality agreements (including agreements binding any of the employees of
MZCG and/or Glade or their respective former employers); (x) agreements or
commitments for capital expenditures in excess of $5,000 for any single project
(it being warranted that all undisclosed agreements or commitments for
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capital projects do not exceed $10,000 in the aggregate for all projects); (xi)
brokerage or finder's agreements; (xii) joint venture and partnership
agreements; and (xiii) leases for equipment, real and personal property; and
(xiv) other agreements, contracts and commitments which involve aggregate
payments or receipts of more than $10,000 (collectively, the "Commitments").
Each of MZCG, Glade and Xxxx has made available to HMG-e complete and correct
copies of all such written Commitments, together with all amendments thereto,
and provided accurate descriptions of all oral agreements listed in Section
4.13(a) of the Seller Disclosure Schedule. All Commitments of the type described
in this Section 4.13(a) are in full force and effect in accordance with their
respective terms and there does not exist thereunder as of the date hereof any
(x) default or defaults by any of MZCG, Glade or Xxxx or, to the knowledge of
any of them, any other party thereto, which default or defaults, individually or
in the aggregate, would adversely affect either MZCG or Glade or any of their
respective assets or businesses, or (y) event or condition which, after notice
or lapse of time or both, would constitute a default thereunder on the part of
Seller or, to Seller's knowledge, any other party thereto, which default,
individually or together with any other defaults covered by this clause (y),
could adversely affect either MZCG, Glade or their respective assets or
businesses.
(b) Except as set forth in Section 4.13(b) of the Seller Disclosure
Schedule, no Commitment to which any of MZCG, Glade or Xxxx is a party or by
which any of them or any of their respective assets or properties has, or in the
future, to the actual knowledge of any of MZCG, Glade or Xxxx, may have, an
adverse effect on the business or assets of either MZCG or Glade. With respect
to each of MZCG, Glade and Xxxx, there are no outstanding powers of attorney,
except routine powers of attorney relating to representation before governmental
agencies or given in connection with qualification to conduct business in
another jurisdiction.
(c) As of the date hereof, neither MZCG, Glade nor Xxxx is a party to
any oral or written (i) consulting or similar agreement with any present or
former director, officer or employee or any entity controlled by any MZCG, Glade
or Xxxx not terminable on thirty days' notice or less involving the payment of
more than $10,000 per annum, (ii) agreement with any executive officer or other
key employee of any of MZCG or Glade the benefits of which agreement are
contingent, or the terms of which are altered, upon the occurrence of a
transaction involving any of MZCG, Glade or Xxxx of the nature contemplated by
this Agreement, (iii) agreement with respect to any executive officer or other
key employee of any of MZCG and Glade providing any term of employment or
compensation guarantee extending for a period longer than one year or for the
payment in excess of $10,000 per annum, or (iv) agreement or plan, including any
stock option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the LLC Agreement or the value of
any of the benefits of which will be calculated on the basis of the transactions
contemplated by this Agreement, except as set forth on Section 4.13(c) of the
Seller Disclosure Schedule.
(d) Except as disclosed on Section 4.13(d) of the Seller Disclosure
Schedule or the Financial Statements, neither MZCG nor Glade is indebted for
money borrowed, either directly or indirectly, from any of their respective
officers, directors or Affiliates (as defined in Section 8.3 hereof), in any
amount whatsoever, nor is any of their respective officers, directors or
Affiliates indebted for money borrowed from any of MZCG, Glade or Xxxx; nor is
there any
13
transaction of a continuing nature between MZCG and/or Glade on the one hand and
Xxxx or any of the other officers, directors or Affiliates of MZCG or Glade, on
the other hand (other than by or through the regular employment thereof by
either of MZCG or Glade), not subject to cancellation that will continue beyond
the Closing Date (or the LLC Closing Date with respect to Glade) or has
continued beyond the Effective Date, including, without limitation, use of
either of MZCG's and/or Glade's assets, as the case may be, for any personal
benefit with or without adequate compensation.
4.14 Litigation; Other Third Party Consents; Insurance Claims; Product
Recalls; Customer Complaints. No governmental approval is required on the part
of any of MZCG, Glade or Xxxx in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
Except as set forth in Section 4.7 or 4.14 of the Seller Disclosure Schedule, no
consent of any third party is required to be obtained by any of MZCG, Glade or
Xxxx in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby. Except as
otherwise disclosed in Section 4.7 or 4.14 of the Seller Disclosure Schedule,
all such consents shall have been obtained by the Closing. Each of MZCG, Glade
and Xxxx has delivered or made available to HMG-e and/or HMG in accordance with
the terms of this Agreement, copies of, and is delivering on the Closing Date,
all files of MZCG and will deliver, on the LLC Closing Date, all files of Glade,
in each case including, but not limited to, files containing all information
with respect to (a) all customer complaints relating to service, (b) recalls of
products or notifications therefor by any Governmental Authority or voluntarily
by either of MZCG or Glade (or Xxxx with respect to the any business or asset of
MZCG or Glade) since January 1, 1998, and (c) claims made or threatened which
either of MZCG or Glade (or Xxxx) with respect to the business) has put in the
hands of its insurance carriers since January 1, 1994 relating to personal or
other injuries or other damages resulting from the production, manufacture, sale
or use of any products produced, manufactured or sold by either of MZCG or
Glade. Each of the liabilities from any such litigation is adequately described
in the records and Financial Statements of MZCG and/or Glade, as applicable,
provided to Buyer or is otherwise described in Section 4.14 of the Seller
Disclosure Schedule, and adequate reserves therefor are maintained on their
respective books.
4.15 Compliance with Laws and Regulations. Each of MZCG and Glade (and
Xxxx with respect to the business and related assets of each of MZCG and Glade)
is in compliance, in all material respects, with all laws, rules, regulations,
orders and requirements (federal, state and local and foreign) applicable to it
in all jurisdictions where its business is conducted or to which it is subject,
including, without limitation, all applicable civil rights, anti-discrimination
and equal opportunity employment laws and regulations, and all federal,
antitrust, antimonopoly, fair trade practice laws and trademark laws, copyright
laws, patent laws and other laws governing intellectual property in general,
except where the failure to comply would not have an adverse effect on (a) MZCG
and/or Glade, or (b) their respective businesses or assets. Except as disclosed
in Section 4.15 of the Seller Disclosure Schedule, none of MZCG, Glade nor Xxxx
has actual knowledge of any assertion by any party that any of MZCG, Glade or
Xxxx is in violation in any material respect of any such laws, rules,
regulations, orders, restrictions or requirements with respect to the operations
of any of MZCG, Glade or their respective businesses and assets and no written
notice in that regard has been received by any of MZCG, Glade or Xxxx.
14
4.16 Governmental Licenses, Permits, Etc. Each of MZCG and Glade has
all material governmental licenses, permits, authorizations and approvals
necessary for the conduct of its business as currently conducted ("Licenses and
Permits"). Section 4.16 of the Seller Disclosure Schedule includes a list of all
Licenses and Permits. All Licenses and Permits are in full force and effect, and
no proceedings for the suspension or cancellation of any thereof is pending or
threatened. Except as disclosed in such Schedule, all applications and
amendments previously filed by either of MZCG, Glade or Xxxx in connection with
receiving such permits, licenses, franchises, orders, registrations or other
approvals were correct at the time such applications were granted and made in
accordance and substantial compliance with all applicable rules, regulations and
instructions for the filing of the same. Access to all applications previously
made or pending, including all related files, correspondence, notes and
telephone logs (in connection therewith, all of which documents are maintained
at the principal offices of MZCG or Glade, respectively) has been provided to
HMG-e and all such applications, files, correspondence, notes and telephone logs
will be transferred to and become the property of HMG-e at the Closing and the
LLC Closing, respectively except to the extent required by Glade to dissolve and
liquidate. Following the Closing, or the LLC Closing, as the case may be, Xxxx,
as President of each of MZCG and Glade and/or a member of the LLC, shall render
reasonable assistance to MZCG, Buyer and the LLC in obtaining the continuation
of such permits, licenses, franchises, orders, registrations or other approvals
as may be required by the transactions contemplated hereby or by the LLC Term
Sheet or the LLC Agreement (as defined in Section 6.4 hereof) or otherwise to
assure continuation in MZCG and/or transfer to the LLC of all rights in any of
the same. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in the
revocation, cancellation or suspension of any of the Licenses and Permits.
4.17 Real Property. Neither MZCG nor Glade (nor Xxxx in connection with
the business or assets of either MZCG or Glade) owns, directly or indirectly,
any real property or interest therein except as set forth in Section 4.23 of the
Seller Disclosure Schedule.
4.18 Environmental Compliance.
(a) Except as set forth in Section 4.18(a) of the Seller Disclosure
Schedule, the business, operations, property and assets of each of MZCG and
Glade, and, to the actual knowledge of MZCG, Glade and/or Xxxx, the business of
any subtenant or licensee which is occupying or has occupied any space on any
premises of any of MZCG or Glade, the activities of which could result in any
liability to any of MZCG, Glade or their respective businesses have been and are
in compliance with all, and are not in violation of any, applicable federal,
state and local or foreign environmental laws, rules or regulations relating to
environmental matters including, without limitation, environmental protection,
hazardous or toxic waste, including, but not limited to, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended,
including the 1986 Amendments thereto, the Superfunds Amendments and
Reauthorization Act and the Resource Conservation and Recovery Act, or any other
local, state or federal environmental laws, rules or regulations (all such laws,
rules and regulations, collectively, the "Environmental Laws").
(b) Except as set forth in Section 4.18(b) of the Seller Disclosure
Schedule, no suit, claim, action, proceeding, or investigation, review or
inquiry by any court or federal, state,
15
county, municipal or local governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign (all of the foregoing
collectively referred to as "Governmental Entity") concerning any violation of
the Environmental Laws by either of MZCG and Glade or any of their respective
assets is pending or, to the actual knowledge of any of MZCG, Glade or Xxxx, is
threatened, including, but not limited to, matters relating to environmental
protection or hazardous or toxic waste. Neither MZCG, Glade nor Xxxx has actual
knowledge of any reasonable basis or ground for any such suit, claim,
investigation, inquiry or proceeding.
4.19 Insurance. Section 4.19 of the Seller Disclosure Schedule sets
forth an accurate description of each insurance policy (including, but not
limited to, policies providing property, casualty, liability and xxxxxxx'x
compensation coverage and bond and surety arrangements) to which any of MZCG and
Glade (or Xxxx, with respect to any asset or activity of the business of MZCG or
Glade) has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past five years. With respect to each such
insurance policy:
(a) the policy is legal, valid, binding, enforceable, and in full
force and effect;
(b) the policy will continue to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby;
(i) neither MZCG, Glade nor Xxxx nor any other party to the
policy is in breach or default (including with respect to the payment
of premiums or the giving of notices), nor has any event occurred
which, with notice or the lapse of time or both, would constitute such
a breach or default or permit termination, modification or acceleration
under the policy; and
(ii) no party to the policy has repudiated any provision
thereof.
Each of MZCG and Glade has been covered during the past five years by
insurance in scope and amount customary and reasonable for the business in which
it has engaged during the aforementioned period. Section 4.19 of the Seller
Disclosure Schedule describes any self-insurance arrangements affecting any of
MZCG or Glade or any of their respective assets.
4.20 Condition of Assets. The equipment, fixtures and other personal
property of each of MZCG and Glade are in good operating condition and repair
(ordinary wear and tear excepted) for the conduct of its business as currently
conducted. Title to all such assets was acquired through arms-length
transactions. Except as set forth in Section 4.20 of the Seller Disclosure
Schedule, all assets necessary for the conduct of the business of each of MZCG
and Glade is owned by MZCG or Glade, or leased by MZCG or Glade subject to valid
and enforceable leases.
4.21 Employees, Labor Matters, Etc.
(a) Section 4.21 of the Seller Disclosure Schedule contains a complete
and correct list of the names of all directors, officers and salaried employees
of each of MZCG and Glade, including any employee on leave of absence or layoff
status. Such Section or Section 4.22 of
16
the Seller Disclosure Schedule also sets forth for each such employee the
employer, employee name, job title, current compensation payable and any changes
in compensation since December 31, 1999, Section 4.21 or 4.22 of the Seller
Disclosure Schedule sets forth all pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare or vacation plan or other
employee Pension Benefit Plan or Employee Welfare Benefit Plan as defined in the
Employee Retirement Income Security Act of 1974, as amended and the rules and
regulations issued pursuant thereto (such Act, rules and regulations and any
successor to any of them collectively, "ERISA") maintained by MZCG and/or Glade.
There is no payment that has not been paid for more than 14 days past the date
which would ordinarily be made in the ordinary course of business that is owed
by either of MZCG or Glade to any of its directors, officers, employees,
trustees, agents, brokers, representatives or other personnel, current and
former, or any beneficiaries, dependents or survivors of the foregoing, in an
amount individually, or in the aggregate, in excess of $10,000 (including,
without limitation, expense reimbursement and severance payments), in accordance
with the terms of their respective employment arrangements or under their
employment, consulting, severance or agency agreements, if any.
(b) None of the employees of either of MZCG or Glade is represented by
any labor union or collective bargaining unit and neither MZCG, Glade nor Xxxx
has actual knowledge of any organizational efforts taking place with respect to
such representation.
4.22 Employee Agreements. Except as set forth in Section 4.21 or
Section 4.22 of the Seller Disclosure Schedule, neither MZCG nor Glade has any
employee benefit, pension, welfare or other compensation plan, or any plan which
is subject to ERISA. All such plans set forth on the Seller Disclosure Schedule
are in full force and effect and comply in all material respects with applicable
laws and regulations.
4.23 Business Locations. Neither MZCG nor Glade owns or leases any real
or personal property in any state or country except as set forth in Section 4.23
of the Seller Disclosure Schedule.
4.24 Intellectual Property.
(a) Section 4.24 of the Seller Disclosure Schedule lists all of the
Intellectual Property (as hereinafter defined) owned by each of MZCG and/or
Glade. "Intellectual Property" means all right, title and interest in and to all
patents, copyrights, trademarks, trade names, assumed names, service marks,
proprietary technology, processes and rights, proprietary names, copyrights,
domain names and any registration and any pending applications for any such
registration for any of the foregoing, together with all the goodwill relating
thereto, and all other intellectual property owned by each of MZCG or Glade or
used by either of them in their respective businesses. Other than as disclosed
in Section 4.24 of the Seller Disclosure Schedule, neither MZCG nor Glade has
any licenses granted by or to it or other agreements to which it is a party,
relating in whole or in part to any Intellectual Property, whether owned by it
or otherwise. All of the patents, trademark registrations and copyrights listed
in Section 4.24 of the Seller Disclosure Schedule are owned by MZCG and are, to
the knowledge of each of MZCG, Glade and Seller, valid and in full force and
effect. As between Seller and/or Glade on the one hand,
17
and MZCG on the other hand, MZCG owns all rights in and to the "Xxxx" name and
brand and the domain names and the unregistered tradenames listed on Schedule
4.24 hereto and all uses of all of the foregoing (provided that Seller shall
continue to be able to use his name other than for branding or similar
commercial purposes). Except as set forth in Section 4.24 of the Seller
Disclosure Schedule, to the knowledge of any of MZCG, Glade or Xxxx, neither
MZCG nor Glade nor any Intellectual Property used by either of them is
infringing upon, or otherwise violating, the rights of any third party with
respect to any Intellectual Property. Except as otherwise set forth in Section
4.24 of the Seller Disclosure Schedule, no proceedings have been instituted
against nor claims received by MZCG, Glade or Xxxx, nor to the actual knowledge
of any of them, are any proceedings or claims threatened alleging any such
violation, nor does any of MZCG, Glade or Xxxx have actual knowledge of any
valid basis for any such proceeding or claim with respect to any Intellectual
Property described or listed in Section 4.24 of the Seller Disclosure Schedule.
Neither MZCG, Glade nor Xxxx has any actual knowledge of any infringement by or
of or other adverse claim or proceeding against any of the Intellectual Property
owned or used by any of them.
(b) Each of MZCG and Glade owns or has the right to use pursuant to
license or agreement all Intellectual Property necessary for the operation of
its business. Each item of Intellectual Property owned or used by MZCG and/or
Glade immediately prior to the Closing hereunder will be owned or available for
use by (i) MZCG, Buyer, and HMG from and after the Closing and (ii) the LLC from
and after the LLC Closing Date, in each case on terms and conditions
substantially identical to those on which they were owned or otherwise available
for use by any of MZCG or Glade immediately prior to the Closing or the LLC
Closing, respectively. Each of MZCG and Xxxx has taken all reasonable action to
protect each item of Intellectual Property owned by MZCG or used by MZCG in its
the business, and will maintain its rights in and to the item of Intellectual
Property or the use thereof through the Closing so as not to affect adversely
the validity or enforceability of those rights.
4.25 Bank Accounts. Section 4.25 of the Seller Disclosure Schedule
contains a correct and complete list of each bank or other financial institution
in which MZCG and/or Glade maintains an account or a safe deposit box, the
account numbers of such accounts and the names of the authorized signatories for
each such account. Neither MZCG nor Glade has any other account or safe deposit
box.
4.26 Selling Materials and Policies. Each of MZCG and Glade has made
available to HMG and Buyer copies of all current catalogs and brochures in any
media relating to products and services offered and or sold by each of MZCG and
/or Glade and the pricing structure for volume and promotional discounts
relating to such products and services.
4.27 Warranties. Section 4.27 of the Seller Disclosure Schedule sets
forth a true and complete list of the forms of all express warranties and
guaranties made by either of MZCG or Glade to third parties with respect to any
products sold or leased or services rendered. No product or service of either of
MZCG and/or Glade has, at any time, been subject to any voluntary or
governmental recall.
4.28 Customers and Suppliers. Except as set forth in Section 4.28 of
the Seller Disclosure Schedule, neither MZCG, Glade nor Xxxx has any reason to
believe that, either as a
18
result of the transactions contemplated hereby or for any other reason
(exclusive of expiration of a contract upon the passage of time), any present
material customer or material supplier of either of MZCG or Glade will not
continue to conduct business with Buyer after the Closing Date or, in the case
of Glade, after the LLC Closing Date, in substantially the same manner as such
customer or supplier has conducted business with MZCG and/or Glade in the past.
Section 4.28 of the Seller Disclosure Schedule sets forth a true, correct and
complete list of each customer of MZCG and each customer of Glade that within
the preceding twelve months accounted for an aggregate of 10% or more of the
gross revenues of MZCG or Glade, respectively (each such customer or supplier
respectively, a "material customer" or "material supplier").
4.29 Brokers. Except as set forth in Section 4.29 of the Seller
Disclosure Schedule, neither MZCG, Glade nor Xxxx has made any agreement or
taken any action with any Person or taken any action which would cause any
Person to be entitled to any agent's, broker's or finder's fee or commission in
connection with any of the transactions contemplated by this Agreement.
4.30 Disclosure. Neither the Seller Disclosure Schedule nor any of the
representations and warranties contained in this Article IV contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements and information contained in such representation or
warranty and/or the Seller Disclosure Schedule, in light of the circumstances
under which they are made, not misleading.
4.31 Other Facts. Except for the representations and warranties set
forth in this Agreement (including the Schedules and Exhibits hereto), or any
certificate or other document or instrument required to be delivered by HMG or
Buyer at the Closing of the transactions contemplated by Section 3.4 hereof, in
deciding to sell the MZCG Shares, Seller has not relied upon any other fact,
disclosure, information representation, warranty or disclosure made by Buyer or
HMG or any representative of Buyer or HMG whether made orally or in writing.
V.
REPRESENTATIONS AND WARRANTIES OF BUYER AND HMG
HMG and Buyer jointly and severally represent and warrant to Seller as
follows, with the knowledge and understanding that Seller is relying materially
on such representations and warranties:
5.1 Organization and Standing of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and has the corporate power to carry on its business as now conducted.
HMG is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has the corporation power to carry on its
business as now conducted and to enter into this Agreement and the LLC Term
Sheet (and the other agreements contemplated hereby), to carry out its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The copies of the certificate of incorporation
of each of Buyer and HMG (certified by their respective Secretaries or Assistant
Secretaries), each as amended to date and delivered to Seller at the Closing,
are true, correct and complete copies of those documents as now in effect.
19
5.2 Buyer/HMG Authority. The execution, delivery and performance by
each of Buyer and HMG of this Agreement and the LLC Term Sheet and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by their respective Boards of Directors. This Agreement constitutes
the valid and binding obligation of each of Buyer and HMG, enforceable against
each of them in accordance with its terms, subject to general principles of
equity and bankruptcy or other laws relating to or affecting the rights of
creditors generally.
5.3 Capitalization. The authorized capital stock of Buyer consists of
10,000 shares of common stock, par value $.01 per share, of which ten (10)
shares are currently issued and outstanding; and the authorized capital stock of
HMG consists of 50,000,000 shares of common stock, par value $.01 per share, of
which 13,483,658 shares were issued and outstanding as at May 24, 2000. [To be
brought current on closing date.]
5.4 HMG Stock; Acquisition of MZCG Shares for Investment.
(a) The HMG Shares to be delivered to Xxxx and the Employee Shares to
be delivered to the Employees at Closing, when issued in accordance with the
terms of this Agreement, shall be duly authorized, validly issued, fully paid
and non-assessable. Upon Closing, Seller will acquire title to the 300,000
shares of HMG Stock being issued to him pursuant hereto free and clear of any
lien, claim or encumbrance. At Closing, the Employees will acquire title to an
aggregate of 16,750 shares of HMG Stock being issued to them pursuant hereto
free and clear of any lien, claim or encumbrance. The HMG Stock is traded on the
NASDAQ SmallCap market.
(b) Buyer is acquiring the MZCG Shares for investment purposes, with no
present intention to distribute, liquidate, transfer or resell such stock in
violation of applicable securities laws, including, without limitation, the
Securities Act.
5.5 HMG SEC Filings. Buyer has delivered to Seller copies of HMG's
annual report on Form 10K as filed with the Securities and Exchange Commission
(the "SEC") for HMG's 1999 fiscal year (the "10K") and all other reports filed
pursuant to the Securities Exchange Act of 1934 for such year (collectively, the
"SEC Filings"). Except as set forth in Section 5.5 of Schedule B attached hereto
(the "Buyer Disclosure Schedule"), the SEC Filings, taken together, accurately
describe the business currently conducted by HMG. The financial statements
contained in the 10K present fairly, in all material respects, the financial
position of HMG as of the respective dates and the results of its operations and
its cash flows for the periods covered thereby and have been prepared in
conformity with GAAP consistently applied. The SEC Filings, taken together, do
not contain any untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
5.6 Effect of Agreement, Etc. Except as set forth in Section 5.6 of the
Buyer Disclosure Schedule or disclosed in any of the SEC Filings, the execution
and delivery of this Agreement and the LLC Term Sheet and the consummation of
the transactions contemplated hereby will not:
20
(a) violate, conflict with or result in the breach of any of the terms
or conditions of, result in modification of the effect of, or otherwise give any
other contracting party the right to terminate, or constitute (or with notice or
lapse of time or both constitute) a default under, any instrument, contract or
other agreement to which HMG or Buyer is a party or to which any of them or any
of their respective securities, assets or properties is or may be bound or
subject;
(b) violate any order, judgment injunction, award or decree of any
court, arbitrator or governmental or regulatory body against or binding upon any
of HMG or Buyer or their respective securities, properties or assets; or
(c) violate any statute or regulation of any jurisdiction as such
statute, law or regulation relates to any of HMG or Buyer.
5.7 Governmental Approvals. Except as disclosed in Section 5.7 of the
Buyer Disclosure Schedule, no governmental approval is required on the part of
any of HMG or Buyer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby (except
any filings as may be required to be made with the SEC). Except as set forth in
Section 5.7 of the Buyer Disclosure Schedule, no consent of any third party is
required to be obtained by any of HMG or Buyer in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. Except as otherwise disclosed in Section 5.7
of the Buyer Disclosure Schedule, all such consents shall have been obtained by
the Closing.
5.8 Litigation. Except as disclosed in Section 5.8 of the Buyer
Disclosure Schedule or in any of the SEC Filings, there is no material judicial
or administrative action, suit, proceeding or investigation pending, or to the
actual knowledge of Xxxxxx Xxxx threatened, which affects or could adversely
affect HMG or its business or assets, or to the actual knowledge of Xxxxxx Xxxx,
the prospect of such business, or which has resulted in any liability on the
part of HMG or HMG-e or which involves or could involve the validity of this
Agreement or any agreement or instrument executed or to be executed in
connection herewith or of any action taken or to be taken in connection herewith
or therewith, nor has any such material action, suit, proceeding or
investigation been pending within the two years preceding the date hereof that
has not been disclosed in any filings by HMG with the SEC. There is no material
action, suit or proceeding pending against, or, to the actual knowledge of
Xxxxxx Xxxx, threatened against, Buyer or HMG before any court or arbitrator or
any governmental body or agency which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated hereby.
5.9 Brokers. Except as set forth in Section 5.9 of the Buyer Disclosure
Schedule, neither Buyer nor HMG has made any agreement or taken any action with
any Person or taken any action which would cause any Person to be entitled to
any agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
5.10 Disclosures. Neither the Buyer Disclosure Schedule nor any of the
representations and warranties contained in this Article V contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements and
21
information contained in this Article V and/or the Buyer Disclosure Schedule, in
light of the circumstances under which they are made, not misleading.
5.11 Other Facts. Except for the representations and warranties set
forth in this Agreement, any Exhibit or Schedule hereto, the Financial
Statements or any certificate or other document or instrument required to be
delivered by MZCG, Glade and/or Xxxx at the Closing of the transactions
contemplated by Section 3.4 hereof or at the LLC Closing, in deciding to
purchase the MZCG Shares, neither Buyer nor HMG has relied upon any other fact,
disclosure, information representation, warranty or disclosure made by Seller or
any representative of Seller whether made orally or in writing.
VI.
ADDITIONAL COVENANTS OF THE PARTIES
The Parties covenant as follows:
6.1 Access to Information After Closing. If, subsequent to the Closing
Date, there is a legitimate purpose (including, but not limited to, the
preparation of tax reports and returns, the need of Buyer or HMG for information
for the operation of their respective businesses or the business of MZCG, Glade
or the LLC, or HMG needs information for any document to be filed with the SEC
or other disclosure which is required to be made pursuant to any applicable
securities law, rule or regulation, or if there is an audit by the Internal
Revenue Service, other governmental inquiry, or litigation or prospective
litigation to which any of Xxxx, MZCG, Glade, the LLC, Buyer, and/or HMG is or
may become a party, making necessary access by Buyer, the LLC and/or HMG to the
records of Xxxx, or access by Xxxx to the records of Buyer or HMG, or HMG
requires any other information to be included any document to be filed with the
SEC or which is otherwise required to be disclosed pursuant to any securities
law, rule or regulation, or Xxxx requires any information in connection with the
payment of any personal Tax, preparation of any personal Return or the defense
of any claim with regard to any Tax for any period prior to the Closing Date or
the LLC Closing Date, as the case may be, each party shall allow representatives
of the other party reasonable access to such records for such purpose; provided,
however, that Xxxx shall not have any right to access any records of Buyer or
HMG following termination of Xxxx'x employment with Buyer or MZCG for any reason
or termination or reduction in his interest as a member of the LLC for any
reason.
6.2 Non-Competition; Non-Disclosure; Confidentiality.
(a) The following capitalized terms, as used herein, shall have the
meanings set forth below:
"Non-Compete Period" shall mean the period commencing on the
date of the first to occur of (i) expiration of the term of the
Employment Agreement or (ii) its earlier termination and ending on the
date which is either (A) the first anniversary of the date of such
expiration or earlier termination (the "One-Year Non-Compete Period")
or (B) the
22
second anniversary of the date of such expiration or earlier
termination (the "Two-Year Non-Compete Period").
"HMG Confidential Information" shall mean any information
relating in any way to the business of HMG, Buyer and/or any of their
respective Affiliates as now conducted or hereafter conducted during
the Non-Compete period which information is disclosed or known to
Seller as a consequence of, result of, or through his affiliation with
Buyer and/or HMG or his conduct of the business of MZCG, Glade and/or
the LLC, which information consists of technical or non-technical
information about the products, processes, programs, concepts, forms,
business methods, data, any and all financial or accounting data,
marketing, customer lists or other information about customers,
suppliers, or services and information corresponding thereto of Buyer,
HMG, MZCG, the LLC or any of their respective Affiliates acquired by
Seller at any time prior up to and including the last day of the
Non-Compete Period. HMG Confidential Information shall not include any
of such items that are published without violation by Seller of the
terms of this Section 6.2 or are otherwise part of the public domain or
freely available from trade sources or otherwise other than as the
result of any violation by Seller of the provisions of this Section
6.2.
(b) As a material inducement to Buyer and HMG to enter into this
Agreement and to perform the transactions contemplated hereby, Seller undertakes
and agrees that except as otherwise expressly provided in the LLC Term Sheet or
the LLC Agreement, he shall not, directly or indirectly, (i) compete or
participate as a director, officer, employee, consultant, agent, representative
or otherwise or as (A) the holder of more than 5% of the equity securities of
any Person, (B) a partner or (C) a joint venturer, (ii) have any direct or
indirect financial interest, including, without limitation, the interest of a
creditor, in any business competing directly with (1) the business of Buyer,
HMG, MZCG (to the extent of any business of MZCG other than architectural or
interior design) or any of their respective Affiliates at any time during the
Two-Year Non-Compete Period, or (2) the business of MZCG, to the extent the
business of MZCG consists of architectural or interior design at any time during
the One-Year Non-Compete Period, in either case within a radius of two hundred
(200) miles of any office of Buyer, HMG, or MZCG or any of their respective
Affiliates existing at any time during the Non-Compete Period. Anything
contained in this paragraph (b) to the contrary notwithstanding, Seller shall
have the right to compete with the architectural and/or interior design business
of MZCG following termination of the Employment Agreement prior to the
expiration of its term if the Employment Agreement is so terminated by MZCG or
Buyer without Cause (as defined in the Employment Agreement) or by Seller on
account of a material breach of any material obligation as provided in Section
7(e)(ii) of the Employment Agreement.
(c) Following the One-Year Non-Compete Period, Seller shall not use the
name, Xxxx Xxxx Consulting Group or any confusingly similar name in the conduct
of any business that competes with any business of Buyer, HMG, MZCG or any of
their respective Affiliates, except as otherwise expressly provided in the LLC
Term Sheet or the LLC Agreement.
(d) Seller further undertakes and agrees that he shall not, at any time
during the Two-Year Non-Compete Period, directly or indirectly, employ, cause to
be employed or solicit for employment any employee of or consultant to Buyer,
MZCG, HMG or any of their respective
23
Affiliates or induce or attempt to induce any customer of or supplier to Buyer,
MZCG, HMG, or the LLC or any of their respective Affiliates to cease conducting
business with any of Buyer, MZCG, HMG or the LLC or any of their respective
Affiliates.
(e) Seller shall (i) not, at any time, directly or indirectly, disclose
to any Person, for any reason, or use for his personal benefit, any HMG
Confidential Information, (ii) at all times take all precautions necessary to
protect from loss or disclosure by him of any and all documents or other
information containing, referring or relating to any HMG Confidential
Information, (iii) promptly return to Buyer any and all documents or other
tangible property containing, referring or relating to any HMG Confidential
Information, whether prepared heretofore or hereafter by or on behalf of any of
MZCG, Glade, Buyer, HMG, any of their respective Affiliates, Seller or any other
Person. Notwithstanding any provision to the contrary contained in this
paragraph (e), this paragraph shall not apply to (A) disclosure by Seller of any
HMG Confidential Information as required by legal process regular on its face
(including, without limitation, by subpoena or discovery requirement, (B)
disclosure of any information which has become part of the public domain or is
otherwise publicly disclosed, in either case through no fault or action of
Seller], or (C) to use (but not disclosure) by Seller of any HMG Confidential
Information to the extent related to any business he conducts in competition
with MZCG without violation of this Section 6.2. The parties hereby expressly
acknowledge and agree that use by Seller of HMG Confidential Information
permitted by clause (C) of this paragraph (e) shall apply where Seller competes
with the architectural or interior design business of MZCG as permitted by the
last sentence of paragraph (b) of this Section 6.2.
(f) Seller agrees that any and all ideas, innovations, inventions,
improvements, developments, methods, designs, analyses, drawings, reports and
all similar or related information which relates to the business of MZCG, Buyer,
HMG or any of their respective Affiliates or any business which any of them has
taken significant action to pursue and which are conceived, created, developed
or made by Seller at any time prior to the date of this Agreement or thereafter
while employed by or an officer or director of MZCG, Buyer, HMG or the LLC (all
of the foregoing, "Work Product"), belong to MZCG, Buyer, HMG or the LLC,
respectively. Seller shall promptly disclose all such Work Product to the Board
of Directors of MZCG and perform all actions reasonably requested by such Board
of Directors (whether during or after expiration of the term of the Employment
Agreement) to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other instruments) as
each such Board of Directors in its sole discretion deems necessary, provided,
however, that anything contained in this paragraph (f) to the contrary
notwithstanding, that the rights of the parties in and to any products using the
"Xxxx Brand" shall be subject to the terms of the LLC Term Sheet and the LLC
Agreement. MZCG, Buyer or HMG shall pay all fees due to public authorities in
connection with the filing, recording, registration or transfer of any Work
Product to secure ownership of Work Product in MZCG, Buyer or HMG.
(g) Should the duration, geographic area or range of proscribed
activities contained in any provision of this Section 6.2 be held to be too
great, too large or too long by any court of competent jurisdiction, then such
duration, geographical area or range of proscribed activities shall be modified
to such degree as is required to make it or them reasonable and enforceable.
Seller acknowledges that the restrictive covenants contained in this Section 6.2
are reasonable in
24
view of the transactions contemplated hereby and Seller's receipt of the
Purchase Price hereunder.
(h) Seller acknowledges and agrees that entering into and performing
under this Agreement and the observance of the restrictive covenants set forth
in this Section 6.2 are additional consideration for HMG and Buyer to enter into
this Agreement and the transactions contemplated hereby, and that in the event
of the breach by Seller of any of the covenants contained in this Section 6.2,
HMG, Buyer and/or the LLC will suffer substantial and irreparable harm which are
not readily ascertainable or compensable in money damages. Seller therefore
agrees that the provisions of this Section 6.2 shall be construed as an
agreement independent of the other provisions of this Agreement and any other
agreement, and that Buyer, HMG, MZCG, and their respective Affiliates,
including, without limitation, the LLC, and the HMG Member (as defined in the
LLC Term Sheet), in addition to any other remedies (including damages) provided
by law, shall have the right and remedy to have each of the provisions of this
Section 6.2 specifically enforced by any court having equity jurisdiction hereof
or thereof. The rights and remedies set forth in this paragraph 6.2(h) shall be
in addition to, and not in lieu or derogation of, any other rights or remedies
available to Buyer, HMG, MZCG and/or any of their respective Affiliates at law
or in equity.
6.3 Employment Agreement. As a further material inducement to Buyer to
execute, deliver and perform its obligations under this Agreement, Xxxx and
Buyer shall enter into, execute and deliver the Employment Agreement.
6.4 Xxxx Brand; LLC Agreement. As soon as reasonably practicable after
the Closing, Xxxx and HMG shall negotiate in good faith, consistent with the
terms of the LLC Term Sheet attached hereto as Exhibit 6.4 (which is hereby
incorporated herein and made a part hereof), an agreement (the "LLC Agreement")
pursuant to which Xxxx and the HMG Member shall form the LLC to develop "Xxxx
Brand" products. Pending formation of the LLC and execution and delivery of the
LLC Agreement, the business of Glade shall be managed and operated as if the LLC
had been formed and the LLC Agreement had been executed and delivered as of the
Closing Date. Simultaneously with the execution and delivery of the LLC
Agreement, Glade shall execute and deliver a bring down certificate with respect
to each of its representations and warranties contained herein.
6.5 Lock-Up; Piggy-back Registration Rights.
(a) During the period commencing on the Closing Date and continuing
until the first anniversary thereof (the "Lock-Up Period"), Xxxx shall not
offer, sell, transfer, assign, exchange, pledge, hypothecate or otherwise
dispose of any of the 300,000 shares of HMG Stock to be delivered to Xxxx at
Closing, without the prior consent of the Board of Directors of HMG, which
consent shall not be unreasonably withheld. Xxxx acknowledges and agrees that
HMG shall give stop transfer instructions to the transfer agent for such shares
of HMG Stock, which instructions shall be effective until expiration of the
Lock-Up Period, whether or not any of the Shares are registered under the
Securities Act prior to the expiration of the Lock-Up Period.
(b) HMG and Buyer acknowledge that if at any time during the period
from the date hereof through and including June 30, 2001 (the "Registration
Rights Period"), HMG proposes
25
to register any of its securities under the Securities Act (other than in
connection with (i) any transaction contemplated by Rule 145(a) promulgated
under the Securities Act or pursuant to Form X-0, Xxxx X-0 or any successor form
thereto or (ii) HMG's underwritten public offering pursuant to Form S-1
currently being prepared), HMG or Buyer shall give written notice to Seller by
registered or certified mail at least twelve (12) business days prior to the
filing of such registration statement of its intention to do so (each such
notice, a "Registration Notice"). If Seller gives written notice to HMG not more
than ten (10) business days after HMG shall have given Seller a Registration
Notice (each such notice from Seller, a "Notice of Exercise") of the desire to
include in such proposed registration statement any of the 300,000 shares of HMG
Stock to be issued to Seller hereunder (collectively, the "Registrable Shares"),
HMG shall (subject to the limitations described below) afford Seller the
opportunity to register such Registrable Shares under such registration
statement. Notwithstanding the foregoing, HMG shall have the right at any time
after a Registration Notice shall have been given (irrespective of whether
Seller shall have given any Notice of Exercise in response to such Registration
Notice) to elect not to file any such proposed registration statement or
withdraw the same after the filing but prior to the effective date thereof.
(c) In the event such registration statement is filed in connection
with an underwritten offering and the managing underwriter or the representative
of the several underwriters (the "managing underwriter") of any such registered
offering advises HMG that the number of securities which Xxxx, HMG and any other
Persons having registration rights (regardless of whether such registration
rights were granted on, prior to or subsequent to the date of issuance of this
Agreement) intend to include in such offering would, in such managing
underwriter's judgment, have a material adverse impact on the offering, then the
number of Registrable Shares to be included in such offering for the account of
Xxxx, along with the securities of any other Persons having registration rights,
but excluding securities that HMG intends to include in such offering, shall be
reduced pro rata to the extent necessary to reduce the aggregate number of
securities proposed to be registered to the aggregate number recommended by the
managing underwriter.
(d) Anything contained in this Section 6.5 to the contrary
notwithstanding, none of the Registrable Shares may be offered, sold,
transferred, exchanged, pledged, hypothecated or otherwise disposed of unless
they are registered under Section 5 of the Securities Act or are exempt from
such registration pursuant to Rule 144 promulgated under the Securities Act or
other recognized exemption from such registration and the provisions of
paragraphs (a) through (d) of this Section 6.5 shall have been satisfied.
(e) In the event that any of the Registrable Shares are not registered
under the Securities Act on or before Xxxxx 0, 0000, XXX shall use its
commercially reasonable efforts to file a registration statement with respect to
such Registrable Shares (and any other HMG securities as HMG shall elect to
register pursuant to the same registration statement) no later than June 30,
2001.
6.6 Registration Rights Generally. HMG shall pay all registration
expenses in connection with the registration of any Registrable Shares by Xxxx
pursuant to Section 6.5 above. HMG shall agree to indemnify Xxxx if any of
Xxxx'x Registrable Shares are included in a registration statement pursuant to
such Section 6.5 in connection therewith substantially to the
26
same extent as HMG would agree to indemnify any other selling stockholders that
are not Affiliates of HMG; if Xxxx participates in a registered offering
hereunder, he shall indemnify HMG, each of the underwriters, if any, and their
respective officers, directors and control Persons (as such term is defined in
Section 15 of the Securities Act or Section 20 of the Exchange Act) solely with
respect to information furnished by him for inclusion in any Registration
Statement. HMG may require Xxxx, if he gives a Notice of Exercise with respect
to any Registrable Shares, as a condition to registration of any Registrable
Shares, to furnish HMG such information, which HMG may request in writing,
regarding Xxxx, MZCG , Glade and/or the LLC and the distribution of such
Registrable Shares as may be required to be included in any registration
statement or amendment thereto or disclosed to the National Association of
Securities Dealers, Inc. Xxxx hereby agrees that if he participates in any
registration as provided herein, he shall be bound by the terms of any lock-up
agreement or other covenants requested by the managing underwriter with respect
to any such registration and shall agree to complete, execute and deliver any
and all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents, instruments and agreements requested by the managing
underwriter or otherwise reasonably requested by HMG or any managing underwriter
in connection therewith.
6.7 Permitted Transferees. In the event that the Board of Directors of
HMG consents to the transfer by Xxxx of any Registrable Shares to any proposed
transferee pursuant to Section 6.5(a) hereof, such consent shall be conditioned
upon the agreement by the proposed transferee to execute and deliver an
agreement pursuant to which such proposed transferee agrees to be bound by the
provisions of this Article VI as a condition to the obligation of HMG to agree
to the transfer of any Registrable Shares to such transferee and the transfer to
such transferee of the registration rights granted thereunder.
6.8 Certain Tax and Accounting Matters.
(a) Seller shall pay all sales, use, transfer, real property transfer,
recording, gains, stock transfer and other similar taxes and fees, including,
without limitation, any New York State Gains Tax (collectively, "Transfer
Taxes") arising out of or in connection with the sale of the MZCG Shares, the
transfer of ownership of MZCG, and the transfer by Glade to the LLC of its
assets, following the Closing, and Xxxx hereby agrees to indemnify, defend and
hold harmless MZCG, the LLC, the HMG Member, Buyer and HMG on an after-Tax basis
with respect to all such Transfer Taxes. Seller shall pay all income Taxes
imposed on him in connection with the sale of the MZCG Shares to Buyer and/or
the transfer of substantially all of the assets of Glade to the LLC. Seller
shall also notify all Employees of the potential tax consequences of the
issuance to them of their respective Employee Shares by delivery to each
Employee of a copy of Exhibit 6.8(a). Upon delivery to each Employee of such
Exhibit, Seller shall obtain the signature of such Employee to an additional
copy thereof, date the same and deliver such signed copy to Buyer and HMG at the
Closing. Seller shall file all necessary documentation and Returns with respect
to such Transfer Taxes.
(b) After the Closing Date, Seller shall cooperate in the preparation
of all Returns and shall provide (or cause to be provided) any records in the
possession of Seller, MZCG or Glade and all other information that Buyer, HMG,
the LLC or the HMG Member requests within Seller's possession or knowledge, and
shall provide access to and the cooperation of Seller's
27
accountant, to the extent requested by HMG or Buyer at HMG's or Buyer's expense
or by the LLC or the HMG Member at the LLC's expense. Seller shall cooperate
with Buyer and HMG in connection with any Tax investigation, audit or other
proceeding.
(c) For accounting purposes, the sale of the MZCG Shares by Seller to
Buyer hereunder and the sale of the Glade assets to the LLC pursuant to the LLC
Term Sheet shall each be accounted for as a purchase.
(d) HMG shall (i) pay all Federal and state income taxes for MZCG for
the year ended December 31, 2000 and (b) file Federal income tax Returns for HMG
on a consolidated basis, including MZCG and the LLC (if any) for the year ending
December 31, 2000.
VII.
INDEMNIFICATION
7.1 By Seller. Seller covenants and agrees to defend, indemnify and
hold harmless Buyer, the LLC, HMG and their respective Affiliates, officers,
directors, employees and agents (collectively, the "Buyer Indemnitees") from and
against, and pay or reimburse the Buyer Indemnitees for, any and all
liabilities, obligations, losses, costs, deficiencies or damages (whether
absolute or accrued) including, without limitation, interest, penalties and
reasonable attorneys' fees and expenses incurred in the investigation or defense
of any of the same or in asserting any of their respective rights hereunder
(collectively, "Losses"), resulting from or arising out of: (a) the inaccuracy
or breach of any representation or warranty of Seller in this Agreement,
including the Schedules and Exhibits hereto, in the Employment Agreement, the
LLC Agreement or in any certificate or other document delivered at Closing by
Seller, MZCG or Glade as contemplated hereby or thereby (this Agreement, the
Employment Agreement, the LLC Agreement and all such other certificates and
documents being hereinafter referred to herein collectively as the "Seller
Transaction Documents"); (b) the failure of Seller to perform any covenant or
fulfill any of his other obligations contained in this Agreement or any of the
Seller Transaction Documents; and (c) any of the "Excluded Buyer Liabilities."
"Excluded Buyer Liabilities" shall mean: (i) any and all liabilities of Seller
or MZCG for any Taxes, ERISA obligations or environmental matters arising with
respect to any period prior to or including the Closing Date except (A) income
Taxes of MZCG for the 2000 calendar year and (B) Taxes arising in the ordinary
course of business of MZCG between the Effective Date and the Closing Date that
were either not paid by the Closing Date or are payable after the Closing Date
and in either case are identified in Section 4.12(e) of the Seller Disclosure
Schedule or the MZCG Balance Sheet; (ii) any liability whatsoever with respect
to the personal injury actions described in Exhibit 7.1 hereto; and (iii) any
and all liabilities incurred by MZCG after December 31, 1999 and on or before
the Closing Date not in the ordinary course of business and not disclosed in
Section 7.1(c) of the Seller Disclosure Schedule (other than liabilities in
connection with any litigation or other proceedings instituted after the
Effective Date as to which neither Xxxx, Xxxxx nor MZCG has any actual knowledge
on the date hereof).
7.2 By Buyer and HMG. Buyer and HMG jointly and severally covenant and
agree to defend, indemnify and hold harmless Seller from and against, and to pay
or reimburse Seller for, any and all Losses resulting from or arising out of (a)
the breach or inaccuracy of any
28
representation or warranty made by Buyer or HMG in this Agreement, in the
Employment Agreement, the LLC Agreement or in any certificate or other document
delivered by Buyer or HMG as contemplated hereby or thereby (this Agreement, the
Employment Agreement and the LLC Agreement and such other certificates and
documents being hereinafter referred to collectively as the "Buyer Transaction
Documents"), or (b) the failure of Buyer or HMG to perform any covenant or
fulfill any of its other obligations contained in this Agreement or any of the
other Buyer Transaction Documents, (c) the Maximum Sales Tax Liability, to the
extent actually incurred, but solely (i) with respect to such Maximum Sales Tax
Liability as defined in Section 4.12(e) hereof and (ii) in the maximum amount
set forth in said Section 4.12(e), and in Section 4.12(e) of the Buyer
Disclosure Schedule and (d) other Taxes for which Buyer and/or HMG agrees to
assume liability pursuant to paragraph (d) of Section 6.8 hereof. To the extent
that Republic Bank seeks payment under its loan in the amount of $50,000 to Xxxx
Xxxx Consulting Group described in Section 7.2 of the Seller Disclosure Schedule
from Seller individually, MZCG shall indemnify Seller therefor. MZCG hereby
agrees to indemnify Seller to the extent that the third party to any agreement
identified in Section 7.2 of the Seller Disclosure Schedule seeks payment from
Seller individually pursuant to any individual guaranty of Seller contained in
such agreement and described in said Section 7.2.
7.3 Claims Procedure. In the event that any claim is asserted or demand
is made by a third party against any party entitled to indemnification pursuant
to the terms of this Agreement (each such party, an "Indemnified Party") or any
Indemnified Party otherwise incurs any Losses for which it is entitled to
indemnification hereunder, such Indemnified Party shall give notice to each
other party that is required to indemnify such Indemnified Party hereunder (each
such party, an "Indemnifying Party") promptly after such Indemnified Party has
knowledge of any such demand, claim or Loss (each such claim or Loss, a "Claim")
and the Indemnifying Party or Parties shall be entitled to assume the defense of
any Claim, whether or not such Claim is the subject of any litigation,
arbitration or administrative proceedings (each Claim which is the subject of
any litigation, arbitration or administrative proceeding, a "Litigation"), and
which defense shall include negotiations and settlement with respect to any
Claim; provided, however, that (a) any counsel that conducts the defense of any
Claim shall be reasonably satisfactory to the Indemnified Party or Parties, and
the Indemnified Party or Parties may participate in such defense, but only at
the expense of such Indemnified Party or Parties and without any indemnification
pursuant to this Article VII for such participation, and (b) the failure by any
Indemnified Party to give notice of the Claim or to give such notice on a timely
basis shall not relieve the Indemnifying Party or Parties of their respective
obligations under this Agreement, except to the extent that any Indemnifying
Party or Parties does not receive notice of such Claim and suffers damage as a
result thereof. In the defense of any Claim, no Indemnifying Party shall, except
with the consent of the Indemnified Party or Parties, (i) consent to entry of
any judgment or enter into any settlement agreement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Parties a release from all further liability with respect
to such Claim, or (ii) pursue any defense strategy with respect to such Claim
that an Indemnified Party believes, in good faith and in the exercise of its
commercially reasonable business judgment, might be expected to affect adversely
such Indemnified Party's liability with respect to
29
any Taxes or the ability to conduct its business. In the event that any
Indemnified Party determines in good faith in the exercise of its commercially
reasonable business judgment that any proposed settlement of any Claim by any
Indemnifying Party or Parties might be expected to affect adversely such
Indemnified Party's liability with respect to any Taxes or the ability to
conduct its business, such Indemnified Party shall have the right to take over
and assume control of the defense of any Claim or the conduct of any Litigation
or any negotiations relating to any Claim or Litigation at the sole cost and
expense of the Indemnifying Party or Parties, provided that if an Indemnified
Party takes over and assumes control of such defense, Claim, Litigation or
negotiations for such Indemnified Party, the amount that such Indemnifying Party
is required to pay pursuant to the indemnification provisions hereof shall be
limited to the amount for which such Indemnifying Party is able to demonstrate
that it could have settled such Claim or Litigation immediately prior to the
assumption. In the event that the Indemnifying Party does not, or (if there is
more than one Indemnifying Party) the Indemnifying Parties do not, assume
control of any such defense, Claim, Litigation or negotiations as provided
above, each of the Indemnified Parties shall have the right to defend against
any Claim (including any Litigation) or to participate in any negotiations in
respect thereof, and shall be entitled to settle such Claim or agree to pay the
amount thereof in full in its (or their) reasonable judgment. In the event of
the making, against any party hereto, of any Claim that is subject to
indemnification hereunder, each of Seller, MZCG, Glade, HMG and Buyer shall
cooperate in the defense thereof, subject to the terms of this Article VII, and
shall make its records available to the other parties for the purpose of the
defense of any such Claim.
7.4 Limitations on Indemnification.
(a) Seller shall have no liability for indemnification or otherwise
with respect to any of the matters described in Section 7.1(a) or (b) hereof
until the total of all Losses with respect to such matters exceeds the sum of
ten thousand dollars ($10,000.00) (the "Basket Amount"), and then only for the
amount by which such Losses exceed such Basket Amount. This limitation on
liability for indemnification shall not apply with respect to indemnification by
Seller (i) on account of any breach of Section 6.1 or 6.2 hereof, (ii) on
account of any breach of Section 4.12(e), 6.6 or 6.8(a) or (b) hereof, and any
sums paid or payable by Seller to Buyer or HMG on account of any of the matters
set forth in the foregoing clauses (i), (ii) or (iii) shall not be included in
determining whether the Basket Amount has been reached or exceeded. Seller's
liability for the Excluded Buyer Liabilities shall not be subject to the Basket
Amount and shall not be included in determining whether the Basket Amount has
been reached or exceeded.
(b) Neither Buyer nor HMG shall have any liability for indemnification
or otherwise with respect to the matters described in Section 7.2(a) or (b)
hereof until the total of all Losses with respect to such matters exceeds the
Basket Amount, and then only for the amount by which such Losses exceed the
Basket Amount. This limitation on liability for indemnification shall not apply
with respect to indemnification by Buyer and/or HMG on account of a breach of
Section 6.6 hereof or the amount of the Maximum Sales Tax Liability assumed by
either of them as provided in Section 4.12(e) hereof, and any sums paid or
payable by Buyer or HMG to Seller pursuant to Sections 4.12(e) or 6.6 hereof
shall not be included in determining whether the Basket Amount has been reached
or exceeded.
(c) Except as otherwise set forth in Section 7.5 hereof or elsewhere in
this Article VII, the maximum aggregate amount of Losses that any Indemnified
Party may recover hereunder pursuant to the provisions of this Article VII shall
be equal to the Purchase Price; for purposes of this Section 7.4 (c), the
Purchase Price shall be equal to the fair market value (as defined below) of the
Registrable Shares to be delivered to Xxxx at Closing. The fair market value
30
of the Registrable Shares shall be derived by multiplying 300,000 by the closing
bid price per share of HMG Stock on the business day immediately preceding the
Closing Date.
(d) No party shall be liable to any other party or to any of the Seller
Indemnitees or Buyer Indemnitees for punitive damages except to the extent that
liability for the same is incurred as the result of any Claim of any third
party.
7.5 Separate Indemnification. The limitation on indemnification set
forth in Section 7.4(c) hereof shall not extend or apply to any obligation of
Seller, Buyer or HMG to provide indemnification with respect to any breach of
Section 6.1, 6.2, 6.6 or 6.8(a) hereof or clause (c) of Section 7.1 or clause
(c) of Section 7.2 hereof.
7.6 Sole and Exclusive Remedy. The indemnification provisions contained
in this Article VII shall be the sole and exclusive remedy available to any
party hereto for breach of any representation, warranty or covenant contained
herein, except as otherwise provided in Section 7.5 or 6.6 hereof.
VIII.
MISCELLANEOUS
8.1 Expenses. Each of the parties shall pay its own expenses incident
to the negotiation, preparation, and carrying out of this Agreement, including
all fees and expenses of their respective counsel, advisors and accountants for
all activities of such counsel, advisors and accountants undertaken pursuant to
this Agreement, whether or not the transactions contemplated hereby are
consummated.
8.2 Survival of Representations, Warranties and Covenants. All
statements of any party hereto contained in this Agreement (including the
Exhibits and Schedules hereto) or in any of the Seller Transaction Documents or
the Buyer Transaction Documents shall be deemed representations, warranties and
covenants by such party hereunder. All representations, warranties and covenants
(other than covenants relating to any period or date following the Closing Date)
made herein by any party to this Agreement, or pursuant hereto, shall survive
the Closing for a period of two (2) years from the date hereof, except for
representations and warranties relating to Taxes, ERISA or matters of local,
state and federal environmental laws, rules and regulations, which shall survive
until expiration of the applicable statute of limitations or, if there is no
such statute, indefinitely. All representations and warranties relating to any
Claim asserted in writing or any Litigation commenced prior to the expiration of
the applicable survival period set forth in this Section 8.2 shall survive until
such Claim or Litigation is resolved and is no longer appealable and payment in
respect thereof, if any is owing, is made.
8.3 Certain Definitions. As used in this Agreement, the following
capitalized terms shall have the meanings set forth below:
"actual knowledge" of any party with respect to any occurrence or
information shall mean any oral or written notice actually received by such
party with respect to such occurrence or information and/or any knowledge of
such occurrence or information which such party would have but for its gross
negligence or purposeful conduct.
31
"Affiliate" shall mean any Person that, directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, the Person specified. As used in the foregoing definition, the
term "control" shall mean the power, through the ownership of voting securities,
contract or otherwise, to direct the affairs of another Person.
"Person" shall mean any natural Person and any corporation,
partnership, company, firm, association, trust, sole proprietorship or any other
entity or organization, including, without limitation, any government (whether
federal, state, local or other political subdivision, or any agency, bureau or
instrumentality of any of them).
8.4 Succession and Assignments; Third Party Beneficiaries. No party to
this Agreement may assign his or its rights or obligations hereunder without the
express written consent of the other parties. Any attempted assignment in
violation of this Section or Section 6.7 hereof shall be void and ineffective
for all purposes. This Agreement shall be binding upon the heirs, successors and
permitted assigns of the parties hereto. Except as expressly set forth in this
Section, there shall be no third party beneficiaries of this Agreement.
8.5 Notices. All notices, requests, demands, or other communications
with respect to this Agreement shall be in writing and shall be (i) sent by
facsimile transmission, (ii) sent by the United States Postal Service,
registered or certified mail, return receipt requested, or (iii) Personally
delivered by a nationally recognized express overnight courier service, charges
prepaid, to the following addresses (or such other addresses as the parties may
specify from time to time in accordance with this Section)
(a) To Buyer, HMG or the HMG Member:
HMG Worldwide Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxx
Fax No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx Xxxxxx & Xxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
(b) To Seller or Xxxx:
Xx. Xxxx Xxxx
Xxxx Xxxx Consulting Group
000 Xxxx 00xx Xxxxxx, #00X
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
32
With a copy to:
Xxxxxxx, Xxxxxxx & Xxxx
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxx Xxxxxxx, Esq.
Fax No.: (000) 000-0000
Any such notice shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day delivered
to such address or sent by facsimile transmission, (ii) the fifth business day
following the date deposited with the United States Postal Service, or (iii) 24
hours after shipment by such courier service.
8.6 Construction. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of New York without giving effect
to the principles of conflicts of law thereof.
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
8.8 No Implied Waiver; Remedies. No failure or delay on the part of the
parties hereto to exercise any right, power, or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power, or privilege preclude any other
or further exercise thereof or the exercise of any other right, power, or
privilege. All rights, powers, and privileges granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
8.9 Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto, sets forth the entire understandings of the parties
with respect to the subject matter hereof, and it incorporates and merges any
and all previous communications, understandings, oral or written as to the
subject matter hereof, and cannot be amended or changed except in writing,
signed by the parties.
8.10 Headings. The headings of the Sections of this Agreement or any
Schedule hereto, where employed, are for the convenience of reference only and
do not form a part hereof or of any such Schedule and in no way modify,
interpret or construe the meanings of the parties.
8.11 Severability. Except as otherwise provided in Section 6.2 hereof,
to the extent that any provision of this Agreement shall be invalid or
unenforceable, it shall be considered deleted herefrom and the remainder of such
provision and of this Agreement shall be unaffected and shall continue in full
force and effect.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
33
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
and among HMG-e, Inc., HMG Worldwide Corporation, Xxxx Xxxx Consulting Group,
Inc., The Glade Corp. and Xxxx Xxxx as of May __, 2000.
HMG-e, INC.
By:
------------------------------------
Name:
Title:
HMG WORLDWIDE CORPORATION
By:
------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Executive Officer
-----------------------------------------
XXXX XXXX
XXXX XXXX CONSULTING GROUP, INC.
By:
------------------------------------
Name: Xxxx Xxxx
Title: President
THE GLADE CORP.
By:
------------------------------------
Name: Xxxx Xxxx
Title: President
34
SCHEDULE A
SELLER DISCLOSURE SCHEDULE
SCHEDULE B
BUYER DISCLOSURE SCHEDULE
EXHIBIT 2.1(b)
EMPLOYEE SHARES
Name of Employee Number of Shares
Xxxxx Xxxx 2,000
Xxxx Xxxx 10,000
Xxxxxx Xxxxxxx 1,250
Xxxxxxx Xxxxxxxxx 1,250
Xxxxx Xxxxxx 500
Xxxxxx Xxxxx 1,250
Xxxxxxx Xxxxxxxx 500
======
Total Employee Shares 16,750
EXHIBIT 3.4(a)
EMPLOYMENT AGREEMENT
EXHIBIT 6.4(a)
LLC TERM SHEET
EXHIBIT 6.4
LLC TERM SHEET
---------------------------------- -----------------------------------------------------------------------------------
Name/Jurisdiction The limited liability company (the "LLC") shall be formed under the laws of
the State of New York and shall be named Zeffstyle, LLC.
---------------------------------- -----------------------------------------------------------------------------------
Parties/Members Xxxx Xxxx ("Xxxx") and the HMG Member shall be parties to the LLC agreement and
members of the LLC (as used herein, the "HMG Member" means HMG-e, Inc. ("HMG-e")
unless HMG-e has designated another direct or indirect subsidiary of HMG Worldwide
Corporation ("HMG"), in which event it shall be such subsidiary).
---------------------------------- -----------------------------------------------------------------------------------
Managing Member and The HMG Member shall be the Managing Member and the Tax Matters
Officers Partner of the LLC. Xxxx shall be the President of the LLC.
---------------------------------- -----------------------------------------------------------------------------------
Term/Duration The LLC shall have a term or duration of ninety-nine (99) years
---------------------------------- -----------------------------------------------------------------------------------
Business and Purpose Directly or through one or more subcontractors or other agents or representatives,
to develop, design, manufacture, produce, market, sell, distribute and otherwise
deal with Approved Products (as hereinafter defined) under the "Xxxx" brand or name
and/or the Service Marks. Use of the "Xxxx" name or brand and/or the Service Marks
may be licensed by the LLC to third parties for the development, design,
manufacturing, production, marketing, sale and/or distribution of products or
categories of products, provided that (except with respect to products or product
categories being developed, designed, manufactured, produced, marketed, sold and/or
distributed by a subcontractor or other agent or representative of the LLC at the
LLC's request), such licensing shall require the approval of both Xxxx and the HMG
Member.
---------------------------------- -----------------------------------------------------------------------------------
Products The "Approved Products" shall consist of any products in the product categories
set forth on Schedule I attached hereto and made a part hereof and (ii) Approved
Categories, where "Approved Categories" means such other categories of products as
the HMG Member may request from time to time and that are approved by Xxxx (such
approval not to be unreasonably withheld or delayed), exclusive, however, of any
product category set forth on Schedule II attached hereto and made a part hereof.
---------------------------------- -----------------------------------------------------------------------------------
Initial Contributions Xxxx shall contribute, or cause to be contributed, to the LLC all of the assets
of The Glade Corp. ("Glade"), which assets shall include, without limitation, to the
extent the same are not held by Xxxx Xxxx Consulting Group ("MZCG"), (i) all trade
names, trademarks, logos, designs, copyrights, patents, know-how, inventions, ideas
and other proprietary or confidential material or information owned or held by Glade
as of the date of the Stock Purchase Agreement, which shall include, without
limitation, the perpetual, exclusive royalty-free right to use (to the extent the
same are not held by MZCG) the "Xxxx" name and brand and all related trade names,
trademarks, logos and
---------------------------------- -----------------------------------------------------------------------------------
---------------------------------- -----------------------------------------------------------------------------------
designs, including the Service Marks, (ii) all applications and/or licenses (and
other contractual rights) with respect to any of the foregoing, (iii) the lease for
the premises currently rented by Glade in Southampton, New York, and all other
contractual rights held by Glade (with, as applicable, the consent of the other
parties thereto) and (iv) all of the inventory of Glade. Concurrently with such
contribution, the LLC shall assume (i) all of the liabilities of Glade set forth in
Glade's March 31, 2000 balance sheet, including the HMG Loan (as defined below),
(ii) all liabilities for returned goods, (iii) all liabilities incurred by Glade in
the normal and ordinary course of its business subsequent to March 31, 2000 and
prior to the execution and delivery of the LLC Agreement, (iv) all liabilities with
respect to unfulfilled purchase orders received from customers of Glade or placed by
Glade with any vendor, in each case in the normal and ordinary course of its
business and (v) all liabilities arising and accruing from and after the date of the
LLC Agreement under any executory contract expressly assumed by the LLC. Glade shall
bear, and remain responsible for, all of its liabilities not expressly assumed by
the LLC and shall indemnify the LLC with respect to such liabilities, which
indemnity shall be guaranteed by Xxxx. The HMG Member shall contribute, or cause to
be contributed, to the LLC the amount of ten dollars ($10.00). In the event Glade's
March 31, 2000 balance sheet is not acceptable to the HMG member, the HMG Member
shall not be obligated to enter into the LLC Agreement.
---------------------------------- -----------------------------------------------------------------------------------
Additional Contributions Neither party shall be obligated to make any further or additional capital
contribution to the LLC without the consent of that party. No capital contribution
shall be accepted by the LLC from a third party without the consent of both Xxxx and
the HMG Member, with it being agreed and understood that in the event any third
party should make a capital contribution to the LLC, the interests of Xxxx and the
HMG Member in the LLC would be diluted in equal proportionate amounts.
---------------------------------- -----------------------------------------------------------------------------------
Funding Obligations Following formation of the LLC but in any event on or prior to December 31, 2000,
the HMG Member will loan (or cause an affiliate to loan), or advance (or cause an
affiliate to advance) on behalf of the LLC an aggregate of one hundred thousand
dollars ($100,000), net of twenty-one thousand dollars ($21,000) heretofore advanced
by HMG to Glade (such advance, the "HMG Loan") to the LLC, which loan (inclusive of
the HMG Loan, the "Initial Loan") shall be evidenced by, and repaid in accordance
with, a non-negotiable promissory note that bears interest at a rate per annum equal
to the commercial lending rate of PNC Bank, NA as publicly announced to be in effect
from time to time plus one and one-quarter percent (1 1/4%), is repayable on
December 31, 2010 and otherwise contains customary terms and conditions. In
addition, subject to the adoption and approval by Xxxx and the HMG Member (any such
approval not to be unreasonably withheld or delayed, it being agreed and understood,
---------------------------------- -----------------------------------------------------------------------------------
2
---------------------------------- -----------------------------------------------------------------------------------
however, that the HMG Member may, in its sole discretion, withhold its approval of
any aspect of the business plan that would require it to advance funds) of a
business plan for the LLC (any such business plan, the "Approved Business Plan"),
the HMG Member will advance additional amounts, up to an aggregate of one hundred
and fifty thousand dollars ($150,000), to the LLC, subject to such schedule,
benchmarks, performance criteria and other conditions as may be set forth in the
Approved Business Plan. Any such further or additional advance made to the LLC is
herein referred to as a "Subsequent Loan;" and each Subsequent Loan shall be shall
be evidenced by, and repaid in accordance with, a non-negotiable promissory note
that bears interest at a rate per annum equal to the commercial lending rate of PNC
Bank, NA as publicly announced to be in effect from time to time plus one and
one-quarter percent (1 1/4%), is repayable on December 31, 2010 and otherwise
contains customary terms and conditions. If the HMG Member shall fail to make (or
cause an affiliate to make) the full amount of the Initial Loan to the LLC on or
prior to December 31, 2000, , then the LLC's right to use the "Xxxx" name and brand
and/or the Service Marks in connection with the development, design, manufacturing,
production, marketing, sale and distribution of Approved Products shall be
terminated; provided, however, that such right shall not be terminated if, on
account of or with respect to any breach by Xxxx (which, for these purposes, shall
be deemed to include any breach by MZCG or Glade) of any of his/its representations,
warranties, duties, obligations and other agreements under the LLC Agreement, the
Employment Agreement and/or the Stock Purchase Agreement, HMG and/or any of its
affiliates has suffered or incurred damages, losses or liabilities in an aggregate
amount (exclusive of any basket) equal to or in excess of the amount, if any, by
which one hundred thousand dollars ($100,000) exceeds the aggregate amount
(inclusive of the HMG Loan) that has been advanced to the LLC, or for the LLC's
account, on or prior to December 31, 2000.
---------------------------------- -----------------------------------------------------------------------------------
Members The initial members shall be the HMG Member and Xxxx. No additional members shall be
admitted to the LLC without the consent of each of the initial members, which consent
may be withheld in the sole and absolute discretion of each such member.
---------------------------------- -----------------------------------------------------------------------------------
Management and Voting Except as otherwise expressly provided herein, operational management of the LLC
shall be subject to the mutual control and determination of the HMG Member and Xxxx,
provided that the LLC shall not develop, market, sell, distribute and otherwise deal
with any products under the "Xxxx" name or brand other than Approved Products.
Notwithstanding the foregoing, (i) the HMG Member shall retain control over
accounting, financial and budgetary matters generally (provided, however, that any
equity financing, or any debt financing in excess of the Initial Loan and the
Subsequent Loans,
---------------------------------- -----------------------------------------------------------------------------------
3
---------------------------------- -----------------------------------------------------------------------------------
shall require the agreement of the HMG Member and Xxxx), (ii) the HMG Member may
(without the consent or approval of Xxxx but subject to a 30-day right of first
refusal granted to Xxxx) arrange for or cause the sale or other disposition by the
LLC of all or substantially all of its business and assets to any independent third
party and (iii) in the event the HMG Member shall deem it desirable that it and Xxxx
sell all of their respective interests in the LLC to an independent third party,
Xxxx will agree to sell all of its interest in the LLC to such independent third
party on the same terms and conditions that the HMG Member sells all of its interest
in the LLC to such independent third party, subject, however, to Xxxx having first
been granted a 30-day right of first refusal to match all of the terms and
conditions of any offer by such independent third party. In the event any
independent third party shall indicate to either member of the LLC such party's
interest in making an acquisition of the LLC, any interest in the LLC or any of the
business and assets of the LLC, such member shall promptly notify the other member
thereof and on a timely basis keep the other member reasonably informed of any
negotiations relating to any such acquisition. Notwithstanding the foregoing, until
December 31, 2002, Xxxx shall (subject to the provision below relating to the
termination of consent and approval rights) retain exclusive control (subject only
to budgetary limitations) over the creative aspects of the design, development,
production and manufacture of any products by the LLC under the "Xxxx" name or brand
or under any Service Xxxx; thereafter, Xxxx shall accept such suggestions as the HMG
Member (or any designee of the HMG Member) may from time to time reasonably make
with respect to creative aspects of the design, development, production and
manufacture of any Approved Products by the LLC under the "Xxxx" name or brand or
under any Service Xxxx; provided, however, that, if Xxxx shall not act diligently
and in good faith in the exercise of the right to control such creative aspects of
the design, development, production and manufacture of any Approved Products by the
LLC under the "Xxxx" name or brand or under any Service Xxxx, such right shall be
vested in the HMG Member or such designee(s) as the HMG Member may from time to time
designate.
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Determination and Profits shall be determined by the independent accountants for HMG on an accrual
Allocation of Profits basis and otherwise in accordance with generally accepted accounting practices.
All profits and, as applicable, all depreciation, amortization and other deductions
shall be allocated 50.1% to the HMG Member and 49.9% to Xxxx, subject, however, to
adjustment as provided below.
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Distributions Distributions from the LLC shall be made from time to time as the HMG Member and
Xxxx may from time to time mutually determine; provided, however, that it will be
the general intent of the parties that, on or before April 1 of each year, the
LLC shall (subject to the
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4
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availability of cash in light of the LLC's anticipated needs for working capital)
distribute to and between Xxxx and the HMG Member an amount that, when added to all
amounts theretofore distributed to the members, equals at least forty percent (40%)
of the profits of the LLC from its inception through the end of the calendar year
next preceding such April. Any distribution made by the LLC shall be paid to and
between the HMG Member and Xxxx in proportion to the respective amounts of the
profits allocated to them and not theretofore distributed to them. Notwithstanding
anything contained in the foregoing to the contrary, in its discretion, the HMG
Member may from time to time allocate and pay from the LLC up to sixty percent (60%)
of the profits of the LLC in prepayment of the Initial Loan and/or any Subsequent
Loan, provided that the aggregate amount so allocated and paid from the LLC shall
not, without the prior consent of both the HMG Member and Xxxx, one hundred and
fifty percent (150%) of the aggregate amount of profits that has been distributed to
and between the HMG Member and Xxxx. Under no circumstances (except with the consent
of the HMG Member) may more than forty percent (40%) of the profits of the LLC be
distributed to the members of the LLC until the Initial Loan and each Subsequent
Loan has been repaid in full.
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Death or Disability In the event of the death or Total Disability (as defined in the Employment
Agreement) of Xxxx, (A) all rights of Xxxx under the LLC Agreement to approve or
consent to any plan, action or other matter shall terminate and (B) the HMG Member
shall have the right to purchase from Xxxx (or his estate, heirs, executor,
administrator or other legal representative) all of Xxxx'x interest in the LLC for
an amount equal to the value of Xxxx'x interest in the LLC at the time of his death
or Total Disability (such value being hereinafter referred to as the "Xxxx Interest
Purchase Price"), which value is to be determined by an independent third party
mutually agreeable to the HMG Member and Xxxx (or his executor, administrator or
other legal representative) or, in the event the HMG Member and Xxxx (or his
executor, administrator or other legal representative) cannot, within sixty (60)
days following such death or thirty (30) days following such Total Disability, agree
upon such an independent third party, by such arbitrator as may, upon the request or
petition of either the HMG Member and Xxxx (or his executor, administrator or other
legal representative) be appointed by, and in accordance with, the Rules of the
American Arbitration Association. The HMG Member shall have sixty (60) days after
being advised in writing of the Xxxx Interest Purchase Price to exercise its right
to purchase all of Xxxx'x interest in the LLC. The Xxxx Interest Purchase Price
shall be payable in five (5) equal installments, together with interest on the
outstanding amount at a per annum interest rate equal to the prime rate from time to
time of Citibank (or any successor bank) plus one and one-quarter percent
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5
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(1 1/4%).
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Termination For Cause In the event of (i) any continuing breach by Xxxx of his material obligation
under the LLC Agreement, (ii) conviction of a felony, (iii) being sentenced to
incarceration for a period of six months or more or (iv) any fraud, embezzlement or
defalcation against the HMG Member, any affiliate thereof or any client, customer,
supplier or vendor of the HMG Member or any affiliate thereof (which in each case,
shall be based upon factual evidence and not mere allegation), (a) all rights of
Xxxx under the LLC Agreement to approve or consent to any plan, action or other
matter shall terminate and (b) Xxxx'x interest in the profits of the LLC shall be
reduced by half.
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Ability To Compete Notwithstanding the expiration of any period during which Xxxx is prohibited
under the Stock Purchase Agreement or the Employment Agreement not to compete with
MZCG or any disposition of his interest in the LLC, Xxxx shall not (except on
account of a shortfall in the funding of the Initial Loan as provided above) have
the right to use the "Xxxx" name or brand, any of the Service Marks or any similar
or related intellectual property (whether now existing or hereafter developed by
MZCG or the LLC), all of which shall remain the exclusive property of MZCG or the
LLC, as the case may be. So long as Xxxx continues to have any interests in the
profits of the LLC, Xxxx shall not be entitled to compete with the LLC. Following
the disposition of all of his interest in the LLC, Xxxx shall be prohibited from
engaging, directly or indirectly, in the development, design, manufacturing,
production, marketing, sale and/or distribution of any products that are in any
product category in or with respect to which the LLC has, prior to such disposition,
developed, designed, manufactured, produced, marketed, sold and/or distributed
products under the "Xxxx" name or brand or under any Service Xxxx.
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Miscellaneous Customary confidentiality and non-solicitation provisions, which will essentially
track the corresponding provisions in the Employment Agreement and Stock Purchase
Agreement.
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Defined Terms and Capitalized terms used herein and defined in the Stock Purchase Agreement to
References which this LLC Term Sheet is attached as Exhibit 6.4(a) are, unless otherwise
defined herein or the context herein otherwise requires, used in this LLC Term Sheet
with the respective meanings ascribed thereto in the Stock Purchase Agreement. This
"Agreement" shall mean the Stock Purchase Agreement to which this LLC Term Sheet is
attached as Exhibit 6.4(a) as such Agreement may be amended, supplemented, modified
or otherwise changed from time to time. Unless otherwise provided herein, reference
to any Section or to any Schedule or Exhibit shall refer to such Section in the
Agreement or to such Schedule or Exhibit attached to the Agreement.
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6
EXHIBIT 6.8(a)
DISCLOSURE TO EMPLOYEES
EXHIBIT 7.1
PERSONAL INJURY ACTIONS
1. Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxx, plaintiffs versus Gerel Corp. and Xxxx
Xxxx Consulting Group, defendants, Index No. 115216/96.
2. Xxxxx Xxxxxxx and Xxxxxxx Xxxxxxx, plaintiffs, versus Midtown Glass Inc. and
Xxxxxxx Clothing Store, defendants, Index No. 128353/94,
and
3. Xxxxxxx Clothing Store, third party plaintiff versus Xxxxx Xxxxxxxx, Xxxx
Xxxx Consulting Group and Xxxxx Xxxxxx, third party defendants, Index No. 5
91063/95.
