EXHIBIT 99.1
SEVENTH AMENDMENT AND TERMINATION AGREEMENT
This Seventh Amendment and Termination Agreement (the "Agreement"), dated
this __ day of May, 2005, between PRECIOUS MOMENTS, INCORPORATED, an Illinois
corporation ("Licensor" or "PMI"), and ENESCO GROUP, INC., an Illinois
corporation ("Licensee" or "Enesco"), is to evidence:
WHEREAS, pursuant to a License Agreement dated July 1, 1993 (the "License
Agreement"), Licensor granted Enesco Corporation, an Ohio corporation ("Enesco
Ohio"), certain rights with respect to the PRECIOUS MOMENTS property; and
WHEREAS, the License Agreement was amended by First Amendment dated
December 29, 1997, effective January 1, 1998, and by Second Amendment dated
January 22, 1999, effective January 1, 1999; and
WHEREAS, Enesco Ohio assigned the License Agreement to Licensee effective
January 21, 2000; and
WHEREAS, since the License Agreement was signed, UNITED FEATURE SYNDICATE,
INC., d.b.a UNITED MEDIA has become the exclusive, worldwide licensing
representative of Licensor; and
WHEREAS. The License Agreement was further amended by a Third Amendment
dated July 30, 0000, Xxxxxx Xxxxxxxxx dated December 19, 2002, Fifth Amendment
dated May 5, 2003 and Sixth Amendment dated September 24, 2004 (the term
"License Agreement" as used herein shall mean the July 1, 1993 License Agreement
together with all amendments thereto); and
WHEREAS, the parties wish to amend the License Agreement in certain
respects, including for the purpose of terminating the License Agreement in
accordance with the terms of this Agreement; and
WHEREAS, capitalized terms used herein and not otherwise defined shall have
the same meaning as set forth in the License Agreement;
NOW, THEREFORE, the License Agreement is amended and terminated and the
Business (as such term is hereinafter defined in Section 1.12) will be
transferred to PMI as follows:
1. ESTIMATED TIMELINE.
1.1 Term Sheet. PMI and Enesco entered into term sheet in February 2005
describing the proposed License Agreement release terms (the "Term Sheet").
Between the date of the Term Sheet and the date of this Agreement, the parties
have been using their best efforts to proceed with the following transactions
contemplated by this Agreement: (a) the amendment of the License Agreement as
provided in Section 2 and (b) the transition of the responsibilities for the
manufacturing, exporting, importing, distributing, marketing and selling the
Licensed Products of PMI (the "Business") from Enesco to PMI as provided in
Section 3 and the termination of the License Agreement. The parties agree the
Term Sheet shall have no force or effect.
1.2 Agreement Execution. With the execution of this Agreement, the parties
will make a public announcement mutually agreed to by the parties regarding the
transactions contemplated by this Agreement as described in Section 1.1 above
and their expectation of completing the Transition (as such term is hereafter
defined in Section 4.1B) by no later than July 1, 2005 as provided in Section 3.
1.3 Transitional Services. Following the Transition Date (as such term is
hereinafter defined in Section 3.1), Enesco has agreed to provide certain
on-going services to PMI with respect to the Business on an as-needed basis
through December 31, 2006 as provided in the Transitional Services Agreement
attached as Exhibit A hereto (the "Transitional Services Agreement").
1.4 Release of Certain Liens. Notwithstanding the foregoing, the parties
agree that this Agreement will be of no force and effect unless and until Enesco
obtains appropriate releases from its lenders related to the Acquired Assets to
be sold to PMI and such lenders consent to this Agreement.
2. AMENDMENTS TO LICENSE AGREEMENT.
2.1 2004 Royalty Payments. Enesco will make all royalty payments owed for
periods ending on or prior to December 31, 2004, including, but not limited to,
the 2004 Difference Payment of $7,170,410.44. Subparagraph 4(c) of the License
Agreement is amended to provide that the 2004 Difference Payment will be payable
$1,800,000 on March 31, 2005 which the parties acknowledge has been made,
$1,790,136.81 on July 1, 2005, $1,790,136.81 on October 1, 2005 and
$1,790,136.82 due on January 2, 2006. Upon any failure to pay such amounts when
due, such past due amounts will, after a three business day cure period, bear
interest at the annual rate of 18%.
2.2 2005, 2006, 2007 Royalty Payments. Subparagraph 4(c) of the License
Agreement is amended to provide that the Annual Minimum Royalty for 2005 shall
be decreased from $15,000,000 to $4,000,000 and the Annual Minimum Royalty of
$15,000,000 for each of 2006 and 2007 is decreased to zero ($0). Royalty
payments for 2005 will be based upon payment of the higher of actual earned
royalties or the Annual Minimum Royalty calculated in accordance with the terms
of the License Agreement (as modified by the preceding sentence). The Annual
Minimum Royalty of $4,000,000 will be payable in quarterly installments as
follows: (a) $2,000,000 on March 31, 2005 which the parties acknowledge has been
made and (b) $2,000,000 on July 1, 2005. If the actual earned royalties for 2005
exceed the Annual Minimum Royalty paid for such six-month period, Enesco shall
pay PMI the Difference Payment within 90 days of the Transition Date. Upon any
failure to pay such amounts when due, such past due amounts will, after a three
business day cure period, bear interest at the annual rate of 18%.
2.3 Termination of the License Agreement and Release.
2.3.1 Paragraph 13 of the License Agreement is amended to provide that as
of the Transition Date the License Agreement hereby terminates. Only Section
12(a) of the License Agreement (limited to third party claims) and Section 15 of
the License Agreement (other than the sell-off right and references within such
section to other portions of the License Agreement) will survive this
termination. Sections, 2, 4.3, 4.4, 4.6, 4.10, 4.11, and 5 of this Agreement
will survive any termination or expiration hereof.
2.3.2 (a) Upon the Transition Date, PMI expressly and completely releases
and forever discharges Enesco and its affiliates and parent corporations, their
administrators, successors, assigns, insurers, officers, directors, employees,
legal representatives and agents (collectively "Enesco Group") from liability
for any and all claims, costs, causes of action, damages, losses, obligations,
or liabilities of any nature whatsoever at law or in equity, past or present
whether or not now or heretofore known, suspected, or claimed against Enesco
Group arising out of or related to the License Agreement, or Enesco Group's
breach, performance or lack of performance under the License Agreement (the "PMI
Released Claim"), other than claims relating to this Agreement or to the
portions of the License Agreement which survive as set forth in Section 2.3.1
above.
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(b) Upon the Transition Date, Enesco expressly and completely releases and
forever discharges PMI and its affiliates and parent corporations, their
administrators, successors, assigns, insurers, officers, directors, employees,
legal representatives and agents (collectively "PMI Group") from liability for
any and all claims, costs, causes of action, damages, losses, obligations, or
liabilities of any nature whatsoever at law or in equity, past or present
whether or not now or heretofore known, suspected, or claimed against PMI Group
arising out of or related to the License Agreement, or PMI Group's breach,
performance or lack of performance under the License Agreement (the "Enesco
Released Claim"), other than claims relating to this Agreement or to the
portions of the License Agreement which survive as set forth in Section 2.3.1
above.
2.3.3 Each party covenants and agrees that it, its successors, assigns,
legal representatives and agents will not xxx, institute, cause to institute,
assist in instituting any proceeding in any court or governmental agency against
the other to charge it with liability for or to recover any compensation or
money from Enesco Group or PMI Group, respectively, related to or arising from
the PMI Released Claim or the Enesco Released Claim, as applicable.
2.3.4 Each party understands that each of Enesco Group and PMI Group,
hereby released, admits no liability or wrongdoing of any sort for any claims,
costs, causes of action, demands, losses, damages, obligations, or liabilities
of any nature whatsoever at law or in equity, past or present, which may be
claimed against Enesco Group or PMI Group, respectively, including, but not
limited to, the PMI Released Claim and Enesco Released Claim, respectively, and
any and all claims related to claims set forth in all previous correspondence
between PMI and Enesco Group.
2.3.5 Each party warrants and represents that it has neither made nor
suffered to be made any assignment or transfer of any right, claim, demand or
cause of action covered by this release or related to or arising from the Enesco
Released Claim, in the case of Enesco and the PMI Released Claim, in the case of
PMI and that Enesco is the sole, absolute and equitable owner of the Enesco
Released Claim, and PMI is the sole, absolute and equitable owner of the PMI
Released Claim..
3. TRANSITION OF THE BUSINESS.
3.1 Completion of the Transition of the Business. Enesco and PMI have
agreed to complete the Transition on July 1, 2005 (the "Transition Date"). On
and after the Transition Date, the License Agreement shall terminate as provided
in Section 2.3.1.
3.2 Parties' Responsibilities With Respect to the Transition of the
Business.
3.2.1 From and after the date of this Agreement until the Transition Date,
Enesco and PMI will each cooperate in good faith with the other to prepare for
the Transition on the Transition Date. Following execution of this Agreement and
continuing during the Transition Period (as defined in the Transitional Services
Agreement), PMI will be given reasonable access during regular business hours at
Enesco at mutually agreed upon times for the purpose of preparing for the
Transition, including access to: (i) relevant Enesco reports and other documents
concerning the Business, (ii) Licensed Products, (iii) suppliers of the Business
and (iii) Enesco's Precious Moments customers and sales personnel. Preparation
for the Transition includes, but is not limited to, the following:
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(a) provision of existing purchase order information in a format mutually
agreed upon by the parties.
(b) allowing PMI to have reasonable access to records relating to customers
of the Business, suppliers, inventory and Licensed Products (subject to
applicable legal restrictions on confidentiality of confidential information).
(c) upon request from PMI, relocating Licensed Product Inventory (as
defined in Section 4.1.1) from Enesco's warehouse to a warehouse owned by PMI;
provided, all risk of loss relating to such inventory shall transfer to PMI
immediately upon departure from Enesco's warehouse and such transfer will be
made at PMI's sole expense, excluding costs for palletizing and loading that
Licensed Product Inventory.
3.2.2 Until the Transition Date, Enesco shall conduct the Business in the
ordinary course of business consistent with past practices. Specifically, and in
keeping with the preceding sentence, Enesco:
(a) will continue to operate the Business consistent with Enesco's past
practices, including but not limited to, activities with respect to Licensed
Product development, pricing, marketing initiatives and pick, pack and shipping
operations and procurement (i.e., subject to Section 3.2.2A below, Enesco will
continue to order inventory in the ordinary course of business consistent with
past practices);
(b) will not make adjustments in the timing of Licensed Product Inventory
shipments outside of the ordinary course of business, including but not limited
to directing vendors to change deliveries scheduled before the Transition Date
to after the Transition Date;
(c) shall not engage in any activity with respect to the Licensed Products
and the Business that could reasonably be expected to harm the Precious Moments
brand, the Licensed Products and their future marketability, including, but not
limited to, any of the following: (i) bulk sales of inventory, (ii) loading the
trade through discounts, (iii) dating or other terms, (iv) other discounting, or
(v) directions to the sales force to limit or otherwise change their marketing
efforts with respect to the Licensed Products;
(d) except as otherwise requested by PMI in writing, shall use commercially
reasonable efforts to (i) maintain intact and preserve the business organization
material to the Business, (ii) retain the employees specified in Schedule 3.2.5
who are material to the Business so that they will be available to PMI after the
Transition Date and (iii) continue all current sales, marketing and promotional
activities relating to the Business consistent with past practices;
(e) shall not (i) sell, dispose or abandon any of the Acquired Assets
except in the ordinary course of the Business and consistent with past practices
or (ii) incur any Lien on any of the Acquired Assets except in the ordinary
course of the Business and consistent with past practices, subject to the
release thereof as required by Section 4.1; and
3.2.2A Notwithstanding the foregoing, after execution of this Agreement,
Enesco will make no order of Licensed Product Inventory which is not likely to
be shipped until 2006 and will not be responsible for marketing or product
development of Licensed Product which is not likely to be shipped until 2006.
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3.2.3 From and after the date hereof until the Transition Date PMI shall
have the right, using reasonable business judgment, to approve any major
business initiatives and/or programs relating to the Licensed Products and the
Precious Moments brand if those initiatives or decisions are different from
Enesco's past practices. Enesco shall have the right to examine PMI's business
plan for 2005 to the extent such plan involves the on-going use of the Enesco
name.
3.2.3A Enesco will use commercially reasonable efforts on mutually
agreeable terms to separate out by June 1, 2005 non-EDI orders having a
requested shipment date of on or after the Transition Date.
3.2.4 Enesco and PMI will agree upon a transition team (the "Transition
Team") whose responsibilities will include finalizing the timetable and
identifying and implementing all actions necessary to complete a successful
transition of the Business. The members of the Transition Team are set forth on
Schedule 3.2.4 hereto. From the date hereof through the Transition, Enesco will
provide PMI with access to and the right to participate in the weekly scheduled
meetings/calls with Enesco regional sales managers. PMI will, for items included
on that meetings agenda, be free to follow up with individual sales personnel
individually. For non-agenda items, PMI may call and meet with Precious Moments
sales force (consisting of national account executives, regional sales managers
and individual sales representatives) provided PMI notifies Enesco before such
meetings and PMI provides Enesco a reasonable opportunity to participate in that
meeting and provided PMI agrees to honor Enesco's reasonable requests relating
to the timing, frequency and subject matter of such meetings/calls. PMI
personnel may accompany Enesco national account executives on sales calls for
the purpose of meeting customers of Licensed Product. During the term of this
Agreement, Enesco will give PMI reasonable access to the broadcast function of
Enesco's voice mail system. PMI will copy Xxxxxxx Xxxxxxxx on all those messages
and on any mass mailings, electronic or otherwise, to Enesco's sales force.
Similarly, Enesco will copy Xxx Xxxxx and Xxxx Xxxxxx on any broadcast voice
mail message or mass mailing, including electronic mass mailings, excluding
those messages which are not product oriented and do not involve the Business.
Each party agrees for itself and its agents to maintain as strictly confidential
and not to use or disclose any information of the other party received pursuant
to the access to Enesco's internal communications granted in this Section and
elsewhere in this Agreement
3.2.5 Subject to the provisions of this Section, from and after the date of
this Agreement PMI shall have the right to contact and solicit for employment
only those Enesco employees and former employees listed on Schedule 3.2.5
("Approved Employees"). Enesco agrees to release (a) any Approved Employees and
(b) other employees or former employees or independent contractors of Enesco who
Enesco subsequently approves for hiring or engaging by PMI who are, in fact,
hired or engaged by PMI from any non-competition or similar covenants that would
preclude such employees from working for or providing services to PMI.
3.2.6 During the period from the date of execution of this Agreement to the
Transition Date and provided PMI executes any confidentiality agreement
reasonably requested by Enesco to preserve the non-public nature of such
information under Regulation FD, Enesco shall promptly notify PMI of the
following to the extent material to the Business:
(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement;
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(c) any actions, suits, charges, complaints, claims, investigations or
proceedings commenced or, to the best of Enesco's knowledge, threatened against,
relating to, involving or otherwise affecting, the Business which, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Section 4.7.5 or which relate to the consummation of the
transactions contemplated by this Agreement;
(d) any material adverse change in the Business, the Acquired Assets,
condition (financial or otherwise), operations or prospects of the Business or
of any event that would materially impair Enesco's ability to perform its
obligations under this Agreement;
(e) the occurrence or non-occurrence of any event, of which Enesco has
knowledge, the occurrence or non-occurrence, of which would be likely to cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Transition Date; or
(f) any material failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
The delivery of any notice pursuant to this Section 3.2.6 shall not limit or
otherwise affect the remedies available hereunder to either party.
3.2.7 Reserved.
3.2.8 With respect to (i) Assigned Contracts (as defined in Section 4.1.11)
for which third consents are necessary to assign but have not been obtained by
the Transition Date and (ii) other agreements and contracts relevant to the
Business but which are not included within the Assigned Contracts, upon request
from PMI, Enesco agrees use its commercially reasonable efforts to provide
introductions to relevant contract parties in assisting PMI to obtain
replacement contracts. The failure to obtain such replacement contracts shall
not be deemed a breach of this Agreement or a failure to consummate the
Transition. In addition, Enesco will use its commercially reasonable efforts to
provide an introduction to Xxxx Disney Corporation relating to PMI entering into
a relationship with such company similar to Enesco's relationship with such
company.
4. ENESCO TRANSFER OF THE BUSINESS TO PMI. In consideration for PMI's
payment of cash consideration referenced in Section 4.1B.2 below and PMI's
agreement to the amendments and termination of the License Agreement and the
adjustments in royalties contemplated in Sections 2.1 and 2.2 above, on the
Transition Date Enesco agrees to transfer the Business and the Acquired Assets
to PMI in accordance with the provisions of this Section 4.
4.1 Acquired Assets. On the terms and subject to the conditions set forth
in this Section 4, Enesco will transfer, convey, assign and deliver to PMI on
the Transition Date all of the right, title and interest in, to and under all
the assets set forth below (collectively, the "Acquired Assets"), free and clear
of all mortgages, liens, security interests, encumbrances, claims, charges and
restrictions of any kind or character (collectively, "Liens"); provided,
however, the Acquired Assets shall not include any accounts receivable of the
Business as provided in Section 4.1A. The Acquired Assets shall consist of the
following:
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4.1.1 All Licensed Product inventory ("Licensed Product Inventory") as of
the Transition Date owned by Enesco (i.e., excluding any inventory for which
title is owned by NC Cameron (a Canadian subsidiary of Enesco) and Enesco
Limited (a United Kingdom subsidiary of Enesco), other than inventory
transferred to those subsidiaries after the date hereof out of the ordinary
course of business). The parties acknowledge nothing in this Agreement affects
inventory owned by distributors which are not subsidiaries of Enesco. Schedule
4.1.1 hereto contains Enesco's Licensed Product Inventory as of the date of this
Agreement, including, but not limited to, the inventory for the Precious Moments
Clubs (as such term is hereinafter defined in Section 4.1.6) and any other
Licensed Products Inventory whether or not included on Enesco's balance sheet,
which Schedule will be updated by Enesco as of the Transition Date for the
Licensed Product Inventory included in the Acquired Assets. PMI shall have the
right at any time after the date of this Agreement to audit and verify the
Licensed Product Inventory at its sole expense by providing Enesco with seven
business days prior notice thereof. The parties currently intend to negotiate
distribution agreements by and between NC Cameron and Enesco Limited,
respectively, on the one hand and PMI on the other hand on or before the
Transition Date. Under those distribution agreements, Precious Moments products
manufactured in Asia will be sold, port of embarkation, to NC Cameron and Enesco
Limited by PMI at PMI's cost, plus twenty percent (20%). The parties will
negotiate pricing applicable to purchases by NC Cameron and Enesco Limited for
replenishment product not sourced from Asia.
4.1.2 Historical archives of Licensed Products.
4.1.3 The Precious Moments bronze statue in Enesco's lobby.
4.1.4 Collateral marketing and promotional materials, including, but not
limited to, display materials.
4.1.5 Customer lists and records for all Business customers only as they
relate to the purchase of Licensed Products, excluding, however, records related
to Wal-Mart and subject to applicable legal requirements relating to the
transfer of personal or confidential information;
4.1.6 Subject to the provisions of Section 4.2, to the extent allowed by
law, lists ("Precious Moments Club Lists") of all current and past members of
the Precious Moments Collectors Club and Precious Moments Fun Club ("Precious
Moments Clubs"), including names, addresses and any other contact information
maintained by Enesco with respect to members of the Precious Moments Clubs.
4.1.7 Those warehouse bins (and related equipment) currently being utilized
to ship Licensed Products; provided, PMI agrees that not all such bins/equipment
shall be included and PMI and Enesco shall reasonably agree prior to the
Transition Date which bins/equipment will be included consistent with prior
discussions.
4.1.8 Copies of all PMI historical reports and records of the Licensed
Products, including, but not limited to, financial reports, sales reports and
customer research.
4.1.10 All artwork and designs relating to all past, present and currently
being developed Licensed Products, which shall include, but not be limited to,
(a) all artwork and photographs related the development of Licensed Products
(all line drawings, painted or otherwise, pictures of clay sculptures, fired
porcelain bisque samples and photographs thereof), (b) all photographs in
Enesco's archives of all past, present and currently being developed Licensed
Products and (c) images libraries maintained by Enesco's creative services
department and by Occozzio in Augusta, Georgia.
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4.1.11 Subject to the provisions of Section 4.5 below, an assignment of the
contracts, agreements and arrangements to which Enesco is a party relating to
the Business and listed individually or by category on Schedule 4.1.11 hereto
("Assigned Contracts").
4.1.12 any toll-free phone number relating only to the Precious Moments
Clubs.
4.1.13 Subject applicable privacy laws, the registration cards (and any
related databases created therefrom) received by Enesco in connection with
Licensed Product Inventory.
4.1A Excluded Assets. Notwithstanding the foregoing and for the avoidance
of doubt, the term Acquired Assets will not include any accounts receivable or
other receivable arising prior to the Transition Date. For purposes of this
Agreement an account receivable will be deemed to have arisen on the date of
shipment of Licensed Product for which such account receivable relates.
4.1B Business Transition. The consummation of the transition of the
Business as contemplated by this Agreement (the "Transition") shall take place
at the office of Wildman, Harrold, Xxxxx & Xxxxx LLP, 000 Xxxx Xxxxxx Xxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000 on the Transition Date. The Transition shall
consist of the following deliveries by the parties.
4.1B.1 Deliveries of Enesco. On the Transition Date, Enesco shall deliver
to PMI the following documents:
(a) a Xxxx of Sale duly executed by Enesco in form sufficient to transfer
title to the Acquired Assets to PMI in form and substance reasonably acceptable
to the parties; and
(b) an Assignment and Assumption Agreement duly executed by Enesco
assigning the Assigned Contracts to PMI in form and substance reasonably
acceptable to the parties (the "Assignment and Assumption").
For the avoidance of doubt, the parties acknowledge and agree that Enesco's
obligation to consummate the Transition will be deemed to have been completed
upon delivery of the items set forth above. Any breach of Enesco's other
obligations under this Agreement may give rise to indemnity or other claims
under this Agreement but will not be deemed to result in a failure on the part
of Enesco to consummate the Transition.
While not a condition to the consummation of the Transition, Enesco agrees to
reimburse PMI for 1/2 of the invoiced consulting fees charged by Xxxxxxx Xxxxxx
relating to the Transition; provided, Enesco's payment obligation under this
paragraph shall not exceed $50,000. Such amount will be paid via offset of such
amount against amounts owed by PMI to Enesco at the Transition Date or pursuant
to Section 4.1B.2 under this Agreement.
4.1B.2 Deliveries of PMI. On the Transition Date, PMI shall deliver to
Enesco the Assignment and Assumption assuming the Assumed Obligations (as such
term is defined in Section 4.3). In addition, on October 1, 2005, PMI shall pay
to Enesco the invoiced cost for Licensed Product Inventory of the sku's set
forth on Schedule 4.1B.2 to the extent that such inventory is physically present
at Enesco's Elk Grove Village, Illinois or PMI's Carthage, Missouri facility on
the Transition Date. Such amount will be paid via offset of such amount against
amounts due to PMI on October 1, 2005 pursuant to Section 2.1 above.
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4.2 Precious Moments Clubs and Programs.
4.2.1 With respect to the Precious Moments Clubs, Enesco acknowledges that
(a) it has received certain of the 2005 membership dues from the members of the
Precious Moments Clubs which entitles the members to one figurine and 4
newsletters during 2005 and (b) any Precious Moments Club kits provided to
retail stores that remain unsold at the end of 2005 may be returned for a
credit. Enesco agrees to pay to PMI at the Transition Date the membership dues
received for all members of the Precious Moments Clubs to which Precious Moments
kits have not been delivered as of the Transition Date. On or before January 31,
2006, PMI will report the number of returned Precious Moment Club kits it
received from retail stores. On or before February 28, 2006, Enesco agrees to
reimburse PMI for Enesco's "allocable share" of the amount of any credit PMI
must give to those retailers for returned Precious Moments Club kits. As used in
this Section, Enesco's allocable share of such returns shall be calculated as a
fraction, (x) the numerator of which is the number of Precious Moments Club Kits
shipped by Enesco during 2005 prior to the Transition Date and (y) the
denominator of which is the number of Precious Moments Club Kits shipped by PMI
during 2005 on or after the Transition Date consistent with Enesco's past
practices plus the amount set forth in (x) above
4.2.2 Enesco acknowledges that it initiated a Precious Moments Loyalty Card
Program in March, 2005 in which persons who purchase five or more Precious
Moments figurines by May 31, 2005 are entitled to purchase a limited edition
figurine for a discounted price of $25.00. Orders for the limited edition
figurine and the purchase price therefor are currently being taken and held by a
third party fulfillment company, with plans to place the orders after May 31,
2005 for planned delivery in September, 2005. Enesco agrees to have the third
party fulfillment company maintain the funds collected in escrow (the "Loyalty
Card Program Escrowed Funds") and, if the Transition Date occurs before the
shipment of the limited edition figurines, to assign to PMI all contractual
agreements with the third party fulfillment company and the Loyalty Card Program
Escrowed Funds to enable PMI to fulfill Enesco's obligations under the Loyalty
Card Program.
4.3 Assumed Liabilities. Except for the Assumed Obligations (as defined
below) and the other obligations specifically provided in this Agreement, PMI
shall not assume by virtue of this Agreement or the transactions contemplated
hereby, and shall have no liability for, any liabilities of Enesco of any kind,
character or description whatsoever, including any liabilities of the Business
accruing prior to the Transition Date. PMI hereby agrees to assume the following
liabilities of Enesco (the "Assumed Obligations") as of the Transition Date,
except for Section 4.3.1:
4.3.1 For the period from the date of this Agreement until the Transition
Date PMI agrees to assume or reimburse Enesco and pay Enesco on the Transition
Date for 100% of the base salary and benefits provided to Xxx Xxxxxx, Xxx
Xxxxxxxx and Xxxxx Xxxxxxx. PMI's reimbursement obligation under this Section
shall not be deemed to constitute those employees as employees of PMI or any of
PMI's affiliates, and none of Enesco's employees shall be entitled by virtue of
this Agreement to any benefits afforded generally to employees of PMI or any of
PMI's affiliates;
4.3.2 all obligations under the Assigned Contracts;
4.3.3 all remaining obligations under the 2005 Precious Moments Clubs
including, without limitation, delivery of Precious Moments kits and the
preparation and delivery of two additional regularly scheduled Precious Moments
newsletters;
4.3.4 Subject to the provisions of Section 4.2.2, all obligations under the
Precious Moments Loyalty Card Program;
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4.3.5 all obligations under the customer purchase orders set forth on
Schedule 4.3.5;
4.3.6 all obligations under the Licensed Product Inventory purchase orders
set forth on Schedule 4.3.6;
4.3.7 obligations and other payables relating to the Business and incurred
with the written approval of PMI; and
4.3.8 Except for Enesco's allocable share of certain Precious Moments Club
kits which are Enesco's obligation pursuant to Section 4.2.1 above, the cost of
any returned Licensed Products (regardless of when and by whom such products
were shipped) returned more than 45 days after the Transition Date.
4.4 Further Assurance; Post Transition Cooperation. Enesco will, from time
to time, at the request of PMI, whether at or after the Transition Date, execute
and deliver such other and further instruments of conveyance, assignment,
transfer and consent as PMI or its counsel may reasonably require for the most
effectual conveyance and transfer of the Acquired Assets to PMI, and Enesco will
assist PMI in the collection and reduction to possession of the Acquired Assets.
Following the Transition Date, upon reasonable advance notice each party will
afford the other party, its counsel and its accountants, during normal business
hours, reasonable access to the books, records and other data relating to the
Business in its possession with respect to periods prior to the Transition Date
and the right to make copies and extracts therefrom, to the extent that such
access may be reasonably required by the requesting party at the requesting
party's sole expense in connection with (a) the preparation of tax returns, (b)
the determination or enforcement of rights and obligations under this Agreement,
(c) compliance with the requirements of any governmental or regulatory
authority, (d) the determination or enforcement of the rights and obligations of
any Indemnitee (as defined and provided in Section 4.11.3) or (e) in connection
with any actual or threatened action or proceeding.
4.5 Third-Party Consents. Anything in this Agreement to the contrary
notwithstanding, (a) if an assignment or purported assignment to PMI of any
Acquired Asset, including any lease or contract included in the Acquired Assets,
or any claim, right or benefit arising thereunder or resulting therefrom,
without the consent of other parties thereto, would constitute a breach thereof
or would not result in PMI receiving all of the rights of Enesco thereunder, and
(b) such consent has not been obtained by the Transition Date, such Acquired
Asset shall be deemed not to have been assigned by Enesco to PMI, and the
obligations thereunder shall be deemed not to have been assumed by PMI and the
failure to obtain such consent and assign such contract or lease shall not be
deemed a breach of this Agreement or a failure to consummate the Transition. In
those circumstances, if requested by PMI, after the Transition Date PMI and
Enesco will use reasonable commercial efforts to obtain any such consent. If
such consent is not obtained and is required to effectively assign an Acquired
Asset to PMI, Enesco will cooperate with PMI in any reasonable arrangement to
provide PMI with the full claims, rights and benefits under any such Acquired
Asset at PMI's expense, including without limitation, enforcement at the cost
and for the benefit of PMI of any and all rights of Enesco, against a third
party thereto arising out of the breach or cancellation by such third party or
otherwise, and any amount received by Enesco in respect thereof shall be held
for and paid over to PMI.
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4.6 Returns During the First 45 Days. Enesco shall be liable for the cost
of any Licensed Products returned within 45 days of the Transition Date. To the
extent PMI pays for any such returns, Enesco agrees to reimburse PMI for the
costs thereof within 30 days of receiving an invoice from PMI for such costs.
4.7 Enesco Representations and Warranties With Respect to the Acquired
Assets and the Business. Enesco represents and warrants to PMI on the date
hereof and on the Transition Date as follows:
4.7.1 Enforceability, Conflict and Consents.
(a) Enesco has taken all requisite action necessary to authorize the
execution, delivery and performance of this Agreement and the consummation of
the transfer of the Acquired Assets and the other transactions contemplated
hereby. This Agreement has been duly executed and delivered and constitutes the
valid and binding obligation of Enesco, enforceable in accordance with its
terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation by Enesco of the transactions contemplated hereby or thereby, nor
compliance with any of the provisions hereof or thereof will: (i) conflict with
or result in a breach of Enesco's Articles of Incorporation or By-Laws; or (ii)
to Enesco's knowledge, violate any statute, law, rule or regulation or any
order, writ, injunction or decree of any court or governmental authority.
(c) Except as set forth on Schedule 4.1.11, no consent or approval of or
notification to any governmental authority or other third party is required in
connection with the execution and delivery of this Agreement, or the
consummation of the transaction contemplated hereby.
4.7.2 Books and Records. All accounts, books, ledgers and official and
other records material to the Business and the Acquired Assets of whatsoever
kind have been properly and accurately kept and are true and complete, and there
are no material inaccuracies or discrepancies of any kind contained or reflected
therein.
4.7.3 Title to Properties; Encumbrances. Except as set forth on Schedule
4.7.3, Enesco has good, valid and marketable title to, or enforceable leasehold
interests in or valid rights under contract to use, all the Acquired Assets,
free and clear of all Liens; provided any Liens set forth on Schedule 4.7.3
shall be released on or prior to the Transition Date. All equipment included in
the Acquired Assets owned or otherwise contracted for by Enesco is in a state of
good maintenance and repair (ordinary wear and tear excepted) and is adequate
and suitable for the purposes for which it is presently being used.
4.7.4 Licensed Product Inventory. The Licensed Product Inventory included
in the Acquired Assets (other than obsolete inventory that has been written off
in Enesco's books and records) consists in all material respects of items usable
and saleable in the ordinary course of business in Enesco's present Licensed
Product lines. The inventory is valued at the lower of cost (on a
first-in-first-out basis) or market in accordance with GAAP on a basis
consistent with all prior periods of Enesco since the fiscal year ended December
31, 2004.
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4.7.5 Litigation. There are no actions, suits, claims or proceedings
pending or, to the knowledge of Enesco, threatened against or involving Enesco
or any of its assets or properties, before any court or arbitration tribunal or
by or before any governmental authority that question the validity of this
Agreement or seek to prohibit, enjoin or otherwise challenge the consummation of
the transactions contemplated hereby. There are no outstanding orders,
judgments, injunctions, stipulations, awards or decrees of any governmental
authority, court or arbitration tribunal against Enesco or any of its assets or
properties which prohibit or enjoin the consummation of the transactions
contemplated hereby.
4.7.6 Customers and Suppliers. Schedule 4.7.6 sets forth for the years
ended December 31, 2003 and 2004, the top ten (10) customers (by revenues) ("Top
10 Customers"), including the sales information by Licensed Product and sku, and
the top three (3) suppliers of the Licensed Products (by revenues) ("Top 3
Suppliers"). To the knowledge of Enesco (a) no Top 10 Customer has given any
formal notice of intent to materially curtail, cancel or terminate its business
relationship with Enesco; and (b) none of the Top 3 Suppliers, has canceled or
terminated the provision of services, Licensed Products or supplies to Enesco.
4.7.7 Operation of the Business. Since January 1, 2005, Enesco (a) has
operated the Business in the ordinary course consistent with past business
practices, including, but not limited to, activities with respect to Licensed
Product development, pricing, marketing initiatives and pick, pack and shipping
operations and procurement; and (b) has not engaged in any activity with respect
to the Licensed Products and the Business that could reasonably be expected to
harm the Precious Moments brand, the Licensed Products and their future
marketability, including, but not limited to, any of the following: (i) bulk
sales of inventory, (ii) loading the trade through discounts, (iii) dating or
other terms, (iv) other discounting, (v) directions to the sales force to limit
or otherwise change their marketing efforts with respect to the Licensed
Products or (vi) any other activity not in the ordinary course of and consistent
with Enesco's past business practices.
4.7.8 Contracts. Except as set forth in Schedule 4.1.11 which Schedule
4.1.11 contains a listing of contracts relating to the Business which will not
be Assigned Contracts and a listing of the Assigned Contracts:
(a) Enesco is not a party to or subject to any material contracts,
licenses, leases, agreements or commitments (oral or written) relating to the
Business other than purchase orders and contracts for the purchase of goods and
services entered into in the ordinary course consistent with past business
practices;
(b) each Assigned Contract to which Enesco is a party is in full force and
effect and is valid and enforceable against Enesco, as the case may be, and, to
the best of Enesco's knowledge, the third parties thereto, and no third party to
any Assigned Contract has given formal notification of its intent to modify,
cancel, terminate or otherwise suspend its relationship with Enesco, as the case
may be;
(c) Enesco is not in default under any Assigned Contracts made or
obligations owed by Enesco and all of such Assigned Contracts are in full force
and effect and are valid and enforceable against Enesco; and
(e) Enesco has heretofore delivered to PMI true and correct copies of all
contracts and agreements listed in Schedule 4.1.11.
12
4.7.9 Compliance with Law. Enesco is not and has not been at any time in
material violation of any applicable foreign, Federal, state or local law, rule,
regulation or ordinance, or any judgment, writ, decree, injunction, order or any
other requirement of any court, administrative agency, bureau, board,
commission, office, department or other governmental authority or agency
relating to the Business and no notice has been received by Enesco alleging any
such violation. All pricing and selling practices used or employed by Enesco are
and have been at all times in material compliance with all such Federal, state
and local laws, rules, regulations and ordinances.
4.7.10 Precious Moments Clubs. In the past 12 months, Enesco has not sold,
assigned, leased or otherwise transferred to, or permitted the use by, or
disclosed to (or authorized, permitted or suffered to incur any such sale,
assignment lease, transfer, use or disclosure) any person, any list of names
(including the Precious Moments Club Lists), email addresses or other
identifying information of past or present members of the Precious Moments
Clubs.
4.7.11 2004 Sales. 2004 gross sales from the Business, as summarized on
Schedule 4.7.11 hereto by channel and Licensed Product line, exceeded
$50,000,000.
4.8 PMI Representations and Warranties. PMI represents and warrants to
Enesco as follows:
4.8.1 Enforceability, Conflict and Consents.
(a) PMI has taken all requisite action necessary to authorize the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered and
constitutes the valid and binding obligation of PMI, enforceable in accordance
with its terms.
(b) Neither the execution and delivery of this Agreement nor the
consummation by PMI of the transactions contemplated hereby or thereby, nor
compliance with any of the provisions hereof or thereof will: (i) conflict with
or result in a breach of PMI's Articles of Incorporation or By-Laws or (ii) to
PMI's knowledge, violate any statute, law, rule or regulation or any order,
writ, injunction or decree of any court or governmental authority.
(c) No consent or approval of or notification to any governmental authority
or other third party is required in connection with the execution and delivery
of this Agreement, or the consummation of the transaction contemplated hereby.
4.8.2 Litigation. There are no actions, suits, claims or proceedings
pending or, to the knowledge of PMI, threatened against or involving PMI or any
of its assets or properties, before any court or arbitration tribunal or by or
before any governmental authority that question the validity of this Agreement
or seek to prohibit, enjoin or otherwise challenge the consummation of the
transactions contemplated hereby. There are no outstanding orders, judgments,
injunctions, stipulations, awards or decrees of any governmental authority,
court or arbitration tribunal against PMI or any of its assets or properties
which prohibit or enjoin the consummation of the transactions contemplated
hereby.
4.9 Conditions of Performance. The obligations of Enesco and PMI to effect
the Transition on the Transition Date are subject to fulfillment (or waiver in
writing where permissible) prior to the Transition Date that there shall not:
(a) be in effect any law or order which makes illegal or enjoins or prevents in
any respect the consummation of the transactions contemplated by this Agreement,
(b) have been commenced, or threatened in writing, any action or proceeding by
any governmental or regulatory authority which seeks to prevent or enjoin in any
13
respect the transactions contemplated by this Agreement which Enesco or PMI, as
the case may be, in good faith believes to be material, or (c) have been
commenced, or threatened in writing, any action or proceeding by any other
person which seeks to prevent or enjoin in any material respect the transactions
contemplated by this Agreement and which in the opinion of counsel to Enesco or
PMI, as the case may be, is reasonably likely to result in the issuance of such
an injunction. In addition, the obligation of PMI to effect the Transition on
the Transition Date is subject to there not having occurred any Bad Faith Event.
As used herein, a "Bad Faith Event" shall be the willful misconduct of Enesco in
violating the provisions of Section 3.2 which willful misconduct is the
proximate cause of a material adverse change in the Business. For the avoidance
of doubt, a material adverse change in the Business will not be deemed to be a
Bad Faith Event if such material adverse change is the result, to a material
degree, of general economic conditions or changes affecting the industry
generally in which such entity operates.
4.10 Restrictive Covenants.
4.10.1 Precious Moments Club Lists. From and after the Transition Date,
Enesco agrees that it will not, and will cause its affiliates and its and their
respective owners, employees, officers, directors, consultants, advisors,
representatives and agents not to, directly or indirectly, use the Precious
Moments Club Lists in any way, including, but not limited to, soliciting the
Precious Moments Club members to purchase other Enesco products, without the
prior written consent of PMI.
4.10.2 Enesco Non-Solicitation of PMI Employees. For a period commencing on
the date hereof and continuing for two years after Transition Date, Enesco
agrees that it will not, directly or indirectly, solicit for employment any
employees of PMI and its affiliates; provided, however, that the foregoing shall
not apply to (a) the hiring or contracting of any individual who approaches
Enesco on an unsolicited basis; (b) the solicitation or hire of or contracting
with any individual whose employment with PMI was previously terminated by
either PMI or the individual; and (c) any solicitation conducted by public
advertisement or recruiting agency not specifically targeting the employees of
PMI and its affiliates and the hiring or contracting of any individual who
responds thereto. PMI acknowledges the rights of its employees to seek
employment at will.
4.10.3 PMI Non-Solicitation of Enesco Employees. For a period commencing on
the date hereof and continuing for two years after Transition Date, PMI agrees
that it will not, directly or indirectly, solicit for employment any employees
of Enesco and its affiliates; provided, however, that the foregoing shall not
apply to (a) the hiring or contracting of any individual who approaches PMI on
an unsolicited basis; (b) the solicitation or hire of or contracting with any
individual whose employment with Enesco was previously terminated by either
Enesco or the individual; (c) any solicitation conducted by public advertisement
or recruiting agency not specifically targeting the employees of Enesco and its
affiliates and the hiring or contracting of any individual who responds thereto;
and (d) Approved Employees and other current or former employees approved by
Enesco in writing for hiring by PMI. Enesco acknowledges the rights of its
employees to seek employment at will.
4.10.4 Non-Disclosure of Confidential Information. Each of Enesco and PMI
agrees not to at any time, disclose, directly or indirectly, to any person any
confidential information relating to the Business and the Licensed Products,
including, but not limited to, any information concerning the financial
condition, customers, sources of leads and methods of obtaining new business, or
methods of doing and operating the Business and producing the Licensed Products
which are not (a) known to others, (b) readily available to others from sources
other than Enesco or PMI (other than by virtue of a breach of the foregoing by
Enesco or PMI) or (c) in the public domain; provided, however, PMI's obligation
under this Section shall terminate on the Transition Date.
4.11 Indemnification.
14
4.11.1 Enesco's Indemnification.
(a) Enesco agrees to indemnify, defend and hold harmless PMI, its
affiliates and its and their respective shareholders, officers, directors,
employees, agents, representatives, successors and assigns from, against and in
respect of the full amount of any and all liabilities, damages, claims,
deficiencies, fines, assessments, losses, taxes, penalties, interest, costs and
expenses, including, without limitation, reasonable fees and disbursements of
counsel ("Damages") arising from, in connection with, or incident to any breach
or violation of any of the representations, warranties, covenants and agreements
of Enesco contained in this Agreement or in any document or certificate
delivered by Enesco at or prior to the Transition Date.
(b) Except for Enesco's obligations under Section 4.10 and under the
Transitional Services Agreement and Enesco's payment obligations under this
Agreement all of which shall survive until the expiration of the applicable
statute of limitations and for which Enesco shall have full liability, the
representations and warranties of Enesco contained in this Agreement shall
survive the Transition Date and the consummation of the transactions
contemplated hereby for a period of 12 months from and after the Transition
Date.
(c) PMI waives compliance by Enesco with (a) the provisions of any "bulk
transfer law" of any state or local jurisdiction in connection with the transfer
of the Acquired Assets to PMI and (b) any bulk transfer provisions of the
Uniform Commercial Code of any state, or any similar statute, if and to the
extent applicable to the transactions contemplated by this Agreement. Enesco
shall indemnify, defend and hold PMI harmless against any and all liabilities
that may be asserted by third parties against PMI as a result of noncompliance
with any such bulk transfer laws in accordance with the provisions of this
Section 4.11.
4.11.2 PMI's Indemnification.
(a) PMI agrees to indemnify, defend and hold harmless Enesco, its
affiliates and its and their respective its shareholders, officers, directors,
employees, agents, representatives, successors and assigns from, against and in
respect of the full amount of any and all Damages arising from, in connection
with, or incident to any breach or violation of any of the representations,
warranties, covenants or agreements of PMI contained in this Agreement or in any
document or certificate delivered by PMI at or prior to the Closing.
(b) Except for the provisions of Section 4.3 and PMI's obligations under
the Transitional Services Agreement and PMI's payment obligations under this
Agreement, all of which shall survive until the expiration of the applicable
statute of limitations and for which PMI shall have full liability, the
representations and warranties of PMI contained in this Agreement shall survive
the Transition Date and the consummation of the transactions contemplated hereby
for a period of 12 months from and after the Transition Date.
4.11.3 Procedures for Making Claims. If and when either PMI or Enesco (the
"Indemnitee") desires to assert a claim for Damages against the other party (the
"Indemnitor") pursuant to the provisions of this Section 4.11, the Indemnitee
shall deliver to the Indemnitor, reasonably promptly after the Indemnitee's
receipt of a claim or specific and affirmative awareness of a potential claim, a
certificate (the "Notice of Claim"): (a) stating that the Indemnitee has paid or
accrued (or intends to pay or accrue) Damages to which it is entitled to
indemnification pursuant to this Section 4.11 and the amount thereof (to the
extent then known); and, (b) specifying to the extent possible (i) the
individual items of loss, damage, liability, cost, expense or deficiency
included in the amount so stated, (ii) the date each such item was or will be
15
paid or accrued and (iii) the basis upon which Damages are claimed. If the
Indemnitor shall object to such Notice of Claim, the Indemnitor shall deliver
written notice of objection (the "Notice of Objection") to the Indemnitee within
15 days after delivery of the Notice of Claim. The Notice of Objection shall set
forth the grounds upon which the objection is based and state whether the
Indemnitor objects to all or only a portion of the matter described in the
Notice of Claim. If the Notice of Objection shall not have been so delivered
within such 15 day period, the Indemnitor shall be conclusively deemed to have
acknowledged the correctness of the claim or claims specified in the Notice of
Claim for the full amount thereof, and the Damages set forth in the Notice of
Claim shall be promptly paid to the Indemnitee, without the necessity of further
action. If the Indemnitor shall make timely objection to a claim or claims set
forth in any Notice of Claim and if such claim or claims shall not have been
resolved or compromised within 60 days from the date of delivery of the Notice
of Objection, then such claims shall be settled pursuant to Section 5.1 hereof.
4.11.4 Participation in Defense of Third Party Claims. If any third party
shall assert any claim against PMI which, if successful, might result in an
obligation of Enesco to pay Damages and which can be remedied to the sole
satisfaction of PMI by the payment of money damages without further adverse
consequence to PMI, Enesco at its sole expense, may assume the primary defense
thereof with counsel reasonably acceptable to PMI, but only if and so long as:
(a) Enesco diligently pursues the defense of such claim; and (b) Enesco
acknowledges to PMI in writing that the claim, if resolved or settled adversely
to PMI, is one for which Enesco is obligated to indemnify PMI hereunder. If
Enesco fails or is unable to so elect to assume the primary defense of any such
claim, PMI may (but need not) do so; in which event PMI may defend, settle or
compromise the claim, at the expense and cost of Enesco, in any such manner as
PMI reasonably deems appropriate.
4.11.5 Indemnification Payments. With regard to the claims for which
indemnification is payable hereunder, whether such claims have been made by
third parties or by any party to this Agreement, such indemnifications shall be
paid by the Indemnitor upon (a) the entry of a judgment against the Indemnitee
and the expiration of any applicable appeal period; (b) the entry of an
unappealable judgment or final appellate decision against the Indemnitee; or (c)
a settlement with the consent of the Indemnitor; provided, however, with respect
to claims by third parties, such consent shall not be unreasonably withheld.
Interest on indemnification payments hereunder shall accrue at the prime rate as
published in the Wall Street Journal, plus two percent (2%) per annum from (i)
the later of the date the Damages to which such payment relates are incurred by
the Indemnitee or the date written notice of such incurrence is given to the
Indemnitor to (ii) the date of the Indemnitor's payment of indemnification for
such Damages.
4.11.6 Threshold. No claim for indemnification under this Section 4.11 be
made unless and until the aggregate amount of such claims exceeds $100,000 (the
"Threshold"), in which event the party seeking indemnification may claim
indemnification for the amount of all such claims but only to the extent such
amount exceeds the Threshold; provided, however, that the Threshold shall not
limit the liability as a result of, with respect to or arising from (a) Enesco's
indemnification obligations arising under Section 4.11.1(c), (b) specific
payment/reimbursement obligations contemplated in this Agreement, or (b) a
breach or inaccuracy of any representation or warranty (i) relating to title to
the Acquired Assets, (ii) arising out of fraud or willful misconduct on the
indemnifying party.
5. MISCELLANEOUS.
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5.1 Dispute Resolution. In the event that an unresolved dispute (a
"Dispute") arises between the parties over any material matter affecting the
Transition of the Business as provided in Section 3 (including as to whether
either party has complied with its obligations under this Agreement) and such
Dispute shall not have been resolved pursuant to good faith negotiations between
the parties, then either party may elect by written notice to the other to have
the Dispute subjected to review by a joint review committee comprised of the CEO
of Enesco and the CEO of PMI (the "Joint Review Committee") as provided in this
Section 5.1. The Joint Review Committee shall meet within 30 days of the date
such notice is delivered, and shall engage in good faith efforts to resolve the
Dispute. As soon as practicable after such meeting, the Joint Review Committee
shall issue a decision setting forth the resolution of the Dispute or the method
for determining the resolution of the Dispute. The decision of the Joint Review
Committee with respect to any dispute shall be binding on the parties.
Notwithstanding any provision in this Agreement to the contrary, either party
may exercise all rights and remedies available to it under this Agreement or at
law or in equity.
5.2 Arbitration. In the event there is (a) any dispute, controversy or
claim as to whether there is (i) a breach of any representation or warranty
under Section 4.7 or Section 4.8 of this Agreement, (ii) whether an event of
default exists due to non-performance by Enesco of its obligations under
Sections 2.1 and 2.2, (iii) whether an event of default exists due to
non-performance of either party of its obligations under Sections 2.3 and 4.10,
(iv) entitlement to indemnification to be provided under Section 4.11 and (b)
such dispute, controversy or claim has not been resolved pursuant to Section 5.1
or the Joint Review Committee has not provided for a method for determining such
resolution pursuant to Section 5.1, then such dispute, controversy or claim
shall be resolved by arbitration under this Section 5.2.
5.2.1 The parties will refer the issue (to the exclusion of a court of law)
to final and binding arbitration in Chicago, Illinois in accordance with the
then existing rules (the "Rules") of the American Arbitration Association
("AAA"), and judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof; provided, however, that the law
applicable to any controversy shall be the law of the State of Illinois,
regardless of principles of conflicts of laws.
5.2.2 In any arbitration pursuant to this Agreement, discovery shall be
allowed and governed by the Illinois Code of Civil Procedure, subject, however,
to the 30 day time period for the rendering of the arbitrator's decision as
provided in Section 5.2.3 unless the parties agree otherwise.
5.2.3 The arbitral tribunal will be composed of one arbitrator, who is a
neutral and impartial lawyer with excellent academic and professional
credentials (a) who has practiced law for at least 15 years, specializing in
either general commercial litigation or general corporate and commercial matters
and (b) who has had both training and experience as an arbitrator and is
generally available to serve as an arbitrator. In the event of failure of the
parties to agree within 30 days of the referral of the issue to arbitration, the
arbitrator shall be appointed by the AAA in accordance with the Rules. Upon the
completion of the selection of arbitrator, an award or decision shall be
rendered within no more than 30 days.
5.2.4 Nothing set forth above shall be interpreted to prevent the parties
from narrowing the scope of discovery or other procedural matters.
5.2.5 The arbitrator will determine the allocation of the costs and
expenses of arbitration based upon the percentage which the portion of the
contested amount not awarded to each party bears to the amount actually
contested by such party. For example, if X submits a claim for $1,000 and if Y
contests only $500 of the amount claimed by X and if the arbitrator ultimately
resolves the dispute by awarding X $300 of the $500 contested, then the costs
and expenses of arbitration will be allocated 60% (i.e., 300 / 500) to Y and 40%
(i.e., 200 / 500) to X.
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5.2.6 Notwithstanding the foregoing, the request by either party for
preliminary or permanent injunctive relief, whether prohibitive or mandatory,
shall not be subject to arbitration and may be adjudicated only by the courts of
the State of Illinois or the Federal District Court for the Northern District of
Illinois. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY
SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
5.2A Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (a) when personally delivered or
sent by facsimile with electronic confirmation of delivery, if promptly followed
by one of the other delivery methods set forth in this Section 5.2 or (b) one
business day after timely delivery to a reputable overnight express courier
(charges prepaid) for next business day delivery, or (c) five business days
following mailing by certified or registered mail, postage prepaid. Unless
another address is specified in writing by notice given in accordance with this
Section, notices, demands and communications to the parties shall be sent to the
addresses indicated below:
If to PMI: Precious Moments, Incorporated
0000 Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: Xxx Xxxxx
Fax: (000) 000-0000
And to: Trivest, Inc.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Fax: (000) 000-0000
With a copy to Xxxxxx & Xxxxxxxx, Ltd.
(which shall not constitute 000 Xxxx Xxxxxxx Xxxxxx
notice): Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Fax: (000) 000-0000
If to Enesco: Enesco Group, Inc.
000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
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With a copy to Enesco Group, Inc.
(which shall not constitute 000 Xxxxxxx Xxxxx
notice): Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
5.3 Costs. Each party hereto shall pay its own costs and expenses
(including attorneys' fees, accountants' fees and other professional fees and
expenses) incurred in connection with the negotiation, preparation, execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.
5.5 Counterparts; Facsimile Copies. This Agreement may be executed in two
or more counterparts, each of which shall be considered an original, but all of
which together shall constitute the same instrument. The parties acknowledge and
agree to accept and be bound by facsimile transmitted copies of this Agreement
and its counterparts.
5.6 Miscellaneous. Any provision of this Agreement which is unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The captions set forth herein are for convenience only and
shall not define or limit any of the terms hereof. The agreements of the parties
to, and the terms and conditions of, this Agreement are for the sole benefit of
such parties and are not for the benefit of any third party. The language used
in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent and no rule of construction will be
applied against either party hereto.
5.7 Entire Agreement and Modification. This Agreement constitutes and
contains the entire agreement of the parties and supersedes any and all prior
negotiations, correspondence, understandings and agreements between the parties
respecting the subject matter hereof, including, the Term Sheet. This Agreement
may be amended only by a written instrument signed by the parties.
5.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without regard to conflicts of
laws principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state.
Signatures appear on following page
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above set forth.
ENESCO GROUP, INC. PRECIOUS MOMENTS, INCORPORATED
By: _____________________________________ By: _____________________________
Xxxxxxx Xxxxxxxx-XxXxxxxxxx, Xxxx X. Xxxxxxxxx,
President and Chief Executive Officer Chief Executive Officer
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