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EXHIBIT 10.16
CONTRIBUTION AND ACQUISITION AGREEMENT
This CONTRIBUTION AND ACQUISITION AGREEMENT, dated as of February 3rd,
1999 (this "Agreement"), among COLLECTORS UNIVERSE, INC., a Delaware corporation
("CUI"), and KINGSWOOD COIN AUCTION, LLC., a California limited liability
company ("Kingswood" or the "Company"), and the Persons named on Exhibit A
hereto, who are Members of Kingswood (individually, a "Member" and collectively,
the "Members").
RECITALS:
A. CUI has been formed, organized and capitalized under the laws of the
State of Delaware for the purposes of effecting the transactions contemplated by
the agreements listed on Exhibit B hereto (the "Other Contribution Agreements")
and to conduct such other business and affairs as the Board of Directors of CUI
may from time to time find to be in the best interests of CUI.
B. Each of the corporations or other business entities whose shares,
membership interests or assets are being contributed to CUI pursuant to this
Agreement and the Other Contribution Agreements (hereinafter sometimes referred
to collectively as the "Founding Companies") is engaged in the business of
marketing and selling, or providing services to, businesses that market and
sell, Collectibles (as hereinafter defined) at retail establishments, by mail
order, at trade shows or auctions or over the internet or by other means of
electronic commerce. CUI intends to integrate the products and services offered
by each of the Founding Companies in order to expand the sale of their products,
increase the efficiencies and reduce the operating costs of the Founding
Companies and to increase their presence and expand their sales over the
Internet.
B. Kingswood is engaged in the business of auctioning rare and
collectible coins (the "Business"). Kingswood and its Members desire to
contribute and transfer to CUI, and CUI desires to acquire from Kingswood, the
Business and all of the Contributed Assets (as more fully described
hereinafter), all for the consideration and on the terms and conditions
hereinafter set forth;
C. This Agreement is being entered into by the parties, and the Other
Contribution Agreements are being or have been entered into by CUI and the other
parties thereto, as part of a unified plan of contribution and exchange of stock
(the "Plan") that is intended by the parties to qualify for non-recognition
treatment under Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code"). However, none of the parties to this Agreement or to the Other
Contribution Agreements has made or is making any representations or warranties
with respect to whether the transactions being consummated pursuant to and as
part of such Plan will comply with the requirements of Code Section 351 or as to
the consequences, under applicable federal, state or other tax laws, of such
transactions to the parties to this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, CUI, and the Company and Contributor hereby agree as follows:
ARTICLE I
CONTRIBUTION OF ASSETS AND EXCHANGE OF CONSIDERATION
1.1 The Contributed Assets. On the terms and subject to the conditions
set forth in this Agreement, at the Closing (as hereinafter defined), the
Company shall contribute, transfer and convey to CUI, and CUI shall acquire from
the Company, free and clear of all Liens and Encumbrances (as hereinafter
defined), the Business and the Contributed Assets, which are described on
Exhibit C hereto
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(the "Contributed Assets"). The Contributed Assets shall not include, and
Kingswood is not contributing, but shall retain ownership of, all of its cash
and accounts receivable (the "Excluded Assets").
1.2 Acquisition Consideration.
(a) On the terms and subject to the conditions that are set
forth in this Agreement, at the Closing CUI shall, as consideration for the
contribution of the Contributed Assets and Business to CUI issue to Kingswood
(i) an aggregate of 190,000 validly issued, fully paid and nonassessable shares
of Common Stock of CUI ("CUI Shares"), and (ii) a promissory note, substantially
in the form of Exhibit D hereto (the "CUI Note") in the principal amount of One
Million Dollars and payable on the first (1st) anniversary of the Closing Date.
The CUI Shares and CUI Note shall constitute and will sometimes be referred to
herein as the "Acquisition Consideration."
(b) The amount of the Acquisition Consideration shall be
allocated among the Contributed Assets as set forth in Exhibit E attached hereto
(the "Consideration Allocation"). Each of the parties, when reporting the
transactions consummated hereunder in their respective Tax Returns (as
hereinafter defined), before any governmental agency charged with the collection
of any tax or in any judicial proceeding, shall allocate the Acquisition
Consideration in a manner that is consistent with the Consideration Allocation
set forth in Exhibit E hereto. Additionally, each of the parties will comply
with, and furnish the information required by, Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code"), and any regulations thereunder.
1.3 Closing. Subject to the satisfaction or waiver of the conditions
set forth in Article VI, the consummation of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Xxxxxxxxx Xxxxx
Xxxxxxx & Xxxxx, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000, on the third (3rd) business day after satisfaction or waiver of such
conditions precedent, provided, however, that, if the Closing occurs on or
before March 12, 1999, the transactions contemplated hereby shall be effective
for accounting purposes as of February 5, 1999 (the "Effective Date"). At the
Closing, the Company shall execute and deliver a Xxxx of Sale and Assignment and
Assumption Agreement substantially in the form of Exhibit F hereto (the "Xxxx of
Sale") and each Member shall execute and deliver a Stockholders Agreement
substantially in the form of Exhibit G hereto (the "Stockholders Agreement"). In
exchange therefor, CUI shall deliver to each Member a certificate evidencing the
number of CUI Shares set forth opposite the name of such Member on Exhibit A
hereto, and shall deliver to the Company the CUI Note to the order of the
Company. The parties also shall execute and deliver the additional documents and
instruments listed on Exhibit H hereto (the "Closing Documents").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS
The Company and each of the Members, severally, make the following
representations and warranties to CUI, as modified by the written disclosure
schedule delivered on or prior to the date hereof by the Company, arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article II (the "Company Disclosure Schedule"); provided, however, that
each Member's representations and warranties contained in this Article II are
being made to the such Member's actual knowledge, without independent
investigation and provided further, that none of the Members are making any of
the representations and warranties contained in Section 2.12 hereof.
2.1 Organization and Qualification. The Company is a limited liability
company that is duly organized, validly existing and in good standing under the
laws of the State of California and it has the requisite power and authority
that are necessary, under its Operating Agreement (as hereinafter
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defined) and California laws applicable to California limited liability
companies (the "Limited Liability Company Laws"), to own, lease and operate the
Contributed Assets, and to conduct and carry on the Business as it is now being
conducted. Except as set forth in Section 2.1 of the Company Disclosure
Schedule, the Company does not directly or indirectly own any ownership, equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation, limited
liability company, partnership, joint venture or other business association or
entity.
2.2 Articles of Organization and Operating Agreement. There has been
furnished to CUI a complete and correct copy of the Company's Articles of
Organization and Operating Agreement dated as of November 8, 1996 (the
"Operating Agreement"), and all amendments thereto. Such Articles of
Organization and Operating Agreement are in full force and effect and the
Company is not in violation of any of the provisions thereof.
2.3 Membership Interests. Exhibit A hereto sets forth the record and
beneficial owners of the all of the Company's outstanding Membership Interests
and the percentage of such outstanding Membership Interests owned by each of
them. There are no obligations, contingent or otherwise, of the Company to issue
any new or repurchase, redeem or otherwise acquire any outstanding Membership
Interests or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any business entity.
2.4 Authority Relative to this Agreement.
(a) The Company has all necessary power and authority, under
its Operating Agreement and the Limited Liability Company Laws, to execute and
deliver this Agreement and to perform its obligations hereunder. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all Member action and all other actions required under the
Operating Agreement or the Limited Liability Company Laws, and no other actions
or proceedings on the part of the Company or its Members are necessary for or in
connection therewith.
(b) This Agreement has been duly and validly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by CUI, this Agreement constitutes, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
the enforceability thereof may be limited by (i) bankruptcy, insolvency,
reorganization, arrangement, moratorium, or other similar laws relating to or
affecting rights of creditors, and (ii) general equitable principles, including
the possible unavailability of specific performance or injunctive relief,
regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law.
2.5 No Conflict; Required Filings and Consents.
(a) Except as otherwise provided below in this Paragraph
2.5(a), Section 2.5 of the Company Disclosure Schedule includes a list of all
promissory notes, mortgages, contracts, leases, licenses, permits, franchises
and all other agreements and obligations to which the Company is a party or by
which it is bound, (i) which provide for payments either by or to the Company of
more than $1,000 per month or more than $15,000 in the aggregate, or (ii) which
requires the giving of more than 30 days notice or the payment of any amounts by
the Company as a condition or requirement of its termination or non-renewal by
the Company, or (iii) as to which a termination or non-renewal or a breach or
default could have a material adverse effect on the Business, the Contributed
Assets or the operating results or future prospects of the Business (a "Material
Adverse Effect"), or (iv) which, in the absence of a the
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obtaining of a consent or approval from the other party or parties thereto,
would be breached or violated by reason of the consummation of the transactions
contemplated hereby or (vi) which imposes any restrictions on the conduct of the
Company's business or any Liens or Encumbrances on the Contributed Assets
(collectively, the "Material Contracts"). The Company has furnished true and
correct copies of all such Material Contracts to the CUI or its counsel. To the
best knowledge of the Company and to the actual knowledge of the Members, the
Company is not in default of, and to the knowledge of the Company there is no
event, condition or circumstance which has occurred that, with the passage of
time or the giving of notice, or both, would constitute a default by the Company
under, any of the Material Contracts. For purposes hereof, the Company
Disclosure Schedule need not include any Material Contract entered into on
behalf of the Company by Professional Coin Grading Service, Inc. ("PCGS") or at
the direction of any officer of PCGS.
(b) Except as set forth in Section 2.5 of the Company
Disclosure Schedule, the execution, delivery and performance of this Agreement
by the Company and the Members do not and will not (i) conflict with or violate
the Articles of Organization or Operating Agreement of the Company; (ii) to the
best knowledge of the Company and the actual knowledge of the Members, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or by which its properties are bound or affected, or (iii)
require the consent or approval of any party to, or result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of any Material Contract or
Company Permit (as hereinafter defined), or result in the creation of a Lien or
Encumbrance on any of the Contributed Assets pursuant to any Material Contract
or Company Permit.
2.6 Compliance, Permits.
(a) Except as disclosed in Section 2.6 of the Company
Disclosure Schedule or as and to the extent known by any officers of PCGS, to
the best knowledge of the Company and the actual knowledge of the Members, the
Company is not in default or violation of, (i) any law, rule, regulation, writ,
order, judgment or decree applicable to the Company or by which any of the
Contributed Assets or the Business is bound or affected or (ii) any Material
Contract, and no event has occurred which, either with the passage of time or
the giving of notice, or both, would constitute a breach or violation of any
such law, rule, regulation, writ, order, judgment or decree or any Material
Contract.
(b) Except as disclosed in Section 2.6 of the Company
Disclosure Schedule or as and to the extent known by any offices of PCGS, to the
best knowledge of the Company and the actual knowledge of the Members, the
Company holds and is in compliance with the terms of all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities which are material to the ownership and use of the
Contributed Assets or the operation of the Business as it is now being conducted
(collectively, the "Company Permits"), except where any failure to have or to
comply with any Company Permits would not have a Material Adverse Effect on the
Business. A list of the Company Permits is set forth in Section 2.6 of the
Company Disclosure Schedule.
2.7 Liabilities. Except as is disclosed in Section 2.7 of the Company
Disclosure Schedule, the Company does not have any liabilities (absolute,
accrued, contingent or otherwise) in an amount in excess of $5,000 individually
or $10,000 in the aggregate and all such liabilities were incurred in the
ordinary course of the Company's business and the Company is not in default of
or delinquent with respect to any such liabilities.
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2.8 Absence of Litigation. Except as set forth in Section 2.8 of the
Company Disclosure Schedule or as and to the extent known by any of the officers
of PCGS, there are no claims, actions, suits, proceedings or investigations
(governmental or other) that are pending or, to the knowledge of the Company or
the actual knowledge of any of the Members, threatened against the Company, the
Business or the Contributed Assets, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign. There are no facts or circumstances known to the Company or any of the
Members which are reasonably likely to result in the bringing of any such action
or proceeding against the Company, the Business or any of the Contributed
Assets.
2.9 Restrictions on Business Activities. Except for this Agreement or
as and to the extent known to any officer of PCGS or as set forth in Section 2.9
of the Company Disclosure Schedule, there is no agreement, judgment, injunction,
order or decree binding upon the Company or known to any of the Members which
has or could reasonably be expected to have the effect of prohibiting or
impairing any material business practice of the Company or CUI's conduct, after
the Closing, of Business, as currently conducted by the Company.
2.10 Title to Assets. Except as set forth in Section 2.10 of the
Company Disclosure Schedule, the Company has good, defensible and marketable
title to all of the Contributed Assets, free and clear of all liens, security
interests, charges, pledges, options, mortgages and encumbrances of any nature
whatsoever (collectively "Liens and Encumbrances"), except liens for taxes not
yet due and payable and such liens or other imperfections of title, if any, as
do not materially detract from the value of or interfere with the present use or
subsequent disposition of any of the Contributed Assets. The Contributed Assets,
together with assets subject to leases included in the Assigned Contracts (as
defined in Exhibit C hereto), are all of the assets required to enable CUI to
conduct the Business as it has been conducted by the Company during the past 12
months.
2.11 Taxes. Except as disclosed in Section 2.11 of the Company
Disclosure Schedule, the Company has filed all United States federal income tax
returns and all other material tax returns required to be filed by it, and the
Company has paid and discharged all Taxes (as defined in Section 9.2) due with
respect to the periods or transactions covered by such tax returns and have paid
all other taxes as are due, except as may be determined to be owed upon
completion of any tax return not yet filed based upon an extension of time to
file, and there are no other Taxes that would be due if asserted by a taxing
authority, except with respect to which the Company is maintaining reserves to
the extent currently required. There are no tax liens on any of the Contributed
Assets; and the Company has not granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any Tax.
2.12 Intellectual Property.
(a) Except as set forth in Section 2.12 of the Company
Disclosure Schedule or as and to the extent known to any officers of PCGS, the
Company owns, or is licensed or otherwise possesses legally enforceable rights
to use all patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, trade secrets, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary information
that are used in the Business of the Company as currently conducted and a list
of which is set forth as part of Exhibit C hereto (collectively, the "Company
Intellectual Property").
(b) Except as disclosed in Section 2.12 of the Company
Disclosure Schedule or as and to the extent known by any officers of PCGS, the
Company is not, nor will it be as a result of the execution and delivery of this
Agreement or the performance of its obligations hereunder, in violation of any
licenses, sublicenses and other agreements as to which the Company is a party
and pursuant to which
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the Company is authorized to use any patents, trademarks, trade names, service
marks, copyrights, trade secrets, technology, know-how, computer software
programs or applications, or other tangible or intangible proprietary
information owned by any third party ("Third-Party Intellectual Property
Rights"). No claims with respect to any of the Company Intellectual Property or
Third Party Intellectual Property Rights (to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual Property Rights by
or through the Company), are currently pending or, to the knowledge of the
Company or the actual knowledge of any of the Members, are threatened by any
person. The Company does not know of any valid grounds for any bona fide claims
(i) to the effect that the conduct of the Business or the sale, licensing or use
of any product as now used, sold or licensed or proposed for use, sale or
license by Company infringes on any copyright, patent, trademark, service xxxx
or trade secret or other intellectual property rights of any person; (ii)
against the use by the Company of any Company or any Third Party Intellectual
Property Rights; (iii) challenging the ownership, validity or effectiveness of
any of the Company's Intellectual Property; or (iv) challenging the license or
legally enforceable right of the Company to use of the Third Party Intellectual
Property Rights.
(c) To the knowledge Company, except as set forth in Section
2.12 of the Company Disclosure Schedule or as and to the extent known by any
officers of PCGS, (i) all Company Intellectual Property and its rights therein,
including patents, registered trademarks, service marks and copyrights held by
the Company, are valid and subsisting, and (ii) there is no material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party, including employee or former employee
of the Company.
2.13 Related Party Transactions. Except as set forth in Section 2.13 of
the Company Disclosure Schedule or as and to the extent known by any officers of
PCGS, the Company is not a party to any agreement or transaction with any of its
Members, Managers, officers or employees, or any of their relatives or
affiliates.
2.14 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of the Members.
2.15 Full Disclosure. The Company represents and warrants that none of
the representations and warranties of the Company contained in this Agreement,
the Company Disclosure Schedule or in any certificates delivered by it at the
Closing ("Closing Certificates"), and each Member represents and warrants,
severally and not jointly with any other party hereto, that none of such
Member's representations or warranties contained in this Agreement or in any
Closing Certificate delivered by such Member, contains or shall contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it was made, in order
to make statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEMBERS
Each Member hereby represents and warrants to CUI that:
3.1 Authority and Capacity. Member has the full legal right and
capacity to execute and deliver, and to perform his or her obligations under,
and has duly executed and delivered, this Agreement with the intent to be
legally bound hereby. This Agreement constitutes, and when executed and
delivered by the Member, the Stockholders Agreement will constitute, valid and
legally binding obligations of the Member that are enforceable against him or
her in accordance with their respective
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terms, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights and by general
principles of equity relating to the availability of equitable remedies
(regardless of whether any such agreements are sought to be enforced in a
proceeding at law or in equity). Member is not obligated to obtain any consent
or approval of any other person in connection with the execution and delivery of
this Agreement or the Stockholders Agreement or the consummation of the
transactions contemplated hereby or thereby and the execution and delivery of
this Agreement and the Stockholders Agreement and the consummation by him or her
of the transactions contemplated hereby or thereby will not violate, or
constitute a breach or default under or cause the acceleration of any obligation
or liability under any contract, promissory note, mortgage, lease, license,
permit, writ, decree or other instrument or agreement to which such Member is a
party or is subject.
3.2 Securities Law Compliance. Member represents and warrants that:
(a) Member has been advised and understands and agrees that
the CUI Shares will not be registered under the Securities Act of 1933, as
amended (the "1933 Act"), nor qualified under any state securities laws, on the
ground (among others) that no distribution or public offering of the CUI Shares
is to be effected in connection with the transactions contemplated herein and in
issuing the CUI Shares to Member, CUI is relying on the accuracy and
completeness of the representations and warranties of Member in this Section
3.2.
(b) Member is acquiring the CUI Shares for his own account,
and not as an nominee or agent for any other persons or entities, and for
investment and not with a view to distribution or resale thereof.
(c) Member acknowledges that he has been informed and
understands that no public market for the CUI Shares exists and that there can
be no assurance that any such market may develop or exist in the future and,
even if a public market does develop, that the CUI Shares may not be sold or
transferred except in compliance with the 1933 Act or any exemption thereunder
and there is no assurance that any exemption from registration, including Rule
144 under the 1933 Act will become available to permit resales of the CUI
Shares.
(d) Member has been furnished with such information regarding
CUI and the CUI Shares as he has requested of CUI and has had an opportunity to
ask questions of the officers of CUI regarding, and to become informed about,
CUI and its business and its consolidated financial condition and results of
operations.
(e) The Member is, or all of the owners of the Member are,
"Accredited Investors" as such term is defined in Regulation D under the 1933
Act.
(f) Member acknowledges and agrees that (i) until the CUI
Shares become eligible for resale under Rule 144(k) under the 1933 Act, any
proposed sale or other transfer or disposition of any of the CUI Shares, other
than pursuant to an effective registration statement under the 1933 Act, may not
be made unless and until Member has furnished to CUI an opinion of counsel,
reasonably acceptable to CUI and its counsel, to the effect that the proposed
sale or other transfer or disposition is exempt from registration under the 1933
Act, and (ii) the CUI Shares will be subject to the Stockholders Agreement
referred to in Section 1.5 hereof and, until the Stockholders Agreement has been
terminated (A) no sale or other disposition of the CUI Shares may be made except
in compliance therewith and (B) the CUI Shares may be required to be sold in one
or more transactions involving sales of shares of CUI initiated by certain other
of the CUI Stockholders, all as more fully provided in the Stockholders
Agreement. Member has read and understands the Stockholders Agreement.
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(g) Member acknowledges and agrees that the certificate
representing the CUI Shares shall contain restrictive legends in the forms set
forth in the form of Stockholders Agreement attached hereto as Exhibit G or
restrictive legends that are substantially similar thereto, and that the CUI
Note shall contain the legends set forth on the form of such Note attached
hereto as Exhibit D.
3.3 Acknowledgements Regarding CUI Representations. Member acknowledges
and agrees that (a) neither CUI nor any of its officers, directors, employees or
agents has made, and none of them is making, any representations or warranties
to the Company or the Member with respect to (i) the federal, state or local
income or other tax consequences to the Company or the Member of the
consummation of the transactions contemplated hereby, or (ii) the future
performance of CUI; and (b) in entering into this Agreement, and the
Stockholders Agreement, the Member is not relying on any statements or
representations or warranties of CUI, or any representations or warranties made
or purported to have been made by any officer, director, stockholder, employee
or agent of CUI, other than the express representations and warranties of CUI
contained in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXX
XXX hereby represents and warrants to the Company and the Members that,
except as set forth in the written disclosure schedule delivered on or prior to
the date hereof by CUI to the Company that is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV (the "CUI Disclosure Schedule"):
4.1 Organization and Qualification; Subsidiaries. CUI is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority to own, lease and operate the properties it purports to own, and to
operate or lease and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and Approvals would not have a Material Adverse
Effect (as hereinafter defined) on CUI. CUI is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not have a Material Adverse Effect. The term "Material
Adverse Effect," when used in connection with the CUI or any of its
subsidiaries, means any change, effect or circumstance that is materially
adverse to the business, assets, financial condition, results of operations or
prospects of the CUI and its subsidiaries, taken as a whole, other than any such
changes, circumstances or effects that are set forth or described in the CUI
Disclosure Schedule.
4.2 Certificate of Incorporation and By-Laws. CUI has heretofore
furnished to the Company and the Members a complete and correct copy of its
Certificate of Incorporation and By-Laws, as in effect on the date hereof. Such
Certificate of Incorporation and By-Laws are in full force and effect. CUI is
not in violation of any of the provisions of Certificate of Incorporation or
By-Laws.
4.3 Capitalization. Immediately prior to the consummation of the
transactions contemplated by this Agreement and the Other Contribution
Agreements (the "Section 351 Transactions"), the authorized capital stock of CUI
consists of 30,000,000 shares of Common Stock, par value $.001 per share, of
which no shares are outstanding. On consummation of the Section 351
Transactions, there will be (i) a total of 19,000,000 fully paid and
nonassessable shares of Common Stock that will be issued and outstanding, all of
which will have been issued pursuant to this Contribution Agreement and the
Other Contribution Agreements. In addition, the Company will reserve 3,250,000
shares of Common Stock for
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future issuance on the exercise of stock options (either granted or to be
granted in the future), which includes a total of approximately 1,800,000 shares
issuable on exercise of options that will be exchanged for employee stock
options held by existing employees of or consultants to PCGS). Except for the
this Agreement and the Other Contribution Agreements and as set forth in this
Section 4.3, as of the date of hereof there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of CUI or obligating CUI to issue or sell any
shares of capital stock of, or other equity interests in, CUI. There are no
obligations, contingent or otherwise, of CUI to repurchase, redeem or otherwise
acquire any of the capital stock of CUI.
4.4 Power and Authority. CUI has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by CUI and the consummation by CUI of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of CUI, and no other corporate
proceedings on the part of CUI are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by CUI and, assuming due authorization,
execution and delivery by the Company and Members, constitutes a legal, valid
and binding obligation of CUI enforceable against it in accordance with its
terms, except as the enforceability thereof may be subject to or limited by (i)
bankruptcy, insolvency, reorganization, arrangement, moratorium, or other
similar laws relating to or affecting rights of creditors, and (ii) general
equitable principles, including the possible unavailability of specific
performance or injunctive relief, regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law.
4.5 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by CUI does
not, and the performance of this Agreement by CUI will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws of CUI, (ii) conflict with
or violate any law, rule, regulation, order, judgment or decree applicable to
CUI or by which its properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or impair CUI's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation, or result in the creation
of a lien or encumbrance on any of the properties or assets of CUI pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which CUI is a party or
by which CUI or its or properties are bound or affected, except in any such case
for any such conflicts, violations, breaches, defaults or other occurrences that
would not have a Material Adverse Effect on CUI.
(b) The execution and delivery of this Agreement by CUI does
not, and the performance of this Agreement by CUI will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the 1933 Act and any applicable state
securities laws, and (ii) where the failure to obtain such consents, approvals,
authorization or permits, or to make such filings or notifications, would not
prevent or delay consummation of the transactions contemplated hereby, or
otherwise prevent CUI from performing its obligations under this Agreement, and
would not have a Material Adverse Effect.
4.6 Financial Statements; Liabilities.
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(a) CUI has furnished to the Company and the Members unaudited
consolidated financial statements of PCGS, which is CUI's predecessor company.
Such financial statements are comprised of a consolidated balance sheet of PCGS
as of June 30,1998 and related consolidated statements of income, cash flows and
stockholders equity for the year then ended, and an unaudited consolidated
balance sheet as of, and a related unaudited consolidated statement of income of
PCGS for the six months ended, December 31, 1998, all of which have been
prepared by PCGS (collectively, the "PCGS Financial Statements"). Except as
otherwise set forth in Section 4.6 of the CUI Disclosure Schedule or in the
footnotes contained in the PCGS Financial Statements, such Financial Statements
fairly present, in all material respects, the financial position of PCGS as at
June 30, 1998 and December 31, 1998, respectively, and the respective results of
operations of PCGS and changes in cash flows and stockholders equity for the
year and six months ended on June 30, 1998 and December 31, 1998, respectively.
(b) No Undisclosed Liabilities. Except as is disclosed in
Section 4.6 of the CUI Disclosure Schedule, neither CUI nor PCGS has any
liabilities (absolute, accrued, contingent or otherwise), except (a) liabilities
that individually and in the aggregate are adequately provided for in the PCGS
balance sheet (including any related notes thereto) as of December 31, 1998
included in the PCGS Financial Statement (the "1998 PCGS Balance Sheet"), (b)
non-material liabilities which were incurred in the ordinary course of business
and were not required under generally accepted accounting principles to be
reflected on the 1998 PCGS Balance Sheet, or which were incurred after December
31, 1998 in the ordinary course of business and consistent with past practice
and would not be required, under generally accepted accounting principles, to be
reflected on a PCGS balance sheet prepared in accordance with GAAP.
4.7 Absence of Material Adverse Changes. Except as is disclosed in
Section 4.7 of the CUI Disclosure Schedule, since December 31, 1998, there has
not been (i) a change in the financial condition or results of operations or
business of PCGS or (ii) any action or legal proceeding that has been brought or
is known by CUI to have been threatened against PCGS, or (iii) any other event
known to CUI, that has had or is reasonably expected to have a Material Adverse
Effect on CUI (assuming that CUI's acquisition of PCGS is consummated
concurrently with the Closing).
4.8 Restrictions on Business Activities. To the best knowledge of CUI,
there is no material agreement, judgment, injunction, order or decree binding
upon CUI or any of its subsidiaries which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any material business
practice of CUI or any of its subsidiaries, any acquisition of property by CUI
or the conduct of business by CUI or any of its subsidiaries as currently
conducted or as proposed to be conducted by CUI, except for any prohibition or
impairment as would not have a Material Adverse Effect on CUI.
4.9 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of CUI.
4.11 Full Disclosure. No representation or warranty of CUI contained in
this Agreement and no statement contained in any certificate or schedule
furnished or to be furnished by CUI to the Company or the Members in, or
pursuant to the provisions of, this Agreement, including without limitation the
CUI Disclosure Schedule, contains or will contain any untrue statement of a
material fact or omits or shall omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
ARTICLE V
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CONDUCT OF BUSINESS PENDING THE CLOSING
5.1 Conduct of Business by the Company Pending the Closing. The Company
and Members jointly and severally covenant and agree that, during the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing, the Company (i) shall conduct its
business only, and shall not take any action except, in the ordinary course of
business and consistent with past practice; and (ii) shall use reasonable
commercial efforts to preserve substantially intact the business organization of
the Company, to keep available the services of the present officers, employees
and consultants of the Company and to preserve the present relationships of the
Company with customers, suppliers and other persons with which the Company has
significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, the Company shall not, either directly or indirectly,
do or propose to do any of the following without the prior written consent of
CUI, which consent shall not be unreasonably withheld:
(a) Amend or otherwise change its Articles of Organization or
Operating Agreement;
(b) Sell, pledge, dispose of, or permit the imposition or
existence of any Liens or Encumbrances on, any of the Contributed Assets or sell
or dispose of or encumber any of the other assets of the Company if such sale,
disposition or encumbrance would adversely affect CUI's ability, after the
Closing, to conduct the Business as currently conducted or would interfere with
the consummation of the transactions contemplated hereby;
(c) Take any of the following actions: (i) acquire (by merger,
consolidation, or acquisition of stock or assets) any corporation, limited
liability company, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money or issue any debt
securities that could result in the imposition of any liens, mortgages, security
interests, claims, charges or encumbrances on any of the Contributed Assets or
the Business or could interfere with the consummation of the transactions
contemplated hereby or subject CUI or any of its subsidiaries to any
liabilities, (iii) enter into or amend any Material Contract except where the
entry into the Contract or the amendment thereto would not have a Material
Adverse Effect on the Company or increase the liabilities thereof; or (iv)
authorize any capital expenditures or purchase of fixed assets which are, in the
aggregate, in excess of $10,000;
(d) Increase the compensation or employee benefits payable or
to become payable to its officers, directors or employees or independent
contractors, except for increases in salary or wages of employees (other than
officers) of the Company in accordance with past practice, or grant any
severance to termination pay to, or enter into or amend or terminate any
employment or severance agreement with any director, officer or other employee
of the Company or establish, adopt, enter into or amend any collective
bargaining agreement or any Company Employee Plans (as hereinabove defined) or
other plan, agreement, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers or employees, except, in each case, as may
be required by law;
(e) Take any action to change accounting policies, principles,
practices or procedures (including, without limitation, procedures with respect
to revenue recognition, payments of accounts payable and collection of accounts
receivable);
(f) Make any material tax election inconsistent with past
practice or settle or compromise any material federal, state, local or foreign
tax liability or agreement to an extension of a statute of limitations, except
to the extent the amount of any such settlement has been reserved for in the
Company Financial Statements;
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(g) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), if such payment, discharge or satisfaction would require the
disposition or encumbrance of any of the Contributed Assets, adversely affect
the Business or interfere with the consummation of the transactions contemplated
hereby.
(h) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (g) above;
The Company agrees that it will not, and each Member also agrees,
severally as to himself and not jointly that he or it (as the case may be) will
not take any action which would (i) make any of its or his respective
representations or warranties contained in this Agreement untrue or incorrect or
(ii) prevent or interfere with the performance by the Company or such Member of
any of its or his respective covenants contained in this Agreement.
5.2 No Solicitation. During the period from the date hereof and
continuing until the earlier of the completion of the Closing or termination of
this Agreement:
(a) The Company shall not directly, or indirectly through any
officer, Manager, employee, representative or agent, and each Member agrees that
he or it shall not directly, or indirectly through any agent or representative:
(i) solicit, initiate or encourage the initiation of
any inquiries or proposals regarding any merger, sale of substantial
assets, sale of shares of capital stock (including without limitation
by way of a tender offer) or similar transactions involving the Company
or the Company's Membership Interest, (any of the foregoing inquiries
or proposals being referred to herein as an "Acquisition Proposal");
(ii) engage in negotiations or discussions concerning
any Acquisition Proposal, (iii) provide any nonpublic information to
any person relating to the Company or the Business or any of the
transactions contemplated hereby, or
(iv) enter into any agreement or understanding,
written or oral, relating to any Acquisition Proposal.
The Company and Members also shall immediately cease and cause to be terminated
any existing discussions or negotiations that any of them may be having with any
person (other than CUI) with respect to any Acquisition Proposal or which could
conceivably lead to the making of an Acquisition Proposal. The Company and the
Members agree not to release any third party from the provisions of any
confidentiality agreement that such third party may have with the Company or
Members.
(b) Each of the Company and Members shall notify CUI
immediately after receipt by any of them of any Acquisition Proposal or any
request for nonpublic information relating to, or for access to the properties,
books or records of, the Company by any person or entity. Such notice to CUI
shall be made orally and in writing.
(c) The Company shall ensure that the officers, Managers and
employees of the Company and any advisor or representative retained by the
Company are aware of and will comply with the restrictions described in this
Section 5.2.
5.3 Access to Information. During the period from the date hereof and
continuing until the earlier of the completion of the Closing or termination of
this Agreement, each of the Company and CUI, upon reasonable notice, and subject
to the provisions of Section 5.8 hereof, shall each (i) afford to the officers,
employees, accountants, counsel and other representatives of the other,
reasonable access,
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during the period between the date hereof and continuing until the earlier of
the Closing or termination of this Agreement, to all its properties, books,
contract, commitments and records (ii) furnish promptly to the other all
information concerning its business, properties and personnel as such other
party may reasonably request, and (iii) make available to the other the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either CUI or the Company may reasonably request.
5.4 Consents; Approvals. The Company, the Members and CUI shall each
use their best reasonable efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all governmental and
regulatory rulings and approvals), and the Company, the Members and CUI shall
make all filings (including, without limitation, all filings with governmental
or regulatory agencies) required in connection with the authorization, execution
and delivery of this Agreement by the Company, the Members and CUI and the
consummation by them of the transactions contemplated hereby. The Company, the
Members and CUI shall furnish all information that is required to be included
and is reasonably available for inclusion in any applications or other filings
to be made pursuant to the rules and regulations of any governmental body in
connection with the transactions contemplated by this Agreement.
5.5 Obligations Being Assumed; Obligations and Liabilities Not Being
Assumed.
(a) Assumed Contractual Obligations. CUI hereby agrees to
assume only those obligations of the Company under the Assigned Contracts listed
in Exhibit C to this Agreement (the "Assumed Contractual Obligations");
provided, however, that CUI shall not be obligated to assume, and CUI shall not
have any liability for or in connection with, any Assumed Contractual Obligation
that is in default as of the Closing Date or as to which there exists as of the
Closing Date an event or circumstance that, with the passage of time or the
giving of notice, or both, would give rise to a default thereunder.
(b) Liabilities Not Being Assumed. Except for the Assumed
Contractual Obligations, the Company and the Members agree that CUI shall not be
obligated to assume or perform or discharge, and that CUI will not be assuming,
performing or otherwise discharging, any liabilities or obligations of the
Company, whether known or unknown, fixed or contingent, matured or unmatured,
certain or uncertain, that have arisen prior hereto or may arise between the
date hereof and the Closing or which may arise after the Closing out of the
conduct of any business or other activities conducted by the Company
(collectively, the "Retained Liabilities"). The Company and Members jointly and
severally covenant and agree that the Company shall be responsible for
performing and satisfying, and shall perform and satisfy, the Retained
Liabilities, at the Company's sole expense, and without liability, cost, loss or
expense of or to CUI. The Retained Liabilities shall include, but shall not be
limited to, any and all of the following obligations and liabilities of the
Company:
(i) Taxes. All Taxes (as defined in Section 9.2
hereof) that have arisen prior to the Closing or may arise thereafter
out of any business or other operations conducted by the Company,
either prior to or after the Closing Date.
(ii) Liens and Encumbrances. Any Liens or
Encumbrances on any of the Contributed Assets or any other assets of
the Company.
(iii) Monetary Obligations. Any accounts or notes
payable and obligations for borrowed money or purchase money
indebtedness of the Company.
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(iv) Claims and Legal Proceedings. Any claims,
demands, actions, suits or legal proceedings that have been asserted or
threatened prior to the Closing against the Company, the Business or
the Contributed Assets or which may be threatened or asserted hereafter
against the Contributed Assets, the Business or CUI that arises in any
way from or in connection with the conduct or operation of the Business
prior to the Closing, or any other business or non-business activities
of the Company conducted prior hereto or hereafter.
(v) Contingent Liabilities. Any liability,
deficiency, penalty, cost or expense arising out of the sale of any
currency or the conduct of the Business by the Company or any other
activities of the Company, whether or not disclosed in the Company's
Financial Statements (as hereinafter defined) or in the Company
Disclosure Schedule.
(vi) Transaction Related Liabilities. Any liabilities
of the Company that may arise out of the consummation of this
Agreement, or actions that may be taken by the Company or Members in
connection therewith, including, but not limited to, any liabilities or
obligations for accrued but unpaid salaries, vacation, and holiday and
such pay and any liabilities or obligations that may arise under any
employment, consulting, independent contractor or severance agreements
or arrangements (whether written or oral) or any bonus or employee
benefit programs or arrangements between the Company and any of its
employees or independent contractors.
5.6 Notification of Certain Matters. The Company or the Members shall
give prompt notice to CUI, and CUI shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event which would be likely to cause
any representation or warranty made by such party in this Agreement to be
materially untrue or inaccurate, or (ii) any inability or failure of the
Company, the Members or CUI, as the case may be, materially to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
hereunder; provided, however, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
5.7 Further Action. On the terms and subject to the conditions hereof,
each of the parties hereto shall use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and otherwise to satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement. From
and after the Closing, each party shall take such actions and execute such
documents and instruments as any other party may reasonably request to better
evidence or effectuate the transactions contemplated by this Agreement or the
Exhibits hereto.
5.8 Confidential Information. Each party acknowledges that it or any of
its officers, directors, managers, employees, agents or advisors
("Representatives") may be given, by one of the other parties hereto (a
"disclosing party") or any of such disclosing party's Representatives, access to
various items of proprietary and confidential information of the disclosing
party in the course of investigations and negotiations prior to Closing. Each
party hereto who is furnished or given access to the confidential information of
a disclosing party (a "receiving party") agrees that such confidential
information shall be kept strictly confidential by the receiving party and by
its Representatives and shall not be used for any purpose other than to
facilitate the consummation of the transactions contemplated herein.
Confidential information shall include any proprietary business or other
information which is delivered (orally or in writing) or to which access is
given by a disclosing party or any of its Representatives to the receiving
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party or any of its Representatives, and any such information that is included
in or incorporated into any notes, analyses, memoranda, projections or other
documents that are prepared by the receiving party or any of its
Representatives, unless such information (a) is already of public knowledge, or
(b) becomes of public knowledge through no fault, action or inaction of the
receiving party or its Representatives, or (c) is demonstrated convincingly by
the receiving party to have been known by the receiving party, or any of its
Representatives, prior to the disclosure of such information by the disclosing
party to the receiving party, unless such knowledge was acquired from a person
who the receiving party or its Representatives knew or reasonably should have
known was subject, at the time of such disclosure, to a fiduciary or other duty
of non-disclosure to the disclosing party. Except as permitted by Section 5.8,
no party hereto, nor its respective Representatives, shall intentionally
disclose any confidential information of any of the other parties to any third
person; provided, however, that such information may be disclosed (i) with the
written consent of the other parties hereto, (ii) in applications or requests
required to be made to obtain licenses, permits, approvals or consents needed to
consummate the transactions contemplated herein, (iii) to the professional
advisors of each party hereto who need to know such information in connection
with the consummation of the transactions contemplated hereby, or (iv) pursuant
to court order or subpoena, provided, however, that if any receiving party or
any of its Representatives is served with a court order or subpoena that would
require the disclosure of any of the confidential information of a disclosing
party, the receiving party or such Representative so served (as the case may be)
shall promptly, but in any event within three (3) days thereafter, notify the
disclosing party thereof and shall provide reasonable cooperation, at the
disclosing party's expense, with any efforts that the disclosing party may
undertake to quash such court order or subpoena or obtain a protective order
with respect to the disclosure and use of such confidential information. The
restrictions and obligations contained in this Section 5.8 shall survive any
termination of this Agreement; provided, however, that, if the transactions
contemplated hereby are consummated, the obligations of CUI and any subsidiaries
thereof under this Section 5.8 shall terminate, but all of the obligations of
the Company and Members under this Section 5.8 shall survive and shall continue
in full force and effect at all times after the Closing.
5.9 Effective Date.
(a) If the transactions contemplated by this Agreement are
consummated by March 12, 1999, then, for accounting, Tax and other recordkeeping
purposes, the Closing shall be deemed to have occurred as of February 5, 1999.
In that event, all auction and other sales of coins or other Collectibles by the
Company that occur between February 5, 1999 and the actual Closing Date
("Post-Effective Date Coin Sales") shall be for the account of CUI. In addition,
and notwithstanding anything to the contrary contained elsewhere in this
Agreement, all cash and accounts receivable generated by the Company from, net
of expenditures made in connection with, such Post-Effective Date Coin Sales
shall be paid to CUI as part of the Purchased Assets and shall not be retained
by the Company. In furtherance thereof, the Company shall furnish CUI with all
records and reports relating to all such Post-Effective Date Coin Sales. CUI
agrees that it shall assume the payment obligations (that have not yet been paid
by the Closing Date) incurred by the Company, in the ordinary course and
consistent with past practices, in connection with the preparations for and the
conduct of such Post-Effective Date Coin Sales.
(b) Each of the parties agrees to report the Post Effective
Date Income (as hereinafter defined), on their respective federal and state tax
returns, in a manner consistent with an effective closing date of February 5,
1999. In the event that Kingswood or its Members are required by any federal or
state Tax agency to recognize and pay income tax on the net income derived from
any such Post-Effective Date Coin Sales ("Post Effective Date Income"), CUI
shall pay to Kingswood, or its Members according to their relative allocable
amounts of such income, an amount of additional
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Acquisition Consideration equal to 22.64 percent of the Post Effective Date
Income. The parties agree that such amount will provide for the difference
between the increase in state and federal tax on such Post Effective Date Income
and the decrease in state and federal tax on long term capital gains due to an
increased basis in Kingswood assets and/or in the Members membership interests.
As a condition to the obligation of CUI to pay such amounts, Kingswood or its
Members shall promptly notify CUI in writing of any formal or informal assertion
or proposal, by an state or federal Tax agency, that Kingswood or its Members be
required to recognize any Post Effective Date Income. If, as a result of any
such assertion or proposal Kingswood or its Members incur any liability to pay
any interest or penalties to any Tax Agency, CUI shall indemnify and hold them
harmless therefrom.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Obligations of Each Party to Consummate Transactions.
The performance by each party of its respective obligations under this Agreement
shall be subject to the satisfaction, at or prior to the Closing Date, of each
of the following conditions unless waived in writing by such party:
(a) Absence of Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect, nor shall any proceeding brought by any administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending; and there shall
not be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the transactions contemplated hereby
which makes their consummation illegal.
(b) Governmental Actions. There shall not have been
instituted, pending or threatened, in writing, any action or proceeding (or any
investigation or other inquiry that might result in such an action or
proceeding) by any governmental authority or administrative agency before any
governmental authority, administrative agency or court of competent
jurisdiction, nor shall there be in effect any judgment, decree or order of any
governmental authority, administrative agency or court of competent
jurisdiction, in either case, seeking to prohibit or limit CUI, following the
Closing, from exercising any of the material rights and privileges pertaining to
its ownership of the Contributed Assets or the ownership or conduct of the
Business.
(c) Consents Obtained. All material consents, waivers,
approvals, authorizations or orders required to be obtained by CUI, the Company
or the Members for the authorization, execution and delivery of this Agreement
and the consummation by each such party of the transactions contemplated hereby
shall have been obtained by CUI, the Company or such Members (as the case may
be), except where the failure to receive such consents, waivers, approvals,
authorizations or orders could not reasonably be expected to have a Material
Adverse Effect on the Business or CUI;
(d) Consummation of Other Transactions. The transactions
contemplated by the Other Contribution Agreements shall have been consummated at
or about the same time as the Closing hereunder.
6.2 Additional Conditions to Obligations of CUI. The obligations of CUI
to consummate its acquisition of the Business and the Contributed Assets and to
perform its other obligations under this Agreement also are subject to the
following conditions:
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(a) Accuracy of Representations and Warranties. The
representations and warranties of the Company and Members contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date, with the same force and effect as if made on and as of the Closing
Date, except for (i) changes contemplated by this Agreement or by the Company
Disclosure Schedule, and (ii) those representations and warranties which address
matters only as of a particular date (which shall have been true and correct as
of such date, and CUI shall have received a certificate to such effect signed by
the President of the Company and the Members.
(b) Performance of Covenants. The Company and the Members
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
or them (as the case may be) on or prior to the Closing Date, including the
execution and delivery by each Member of his or its Stockholders Agreement, and
CUI shall have received a certificate to such effect signed by the President of
the Company and the Members.
(c) Additional Instruments. CUI shall have received the
Closing Documents listed on Exhibit H hereto and such other instruments and
documents as CUI or its counsel reasonably deems to be necessary.
6.3 Additional Conditions to Obligations of the Company and Members.
The obligation of the Company and Members to consummate their respective
obligations under this Agreement is also subject to the following conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of CUI contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date, except for (i)
changes contemplated by this Agreement or by the CUI Disclosure Schedule, and
(ii) those representations and warranties which address matters only as of a
particular date (which shall have been true and correct as of such date, and the
Members shall have received a certificate to such effect signed by the President
of CUI.
(b) Agreements and Covenants. CUI shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and the Company and the Members shall have received a certificate to such
effect signed by the President of CUI.
(c) Additional Instruments. Members shall have received the
additional Closing Documents listed on Exhibit H hereto and such other
instruments and documents as Members or their counsel reasonably deems to be
necessary.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the transactions
herein contemplated may be abandoned at any time prior to the Closing:
(a) By mutual written consent of CUI and the Company; or
(b) By CUI, if any of the conditions to its obligations set
forth in Section 6 of this Agreement shall not have been satisfied, or waived by
CUI in writing, prior to March 12, 1999;
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(c) By the Company, if any of the conditions set forth in
Section 6 of this Agreement to the obligations of the Company or the Members
shall not have been satisfied, or waived in writing by the Company, prior to
March 12, 1999;
Provided, that in each of the foregoing cases the party so terminating
is not in breach of any of its material obligations or representations or
warranties under this Agreement.
Notwithstanding anything to the contrary contained elsewhere in this Agreement,
if a party hereto has breached this Agreement (a "Breaching Party") and such
breach is of a nature that it is susceptible of cure, and the other party
determines to terminate this Agreement by reason thereof, such other party shall
give prompt written notice of such termination to the Breaching Party and such
intended termination shall not become effective provided that the Breaching
Party effectuates a cure of such breach by the earlier of (i) the 30th day
following such notice of termination or (ii) March 12, 1999.
7.2 Procedure Upon Termination. Any termination and
abandonment by CUI or the Company, or both, pursuant to Section 7.1 hereof,
shall be effective on written notice thereof from the terminating party to the
other parties and upon any such termination:
(a) Each party will redeliver all documents, workpapers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) The obligations of confidentiality set forth in Section
5.8 hereof shall continue despite such termination; and
(c) The parties shall be relieved of any obligation to
consummate the transactions contemplated hereby, but none of the parties shall
be relieved of any liability for its breach or default under this Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Regardless of any due diligence or other investigation, either prior to
or after the Closing, or any verification or approval by any party hereto or by
anyone or on behalf of any party hereto, all of the representations and
warranties set forth in this Agreement or in any certificates delivered pursuant
hereto shall remain in full force and effect and shall survive the Closing until
the expiration of twelve (12) months from the Closing Date, except that (i) the
representations and warranties of the Company and the Members relating to Taxes
shall survive until six (6) months following the expiration of the statutory
limitations period applicable to such Taxes, (ii) the representations and
warranties of the Company and Members contained in Sections 2.4 and 2.10, the
representations and warranties of each of the Members contained in Section 3.1
and the representations and warranties of CUI contained in Sections 4.3 and 4.4,
shall survive for a period of five (5) years following the Closing. All
covenants which by their terms require performance or compliance following the
Closing, including the obligations of the Company and the Members under Section
5.5, shall remain in full force and effect and shall survive the Closing until
they have been fully performed and discharged; provided, however, that the
covenants of the Company and the Members under Paragraphs 5.5(b) with respect to
Taxes that constitute Retained Liabilities shall survive until six (6) months
following the expiration of the statutory limitations period applicable to the
payment of Taxes.
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ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the addresses set forth on Exhibit I hereto or sent by electronic
transmission, with confirmation received, to the telecopy numbers or E-Mail
addresses specified on that Exhibit (or at such other address or telecopy number
for a party as shall be specified hereafter by like notice).
9.2 Interpretation and Certain Definitions. This Agreement is the
result of arms'-length negotiations between the parties hereto and no provision
hereof, because of any ambiguity found to be contained therein or otherwise,
shall be construed against a party by reason of the fact that such party or its
legal counsel was the draftsman of that provision. Unless otherwise indicated
elsewhere in this Agreement, (a) the term "or" shall not be exclusive, (b) the
term "including" shall mean "including, but not limited to," and (c) the terms
"herein," "hereof," "hereto," "hereunder" and other terms similar to such terms
shall refer to this Agreement as a whole and not merely to the specific section,
subsection, paragraph or clause where such terms may appear. In addition, for
purposes of this Agreement, the term:
(a) "business day" means any day other than a day on which
banks in California are required or authorized to be closed.
(b) "Collectibles" means rare or valuable coins, stamps,
sports cards, sports memorabilia, comic books, movie posters, items autographed
by recording artists, or sports, movie, television or other celebrities,
game-used and other products or items the value of which is greater than the
customary retail price of similar items or products because they are associated
with a recording artist, or sports, movie, television or other celebrities or a
well-known event and other products or items (such as antiques) which derive
their value largely from their uniqueness or the limited quantity or
availability thereof.
(c) "control" (including the terms "controlled by" and "under
common control with") means possession, directly or indirectly or as trustee or
executor, or the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise.
(d) "person" means an individual, corporation, limited
liability company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934).
(e) "Tax" or "Taxes" shall mean taxes, fees, levies, duties,
tariffs, imposts, and governmental impositions or charges of any kind in the
nature of (or similar to) taxes, payable to any federal, state, local or foreign
taxing authority, including (without limitation) (i) income, franchise, profits,
gross receipts, ad valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto.
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9.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto, provided, however, the
signatures of the Members shall not be required if such instrument has been
signed by the Company.
9.4 Waiver. At any time prior to the Closing, the Company, on behalf of
itself and the Members, may with respect to CUI and CUI may with respect to the
Members and the Company (i) extend the time for the performance of any of the
obligations or other acts of the other, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto by the other, or (c) waive compliance with any of the agreements
or conditions contained herein. Any such extension or waiver shall be valid if
set forth in an instrument in writing signed by the party or parties to be bound
thereby.
9.5 Headings. The section, subsection and any paragraph headings
contained herein are for the purpose of convenience only and are not intended to
define, limit or affect, and shall not be considered in connection with, the
interpretation of any of the terms or provisions of this Agreement.
9.6 Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by reason of any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect, unless such invalidity, illegality or unenforceability
would prevent consummation of the material transactions contemplated hereby or
would have a Material Adverse Effect on the Business or CUI.
9.7 Entire Agreement. This Agreement (inclusive of the Exhibits hereto
and the Company and CUI Disclosure Schedules) constitutes the entire agreement
and supersedes all prior agreements and undertakings, both oral and written,
among the parties, or any of them, with respect to the subject matter of this
Agreement and the Exhibits hereto.
9.8 Assignment. This Agreement shall not be assigned voluntarily by any
of the parties nor by operation of law or otherwise.
9.9 Parties In Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, including, without limitation, by way of subrogation, other than
Section 5.5 (which is intended to be for the benefit of the Indemnified Parties
and the others specifically referenced therein as beneficiaries of the
agreements contained in Section 5.5, and may be enforced by such Indemnified
Parties and other persons).
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
9.11 Governing Law; Jurisdiction over Legal Actions. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of California applicable to contracts executed and fully performed within
the State of California. In the event any party hereto is required to initiate
any legal action or proceeding to enforce its rights hereunder, such action or
proceeding shall be
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brought and maintained exclusively in the Superior Court for the County of
Orange, in California and each party agrees to accept, and not to challenge, the
jurisdiction of such court over the parties and the subject matter of such
action or proceeding or the convenience of the forum and to accept and not to
challenge the adequacy of service by certified or registered mail. The
prevailing party in any such action or proceeding shall be entitled to recover
its reasonable attorneys fees and disbursements, expert witness fees and
disbursements and other costs of suit from the non-prevailing party. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY EXPRESSLY WAIVES
ITS RIGHT TO A JURY TRIAL IN ANY SUCH ACTION OR PROCEEDING, IRRESPECTIVE OF
WHICHEVER PARTY MAY BRING ANY SUCH ACTION OR PROCEEDING.
9.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
(Signatures of parties follow on next page.)
IN WITNESS WHEREOF, each of CUI and the Company has caused this
Agreement to be executed, by its respective officers thereunto duly authorized,
and each Member has executed this Agreement, as of the date first written above.
KINGSWOOD COIN AUCTIONS, LLC COLLECTORS UNIVERSE, INC.
By: /s/ Xxxxx Xxxx By: /s/ Xxxxx Xxxx
-------------------- --------------------
Xxxxx Xxxx, Chairman
MEMBERS:
XXXXX XXXX'X NORTH AMERICAN KENSINGTON ASSOCIATES, LLC
TRADING, LLC ("DHNAT")
By: /s/ Xxxxx Xxxx By: /s/ Xxxx X. Xxxxxxx
-------------------- ------------------------
Xxxxx Xxxx, President Xxxx X. Xxxxxxx, Manager
/s/ Xxxxx Xxxx /s/ Xxx Xxxxxxx
-------------------- --------------------
Xxxxx Xxxx Xxx Xxxxxxx
/s/ Q. Xxxxx Xxxxxx /s/ Xxxxxxx Xxxxxx
-------------------- --------------------
Q. Xxxxx Xxxxxx Xxxxxxx Xxxxxx
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EXHIBIT A
THE MEMBERS OF KINGSWOOD
OWNERS OF MEMBERSHIP INTERESTS; ALLOCATION OF CONSIDERATION
Allocation of Acquisition Consideration Among Members
Membership -----------------------------------------------------
Name of Owner Interest CUI Shares CUI Note Payment
------------- -------- ---------- ----------------
DHNAT 25% 47,500 $ 250,000
Kensington Associates, LLC 25% 47,500 $ 250,000
Xxxxx Xxxx 15% 28,500 $ 150,000
Xxx Xxxxxxx 15% 28,500 $ 150,000
Q. Xxxxx Xxxxxx 12% 22,800 $ 120,000
Xxxxxxx Xxxxxx 8% 15,200 $ 80,000
--- ------- -------------
100% 190,000 $ 1,000,000
=== ======= =============
