ASSET PURCHASE AGREEMENT
DATED AS OF DECEMBER 19, 1997
BETWEEN
ACTION PERFORMANCE COMPANIES, INC.
AND
REVELL-MONOGRAM, INC.
TABLE OF CONTENTS
Page
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SECTION 1
TRANSFER OF ASSETS.......................................................... 1
1.1 Purchase and Sale of Assets....................................... 1
1.2 Transferred Assets................................................ 1
(a) Accounts Receivable.......................................... 2
(b) Furniture, Fixtures, and Equipment........................... 2
(c) Inventory.................................................... 2
(d) Claims and Rights to the Transferred Assets.................. 2
(e) Business Contracts........................................... 2
(f) Intellectual Property........................................ 2
(g) Vendor and Customer Lists.................................... 3
(h) Licenses, Permits, and Approvals............................. 3
(i) Books and Records............................................ 3
(j) Leasehold Interests.......................................... 3
(k) Names........................................................ 3
(l) Phone Numbers................................................ 3
(m) Deposits and Prepaid Expenses................................ 3
1.3 Excluded Assets................................................... 3
(a) Rights Hereunder............................................. 4
(b) Cash......................................................... 4
(c) Corporate Documents.......................................... 4
(d) Employee Records............................................. 4
(e) Tax Records.................................................. 4
(f) Disposed of Assets........................................... 4
(g) Assets of the Other Business................................. 4
(h) Assets Related to Hallmark................................... 4
(i) Intellectual Property........................................ 4
SECTION 2
ASSUMPTION OF LIABILITIES................................................... 4
2.1 Liabilities Assumed............................................... 4
2.2 No Expansion of Third Party Rights................................ 5
2.3 Designated Subsidiary............................................. 5
SECTION 3
PURCHASE PRICE.............................................................. 5
3.1 Purchase Price.................................................... 5
3.2 Payment of Purchase Price......................................... 5
3.3 Additional Amount................................................. 5
3.4 Adjustment to Initial Payment..................................... 6
SECTION 4
REPRESENTATIONS AND WARRANTIES.............................................. 7
4.1 Representations and Warranties of Seller.......................... 7
(a) Due Incorporation, Good Standing, and Qualification.......... 7
i
(b) Corporate Authority.......................................... 7
(c) No Subsidiaries.............................................. 7
(d) Financial Statements......................................... 7
(e) No Material Change........................................... 8
(f) Title to Properties.......................................... 8
(g) Condition of Assets and Properties........................... 8
(h) Litigation................................................... 8
(i) Rights and Licenses.......................................... 9
(j) No Violation................................................. 9
(k) Taxes........................................................ 9
(l) Accounts Receivable.......................................... 9
(m) Contracts.................................................... 9
(n) Compliance with Law and Other Regulations.................... 10
(o) Employee Benefit and Employment Matters...................... 10
(p) Insurance.................................................... 10
(q) Intellectual Property........................................ 10
(r) Inventories.................................................. 11
(s) Consents..................................................... 11
(t) Accuracy of Statements....................................... 11
4.2 Representations and Warranties of Buyer........................... 11
(a) Due Incorporation, Good Standing, and Qualification.......... 11
(b) Corporate Authority.......................................... 12
(c) Financial Statements......................................... 12
(d) No Material Change........................................... 12
(e) Litigation................................................... 13
(f) No Violation................................................. 13
(g) Taxes........................................................ 13
(h) Compliance with Law and Other Regulations.................... 13
(i) SEC Reports.................................................. 14
(j) Consents..................................................... 14
(k) Accuracy of Statements....................................... 14
4.3 Survival of Representations and Warranties........................ 14
SECTION 5
COVENANTS................................................................... 14
5.1 Covenants of Seller............................................... 14
(a) Truth of Representations and Warranties...................... 14
(b) Preservation of Business..................................... 14
(c) Ordinary Course.............................................. 15
(d) Books and Records............................................ 15
(e) Compensation................................................. 15
(f) Transfer of Rights Under Certain Excluded Business Contracts. 15
(g) Assistance to Buyer.......................................... 15
(h) Consents and Approvals....................................... 15
(i) Confidentiality.............................................. 16
(j) Insurance.................................................... 16
(k) Maintenance of Assets and Properties......................... 16
(l) Satisfaction of Obligations and Liabilities.................. 16
(m) Employees.................................................... 16
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(n) Investments.................................................. 16
(o) Right of Inspection.......................................... 16
5.2 Covenants of Buyer................................................ 17
(a) Truth of Representations and Warranties...................... 17
(b) Consents and Approvals....................................... 17
(c) Assistance to Seller......................................... 17
5.3 No Solicitation................................................... 17
5.4 Efforts to Consummate Transaction; Further Assurances............. 17
5.5 Public Announcements.............................................. 18
5.6 Expenses.......................................................... 18
5.7 Post-Closing Assistance to Seller................................. 18
5.8 Post-Closing Assistance to Buyer.................................. 18
5.9 Seller's Right of First Refusal................................... 18
SECTION 6
CONDITIONS PRECEDENT TO OBLIGATIONS......................................... 18
6.1 Conditions Precedent to the Obligations of Buyer.................. 18
(a) Accuracy of Representations and Warranties................... 19
(b) Performance of Agreements.................................... 19
(c) Corporate Approval........................................... 19
(d) Opinion of Counsel for Seller................................ 19
(e) No Material Adverse Change................................... 20
(f) Litigation................................................... 20
(g) Certificate of Seller........................................ 20
(h) License Agreement............................................ 20
(i) Manufacturing Agreement...................................... 20
(j) Distribution Agreement....................................... 20
(k) Assignment of Business Contracts............................. 20
(l) Assistance to Buyer.......................................... 21
(m) Termination of HSR Act Waiting Periods....................... 21
(n) Consents and Approvals....................................... 21
(o) Delivery of Documents........................................ 21
(p) Proceedings Satisfactory to Counsel.......................... 21
6.2 Conditions Precedent to the Obligations of Seller................. 21
(a) Accuracy of Representations and Warranties................... 21
(b) Performance of Agreements.................................... 21
(c) Corporate Approval........................................... 21
(d) Opinion of Counsel for Buyer................................. 21
(e) Litigation................................................... 22
(f) Certificates of Buyer and Designated Subsidiary.............. 22
(g) License Agreement............................................ 23
(h) Manufacturing Agreement...................................... 23
(i) Distribution Agreement....................................... 23
(j) Assistance to Seller......................................... 23
(k) Termination of HSR Act Waiting Periods....................... 23
(l) Consents and Approvals....................................... 23
(m) Delivery of Documents........................................ 23
(n) Proceedings Satisfactory to Counsel.......................... 23
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SECTION 7
THE CLOSING.................................................................. 23
7.1 Closing.............................................................. 23
7.2 Deliveries by Seller................................................. 23
(a) Instruments of Conveyance........................................ 23
(b) Certificate of Seller............................................ 24
(c) Certificate of Secretary......................................... 24
(d) Consents......................................................... 24
(e) Legal Opinion.................................................... 24
(f) Books and Records................................................ 24
(g) License Agreement................................................ 24
(h) Manufacturing Agreement.......................................... 24
(i) Distribution Agreement........................................... 24
7.3 Deliveries by Buyer or Designated Subsidiary......................... 24
(a) Assumption of Liabilities........................................ 24
(b) Initial Payment of Purchase Price................................ 24
(c) Buyer's Certificates............................................. 24
(d) Secretary's Certificate.......................................... 24
(e) Legal Opinion.................................................... 25
(f) Consents and Approvals........................................... 25
(g) License Agreement................................................ 25
(h) Manufacturing Agreement.......................................... 25
(i) Distribution Agreement........................................... 25
7.4 Further Assurances................................................... 25
SECTION 8
WAIVER, MODIFICATION, ABANDONMENT............................................ 25
8.1 Waivers.............................................................. 25
8.2 Modification......................................................... 25
8.3 Abandonment.......................................................... 26
8.4 Effect of Abandonment................................................ 26
SECTION 9
NON-COMPETITION, CONFIDENTIALITY,
AND NON-SOLICITATION......................................................... 27
9.1 Non-competition, Confidentiality, and Non-Solicitation by Seller..... 27
(a) Duration and Extent of Restriction............................... 27
(b) Confidentiality.................................................. 27
(c) Restrictions with Respect to Vendors and Customers............... 27
(d) Expiration of Non-Competition Period Under Certain Circumstances. 28
9.2 Non-competition, Confidentiality, and Non-Solicitation by Buyer...... 28
(a) Duration and Extent of Restriction............................... 28
(b) Confidentiality.................................................. 28
(c) Restrictions with Respect to Vendors and Customers............... 29
9.3 Remedies for Breach.................................................. 29
9.4 Restrictions Separable............................................... 29
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SECTION 10
INDEMNIFICATION.............................................................. 29
10.1 Indemnification by Seller........................................ 29
(a) General..................................................... 29
(b) Bulk Sales Matters.......................................... 30
10.2 Indemnification by Buyer......................................... 30
10.3 Notice and Right to Defend Third-Party Claims.................... 30
10.4 Limitation on Rights to Indemnification.......................... 31
SECTION 11
GENERAL...................................................................... 31
11.1 Indemnity Against Finders........................................ 31
11.2 Controlling Law.................................................. 31
11.3 Notices.......................................................... 31
11.4 Binding Nature of Agreement; No Assignment....................... 32
11.5 Entire Agreement................................................. 33
11.6 Construction..................................................... 33
11.7 Attorneys' Fees.................................................. 33
11.8 Remedies Cumulative.............................................. 33
11.9 Computation of Time.............................................. 33
11.10 Authority........................................................ 33
11.11 Paragraph Headings............................................... 33
11.12 Gender........................................................... 33
11.13 Counterparts..................................................... 33
11.14 Subsidiaries..................................................... 33
v
ASSET PURCHASE AGREEMENT
AGREEMENT dated as of December 19, 1997, between ACTION
PERFORMANCE COMPANIES, INC., an Arizona corporation ("Buyer") and
REVELL-MONOGRAM, INC., a Delaware corporation ("Seller").
Seller is engaged in the business (the "Business") of
developing, producing, marketing, and selling metal die-cast miniature replicas
of motorsports vehicles, haulers, and trains associated with motorsports
activities that are conducted primarily in the United States, specifically
limited to National Association for Stock Car Auto Racing ("NASCAR"), National
Hot Rod Association ("NHRA"), International Hot Rod Association ("IHRA"), "dirt
car," and "sprint car" racing (collectively, "U.S. Motorsports"). Seller owns or
has rights to all of the assets relating to or used by Seller in connection with
the Business. Buyer desires to acquire and assume from Seller, and Seller
desires to transfer to Buyer, the Transferred Assets and the Assumed Liabilities
(as such terms are defined respectively in Sections 1.2 and 2.1), all upon the
terms and conditions set forth in this Agreement.
Seller also engages in the development, production, marketing,
and sale of plastic models, plastic model kits, and plastic miniature replicas
of U.S. Motorsports vehicles and die-cast models, as well as plastic models,
plastic model kits, and other products that are not related to U.S. Motorsports
(the "Other Business"). Buyer is not acquiring any of the assets used or
intended for use in the Other Business, except as set forth in a Schedule
hereto.
In connection with the transfer of the Transferred Assets and
assumption of the Assumed Liabilities, Buyer and Seller also desire to enter
into a License Agreement, a Manufacturing Agreement, and a Distribution
Agreement, as respectively defined in Sections 6.1(h), 6.1(i), and 6.1(j) of
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants set forth herein, the parties agree as follows:
SECTION 1
TRANSFER OF ASSETS
1.1 Purchase and Sale of Assets. Based upon and subject to the
representations, warranties, covenants, agreements, and other terms and
conditions set forth in this Agreement, Seller shall sell, convey, transfer,
assign, and deliver on the Closing Date (as defined in Section 7.1), and Buyer
shall purchase, acquire, and accept or cause one of its subsidiaries
("Designated Subsidiary") to purchase, acquire, and accept, as provided herein,
all of the assets, properties, rights, and goodwill of Seller of every kind and
description, wherever located, used or intended for use in connection with the
Business, except for the "Excluded Assets" listed in Section 1.3.
1.2 Transferred Assets. The assets, properties, rights, and
goodwill to be sold, conveyed, transferred, assigned, and delivered by Seller on
the Closing Date pursuant to Section 1.1 are sometimes herein called the
"Transferred Assets" and shall include, without limitation, all of the assets
and properties shown on or reflected in the Balance Sheet relating to the
Business as at November 30, 1997 ("Seller's Base Balance Sheet") and all assets
and properties used in or intended for use in connection with the Business
acquired by Seller after the date of Seller's Base Balance Sheet and to the
Closing Date except for those disposed of before the Closing Date as permitted
by this Agreement. Without limiting the foregoing, the Transferred Assets shall
include the following:
(a) Accounts Receivable. All accounts receivable and
notes and other receivables relating solely to the Business (the "Accounts
Receivable"), including, without limitation, those set forth on Schedule
"1.2(a)" hereto, which sets forth the amount of each receivable and the name and
mailing address of the obligor on each such receivable as of the date of
Seller's Base Balance Sheet, except for accounts receivable associated with
sales of "Revell Select" and "Revell Racing" inventory to mass-retail accounts
and hobby distributors.
(b) Furniture, Fixtures, and Equipment. All
furniture, fixtures, machinery, equipment, parts, tools, molds, and dyes used or
intended for use solely in connection with the Business (the "Equipment"),
including, without limitation, the Equipment set forth on Schedule "1.2(b)"
hereto.
(c) Inventory. All inventory, including, without
limitation, raw materials, supplies, work in process, finished goods, packaging,
and promotional materials used in or intended for use solely in connection with
the Business (the "Inventory" or "Inventories"), including, without limitation,
the Inventories set forth on Schedule "1.2(c)" hereto, excluding "Revell Racing"
and "Revell Select" inventory as described in the Manufacturing Agreement.
(d) Claims and Rights to the Transferred Assets. All
claims and rights (and benefits arising therefrom) relating to the Transferred
Assets against all persons and entities, including, without limitation, all
rights against suppliers under warranties covering any of the Equipment and
Inventory, in each case, to the same extent as the same are used or held for use
in connection with the Business.
(e) Business Contracts. All Leases (as defined in
Section 1.2(k)), license agreements, sales orders, sales contracts, sales
representative agreements, service agreements, supply agreements, franchise
agreements, technical service agreements, and other contracts and agreements to
which Seller is a party and that are in writing and used or held for use by
Seller solely in connection with the Business (the "Business Contracts"),
including, without limitation, each Business Contract set forth on Schedule
"1.2(e)(i)" hereto. Attached to Schedule "1.2(e)(i)" is the text of each
Business Contract that Seller reasonably believes will be in effect on the
Closing Date. Subject to Sections 5.1(f) and 5.8, below, Seller is not obligated
to transfer to Buyer any contract or agreement that relates in whole or in part
to the Other Business (the "Excluded Business Contracts"). The Excluded Business
Contracts that relate in part to the Business are identified in Schedule
"1.2(e)(ii)".
(f) Intellectual Property. Except for those
trademarks and trade names of Seller that are covered by and the subject of the
License Agreement, all intellectual property rights used or intended for use by
Seller solely in connection with the Business that are owned by or licensed to
Seller, including, without limitation, all patents and applications therefor,
know-how, unpatented inventions, trade secrets, packaging styles and methods,
business and marketing plans, ideas for products or production developed by or
on behalf of Seller for use solely in connection with the Business, copyrights
and applications therefor, trademarks and applications therefor, service marks
and applications therefor, trade names and applications therefor, and all names,
logos, and slogans used or intended for use by Seller solely in connection with
the Business (the "Intellectual Property"), including, without limitation, the
Intellectual Property set forth on Schedule "1.2(f)" hereto and including any
other Intellectual Property transferrable by Seller. Seller shall promptly
deliver to Buyer complete copies of all such business and marketing plans,
license agreements, copyrighted materials, trademarks, and trade
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names, and patents and all applications therefor used or intended for use solely
in connection with the Business.
(g) Vendor and Customer Lists. All vendor and
customer lists and vendor and customer records used or intended for use in
connection with the Business. Schedule "1.2(g)" hereto sets forth a list of all
previous (within the last two years from the date hereof) and existing vendors
and customers of Seller relating to the Business and their last known business
addresses.
(h) Licenses, Permits, and Approvals. All licenses,
permits, approvals, and authorizations of whatsoever kind and type, governmental
or private, issued, applied for, or pending, used or intended for use solely in
connection with the Business (the "Licenses and Permits"). The Licenses and
Permits are set forth on Schedule "1.2(h)" hereto. Attached to Schedule "1.2(h)"
are complete copies of all Licenses and Permits.
(i) Books and Records. Copies of all books and
records used or intended for use solely in connection with the Business,
including, without limitation, the vendor and customer lists, blueprints,
drawings, and other technical papers used or intended for use solely in
connection with the Business or the Transferred Assets, and all accounts
receivable, inventory, maintenance, and asset history records, but excluding all
employee and tax records whether or not used or intended for use in connection
with the Business (provided, however, that Seller shall provide to Buyer access
to such employee and tax records relating to the Business upon written request
following the Closing Date).
(j) Leasehold Interests. The leasehold interests
created by all leases of real property and personal property used or intended
for use solely in connection with the Business, under which Seller is a lessee,
including those leases that are capitalized leases and any maintenance contracts
and deposits in connection therewith (all such leasehold interest shall herein
be referred to as "Leasehold Interests" and the contracts evidencing the same
shall herein be referred to as the "Leases," and all such personal property that
Seller is leasing as lessee relating to the Business shall herein be referred to
as "Leased Personalty"), including, without limitation, the Leased Personalty
set forth on Schedule "1.2(k)" hereto and any other Leased Personalty
transferrable by Seller. Attached to Schedule "1.2(k)" are complete copies of
all the lease agreements listed on Schedule "1.2(k)".
(k) Names. Except for those names that will be
licensed to Buyer pursuant to the License Agreement, all right, title, and
interest in and to any and all names solely associated with the Business and the
Transferred Assets used at any time within the preceding 24 months, and any
derivations thereof (the "Names").
(l) Phone Numbers. All telephone and facsimile
numbers used solely in the conduct of the Business.
(m) Deposits and Prepaid Expenses. All deposits,
notes receivable, and prepaid expenses relating solely to the Business (the
"Deposits"), including, without limitation, the Deposits set forth on Schedule
"1.2(m)" hereto (including any deposits with respect to the Leases assumed by
Buyer pursuant to Section 2.1) as reduced in the ordinary course of business in
accordance with past historical practices.
1.3 Excluded Assets. Except as set forth in Section 1.2 of
this Agreement, the following assets, properties, and rights of Seller shall not
constitute Transferred Assets and therefore shall
3
be excluded from the purchase and sale contemplated by this Agreement
(collectively, the "Excluded Assets"):
(a) Rights Hereunder. Seller's rights under this
Agreement, the License Agreement, the Manufacturing Agreement, the Distribution
Agreement, and any other agreement contemplated by this Agreement.
(b) Cash. Any cash, bank accounts, certificates of
deposit, or investment securities of Seller.
(c) Corporate Documents. Seller's corporate charter,
minute and stock record books, and corporate seal.
(d) Employee Records. To the extent such records
relate to the Business, all of Seller's records with respect to employees,
provided that access thereto shall be provided to Buyer upon written request.
(e) Tax Records. To the extent such books and records
relate to the Business, all of Seller's books and records with respect to taxes,
provided that access thereto shall be provided to Buyer upon written request.
(f) Disposed of Assets. Any assets and properties
disposed of since the date of Seller's Base Balance Sheet in the ordinary course
of business and as contemplated by this Agreement.
(g) Assets of the Other Business. Except as
explicitly set forth on a Schedule to this Agreement, any asset, property, or
other right related to the Other Business, subject to Seller's obligations to
assign or sublicense certain of its rights with respect to the Business under
certain of the Excluded Business Contracts pursuant to Sections 5.1(f) and 5.8
of this Agreement.
(h) Assets Related to Hallmark. Any asset, property
or right derived from Seller's sales, licenses or other dealings with Hallmark
Cards, Incorporated ("Hallmark") or Hallmark's distribution channels as
currently constituted (the "Hallmark Distribution Channels").
(i) Intellectual Property. Any name, trademark, or
other intellectual property that will be licensed to Buyer pursuant to the
License Agreement.
SECTION 2
ASSUMPTION OF LIABILITIES
2.1 Liabilities Assumed. Upon the sale and purchase of the
Transferred Assets as provided in this Agreement, Buyer or Designated Subsidiary
shall, except as provided in this Agreement, assume and shall thereafter pay or
discharge when due (a) all accounts payable of Seller or its affiliates to
vendors with respect to the Business as reflected on Seller's Base Balance Sheet
and as incurred by Seller with respect to the Business in the ordinary course of
the conduct of the Business after the date of Seller's Base Balance Sheet to the
Closing Date, to the extent such accounts payable exist on the Closing Date; (b)
all obligations and liabilities of Seller, including royalties payable under
license agreements, under the Leases and the Business Contracts transferred to
Buyer pursuant to Section 1.2; and (c) all other accrued liabilities of the
Business incurred in the normal course with respect to payroll expense for the
employees listed on Schedule 2.1 and accrued liabilities for sales tax
collections and any sales, value
4
added, transfer, and other taxes (other than income taxes) associated with the
sale, transfer, or delivery of the Transferred Assets, or as listed on the Base
Balance Sheet. Such obligations and liabilities being assumed pursuant to this
Section 2.1 are sometimes referred to herein as "Assumed Liabilities."
2.2 No Expansion of Third Party Rights. The assumption by
Buyer or Designated Subsidiary of the Assumed Liabilities, and the transfer
thereof by Seller, shall in no way expand the rights and remedies of any third
party against Seller or Buyer or Designated Subsidiary as assignee of Seller as
compared to the rights and remedies that such third party would have had against
Seller or Buyer or Designated Subsidiary as assignee of Seller had Buyer or
Designated Subsidiary not assumed such liabilities. Without limiting the
generality of the preceding sentence, the assumption by Buyer or Designated
Subsidiary of such liabilities shall not create any third party beneficiary
rights.
2.3 Designated Subsidiary. Buyer and Seller contemplate that
Buyer may organize a newly formed, wholly owned subsidiary (referred to herein
as "Designated Subsidiary") to acquire the Transferred Assets and assume the
Assumed Liabilities. Accordingly, notwithstanding anything to the contrary in
Section 11.4, at the Closing (as defined in Section 7.1), Buyer may assign and
delegate to such Designated Subsidiary all its rights and obligations under this
Agreement and the other agreements contemplated by this Agreement (a "Permitted
Assignment"), it being agreed that any such Permitted Assignment shall not
release Buyer from any of its obligations under this Agreement or any other
agreement that Buyer would have entered into in connection with this Agreement
or the transactions contemplated hereby but for such Permitted Assignment.
Therefore, upon a Permitted Assignment, all obligations of Buyer hereunder and
under any such other agreement shall be joint and several obligations of Buyer
and such Designated Subsidiary, notwithstanding anything to the contrary in this
Agreement or any such other agreement.
SECTION 3
PURCHASE PRICE
3.1 Purchase Price. The purchase price for the Transferred
Assets to be acquired pursuant to Section 1.1 shall be, in addition to the
assumption of the Assumed Liabilities pursuant to Section 2.1, an amount equal
to $14,806,000.00 (subject to adjustment pursuant to Section 3.4), plus the
Additional Amount (as defined in Section 3.3).
3.2 Payment of Purchase Price. At the Closing, Buyer shall pay
to Seller, by cashier's check or wire transfer, the sum of $14,806,000.00 (the
"Initial Payment").
3.3 Additional Amount. In addition to the Initial Payment,
Buyer shall pay or cause to be paid to Seller an additional amount (the
"Additional Amount") calculated as follows:
(i) Buyer shall pay or cause to be paid to Seller
$1,000,000 (the "Base Additional Amount") on January 1 of each year beginning on
January 1, 1998 and ending on December 31, 2007, provided that, during the
12-month period immediately preceding each Base Additional Amount payment date,
Seller (A) has kept the "Revell" trademark duly and validly registered in the
United States, and (B) the License Agreement is still in effect.
(ii) For each of the five 12-month periods beginning
on January 1, 1998 and ending on December 31, 2002, Buyer shall pay or cause to
be paid to Seller, in addition to the Base Additional Amount, an Additional
Amount to be calculated based on 5.0% of the amount of Buyer's sales of "Revell"
trademarked die-cast products in excess of $20,000,000 in such 12-month period,
provided
5
that the maximum Additional Amount payable by Buyer pursuant to this Section
3.3(ii) for any such 12- month period shall not exceed $500,000.
(iii) For each of the five 12-month periods beginning
on January 1, 2003 and ending on December 31, 2007, Buyer shall pay or cause to
be paid to Seller, in addition to the Base Additional Amount, an Additional
Amount to be calculated based on (A) 5.0% of the amount of Buyer's sales of
"Revell" trademarked die-cast products in excess of $20,000,000 but less than or
equal to $30,000,000 in such 12-month period, (B) 3.0% of the amount of Buyer's
sales of "Revell" trademarked die-cast products in excess of $30,000,000 but
less than or equal to $40,000,000 in such 12-month period, and (C) 2.0% of the
amount of Buyer's sales of "Revell" trademarked die-cast products in excess of
$40,000,000 in such 12-month period.
(iv) Buyer shall have no obligation (A) to pay any
Base Additional Amount for any 12-month period beginning on or after January 1,
2008, or (B) to pay any Additional Amount to Seller based on sales of "Revell"
trademarked die-cast products made on or after January 1, 2008.
The amount, if any, of the Additional Amount for each year shall be calculated
by Buyer and paid to Seller within 90 days following such year. Each payment
shall be accompanied by a report to Seller, certified by an authorized officer
of Buyer to be accurate, setting forth the amount of sales of "Revell"
trademarked die-cast products in each calendar month of the relevant period. For
the purposes of this Agreement, a "sale" or "sales" shall be deemed to have
occurred upon the shipment by Buyer of any product bearing or accompanied by the
"Revell" name or otherwise licensed under the License Agreement and the amount
of Buyer's sales shall be the sales price to Buyer's immediate customers without
▇▇▇▇-up by third parties. Sales to affiliates of Buyer shall be made on an arm's
length basis. Buyer shall keep full, clear, and accurate books and records with
respect to all sales or other revenue with respect to the Transferred Assets
subject to this Agreement. The books and records shall be maintained in such a
manner that the Additional Amount shall be readily verifiable and shall be
available for inspection by representatives of Seller once per calendar year
upon reasonable prior notice and during normal business hours. Seller shall have
the right to cause the books and records of Buyer to be audited on Buyer's
premises upon reasonable prior notice and during normal business hours, by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP or another independent accountant selected from a "big
four" accounting firm mutually agreed upon by Buyer and Seller, which shall
provide Seller with a statement summarizing the sales or other revenue with
respect to the Transferred Assets and the Additional Amount due for the audit
period. The information contained in Buyer's books and records shall remain
confidential. In no event shall Seller be entitled to examine and audit Buyer's
records more than once per calendar year except upon good cause shown. In the
event Seller's audit reveals an overpayment or deficiency in any Additional
Amount due under this Agreement, Seller or Buyer shall remit the overpayment or
deficiency, as the case may be, within 10 days together with interest at a rate
of 8% per annum accruing from the date such amount was paid. In the event such
audit shows an underpayment of an Additional Amount by Buyer of more than 5%,
the cost of the audit shall be paid by Buyer; otherwise, the cost of the audit
shall be paid by Seller. Should Seller fail to examine records for a period of
three years from the date of any report from which they were compiled, then that
report shall be deemed final and binding and Seller shall have no further right
to contest the report or payment of the Additional Amount called for therein.
Nothing in this Section 3.3 shall give Buyer the right to use the "Revell" name
or trademark. Such right must be pursuant to the License Agreement between
Seller and Buyer.
3.4 Adjustment to Initial Payment. Within 35 days after the
Closing, Seller shall prepare and deliver to Buyer a Closing Balance Sheet as of
the Closing Date which will reflect Seller's best estimate of the Transferred
Assets and the Assumed Liabilities, prepared in accordance with the
6
principles reflected in, and on a basis consistent with, the Base Balance Sheet.
Buyer shall have access to relevant personnel, books, and records of Seller to
determine if it agrees with the Closing Balance Sheet, and will inform Seller,
in writing, within 15 days after receipt of the Closing Balance Sheet whether it
agrees with the Closing Balance Sheet and, if it does not, the specifics of any
disagreement. If the parties do not reach an agreement within 10 days after
Buyer notifies Seller of any disagreements with Seller's Closing Balance Sheet,
then ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP (the "Accountants") shall be engaged by both Seller and
Buyer to determine whether the proposed adjustments are appropriate. Seller and
Buyer shall provide to the Accountants all information and access to personnel
that the Accountants may require and shall divide equally and share equally the
costs, fees, and expenses of the Accountants. The Accountants' determination
shall be conclusive. Once the final determination of the net assets on the
Closing Balance Sheet is made, the Initial Payment shall be increased by the
amount of such net assets over, or will be decreased by the amount of such net
assets under, the amount of net assets as reflected in the Base Balance Sheet,
and there shall be payment to or repayment by the Seller, as the case may be, to
reflect such difference.
SECTION 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Seller. Except as
otherwise set forth in Seller's disclosure schedule (the "Seller Disclosure
Schedule") attached hereto and incorporated herein by reference, Seller
represents and warrants to Buyer and Designated Subsidiary as follows:
(a) Due Incorporation, Good Standing, and
Qualification. Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation with all
requisite corporate power and authority to own, operate, and lease its assets
and properties and to carry on the Business as now being conducted. Seller is
not subject to any material disability in connection with the conduct of the
Business by reason of the failure to be duly qualified as a foreign corporation
for the transaction of business or to be in good standing under the laws of any
jurisdiction. Schedule "4.1(a)" hereto constitutes a list setting forth, as of
the date of this Agreement, each jurisdiction in which Seller is qualified to do
business with respect to the Business.
(b) Corporate Authority. Seller has the corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. The Board of Directors and shareholders of
Seller have duly authorized the execution, delivery, and performance of this
Agreement. No other corporate proceedings on the part of Seller are necessary to
authorize the execution and delivery by Seller of this Agreement or the
consummation by Seller of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by, and constitutes a legal, valid, and
binding agreement of, Seller, enforceable against Seller in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.
(c) No Subsidiaries. Seller does not have any other
affiliates or subsidiaries that own or have an interest in any of the
Transferred Assets or conduct any portion of the Business.
(d) Financial Statements. The Balance Sheets of the
Business as of December 31, 1996 and November 30, 1997, and the Statements of
Income and the Statements of Cash Flows of the Business for the periods ended
December 31, 1996 and November 30, 1997 have been
7
prepared by Seller without audit. Within 35 days after the Closing Date, Seller
shall provide to Buyer a Balance Sheet of the Business as of the Closing Date
and the Statement of Income for the period from January 1, 1997 through the
Closing Date. All of the foregoing financial statements have been and will be
prepared in accordance with generally accepted accounting principles (but
without footnotes), which were applied on a consistent basis, are correct and
complete, and present fairly and accurately, in all material respects, the
consolidated financial position, results of operations, and changes in financial
position of the Business as of their respective dates and for the periods
indicated. Seller has no material liabilities or obligations relating to the
Business of a type that would be included in a balance sheet prepared in
accordance with generally accepted accounting principles, whether related to tax
or non-tax matters, accrued or contingent, due or not yet due, liquidated or
unliquidated, or otherwise, except as and to the extent disclosed or reflected
in Seller's Base Balance Sheet or incurred since the date of that balance sheet
in the ordinary course of business and as contemplated by this Agreement.
(e) No Material Change. Since the date of Seller's
Base Balance Sheet, there has not been and there is not threatened (i) any
material adverse change in the financial condition, business or operating
results of Seller with respect to the Business or the Transferred Assets, (ii)
any loss or damage (whether or not covered by insurance) to any of the
Transferred Assets that materially affects or impairs Seller's ability to
conduct the Business, or (iii) any mortgage or pledge of any of the Transferred
Assets, or any indebtedness incurred by or relating to Seller with respect to
the Business, other than indebtedness, not material in the aggregate, incurred
in the ordinary course of business. Seller makes no representation or warranty,
however, with respect to the manner in which any of Seller's current customers
may react to the news of the transactions that are the subject of this
Agreement.
(f) Title to Properties. Seller has good and
marketable title to all of the Transferred Assets, including those reflected in
Seller's Base Balance Sheet or acquired subsequent to the date of Seller's Base
Balance Sheet, except Transferred Assets disposed of subsequent to the date of
Seller's Base Balance Sheet in the ordinary course of the conduct of the
Business and as contemplated by this Agreement. The Transferred Assets are
subject to no mortgage, indenture, pledge, lien, claim, encumbrance, charge,
security interest or title retention, or other security arrangement, except for
liens for the payment of federal, state, and other taxes, the payment of which
is neither delinquent nor subject to penalties, and except for other liens and
encumbrances incidental to the conduct of the Business by Seller or the
ownership of the Transferred Assets, which were not incurred in connection with
the borrowing of money or the obtaining of advances and which do not in the
aggregate materially detract from the value of the Transferred Assets or
materially impair the use thereof in the operation of the Business, except in
each case as disclosed in Seller's Base Balance Sheet. All leases pursuant to
which Seller leases any substantial amount of the Transferred Assets are valid
and effective in accordance with their respective terms.
(g) Condition of Assets and Properties. The
buildings, equipment, machinery, fixtures, furniture, furnishings, office
equipment, and all other tangible personal assets and properties of Seller
constituting Transferred Assets do not require any repairs other than normal
maintenance and are in good operating condition and in a state of reasonable
maintenance and repair.
(h) Litigation. There are no actions, suits,
proceedings, or other litigation pending or, to the knowledge of Seller,
threatened against Seller at law or in equity, or before or by any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality that, if determined adversely to Seller, might
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the Transferred Assets or the operations, operating results,
or condition, financial or otherwise, of Seller with respect to the Business.
8
(i) Rights and Licenses. Seller has all Licenses and
Permits necessary for the conduct of the Business as presently conducted by it
and the ownership and use of the Transferred Assets and the premises occupied by
it with respect to the Business. Schedule "1.2(h)" hereto contains a true,
correct, and complete list of all Licenses and Permits necessary for the conduct
of the Business.
(j) No Violation. Except as contemplated in Sections
5.1(f) and 5.8 of this Agreement, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will not violate or
result in a breach by Seller of, or constitute a default under, or conflict
with, or cause any acceleration of any obligation with respect to, (i) any
provision or restriction of any charter, bylaw, loan, indenture, or mortgage of
Seller, or (ii) any provision or restriction of any lien, lease agreement,
contract, instrument, order, judgment, award, decree, ordinance, or regulation
or any other restriction of any kind or character to which any of the
Transferred Assets is subject or by which Seller is bound with respect to the
Business.
(k) Taxes. Seller has duly filed in correct form all
Tax Returns (as defined below) relating to the activities of Seller required or
due to be filed (with regard to applicable extensions) on or prior to the date
hereof. All such Tax Returns are accurate and complete in all material respects,
and Seller has paid or made provision for the payment of all Taxes (as defined
below) that have been incurred or are due or claimed to be due from Seller by
federal, state, or local taxing authorities for all periods ending on or before
the date hereof, other than Taxes or other charges that are not delinquent or
are being contested in good faith and have not been finally determined and have
been disclosed to Buyer. The amounts set up as reserves for Taxes on the books
of Seller are sufficient in the aggregate for the payment of all unpaid Taxes
(including any interest or penalties thereon), whether or not disputed, accrued,
or applicable. No claims for Taxes or assessments are being asserted or
threatened against Seller. For purposes of this Agreement, the term "Taxes"
shall mean all taxes, charges, fees, levies, or other assessments, including,
without limitation, income, gross receipts, excise, property, sales, transfer,
license, payroll, and franchise taxes, imposed by the United States, or any
state, local, or foreign government or subdivision or agency thereof; and such
term shall include any interest, penalties, or additions to tax attributable to
such assessments or to the failure to file any Tax Return; and the term "Tax
Return" shall mean any report, return, or other information required to be
supplied to a taxing authority or required by a taxing authority to be supplied
to any other person.
(l) Accounts Receivable. The accounts receivable of
Seller constituting Transferred Assets have been acquired in the ordinary course
of business, are valid and enforceable, and are fully collectible, subject to no
defenses, deductions, set-offs, or counterclaims, except to the extent of the
reserve reflected in Seller's Base Balance Sheet or in such other amount that is
not material in the aggregate. Each such account receivable is fully collectible
to the extent of the face value thereof (less the amount of the reserve for
doubtful accounts, if any, reflected on the books of Seller with respect to such
account), no later than 30 days after such account receivable is due, and no
account receivable is due more than 90 days after it was created. Any such
account receivable not collected in full (less any such reserve) within 30 days
after such account is due, or within 90 days after the Closing Date, whichever
is later, shall conclusively be deemed to be uncollectible. Notwithstanding the
foregoing, Buyer shall make no claim against Seller unless and until an
aggregate of at least $150,000 of accounts receivable are determined to be
non-collectible, in which case Seller shall be responsible for and shall
promptly reimburse Buyer for 50% of uncollectible accounts receivable in excess
of $150,000.
(m) Contracts. With respect to the Business, Seller
is not a party to any material contract, lease, agreement, mortgage, or other
arrangement other than the Business Contracts and the Excluded Business
Contracts. All material mortgages, leases, contracts, agreements, and other
9
arrangements with respect to the Business to which Seller is a party are valid
and enforceable in accordance with their terms; Seller and all other parties to
each of the foregoing have performed all obligations required to be performed to
date; neither Seller nor any such other party is in default in any material
respect or in arrears under the terms of any of the foregoing; and no condition
exists or event has occurred that, with the giving of notice or lapse of time or
both, would constitute a default in any material respect under any of them.
(n) Compliance with Law and Other Regulations. Seller
is in compliance in all material respects with all requirements (including those
relating to environmental matters) of federal, state, or local law and all
requirements of all governmental bodies and agencies having jurisdiction over it
with respect to the conduct of the Business, the use of Transferred Assets, and
the use of all premises occupied by it with respect to the Business. There is no
environmental contamination, toxic waste or other discharge, spill, construction
component, structural element or condition, adversely affecting any of the
Transferred Assets, nor has Seller received any official notice or citation that
any of the Transferred Assets in any way contravene any federal, state, or local
law or regulation relating to environmental, health, or safety matters,
including without limitation any requirements of the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA") or any OSHA requirements.
Without limiting the foregoing, Seller has properly filed all reports, paid all
monies, and obtained all licenses, permits, certificates, and authorizations
needed or required for the conduct of the Business and the use of the
Transferred Assets and the premises occupied by it in connection with the
Business and is in compliance in all material respects with all conditions,
restrictions, and provisions of all of the foregoing. Seller has not received
any notice from any federal, state, or local authority or any insurance or
inspection body that any of the Transferred Assets or the business procedures or
practices related to the Business fails to comply with any applicable law,
ordinance, regulation, building, or zoning law or requirement of any public
authority or body.
(o) Employee Benefit and Employment Matters. Seller
is not a party to any collective bargaining agreement and, to the best of
Seller's knowledge, there is no material request for union representation
pending or threatened against Seller. Subject to a contingent six-month
severance liability as set forth on the Seller Disclosure Schedule, the
employment of each employee of Seller with respect to the Business is terminable
at will without cost to Buyer. Seller has complied with all other applicable
federal, state, and local laws relating to the employment of labor, including,
but not limited to, the provisions thereof relative to wages, hours, collective
bargaining, working conditions, and payment of taxes of any kind, with respect
to the Business, and Seller is not liable for any arrears of wages or any taxes
or penalties for failure to comply with any of the foregoing or has any
obligations for any vacation, sick leave, or other compensatory time, except as
reflected in the financial statements described in Section 4.1(d). All officers
and independent contractors of Seller with respect to the Business are paid
salaries or other compensation in accordance with the amounts set forth on
Schedule "4.1(o)" hereto, and Schedule "4.1(o)" hereto correctly and accurately
sets forth all salaries, expenses, and personal benefits paid to or accrued for
all directors, officers, and principal shareholders of Seller with respect to
the Business as of the date of this Agreement, all of which are reflected as
appropriate in Seller's Base Balance Sheet.
(p) Insurance. Seller maintains in full force and
effect insurance coverage on the Transferred Assets and its premises,
operations, and personnel relating to the Business in such amounts as Seller
deems appropriate.
(q) Intellectual Property. Seller owns or holds all
of the rights to use all packaging, logos, trademarks, trade names, trade
secrets, fictitious names, service marks, patents, and
10
copyrights that are used in or necessary to the conduct of the Business. None of
the matters covered by the Intellectual Property, nor any of the products or
services sold or provided by Seller, nor any of the processes used or the
business practices followed by Seller, with respect to the Business, infringes
or has infringed upon any trademark, trade name, trade secret, fictitious name,
service ▇▇▇▇, patent, or copyright owned by any person or entity (or any
application with respect thereto), or constitutes unfair competition. Except as
set forth on Schedule "4.1(q)" or elsewhere in this Agreement, Seller is not,
and following the Closing neither Buyer nor Designated Subsidiary will be,
obligated to pay any royalty or other payment with respect to any of the
Intellectual Property. To the knowledge of Seller, no person or entity is
producing, providing, selling, or using products or services that would
constitute an infringement of any of the Intellectual Property.
(r) Inventories. The Inventories are in good and
merchantable condition and are stated at not more than the lower of cost or
market, with adequate adjustments for obsolete, obsolescent, or otherwise not
readily marketable items. Since the date of Seller's Base Balance Sheet, there
have not been and there are not required to be any write-downs in the value of
the Inventories or write-offs with respect to such Inventories. The raw
materials, work in progress, and finished goods inventory of Seller constituting
Transferred Assets are all in good condition and are usable and currently are
being used in the present production and sales activities of Seller with respect
to the Business, and Seller does not have on hand or on order any raw materials,
work in progress, or finished goods inventory with respect to the Business in
excess of its normal requirements (based upon sales experience from the latest
12 months) for products that are included in its current line with respect to
the Business and for which Seller is now taking orders. Without limiting the
foregoing, (i) Seller does not have more than an eight-month supply of raw
materials, work in progress, or finished goods inventory with respect to the
Inventories, substantially all of which is saleable at prices currently quoted
by Seller but in no event at prices lower than the amounts reflected on the Base
Balance Sheet, and (ii) all work in progress and finished goods inventory to be
transferred to Buyer or Designated Subsidiary pursuant to this Agreement are in
accordance with customers' specifications and the sale thereof to customers will
not result in any liability of any kind to Buyer or Designated Subsidiary.
(s) Consents. Except as set forth in Schedule 4.1(s)
hereto, no consent, approval, license, permit, or authorization of any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality, or other person is required in connection with the
execution and delivery of this Agreement by Seller or the consummation by Seller
of the transactions contemplated hereby.
(t) Accuracy of Statements. Neither this Agreement
nor any statement, list, certificate, or other information furnished or to be
furnished by Seller to Buyer in connection with this Agreement or any of the
transactions contemplated hereby contains or will contain an untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of circumstances in which
they are made, not misleading.
4.2 Representations and Warranties of Buyer. Except as
otherwise set forth in Buyer's disclosure schedule (the "Buyer Disclosure
Schedule") heretofore delivered by Buyer to Seller and acknowledged as received
by Seller, and except as disclosed in Buyer's Annual Report on Form 10-K for the
year ended September 30, 1997 as heretofore filed by Buyer with the Securities
and Exchange Commission (the "SEC"), Buyer represents and warrants to Seller as
follows:
(a) Due Incorporation, Good Standing, and
Qualification. Each of Buyer and Designated Subsidiary is a corporation duly
organized, validly existing, and in good standing under
11
the laws of its jurisdiction of incorporation with all requisite corporate power
and authority to own, operate, and lease its assets and properties and to carry
on its business as now being conducted. Neither Buyer nor Designated Subsidiary
is subject to any material disability by reason of the failure to be duly
qualified as a foreign corporation for the transaction of business or to be in
good standing under the laws of any jurisdiction.
(b) Corporate Authority. Buyer has and, if a
Permitted Assignment is effected, Designated Subsidiary will have, the corporate
power and authority to enter into this Agreement and carry out the transactions
contemplated hereby. The Board of Directors of Buyer has duly authorized the
execution, delivery, and performance of this Agreement and, if a Permitted
Assignment is effected, prior to such Permitted Assignment, the Board of
Directors of Designated Subsidiary will have authorized the performance of this
Agreement by virtue of its approval of the execution and delivery of documents
memorializing such Permitted Assignment. No other corporate proceedings on the
part of Buyer or any of its subsidiaries, including the approval of Buyer's
shareholders, are necessary to authorize the execution and delivery by Buyer of
this Agreement or the consummation by Buyer or Designated Subsidiary of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer. This Agreement constitutes a legal, valid, and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms, and
if a Permitted Assignment is effected, this Agreement will also constitute a
legal, valid, and binding agreement of Designated Subsidiary enforceable against
Designated Subsidiary in accordance with its terms, except that, in each case,
(i) such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or hereafter in effect relating to
creditors' rights, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefore may be
brought.
(c) Financial Statements. The Consolidated Balance
Sheets of Buyer and its subsidiaries as of September 30, 1996 and September 30,
1997 and the Consolidated Statements of Operations, the Consolidated Statements
of Shareholders' Equity, and the Consolidated Statements of Cash Flows of Buyer
and its subsidiaries for the three years ended September 30, 1997, and all
related schedules and notes to the foregoing, have been reported on by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, LLP, independent public accountants. All of the foregoing financial
statements have been prepared in accordance with generally accepted accounting
principles, which were applied on a consistent basis (except as described
therein), are correct and complete, and present fairly, in all material
respects, the financial position, results of operations, and changes of
financial position of Buyer and its subsidiaries as of their respective dates
and for the periods indicated. Neither Buyer nor any of its subsidiaries has any
material liabilities or obligations of a type that would be included in a
balance sheet prepared in accordance with generally accepted accounting
principles, whether related to tax or non-tax matters, accrued or contingent,
due or not yet due, liquidated or unliquidated or otherwise, except as and to
the extent disclosed or reflected in the Consolidated Balance Sheet of Buyer and
its subsidiaries as of September 30, 1997, or incurred since September 30, 1997,
in the ordinary course of business or as contemplated by this Agreement.
(d) No Material Change. Since September 30, 1997,
there has not been and there is not threatened (i) any material adverse change
in the business, assets, properties, financial condition, or operating results
of Buyer or its subsidiaries taken as a whole, (ii) any loss or damage (whether
or not covered by insurance) to any of the assets or properties of Buyer or its
subsidiaries, which materially affects or impairs their ability to conduct their
business, or (iii) any mortgage or pledge of any material amount of the assets
or properties of Buyer or any of its subsidiaries, or any indebtedness incurred
by Buyer or any of its subsidiaries, other than indebtedness, not material in
the aggregate, incurred in the ordinary course of business.
12
(e) Litigation. There are no actions, suits,
proceedings, or other litigation pending or, to the knowledge of Buyer,
threatened against Buyer or Designated Subsidiary, at law or in equity, or
before or by any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality that, (i) if determined
adversely to Buyer or Designated Subsidiary, might reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
business, assets, properties, or prospects or on the condition, financial or
otherwise, of Buyer and Designated Subsidiary taken as a whole, or (ii) question
the validity of this Agreement or seek to prohibit, enjoin, or challenge the
consummation of the transactions contemplated hereby.
(f) No Violation. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
violate or result in a breach by Buyer or Designated Subsidiary of, or
constitute a default under, or conflict with, or cause any acceleration of any
obligation with respect to, (i) any provision or restriction of any charter,
bylaw, loan, indenture, or mortgage of Buyer or Designated Subsidiary, or (ii)
any provision or restriction of any lien, lease agreement, contract, instrument,
order, judgment, award, decree, ordinance, or regulation or any other
restriction of any kind or character to which any assets or properties of Buyer
or Designated Subsidiary is subject or by which Buyer or Designated Subsidiary
is bound.
(g) Taxes. Buyer has duly filed in correct form all
Tax Returns relating to the activities of Buyer and its subsidiaries required or
due to be filed (with regard to applicable extensions) on or prior to the
Closing Date. All such Tax Returns are accurate and complete in all material
respects, and Buyer has paid or made provision for the payment of all Taxes that
have been incurred or are due or claimed to be due from it by federal, state, or
local taxing authorities for all periods ending on or before the Closing Date,
other than Taxes or other charges that are not delinquent or are being contested
in good faith and have not been finally determined and have been disclosed to
Seller. The amounts set up as reserves for Taxes on the books of Buyer and its
subsidiaries are sufficient in the aggregate for the payment of all unpaid Taxes
(including any interest or penalties thereon), whether or not disputed, accrued,
or applicable. No claims for taxes or assessments are being asserted or
threatened against Buyer or any of its subsidiaries.
(h) Compliance with Law and Other Regulations. Each
of Buyer and Designated Subsidiary is in compliance in all material respects
with all requirements (including those relating to environmental matters) of
federal, state, and local law and all requirements of all governmental bodies
and agencies having jurisdiction over it, the conduct of its business, the use
of its assets and properties, and all premises occupied by it. There is no
environmental contamination, toxic waste or other discharge, spill, construction
component, structural element or condition, adversely affecting any of the
properties of Buyer or Designated Subsidiary, nor has Buyer or Designated
Subsidiary received any official notice or citation that the properties of Buyer
or Designated Subsidiaries in any way contravene any federal, state, or local
law or regulation relating to environmental, health, or safety matters,
including without limitation any requirements of CERCLA nor any OSHA
requirements. Without limiting the foregoing, each of Buyer and Designated
Subsidiary has properly filed all reports, paid all monies, and obtained all
licenses, permits, certificates, and authorizations needed or required for the
conduct of its business and the use of its assets and properties and the
premises occupied by it in connection therewith and is in compliance in all
material respects with all conditions, restrictions, and provisions of all of
the foregoing. Neither Buyer nor Designated Subsidiary has received any notice
from any federal, state, or local authority or any insurance or inspection body
that any of its assets, properties, facilities, equipment, or business
procedures or practices fails to comply in any material respect with any
applicable law, ordinance, regulation, building, or zoning law or requirement of
any public authority or body.
13
(i) SEC Reports. Buyer's Form 10-K Report for the
year ended September 30, 1997, and all subsequent reports and proxy statements
filed by Buyer thereafter with the SEC pursuant to Section 13(a) or 14(a) of the
Securities Exchange Act of 1934, do not contain a misstatement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading as of the time the document was
filed. No report, proxy statement, or other document has been required to be
filed by Buyer pursuant to Section 13(a) or 14(a) of the Securities Exchange Act
of 1934 that has not been filed. All such reports, registrations, and
statements, which are filed between the date hereof and the Closing Date, will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they are made, not misleading.
(j) Consents. No consent, approval, license, permit,
or authorization of any federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality, or other
person is required.
(k) Accuracy of Statements. Neither this Agreement
nor any statement, list, certificate, or other information furnished or to be
furnished by Buyer or Designated Subsidiary to Seller in connection with this
Agreement or any of the transactions contemplated hereby contains or will
contain an untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
4.3 Survival of Representations and Warranties. Each of the
representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement irrespective of
any investigations or inquiries made by any party or any knowledge that any
party may possess, and each party shall be entitled to rely upon such
representations and warranties irrespective of any investigations, inquiries, or
knowledge.
SECTION 5
COVENANTS
5.1 Covenants of Seller. Seller agrees that, unless Buyer
otherwise agrees in writing and except as set forth in the Seller Disclosure
Schedule, at all times prior to the Closing Date:
(a) Truth of Representations and Warranties. Seller
shall not take or suffer or permit any action that would render untrue any of
the representations or warranties of Seller herein contained, and Seller shall
not omit to take any action, the omission of which would render untrue any such
representation or warranty.
(b) Preservation of Business. Seller shall use its
commercially reasonable best efforts to (i) preserve intact the present business
organization of Seller related to the Business, (ii) preserve the present
goodwill and advantageous relationships of Seller related to the Business with
all persons having business dealings with Seller, and (iii) preserve and
maintain in force all licenses, registrations, franchises, patents, trademarks,
copyrights, bonds, and other similar rights of Seller related to the Business.
Seller shall not enter into any employment agreements with any of its officers
or management personnel related to the Business and to be assumed by Buyer
hereunder that may not be canceled by Seller without penalty upon notice not
exceeding 30 days. The foregoing covenants shall not apply to (A) ▇▇▇▇▇▇▇
▇▇▇▇▇▇, who will remain an employee of Seller or (B) any change to the Business
14
to which Buyer gives its prior written consent, which consent may be withheld in
Buyer's sole and absolute discretion.
(c) Ordinary Course. Seller shall operate the
Business only in the usual, regular, and ordinary course and manner. Without
limiting the foregoing, Seller shall not (i) acquire, transfer, sell, convey,
dispose of, encumber, pledge, or mortgage any Transferred Asset, except in the
ordinary course of the conduct of the Business and consistent with past practice
and as contemplated by this Agreement; (ii) incur any obligations (contingent or
otherwise) or modify any indebtedness that may create, increase or modify any
Assumed Liability in an amount greater than $100,000 without the prior written
consent of Buyer, which consent may be withheld in Buyer's sole and absolute
discretion; (iii) acquire directly or indirectly or redeem any shares of its
capital stock, acquire any stock or other equity interest in any corporation,
trust, or other entity, or create or acquire any subsidiary, except to the
extent that any such action will have no effect on the conduct of the Business,
the Transferred Assets, the Assumed Liabilities, or the performance of this
Agreement; (iv) merge or consolidate with any other corporation, trust, or
entity or change the character of the Business; (v) enter into, amend, modify,
terminate, extend, or otherwise change any lease, contract, agreement, or other
obligation with respect to a Transferred Asset or an Assumed Liability other
than contracts for the sale of products or services, and contracts for the
purchase of supplier or services, in the ordinary and usual course of the
conduct of the Business, which involve obligations aggregating $50,000 or more
or which extend beyond six months from the date of this Agreement; or (vi) enter
into any service agreement, maintenance agreement, contract, or other
arrangement relating to the operations of the Business, or maintenance of any
Transferred Assets other than in the ordinary course of the conduct of the
Business.
(d) Books and Records. Seller shall maintain its
books, accounts, and records related to the Business in the usual, regular, and
ordinary manner and on a basis consistent with prior years, and Seller shall
comply with all laws applicable to them with respect to the conduct of the
Business.
(e) Compensation. Seller shall not (i) provided that
such compensation is an Assumed Liability, increase the compensation payable
(including bonus compensation) to any officer or director or to other management
personnel related to the Business from the amount payable as of the date of
Seller's Base Balance Sheet, or (ii) provided that such profit sharing plan or
employee benefit arrangement is an Assumed Liability, introduce or change in any
material respect any pension or profit sharing plan or any other employee
benefit arrangement related to the Business.
(f) Transfer of Rights Under Certain Excluded
Business Contracts. Seller shall use its best efforts to assign or sublicense to
Buyer its rights related solely to the Business under those Excluded Business
Contracts listed on Schedule "1.2(e)(ii)" hereto, which schedule lists each
Excluded Business Contract that relates to both the Business and the Other
Business. Seller and Buyer shall allocate any guaranteed payments to third
parties with respect to the rights assigned or sublicensed to Buyer pursuant to
this Section "5.1(f)".
(g) Assistance to Buyer. Seller shall use its
commercially reasonable best efforts to assist Buyer to enter into manufacturing
agreements with Seller's current suppliers of die-cast products for the
Business.
(h) Consents and Approvals. Seller shall use its
commercially reasonable best efforts to obtain all necessary consents and
approvals of other persons and governmental authorities to the performance by
Seller of the transactions contemplated by this Agreement. Seller shall make or
15
cause to be made all filings, applications, statements, and reports to all
federal and state government agencies or entities that are required to be made
prior to the Closing Date by or on behalf of Seller pursuant to any statute,
rule, or regulation in connection with the transactions contemplated by this
Agreement.
(i) Confidentiality. Except to the extent necessary
to enable Seller to maintain its ordinary course of business, Seller shall not
reveal, orally or in writing, to any person, other than Buyer and Designated
Subsidiary and their representatives, any of the business procedures or
practices followed by it in the conduct of the Business or any other information
of a confidential nature with respect to the Business.
(j) Insurance. Seller shall maintain in force through
the Closing Date all of the property, casualty, crime, directors and officers,
and other forms of insurance that it is presently carrying with respect to the
Transferred Assets or the Business and shall refrain from making any change in
any such insurance coverage.
(k) Maintenance of Assets and Properties. With
respect to the Business, Seller shall keep the premises occupied by it and all
of the equipment and other tangible assets and personal property of Seller
constituting a Transferred Asset in good operating condition and shall perform
all necessary repairs and maintenance. Seller shall not remove any personal
property constituting a Transferred Asset from any facility of Seller unless the
same are replaced with similar items of at least equal quality prior to the
Closing Date. Seller shall not permit any modifications or additions to and
shall not sell or permit to be sold or otherwise transferred or disposed of any
item or group of items constituting a Transferred Asset, except items sold in
the ordinary course of the conduct of the Business. Seller shall not convey any
interest in any of the Transferred Assets or subject any of the Transferred
Assets, or any portion thereof, to any additional liens, encumbrances, or
similar matters.
(l) Satisfaction of Obligations and Liabilities.
Seller shall (i) pay or cause to be paid all of its obligations and liabilities
related to the Business as they mature including those related to taxes, except
for those that are in good faith disputed with the written approval of Buyer,
(ii) maintain and perform in all material respects its obligations under all
agreements and contracts related to the Business to which it is bound in
accordance with their terms, and (iii) comply in all material respects with all
requirements of applicable federal, state, and local laws, regulations, and
rules related to the Business. Seller shall pay or cause to be paid in full, as
they mature and come due, all bills and invoices for labor, goods, materials,
services, and utilities of any kind relating to the Business, which were
contracted for by Seller or which were delivered to or performed on its
properties.
(m) Employees. Seller shall not hire any employees
with respect to the Business, except in the ordinary course of the conduct of
the Business and consistent with past practice.
(n) Investments. Seller shall not create or acquire
any subsidiary, invest in or acquire an equity interest in any entity, or
purchase any investment assets with respect to the Business.
(o) Right of Inspection. Seller shall make available
to Buyer and its representatives for inspection at all reasonable times all of
the assets, properties, facilities, and agreements relating to the Business
(including all documents of any description evidencing any right or obligation
of Seller) and the books, accounts, records, and financial statements of Seller
relating to the Business as Buyer shall reasonably request and allow Buyer and
its representatives the right to make whatever copies of such materials they
require, and Seller shall permit Buyer and its independent accountants to audit
or
16
make such audit tests respecting the accounts of Seller relating to the Business
as Buyer or those accountants consider appropriate.
5.2 Covenants of Buyer. Buyer agrees that, unless Seller
otherwise agrees in writing and except as set forth in the Buyer Disclosure
Schedule or contemplated by this Agreement, at all times prior to the Closing
Date:
(a) Truth of Representations and Warranties. Buyer
and Designated Subsidiary shall not take or suffer or permit any action that
would render untrue any of the representations or warranties of Buyer herein
contained, and Buyer and Designated Subsidiary shall not omit to take any
action, the omission of which would render untrue any such representation or
warranty.
(b) Consents and Approvals. Buyer shall use its best
efforts to obtain all necessary consents and approvals of other persons and
governmental authorities to the performance by Buyer and Designated Subsidiary
of the transactions contemplated by this Agreement. Buyer shall make or cause to
be made all filings, applications, statements, and reports to all federal and
state government agencies and entities that are required to be made prior to the
Closing Date by or on behalf of Buyer or Designated Subsidiary pursuant to any
statute, rule, or regulation in connection with the transactions contemplated by
this Agreement.
(c) Assistance to Seller. Prior to the Closing, Buyer
shall obtain for Seller license agreements with each of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Inc. and
▇▇▇▇ ▇▇▇▇▇▇, Inc. for a term of one year or more with respect to plastic model
kits.
5.3 No Solicitation. Unless and until this Agreement shall
have been abandoned pursuant to Section 8, neither Seller nor any of its
officers, directors, affiliates, representatives, or agents shall:
(a) directly or indirectly, encourage, solicit, or
initiate discussions or negotiations with, any corporation, partnership, person,
or other entity or group (other than Buyer, its affiliates, employees,
representatives, and advisors) concerning any merger, sale of assets, sale of
shares of capital stock, tender offer, or similar transaction involving Seller
or any of its subsidiaries, except to the extent that such action will have no
effect on the conduct of the Business, the Transferred Assets, the Assumed
Liabilities or the performance of this Agreement; or
(b) disclose, directly or indirectly, any non-public
information to any corporation, partnership, person, or other entity or group
(other than to Buyer, its affiliates, employees, representatives, or agents)
concerning the Business, afford to any such party access to the books or records
of Seller relating to the Business, or otherwise assist or encourage any such
party in connection with any of the foregoing.
5.4 Efforts to Consummate Transaction; Further Assurances.
Subject to the terms and conditions of this Agreement, each of the parties
hereto agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, using its best efforts to obtain all
necessary, proper, or advisable permits, consents, authorizations, requests, and
approvals of third parties and governmental authorities. If at any time after
the Closing Date, any further action is necessary or desirable to carry out the
purposes of this Agreement (including providing any information in any way
related to the Transferred Assets), the proper officers
17
and directors of each party to this Agreement shall take any such actions as the
other party may reasonably request.
5.5 Public Announcements. Buyer and Seller shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law on the advice of counsel or by any listing agreement with
any national securities exchange or The Nasdaq Stock Market, Inc.
5.6 Expenses. Except as may otherwise expressly be provided in
this Agreement, each party shall bear all those costs and expenses incurred by
it (including any fees and expenses of brokers, attorneys, or other
professionals engaged by such party) in connection with this Agreement and the
transactions contemplated hereby.
5.7 Post-Closing Assistance to Seller. Buyer hereby agrees
that as long as the License Agreement is in effect, for a period of 10 years
following the Closing Date, Buyer (i) shall use its best efforts to obtain for
Seller's Other Business licenses (exclusive, if possible) relating to U.S.
Motorsports and (ii) shall not obtain licenses for or on behalf of any other
person for use in a business that directly competes with Seller's Other
Business.
5.8 Post-Closing Assistance to Buyer. Following the Closing
Date, Seller shall use its best efforts to assign or sublicense to Buyer its
rights related solely to the Business under those Excluded Business Contracts
listed on Schedule "1.2(e)(ii)" that have not previously been assigned or
sublicensed to Buyer pursuant to Section 5.1(f). Seller and Buyer shall allocate
any guaranteed payments to third parties with respect to the rights assigned or
sublicensed to Buyer pursuant to this Section 5.8.
5.9 Seller's Right of First Refusal. In the event that Buyer's
current relationship with Hasbro, Inc. with respect to mass-retail sales of
Buyer's licensed products is terminated on or before December 31, 2004, and
Buyer desires to enter into a new agreement with a third party with respect to
mass-retail sales of Buyer's licensed products, Buyer hereby agrees that Seller
shall have the right of first refusal (the "Seller's Right of First Refusal") to
enter into a mass-retail distribution agreement with Buyer. If Seller desires to
exercise the Seller's Right of First Refusal, Seller shall exercise Seller's
Right of First Refusal by giving written notice of such exercise to Buyer within
30 days after receipt of notice from Buyer of the terms to be offered for a
mass-retail distribution agreement for such products to or by a third party.
Buyer agrees that it shall not enter into any mass-retail distribution
agreements with respect to its products until it has notified Seller and Seller
has had an opportunity to respond as set forth above. In the event that Seller
exercises the Seller's Right of First Refusal, the parties shall in good faith
negotiate the terms of mutually acceptable agreements with respect to Seller's
rights to distribute such products, provided that the terms of such agreement
are substantially the same as those offered by such third party to Buyer or by
Buyer to such third party. Notwithstanding the foregoing, however, nothing in
this Agreement shall preclude Buyer from pursuing mass-retail sales of its
products independent of any arrangement with third parties.
SECTION 6
CONDITIONS PRECEDENT TO OBLIGATIONS
6.1 Conditions Precedent to the Obligations of Buyer. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement are, at the option of Buyer, subject to the satisfaction of the
following conditions on or before the Closing Date.
18
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller herein contained shall have been true
and correct in all material respects when made and, in addition, shall be true
and correct in all material respects on the Closing Date with the same force and
effect as though made on and as of the Closing Date, except as affected by
transactions contemplated hereby.
(b) Performance of Agreements. Seller shall have in
all material respects performed all obligations and agreements and complied with
all covenants and conditions contained in this Agreement to be performed and
complied with by it on or prior to the Closing Date and shall have delivered all
documents, instruments, and materials required by Section 7.2.
(c) Corporate Approval. All necessary corporate
action on the part of the directors and shareholders of Seller approving this
Agreement and the transactions contemplated hereby shall have been duly and
validly taken.
(d) Opinion of Counsel for Seller. Buyer shall have
received an opinion of ▇▇▇▇▇▇ ▇▇▇, Esq., counsel for Seller, dated the Closing
Date, with customary assumptions, exceptions, and qualifications reasonably
acceptable to Buyer and its counsel, to the effect that:
(i) Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority under the laws of such
jurisdiction to own, lease, and operate its properties, to carry on its business
as then being conducted, and to consummate the transactions contemplated hereby;
(ii) all necessary corporate proceedings of the
Board of Directors and the shareholders of Seller to approve and adopt this
Agreement and to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
and validly taken;
(iii) Seller has the corporate power and
authority to execute and deliver this Agreement, and this Agreement has been
duly authorized, executed, and delivered by Seller and constitutes the legal,
valid, and binding obligation of Seller, enforceable against Seller in
accordance with its terms;
(iv) such counsel knows of no actions, suits, or
proceedings pending or threatened against Seller or any of its subsidiaries at
law or in equity, or before or by any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality
that would result in a breach of the representation and warranty set forth in
Section 4.1(h) of this Agreement; and
(v) except as listed in the Seller's Disclosure
Schedule with respect to consents not obtained, the consummation of the
transactions contemplated by this Agreement will not violate the charter or
bylaws (or similar constituent documents) of Seller or result in a breach of or
constitute a default by Seller under any provision of any indenture, mortgage,
lien, lease, agreement, contract, instrument, order, judgment, decree, award,
ordinance, regulation, or any other restriction of any kind or character known
to such counsel, to which Seller or any of its subsidiaries is a party or by
which any of them are bound.
19
With respect to the opinions expressed pursuant to clauses
(iv) and (v) above, such opinion may be based upon a certificate or certificates
of an officer or officers of Seller and such other matters as such counsel deems
appropriate, and such counsel may rely on opinions of other counsel reasonably
satisfactory to Buyer, which opinion is delivered in connection with this
Agreement.
(e) No Material Adverse Change. Except with respect
to matters arising as a result of the transactions contemplated by this
Agreement, there shall have been no material adverse change in the business,
assets, properties, operating results, financial condition or prospects of
Seller with respect to the Business since the date of Seller's Base Balance
Sheet.
(f) Litigation. No action or proceeding by or before
any governmental agency shall have been instituted or threatened that seeks to
enjoin, restrain, or prohibit, or, if adversely decided, might reasonably be
expected to result in substantial damages in respect of, this Agreement or the
consummation of the transactions contemplated by this Agreement and would, in
the reasonable judgment of Buyer, make it inadvisable to consummate such
transactions, and no court order shall have been entered in any action or
proceeding instituted by any other party that enjoins, restrains, or prohibits
this Agreement or consummation of the transactions contemplated by this
Agreement.
(g) Certificate of Seller. Buyer and Designated
Subsidiary shall have received from Seller a certificate executed by the chief
executive officer and secretary of Seller, dated the date of the Closing Date,
certifying that all representations and warranties of Seller set forth in this
Agreement are true, complete, and correct in all material respects on and as of
the Closing Date as if made at that time, and that Seller has performed and
complied in all material respects with all agreements, covenants, and conditions
required by this Agreement to be performed or complied with by it at or before
the Closing Date.
(h) License Agreement. Seller and Buyer shall have
negotiated, executed, and delivered a license agreement (the "License
Agreement") in the form attached as Exhibit A hereto, pursuant to which Seller
shall license to Buyer the "Revell" trademarks for use in connection with the
Business.
(i) Manufacturing Agreement. Seller and Buyer shall
have negotiated, executed, and delivered a manufacturing agreement (the
"Manufacturing Agreement") in the form attached as Exhibit B hereto, pursuant to
which Buyer shall be the exclusive manufacturer of U.S. Motorsports die-cast
products for Seller's distribution under existing mass-merchandise license
agreements.
(j) Distribution Agreement. Seller and Buyer shall
have negotiated, executed, and delivered a distribution agreement (the
"Distribution Agreement") in the form attached as Exhibit C hereto, pursuant to
which Buyer shall be the exclusive distributor of "Revell" motorsport plastic
model kits at trackside sales venues and a non-exclusive distributor of "Revell"
motorsport plastic model kits through Buyer's network of wholesale distributors,
except as otherwise set forth therein.
(k) Assignment of Business Contracts. Subject to
Section 7.2(d), at the Closing Seller shall have assigned to Buyer or Designated
Subsidiary each of the Business Contracts, provided that Buyer shall have
obtained consents to such assignments to the extent that such consents are
required by any of the Business Contracts.
20
(l) Assistance to Buyer. Seller shall have used its
best efforts to assist Buyer to enter into manufacturing agreements with
Seller's current suppliers of die-cast products for the Business.
(m) Termination of HSR Act Waiting Periods. Any and
all applicable waiting periods under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or shall have
been terminated.
(n) Consents and Approvals. Seller shall have
obtained all necessary consents and approvals of other persons and governmental
authorities to the performance by Seller of the transactions contemplated by
this Agreement. Seller shall have made or caused to be made all filings,
applications, statements, and reports to all federal and state governmental
agencies and entities that are required to be made prior to the Closing by or on
behalf of Seller pursuant to any statute, rule, or regulation in connection with
the transactions contemplated by this Agreement.
(o) Delivery of Documents. All other documents
required to be delivered by Seller at or prior to the Closing Date shall be
delivered or shall be tendered by the Closing Date.
(p) Proceedings Satisfactory to Counsel. All
proceedings taken by Seller and all instruments executed and delivered by Seller
on or prior to the Closing Date in connection with the transactions contemplated
hereby shall be satisfactory in form and substance to counsel for Buyer.
6.2 Conditions Precedent to the Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated by this
Agreement are, at the option of Seller, subject to the satisfaction of the
following conditions on or before the Closing Date:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer herein contained shall have been true
and correct in all material respects when made and, in addition, shall be true
and correct in all material respects on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date, except as
affected by transactions contemplated hereby.
(b) Performance of Agreements. Buyer and, if a
Permitted Assignment is effected, Designated Subsidiary shall have in all
material respects performed all obligations and agreements and complied with all
covenants and conditions contained in this Agreement to be performed and
complied with by them on or prior to the Closing Date and shall have delivered
all consideration, documents, instruments, and other materials required by
Section 7.3 hereof.
(c) Corporate Approval. All necessary corporate
action on the part of the directors of Buyer and, if a Permitted Assignment is
effected, Designated Subsidiary approving this Agreement and approving the
transactions contemplated hereby shall have been taken.
(d) Opinion of Counsel for Buyer. Seller shall have
received an opinion of ▇'▇▇▇▇▇▇, Cavanagh, Anderson, ▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, a
professional association, counsel for Buyer and Designated Subsidiary, dated the
Closing Date, with customary assumptions, exceptions, and qualifications
reasonably acceptable to Seller and its counsel, to the effect that:
(i) Each of Buyer and Designated Subsidiary (to
the extent applicable) is a corporation duly organized, validly existing, and in
good standing under the laws of the
21
state of its incorporation and has the corporate power and authority under the
law of such state to own, lease, and operate its properties, to carry on its
business as then being conducted, and to consummate the transactions
contemplated hereby;
(ii) all necessary corporate proceedings of the
Board of Directors and shareholders of Buyer and Designated Subsidiary to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly and validly
taken;
(iii) Buyer has the corporate power and authority
to execute and deliver this Agreement, and this Agreement has been duly
authorized, executed, and delivered by it and constitutes the legal, valid, and
binding obligation of Buyer, enforceable against it in accordance with its
terms;
(iv) such counsel knows of no actions, suits, or
proceedings pending or threatened against Buyer or Designated Subsidiary at law
or in equity, or before or by any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality
that would result in a breach of the representation and warranty set forth in
Section 4.2(e) of this Agreement; and
(v) the consummation of the transactions
contemplated by this Agreement will not violate the charter or bylaws of Buyer
or Designated Subsidiary or result in a breach of or constitute a default by
Buyer or Designated Subsidiary under any provision of any indenture, mortgage,
lien, lease, agreement, contract, instrument, order, judgment, decree, award,
ordinance, regulation, or any other restriction of any kind or character known
to such counsel, to which Buyer or Designated Subsidiary is a party or by which
either of them are bound.
With respect to the opinions expressed pursuant to
clauses (iv) and (v) of this subparagraph, such opinion may be based upon a
certificate or certificates of an officer or officers of Buyer or its
subsidiaries (including Designated Subsidiary) and such other matters as such
counsel deems appropriate, and such counsel may rely on opinions of other
counsel reasonably satisfactory to Seller, which opinion is delivered in
connection with this Agreement.
(e) Litigation. No action or proceeding by or before
any governmental agency shall have been instituted or threatened that seeks to
enjoin, restrain, or prohibit, or, if adversely decided, might reasonably be
expected to result in substantial damages in respect of, this Agreement or the
consummation of the transactions contemplated by this Agreement and would, in
the reasonable judgment of Seller, make it inadvisable to consummate such
transactions, and no court order shall have been entered in any action or
proceeding instituted by any other party that enjoins, restrains, or prohibits
this Agreement or consummation of the transactions contemplated by this
Agreement.
(f) Certificates of Buyer and Designated Subsidiary.
Seller shall have received from Buyer and Designated Subsidiary a certificate
executed by the chief executive officer and secretary of Buyer and Designated
Subsidiary, dated the date of the Closing Date, certifying that all
representations and warranties of Buyer set forth in this Agreement are true,
complete, and correct in all material respects on and as of the Closing Date as
if made at that time and that Buyer and Designated Subsidiary have performed and
complied in all material respects with all agreements, covenants, and conditions
required by this Agreement to be performed or complied with by Buyer and
Designated Subsidiary on or before the Closing Date.
22
(g) License Agreement. Buyer and Seller shall have
negotiated, executed, and delivered the License Agreement.
(h) Manufacturing Agreement. Buyer and Seller shall
have negotiated, executed, and delivered the Manufacturing Agreement.
(i) Distribution Agreement. Buyer and Seller shall
have negotiated, executed, and delivered the Distribution Agreement.
(j) Assistance to Seller. Prior to the Closing, Buyer
shall have obtained for Seller license agreements with each of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Inc. and ▇▇▇▇ ▇▇▇▇▇▇, Inc. for a term of one year or more with respect to
plastic model kits.
(k) Termination of HSR Act Waiting Periods. Any and
all applicable waiting periods under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or shall have
been terminated.
(l) Consents and Approvals. Buyer or Designated
Subsidiary shall have obtained all necessary consents and approvals of other
persons and governmental authorities to the performance by Buyer or Designated
Subsidiary of the transactions contemplated by this Agreement. Buyer or
Designated Subsidiary shall have made or caused to be made all filings,
applications, statements, and reports to all federal and state governmental
agencies and entities that are required to be made prior to the Closing by or on
behalf of Buyer or Designated Subsidiary pursuant to any statute, rule, or
regulation in connection with the transactions contemplated by this Agreement.
(m) Delivery of Documents. All other documents
required to be delivered by Buyer and Designated Subsidiary shall be delivered
or shall be tendered by the Closing Date.
(n) Proceedings Satisfactory to Counsel. All
proceedings taken by Buyer and Designated Subsidiary and all instruments
executed and delivered by Buyer and Designated Subsidiary on or prior to the
Closing Date in connection with the transactions herein contemplated shall be
satisfactory in form and substance to counsel for Seller.
SECTION 7
THE CLOSING
7.1 Closing. Subject to Section 8.3, the closing (the
"Closing") of the transactions contemplated by this Agreement shall take place
at the offices of ▇'▇▇▇▇▇▇, Cavanagh, Anderson, ▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ on or before December 31, 1997,
or at such other date, time, and place as may be agreed upon by Buyer and
Seller, which date is sometimes herein called the "Closing Date."
7.2 Deliveries by Seller. At the Closing or other acceptable
date as set forth in Sections 7.2(d) and 7.2(f), Seller shall execute (as
applicable) and deliver:
(a) Instruments of Conveyance. Such deeds, bills of
sale, instruments of assignment, and other instruments and documents as may be
necessary to convey, transfer, and assign to Buyer, or if a Permitted Assignment
is effected, Designated Subsidiary, title to the Transferred Assets.
23
(b) Certificate of Seller. The certificate of the
chief executive officer and secretary of Seller required by Section 6.1(g).
(c) Certificate of Secretary. The certificate of the
secretary of Seller certifying to the resolutions constituting all necessary
corporate action by the board of directors and by the shareholders of Seller to
authorize the consummation of the transactions provided for herein.
(d) Consents. Within 30 days after the Closing Date,
Seller shall deliver to Buyer the written consents to assignment of all parties
whose written consent is necessary to the continued effectiveness and validity,
after assignment as provided herein, of all contracts, agreements, indentures,
or leases to which Seller or its subsidiaries are parties, and written evidence
of other consents and approvals of the transactions contemplated hereby.
(e) Legal Opinion. The opinion of ▇▇▇▇▇▇ ▇▇▇, Esq.
required by Section 6.1(d).
(f) Books and Records. Within the later of (i) 10
days after the Closing Date or (ii) December 31, 1997, Seller shall deliver to
Buyer all of the books, records, and files of Seller and its subsidiaries,
relating to the Business excepting only Seller's corporate minute books, stock
books or records, and employee and tax records.
(g) License Agreement. The License Agreement required
by Section 6.1(h).
(h) Manufacturing Agreement. The Manufacturing
Agreement required by Section 6.1(i).
(i) Distribution Agreement. The Distribution
Agreement required by Section 6.1(j).
All assignments, consents, certificates, and other documents
delivered by Seller shall be in form reasonably satisfactory to counsel for
Buyer.
7.3 Deliveries by Buyer or Designated Subsidiary. At the
Closing, Buyer, or if a Permitted Assignment is effected, Designated Subsidiary,
shall execute and deliver to Seller:
(a) Assumption of Liabilities. One or more
assumptions or other instruments or documents as may be necessary for Buyer or
Designated Subsidiary (as applicable) to assume the Assumed Liabilities.
(b) Initial Payment of Purchase Price. Payment of the
Initial Payment of the purchase price provided for in Section 3.2 in immediately
available funds by cashier's check or wire transfer to the account or accounts
designated in advance by Seller.
(c) Buyer's Certificates. The certificate executed by
the chief executive officer and secretary of Buyer and Designated Subsidiary
required by Section 6.2(f).
(d) Secretary's Certificates. The certificate of the
secretary or an assistant secretary of Buyer and Designated Subsidiary
certifying to the resolutions constituting all necessary
24
corporate action by the Board of Directors of Buyer and Designated Subsidiary to
authorize the consummation of the transactions provided for herein.
(e) Legal Opinion. The opinion of ▇'▇▇▇▇▇▇, Cavanagh,
Anderson, ▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, a professional association, required by
Section 6.2(d).
(f) Consents and Approvals. Written evidence of all
consents and approvals of the transactions contemplated hereby.
(g) License Agreement. The License Agreement required
by Section 6.2(g).
(h) Manufacturing Agreement. The Manufacturing
Agreement required by Section 6.2(h).
(i) Distribution Agreement. The Distribution
Agreement required by Section 6.2(i).
All assumptions, certificates, and other documents delivered
by Buyer or Designated Subsidiary shall be in form reasonably satisfactory to
counsel for Seller.
7.4 Further Assurances. From time to time, on and after the
Closing Date, as and when requested by Buyer or its assigns, the proper officers
and directors of Seller shall, for and on behalf and in the name of Seller or
otherwise, execute and deliver all such deeds, bills of sale, assignments, and
other instruments and shall take or cause to be taken such further or other
actions as Buyer or its assigns may deem necessary or desirable in order to
confirm of record or otherwise to Buyer or Designated Subsidiary title to and
possession of all of the Transferred Assets and otherwise to carry out fully the
provisions and purposes of this Agreement. Without limiting the foregoing,
Seller shall make available the books and records retained by Seller pursuant to
Section 1.3 available to Buyer upon three days' prior notice and shall allow
Buyer to make extracts, copies, or summaries thereof. The parties shall
cooperate with each other and with their respective counsel and accountants in
connection with any steps to be taken as a part of their respective obligations
under this Agreement, including the preparation of financial statements. Seller
shall, at Buyer's cost, make all of its books and records available to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP and cooperate fully with Buyer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, including
making any standard representations and signing any standard audit
representations letters to the extent the same are true in order to complete any
audit that may be required under applicable rules and regulations of the SEC, as
determined by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
SECTION 8
WAIVER, MODIFICATION, ABANDONMENT
8.1 Waivers. The failure of Seller to comply with any of their
obligations, agreements, or conditions as set forth in this Agreement may be
waived expressly in writing by Buyer, by action of its Board of Directors. The
failure of Buyer or Designated Subsidiary to comply with any of their
obligations, agreements, or conditions as set forth in this Agreement may be
waived expressly in writing by Seller, by action of its Board of Directors,
without the vote of its shareholders.
8.2 Modification. This Agreement may be modified at any time
in any respect by the mutual consent of all of the parties, notwithstanding
prior approval by the shareholders of Seller. Any such modification may be
approved for any party by its Board of Directors, without further
25
shareholder approval, except that amount of consideration to be paid for the
Transferred Assets may not be decreased (except as provided herein) without the
consent of the shareholders of Seller given by the same vote as is required
under applicable state law for approval of this Agreement.
8.3 Abandonment. The transactions contemplated by this
Agreement may be abandoned on or before the Closing Date, notwithstanding
approval of this Agreement by the shareholders of Seller:
(a) By the mutual agreement of the Boards of
Directors of Buyer and Seller, or
(b) By the Board of Directors of Buyer, if any of the
conditions provided in Section 6.1 shall not have been satisfied, complied with,
or performed in any material respect by the Closing Date, and Buyer shall not
have waived such failure of satisfaction, noncompliance, or nonperformance, or
(c) By the Board of Directors of Seller, if any of
the conditions provided in Section 6.2 shall not have been satisfied, complied
with, or performed in any material respect by the Closing Date, and Seller shall
not have waived such failure of satisfaction, noncompliance, or nonperformance,
or
(d) At the option of Buyer or Seller, if there shall
have been instituted and be pending or threatened any legal proceeding before
any court or governmental agency seeking to restrain or prohibit or to obtain
damages in respect of this Agreement or the consummation of the transactions
contemplated by this Agreement, or if any order restraining or prohibiting the
transactions contemplated by this Agreement shall have been issued by any court
or governmental agency and shall be in effect.
In the event of any abandonment pursuant to this Section 8.3
(other than pursuant to subparagraph (a) hereof), written notice setting forth
the reasons thereof shall forthwith be given by Seller if it is the abandoning
party, to Buyer, or by Buyer, if Buyer is the abandoning party, to Seller. This
Agreement shall terminate automatically if the Closing Date shall not have
occurred on or before December 31, 1997, or such later date as shall have been
agreed to by the parties hereto under Section 8.2.
8.4 Effect of Abandonment. Subject to the provisions of
Section 5.3, if the transactions contemplated by this Agreement are abandoned as
provided for in this Section, (a) this Agreement shall forthwith become wholly
void and of no effect without liability to any party to this Agreement or to the
directors, officers, representatives, and agents of any such party, (b) Buyer
and Seller shall each pay its own fees and expenses incident to the negotiation,
preparation, and execution of this Agreement and the obtaining of the necessary
approvals thereof, including fees and expenses of its counsel, accountants,
investment bankers, and other experts, and (c) Seller and Buyer (and their
representatives) shall return to the other all copies of books, records,
documents, or other papers given by Seller or Buyer (or their representatives)
to the other (or their representatives).
26
SECTION 9
NON-COMPETITION, CONFIDENTIALITY,
AND NON-SOLICITATION
9.1 Non-competition, Confidentiality, and Non-Solicitation by
Seller. Buyer is unwilling to enter into and perform this Agreement unless
Seller enters into the non-competition, confidentiality, and non-solicitation
agreements contained in this Section 9.1. To induce Buyer to enter into this
Agreement and for the benefit of Buyer and Designated Subsidiary, Seller agrees
as follows:
(a) Duration and Extent of Restriction. Except for
(i) products directly or indirectly sold through the Hallmark Distribution
Channel, (ii) the sale of U.S. Motorsports die-cast items to third parties for
use as premiums or promotional items by those third parties, and (iii) sales
permitted under the Manufacturing Agreement, neither Seller nor any person or
entity directly or indirectly in control of or controlled by Seller shall, for a
period ending 10 years after the Closing Date (the "Non-Competition Period"),
within the United States or Canada (collectively, the "Relevant Territory"),
engage in a business the same as, similar to, or in general competition with the
Business as being conducted by Seller at or within 12 months prior to the
Closing Date provided that, for the purposes of this Section 9.1, the Other
Business shall not be considered the same as or similar to or in general
competition with the Business. The term "engage in" shall include, but shall not
be limited to, activities, whether direct or indirect, as proprietor, partner,
shareholder, principal, agent, employee, consultant or lender; provided,
however, that the ownership of not more than 5% in the aggregate by Seller of
the stock of a publicly held corporation shall not be included in such term.
(b) Confidentiality. Seller agrees that Seller and
each of its officers, directors, affiliates, representatives, or agents shall
maintain in strict secrecy and confidence all confidential, proprietary, or
other information relating to the Business. Furthermore, neither Seller nor any
of its officers, directors, affiliates, representatives, or agents shall, unless
first authorized in writing by Buyer, disclose to any person, firm or other
entity, or use for the benefit of Seller or any person, firm or other entity, at
any time during the Non-Competition Period, any confidential information
relating to the Business. For purposes of this Agreement, confidential
information will include, without limitation, any trade secrets, knowledge or
information with respect to processes, techniques, procedures or know-how unique
to the Business, or to which Seller has been given access in confidence by a
third party pursuant to any agreement with that third party; the names of any
customers or vendors; prices for materials, components or other supplies or
finished products; relations with employees, salaries, job classifications,
skill levels; or any other information of, about or concerning the Business,
including manner of operation, products, plans or any other data of any kind,
nature or description with respect to the Business. Seller understands and
agrees that all confidential information is a valuable and special asset and is
important, material and confidential and gravely affects the effective and
successful conduct of the Business, and that any breach of the terms of this
Section 9.1(b) is a material breach of this Agreement.
(c) Restrictions with Respect to Vendors and
Customers. In furtherance of, and without in any way limiting the restriction in
Sections 9.1(a) and 9.1(b), during the Non-Competition Period, neither Seller
nor any person or entity directly or indirectly in control of or controlled by
Seller shall, directly or indirectly, (i) request any past, present, or future
vendors or customers of the Business to curtail or cancel their business with
Buyer or any of its subsidiaries; (ii) except in connection with Seller's normal
conduct of the Other Business, disclose the identity of any past, present, or
future vendors or customers of Seller, Buyer, or any subsidiary of Buyer to any
other person, firm or corporation engaged in a business the same as, similar to,
or in general competition with the
27
Business within the Relevant Territory; (iii) except in connection with Buyer's
normal conduct of the Other Business, solicit, canvas, or accept, or authorize
any other person to solicit, canvas, or accept, from any past, present, or
future vendors or customers of Seller, Buyer or any subsidiary of Buyer, any
business for any other person, firm, or corporation engaged in a business the
same as, similar to, or in general competition with the Business within the
Relevant Territory; (iv) induce or attempt to influence any employee,
independent contractor, or agent with respect to the Business of Seller, Buyer
or any subsidiary of Buyer to terminate his, her, or its employment or
engagement with Buyer. As used in this Section 9.1(c) "future customer" shall
mean a customer with whom business will have been transacted between the date
hereof and the end of the Non-Competition Period.
(d) Expiration of Non-Competition Period Under
Certain Circumstances. In the event that (i) the License Agreement is terminated
for breach by Buyer or, (ii) any payment due Seller pursuant to Section 3 of
this Agreement is not paid within 10 days of Buyer's receipt of written notice
from Seller that such payment is overdue and Buyer has not reasonably objected
to such notice in writing within such 10-day period, then the Non-Competition
Period shall automatically terminate upon the termination of the License
Agreement or expiration of such 10-day period.
9.2 Non-competition, Confidentiality, and Non-Solicitation by
Buyer. Seller is unwilling to enter into and perform this Agreement unless Buyer
enters into the non-competition, confidentiality, and non-solicitation
agreements contained in this Section 9.2. To induce Seller to enter into this
Agreement and for the benefit of Seller, Buyer agrees as follows:
(a) Duration and Extent of Restriction. Neither Buyer
nor any person or entity directly or indirectly in control of or controlled by
Buyer shall, during the Non-Competition Period and within the Relevant
Territory, engage in a business the same as, similar to, or in general
competition with Seller's Other Business as being conducted by Seller at or
within 12 months prior to the Closing Date. The term "engage in" shall include,
but shall not be limited to, activities, whether direct or indirect, as
proprietor, partner, shareholder, principal, agent, employee, consultant or
lender; provided, however, that the ownership of not more than 5% in the
aggregate by Buyer of the stock of a publicly held corporation shall not be
included in such term.
(b) Confidentiality. Buyer agrees that Buyer and each
of its officers, directors, affiliates, representatives, or agents shall
maintain in strict secrecy and confidence all confidential, proprietary or other
information relating to the Other Business. Furthermore, neither Buyer nor any
of its officers, directors, affiliates, representatives, or agents shall, unless
first authorized in writing by Seller, disclose to any person, firm or other
entity, or use for the benefit of Buyer or any person, firm or other entity, at
any time during the Non-Competition Period, any confidential information
relating to the Other Business. For purposes of this Agreement, confidential
information will include, without limitation, any trade secrets, knowledge or
information with respect to processes, techniques, procedures or know-how unique
to the Other Business, or to which Buyer has been given access in confidence by
a third party pursuant to any agreement with that third party; the names of any
customers or vendors; prices for materials, components or other supplies or
finished products; relations with employees, salaries, job classifications,
skill levels, or any other information of, about or concerning the Other
Business, including manner of operation, products, plans or any other data of
any kind, nature or description with respect to the Business. Buyer understands
and agrees that all confidential information is a valuable and special asset and
is important, material and confidential and gravely affects the effective and
successful conduct of the Other Business, and that any breach of the terms of
this Section 9.2(b) is a material breach of this Agreement.
28
(c) Restrictions with Respect to Vendors and
Customers. In furtherance of, and without in any way limiting the restriction in
Sections 9.2(a) and 9.2(b), during the Non-Competition Period, neither Buyer nor
any person or entity directly or indirectly in control of or controlled by Buyer
shall, directly or indirectly, (i) request any past, present, or future vendors
or customers of the Other Business to curtail or cancel their business with
Seller or any of its subsidiaries; (ii) disclose the identity of any past,
present, or future vendors or customers of Buyer, Seller, or any subsidiary of
Seller to any other person, firm or corporation engaged in a business the same
as, similar to, or in general competition with the Other Business within the
Relevant Territory; (iii) solicit, canvas, or accept, or authorize any other
person to solicit, canvas, or accept, from any past, present, or future vendors
or customers of Buyer, Seller or any subsidiary of Seller, any business for any
other person, firm, or corporation engaged in a business the same as, similar
to, or in general competition with the Other Business within the Relevant
Territory; (iv) induce or attempt to influence any employee, independent
contractor, or agent with respect to the Other Business to terminate his, her,
or its employment or engagement. As used in this Section 9.2(c) "future
customer" shall mean a customer with whom business will have been transacted
between the date hereof and the end of the Non-Competition Period.
9.3 Remedies for Breach. Each of the parties acknowledges that
the restrictions contained in this Section 9, in view of the nature of the
business in which the parties are engaged, are reasonable and necessary to
protect the legitimate interests of the other party and its subsidiaries and
that any violation of these restrictions would result in irreparable injury to
the other party and its subsidiaries. Each of the parties agrees that, in the
event of a violation of any of such restrictions, the other party shall be
entitled to preliminary and permanent injunctive relief as well as an equitable
accounting of all earnings, profits, and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies to which the other party may be entitled. In the event of a
violation, the Non-Competition Period shall be extended by a period of time
equal to that period beginning when such violation commenced and ending when the
activities constituting such violation shall have been finally terminated in
good faith.
9.4 Restrictions Separable. If the scope of any provision of
this Section 9 is found by a Court to be too broad to permit enforcement to its
full extent, then such provision shall be enforced to the maximum extent
permitted by law. The parties agree that the scope of any provision of this
Agreement may be modified by a judge in any proceeding to enforce this
Agreement, so that such provision can be enforced to the maximum extent
permitted by law. Each and every restriction set forth in this Section 9 is
independent and severable from the others, and no such restriction shall be
rendered unenforceable by virtue of the fact that, for any reason, any other or
others of them may be unenforceable in whole or in part.
SECTION 10
INDEMNIFICATION
10.1 Indemnification by Seller.
(a) General. Seller covenants and agrees to defend,
indemnify, and hold Buyer and, if a Permitted Assignment is effected, Designated
Subsidiary harmless for, from, and against any and all damages, losses,
liabilities (absolute and contingent), fines, penalties, costs, and expenses
(including, without limitation, reasonable counsel fees and costs and expenses
incurred in the investigation, defense, or settlement of any claim covered by
this indemnity) with respect to or arising out of any demand, claim, inquiry,
investigation, proceeding, action or cause of action that Buyer and,
29
if a Permitted Assignment is effected, Designated Subsidiary may suffer or incur
by reason of (i) the inaccuracy of any of the representations or warranties of
Seller contained in this Agreement, or any of the agreements, certificates,
documents, exhibits or schedules delivered in connection with this Agreement;
(ii) the failure to comply with, or the breach or the default by Seller of, any
of the covenants, warranties or agreements made by Seller contained in this
Agreement, or any of the agreements, certificates, documents, exhibits or
schedules delivered in connection with this Agreement; or (iii) any obligation
or liabilities of Seller other than those specifically assumed pursuant to
Section 2.1 hereof (the "Excluded Liabilities").
(b) Bulk Sales Matters. Seller covenants and agrees
to defend, indemnify and hold Buyer and, if a Permitted Assignment is effected,
Designated Subsidiary harmless for, from, and against any and all damages,
losses, liabilities (absolute and contingent), fines, penalties, costs, and
expenses (including, without limitation, reasonable counsel fees and costs and
expenses incurred in the investigation, defense, or settlement of any claim
covered by this indemnity) with respect to or arising out of any demand, claim,
inquiry, investigation, proceeding, action, or cause of action that Buyer and,
if a Permitted Assignment is effected, Designated Subsidiary may suffer or incur
by reason of any liability or obligation of Seller, of whatsoever nature and
type, with respect to or arising under any applicable Bulk Sales Act.
10.2 Indemnification by Buyer. Buyer and Designated Subsidiary
covenant and agree to defend, indemnify, and hold Seller harmless for, from, and
against any and all damages, losses, liabilities (absolute and contingent),
fines, penalties, costs, and expenses (including, without limitation, reasonable
counsel fees and costs and expenses incurred in the investigation, defense, or
settlement of any claim covered by this indemnity) with respect to or arising
out of any demand, claim, inquiry, investigation, proceeding, action, or cause
of action that Seller may suffer or incur by reason of (a) the inaccuracy of any
of the representations or warranties of Buyer or Designated Subsidiary contained
in this Agreement or any of the agreements, certificates, documents, exhibits,
or schedules delivered in connection with this Agreement; (b) the failure to
comply with, or the breach or the default by Buyer or Designated Subsidiary of,
any of the covenants, warranties, or agreements made by Buyer or Designated
Subsidiary in this Agreement or any of the agreements, certificates, documents,
exhibits, or schedules delivered in connection with this Agreement; or (c) any
Assumed Liability. Notwithstanding the above, however, Buyer and Designated
Subsidiary shall have no obligation to defend, indemnify, and hold Seller
harmless pursuant to this Section 10.2 hereof with respect to any liability that
is an Excluded Liability.
10.3 Notice and Right to Defend Third-Party Claims. Promptly
upon receipt of notice of any claim, demand, or assessment or the commencement
of any suit, action, or proceeding with respect to which indemnity may be sought
pursuant to this Agreement, the party seeking to be indemnified or held harmless
(the "Indemnitee") shall notify in writing, if possible, within sufficient time
to respond to such claim or answer or otherwise plead in such action (but in any
event within ten days), the party from whom indemnification is sought (the
"Indemnitor"). In case any claim, demand, or assessment shall be asserted, or
suit, action, or proceeding commenced against the Indemnitee, the Indemnitor
shall be entitled, at the Indemnitor's expense, to participate therein, and, to
the extent that it may wish, to assume the defense, conduct, or settlement
thereof, at its own expense, with counsel satisfactory to the Indemnitee, whose
consent to the selection of counsel shall not be unreasonably withheld or
delayed, provided that the Indemnitor confirms to the Indemnitee that it is a
claim to which its rights of indemnification apply. The Indemnitor shall have
the right to settle or compromise monetary claims without the consent of
Indemnitee; however, as to any other claim, the Indemnitor shall first obtain
the prior written consent from the Indemnitee, which consent shall be exercised
in the sole discretion of the Indemnitee. After notice from the Indemnitor to
the Indemnitee of Indemnitor's intent so to assume
30
the defense, conduct, settlement, or compromise of such action, the Indemnitor
shall not be liable to the Indemnitee for any legal or other expenses
(including, without limitation, settlement costs) subsequently incurred by the
Indemnitee in connection with the defense, conduct, or settlement of such action
while the Indemnitor is diligently defending, conducting, settling, or
compromising such action. The Indemnitor shall keep the Indemnitee apprised of
the status of the suit, action, or proceeding and shall make Indemnitor's
counsel available to the Indemnitee, at the Indemnitor's expense, upon the
request of the Indemnitee. The Indemnitee shall cooperate with the Indemnitor in
connection with any such claim and shall make personnel, books and records and
other information relevant to the claim available to the Indemnitor to the
extent that such personnel, books and records and other information are in the
possession and/or control of the Indemnitee. If the Indemnitor decides not to
participate, the Indemnitee shall be entitled, at the Indemnitor's expense, to
defend, conduct, settle or compromise such matter with counsel satisfactory to
the Indemnitor, whose consent to the selection of counsel shall not be
unreasonably withheld or delayed.
10.4 Limitation on Rights to Indemnification. An Indemnitee
shall not be entitled to indemnification pursuant to this Section 10 until the
total amount of all damages actually paid or incurred by such Indemnitee for
which it shall be entitled to indemnification under this Section 10, but for
this provision, exceeds $250,000 in the aggregate (the "Basket Amount");
provided, however, that once such amount exceeds the Basket Amount, such
Indemnitee shall be entitled to indemnification for the total amount for which
indemnification may be owing in excess of the Basket Amount, and provided
further, that (i) the aggregate liability of any Indemnitor for all claims for
indemnification under this Section 10 shall not exceed $15,000,000. The
obligations of an Indemnitor to indemnify any Indemnitee under this Section 10
shall survive for a period ending 18 months after the Closing Date, except that
an Indemnitor's obligations shall continue as to any matter to which a claim
identified as a claim for indemnification pursuant to this Agreement is
submitted in writing to the Indemnitor prior to the date that is 18 months after
the Closing Date.
SECTION 11
GENERAL
11.1 Indemnity Against Finders. Each party hereto shall
indemnify and hold the other parties harmless against any claim for finders'
fees based on alleged retention of a finder by it.
11.2 Controlling Law. This Agreement, and all questions
relating to its validity, interpretation, performance, and enforcement, shall be
governed by and construed in accordance with the laws of Arizona,
notwithstanding any Arizona or other conflict-of-law provisions to the contrary.
11.3 Notices. All notices, requests, demands, and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when delivered
against receipt or when deposited in the United States mails, first class
postage prepaid, addressed as set forth below:
31
If to Buyer:
Action Performance Companies, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with a copy given in the manner
prescribed above, to:
▇'▇▇▇▇▇▇, Cavanagh, Anderson,
▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Seller:
Revell-Monogram, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇
with a copy given in the manner
prescribed above, to:
Hallmark Cards, Incorporated
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇, Esq.
Any party may alter the address to which communications or
copies are to be sent by giving notice to such other parties of change of
address in conformity with the provisions of this paragraph for the giving of
notice.
11.4 Binding Nature of Agreement; No Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, that (except as
expressly provided in Section 2.3), no party may assign, delegate, or transfer
its rights or obligations under this Agreement other than as expressly provided
for herein without the prior written consent of the other parties hereto. Any
assignment, delegation, or transfer made in violation of this Section 11.4 shall
be null and void.
32
11.5 Entire Agreement. This Agreement, together with all
Schedules and Exhibits attached hereto and made a part hereof, contains the
entire understanding among the parties hereto with respect to the subject matter
hereof and supersede all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
11.6 Construction. The parties hereto acknowledge that each
party was represented by legal counsel in connection with this Agreement and
that each of them and its counsel have reviewed and revised this Agreement, or
have had an opportunity to do so, and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be employed in the interpretation of this Agreement or any amendments or any
exhibits hereto or thereto.
11.7 Attorneys' Fees. In the event of any claim, controversy
or dispute arising out of or relating to this Agreement, or the breach hereof,
the prevailing party (as determined by the court in which such claim,
controversy, or dispute is heard) shall be entitled to recover reasonable
attorneys' fees incurred in connection with the resolution of such matter.
11.8 Remedies Cumulative. The remedies of the parties hereto
under this Agreement are cumulative and shall not exclude any other remedies to
which any party may be lawfully entitled.
11.9 Computation of Time. Whenever the last day for the
exercise of any privilege or discharge of any duty hereunder shall fall upon
Saturday, Sunday or any public or legal holiday, whether under federal or
Arizona law, the party having such privilege or duty shall have until 5:00 p.m.
(Phoenix, Arizona time) on the next succeeding regular business day to exercise
such right or to discharge such duty.
11.10 Authority. Any individual signing below on behalf of a
corporation, partnership or other entity hereby personally represents that he or
she has full authority to bind the party or parties on whose behalf he or she is
signing.
11.11 Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
11.12 Gender. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context requires.
11.13 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
11.14 Subsidiaries. For purposes of this Agreement, all
references to a subsidiary or subsidiaries of Seller or Buyer shall mean any
corporation or partnership in which Seller or Buyer, as the case may be, owns a
majority interest or otherwise controls.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ACTION PERFORMANCE COMPANIES, INC.
By:____________________________________________
Its:___________________________________________
REVELL-MONOGRAM, INC.
By:____________________________________________
Its:___________________________________________
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