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Exhibit: 10.10FT
OPERATING AGREEMENT
OF
LITTLE TIGER PRESS USA, L.L.C.
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TABLE OF CONTENTS
SECTION
ARTICLE I
FORMATION; NAME; PURPOSE;
PRINCIPAL PLACE
OF BUSINESS; AGENT; TERM; INTENT; DEFINITIONS
Formation 1.1
Name 1.2
Purpose 1.3
Principal Place of Business 1.4
Agent for Service of Process 1.5
Term 1.6
Intent Regarding Partnership Status 1.7
Definitions 1.8
ARTICLE II
CAPITAL CONTRIBUTIONS
Initial Capital Contributions 2.1
Additional Capital Contributions 2.2
Return of Capital Contributions 2.3
ARTICLE III
CAPITAL ACCOUNTS
ARTICLE IV
PROFITS OR LOSSES; DISTRIBUTIONS
Interest in Profits or Losses 4.1
Limitation on Liability for Losses 4.2
Chargeable to Members
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Distributions 4.3
ARTICLE V
MANAGEMENT PROVISIONS
Management 5.1
Major Decisions 5.2
Member Compensation 5.3
Reimbursement of Expenses 5.4
Reliance by Third Parties 5.5
ARTICLE VI
ADMINISTRATIVE PROVISIONS
Limitation of Liability 6.1
Indemnification by the Company 6.2
Indemnification by Members 6.3
Loans 6.4
Banking 6.5
Books and Records 6.6
Tax Returns 6.7
Accounting Period 6.8
List of Members 6.9
Insurance 6.10
Employment of Members 6.11
ARTICLE VII
MEETINGS OF MEMBERS
Annual Meeting 7.1
Special Meetings 7.2
Place of Meetings 7.3
Notice of Meetings 7.4
Meeting of All Members 7.5
Adjourned Meetings 7.6
Record Date 7.7
Manner of Acting; Voting 7.8
Voting of Units by Certain Members 7.9
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Proxies 7.10
Action by Members Without a Meeting 7.11
Waiver of Notice 7.12
ARTICLE VIII
DISSOLUTION; TERMINATION; WITHDRAWAL
Events Causing Dissolution 8.1
Events Not Causing Dissolution 8.2
Winding Up 8.3
Member Withdrawals 8.4
ARTICLE IX
TRANSFERS BY MEMBERS;
ADDITIONAL MEMBERS
Transfer Restrictions 9.1
Additional Units; Additional Members 9.2
Involuntary Assignments 9.3
ARTICLE XI
CONTINGENCIES; TRANSFERS; OPERATIONS
Contingencies to these Transactions 10.1
Futech Purchase of Name and Logo from Magi 10.2
Futech's Contribution to the Company of the Name and Logo 10.3
Company's Use of Magi Address and Facilities 10.4
Employment of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ 10.5
This Section is Reserved 10.6
Co-Publisher Agreement with Magi for U.K. Materials 10.7
Co-Publisher Agreement with Magi for U.S. Materials 10.8
Distribution Agreement with XYZ 10.9
Company's Option Regarding Formation of LTP-UK 10.10
Potential Future Merger with Magi Operations 10.11
Overhead Reimbursement to Futech 10.12
ARTICLE XI
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AMENDMENTS
ARTICLE XII
OTHER PROVISIONS
Other Interests of a Member 12.1
Partition 12.2
Notices 12.3
Validity 12.4
Headings 12.5
Governing Law 12.6
Jurisdiction 12.7
Successors and Assigns 12.8
Rights and Remedies 12.9
Waiver 12.10
Counterparts 12.11
Additional Acts 12.12
Construction 12.13
Integration 12.14
Time is of the Essence 12.15
Creditors 12.16
Attorney's Fees and Costs 12.17
Expenses 12.18
Public Announcements 12.19
EXHIBITS
Members; Units; Capital Contributions "2.1"
Promissory Note Owing to Futech "6.4.1"
Promissory Note Owing to Magi "6.4.2"
Registration Rights Agreement "10.2"
Consulting Agreement With ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia "10.5.1"
Confidentiality Agreement of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ "10.5.2"
Co-Publishing Agreement with Magi for U.K. Materials "10.7"
Co-Publishing Agreement with Magi for U.S. Materials "10.8"
Distribution Agreement with XYZ "10.9"
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OPERATING AGREEMENT
OF
LITTLE TIGER PRESS USA, L.L.C.
This Agreement is made effective January 5, 1998, by the following,
whose addresses appear on Exhibit "A" attached hereto, and who with any future
additional Members are hereinafter sometimes referred to individually as
"Member" and collectively as the "Members":
Futech Educational Products, Inc., an Arizona corporation
Magi Publications, a partnership ("Magi")
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned hereby agree as follows:
ARTICLE I
FORMATION; NAME; PURPOSE; PRINCIPAL
PLACE OF BUSINESS; AGENT; TERM; INTENT; DEFINITIONS
1.1 FORMATION. Pursuant to the laws of New York dealing with limited
liability companies (the "Act"), the Members will form a New York limited
liability company (the "Company") effective upon the filing of the Articles of
Organization of this Company with the State of New York. The parties shall
immediately, and from time to time hereafter, as may be required by law, execute
all amendments of the Articles of Organization, and do all filing, recording and
other acts as may be appropriate for the Company to comply with the Act.
1.2 NAME. The name of the Company shall be "Little Tiger Press USA,
L.L.C." The Company may do business under that name and/or under any other name
or names which the Members select. If the Company does business under a name
other than that set forth in its Articles of Organization, then the Company
shall file a fictitious name certificate or any other documents required by
applicable law.
1.3 PURPOSE. The Company has been formed for the purpose of engaging in
business in the publishing industry, and may conduct any activities relating
thereto.
1.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Company shall be at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
Maricopa County, Arizona, or at such other place, and with such other places of
business, as may be designated by the Members from time to time. The registered
office of the Company in New York shall be determined by the Company.
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1.5 AGENT FOR SERVICE OF PROCESS. The agent for service of process on
the Company is the Department of State for New York, or such other person as may
be designated by the Members from time to time.
1.6 TERM. The Company shall commence upon the filing of its Articles
of Organization, and shall continue until terminated by law or as hereinafter
provided.
1.7 INTENT REGARDING PARTNERSHIP STATUS. It is the intent of the
Members that the Company shall always be operated in a manner consistent with
its treatment as a "partnership" for federal and state income tax purposes, but
that the Company shall not be operated or treated as a partnership for purposes
of the United States federal Bankruptcy Code. No Member, member of the
Management Committee, or Manager shall take any action inconsistent with such
intent. The Company hereby elects to be treated as a partnership for federal and
state income tax purposes.
1.8 DEFINITIONS. The following terms used in this Agreement shall have
the meanings described below:
1.8.1 "Act" shall mean the laws of the State of New York that may
relate to limited liability companies.
1.8.2 "Affiliate(s)" of another Person shall mean: (a) any person
directly or indirectly owning, controlling, or holding with power
to vote ten percent (10%) or more of the outstanding voting
securities of such other Person; (b) any Person ten percent (10%)
or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with power to vote by such
other Person; (c) any Person directly or indirectly controlling,
controlled by, or under common control with such other Person; (d)
any officer, director, manager, member or partner of such other
Person; and (e) if such other Person is an officer, director,
manager, member or partner, any company for which such Person acts
in any such capacity; and (f) any immediate family member of such
other Person.
1.8.3 "Agreement" shall mean this written Operating Agreement, as
the same may from time to time be amended. No other document or
oral agreement among the Members shall be treated as part of or
superseding this Agreement unless it is reduced to writing and it
has been signed by all of the Members.
1.8.4 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
1.8.5 "Company" shall mean Little Tiger Press USA, L.L.C., the
limited liability company formed pursuant to this Agreement.
1.8.6 "Contingency Expiration Date" shall have the meaning given
that term in
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Section 10.1 below.
1.8.7 "Manager" or "Managers" shall mean any person who becomes
Manager pursuant to this Agreement, including Section 5.1 below.
1.8.8 "Management Committee" shall have the meaning given said term
in Section 5.1 below.
1.8.9 "Member" shall mean each of the parties who executes a
counterpart of this Operating Agreement as a Member and each Person
who may hereafter become an additional or substituted Member.
1.8.10 "Person" shall mean any natural person, partnership, joint
venture, corporation, estate, trust, association, limited liability
company, or other legal entity.
1.8.11 "Treasury Regulations" shall mean the federal income tax
regulations promulgated under the Code, as such regulations may be
amended from time to time, including corresponding provisions of
succeeding regulations.
1.8.12 "Unit" shall mean an interest in the Company, as that term
is used in Section 2.1 below and in other provisions of this
Agreement.
ARTICLE II
CAPITAL CONTRIBUTIONS
2. 1. INITIAL CAPITAL CONTRIBUTIONS. The initial capital contributions
of the Members, which shall be made upon execution of this Agreement, shall be
as specified in "Exhibit 2. 1" attached hereto and hereby made a part hereof,
and the Members shall acquire "Units" for said contributions as identified on
said Exhibit.
Within fifteen days after the Contingency Expiration Date (defined in
Section 10.1 below), each Member shall make an additional capital contribution
to the Company in the amount of $500,000.00 (cash, cashiers check, wire funds or
other cash equivalent agreed to by the parties).
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as called for in Section
10.3 below, the Members shall not be entitled to make additional capital
contributions without the prior written consent of the Manager and all Members,
and the Members shall not be required to make additional capital contributions
without the prior written consent of the Manager and all Members. Any additional
capital contributions made with said consent may be, but are not required to be,
identified on supplemental schedules to "Exhibit 2.1" (which schedules may
contain alpha numeric designations such as "Exhibit 2.1.1"). Unless otherwise
agreed to by all Members, no interest shall accrue or be paid on said
contributions and no Units shall be issued
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for the additional contributions.
2.3 RETURN OF CAPITAL CONTRIBUTIONS. No Member shall, without the prior
written consent of all of the Members (which consent may be withheld for any or
no reason), be entitled to withdraw or demand the return of any part of his/her
capital contribution, except upon dissolution of the Company and as specifically
provided otherwise in this Agreement. Upon dissolution of the Company, each
Member shall look solely to the assets of the Company for return of his or her
capital contributions and, if the Company's property remaining after the payment
and discharge of the debts, obligations, and liabilities of the Company is
insufficient to return the capital contributions of each Member, no Member shall
have any recourse against the Company or any Member, except for gross
negligence, malfeasance, bad faith or fraud. The Company shall not be obligated
to pay interest on any capital contribution of any Member.
ARTICLE III
CAPITAL ACCOUNTS
An individual capital account shall be maintained for each Member. The
capital interest of each Member shall consist of the Member's original
contribution increased by the Member's additional contributions to capital, the
Member's share of Company profits transferred to capital, and the amount of
Company liabilities assumed by the Member or that are secured by any of the
Company's property distributed to such Member, and decreased by the amount of
money and fair market value of Company property distributed to the Member in
reduction of the Member's Company capital, the Member's share of Company losses,
and the amount of liabilities of such Member that are assumed by the Company or
that are secured by any property contributed by such Member to the Company.
The provisions in this Agreement relating to the maintenance of capital
accounts, and with respect to allocations and distributions, are intended to
comply with the Internal Revenue Code and the Treasury Regulations promulgated
thereunder, and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Members shall determine that it is prudent to
modify the manner in which the capital accounts, or any debits or credits
thereto, or other allocations among the Members, are computed in order to comply
with such Regulations, the Members may make any such modification, provided that
the modification is not likely to have a material effect on the amounts
distributable to any Member upon the dissolution of the Company. The Members
also shall make any appropriate modifications in the event of unanticipated
events (for example, the acquisition by the Company of royalty and gas
properties or the encumbrance of Company property by nonrecourse debt) that
might otherwise cause this Agreement not to comply with the Treasury
Regulations.
ARTICLE IV
PROFITS OR LOSSES; DISTRIBUTIONS
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4.1 INTERESTS IN PROFITS OR LOSSES.
(a) Except as may be expressly provided to the contrary in this
Agreement, the net profits of the Company shall be credited to the Members in
proportion to their Company Units.
Except as may be expressly provided to the contrary in this Agreement,
the net losses of the Company shall be charged to the Members as follows:
(i) First, to each Member having a negative balance in that
Member's capital account, to the extent of such negative balance, in
the proportion that the negative balance of each Member bears to the
total negative balances of all Members;
(ii) Thereafter, to the Members in accordance with the balances in
their capital accounts.
(b) In accordance with Internal Revenue Code Section 704(c) and the
Treasury Regulations thereunder, income, gain, loss and deductions with respect
to any property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members in a manner determined by the Members
so as to take into account any variation between the adjusted basis of such
property to the Company for Federal income tax purposes and the value of said
property at the date of its contribution.
(c) The Members shall make such other special allocations as are
required in order to comply with any mandatory provision of the applicable
Treasury Regulations or to reflect a Member's economic interest in the Company
determined with reference to such Member's right to receive distributions from
the Company and such Member's obligation to pay its expenses and liabilities.
(d) The Members are aware of the income tax consequences of the
allocations made by this Article and hereby agree to be bound by the provisions
of this Article in reporting their shares of Company income and loss for income
tax purposes.
4.2 LIMITATION ON LIABILITY CHARGEABLE TO MEMBERS. Notwithstanding any
other provision of this Agreement, no Member shall personally be liable for any
of the losses of the Company beyond the Member's capital interest in the
Company.
4.3 DISTRIBUTIONS.
(a) The Members shall determine whether cash or other property shall be
distributed. Except as otherwise provided for in Section 8.3 below,
distributions shall be made among the Members in proportion to their Units held.
(b) Any amounts withheld pursuant to the Code or any provisions of
state or local tax law with respect to any payment or distribution to the
Members from the Company shall be
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treated as amounts distributed to the Members for whom the withholding was made.
ARTICLE V
MANAGEMENT PROVISIONS
5.1 MANAGEMENT.
(a) Management Committee. Notwithstanding the fact that the Company is
a "member-run" limited liability company, except as may otherwise be expressly
provided for in this Agreement (including Section 5.2 below), the business and
affairs of the Company shall be governed in all respects by a committee (the
"Management Committee") composed of four members, two of whom shall be appointed
by Futech and two of whom shall be appointed by Magi. The Management Committee
shall be responsible for formulating the policies of the Company and authorizing
all material decisions regarding its operations, including decisions regarding
material capital expenditures and investments (except for the "Major Decisions"
identified in Section 5.2 below). There are provisions in this Agreement calling
for decisions to be made by the Members, and those provisions do not alter the
affect of the provisions in this subparagraph (a). Except for provisions
expressly requiring 100% vote of the Members, the Management Committee's
decisions shall exclusively be deemed to be the decisions of the Members for all
purposes. Wherever this Agreement calls for the vote or consent of less than all
of the Members, the Management Committee shall have the exclusive right to
exercise all of the discretionary authority granted to the Members under the
provisions of this Agreement, and shall manage and direct the conduct of the
Company's day-to-day business affairs. Specifically, but not in limitation of
the foregoing, the Management Committee will be responsible for all decisions
relating to title selection, production management, and expenditures for
published materials, and shall set Company customer credit policies.
Futech hereby appoints ▇▇▇▇ ▇▇▇ ("▇▇▇") ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
as Futech's initial members of the Management Committee, and Magi hereby
appoints ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia and ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ as Magi's initial
members of the Management Committee.
Each member of the Management Committee shall devote such time to the
business and affairs of the Company as shall be necessary or appropriate to
properly conduct such business and affairs in accordance with this Agreement and
applicable law. It is expressly understood and agreed that no member of the
Management Committee shall be required to devote that member's entire business
time to the business and affairs of the Company.
The Management Committee shall be under a fiduciary duty to conduct the
affairs of the Company in the best interests of the Company and its Members,
including the safe keeping of all Company property and the use thereof for the
exclusive benefit of the Company.
(b) Actions of the Management Committee. At any meeting at which a
quorum is
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present, the Management Committee shall act, except as may otherwise be provided
herein, upon the unanimous vote of the Management Committee, and such actions
shall be binding upon the Members and the Company. Each member of the Management
Committee shall have one vote. The presence, by proxy, in person or by
telephone, at any regular or special meeting of the Management Committee, of all
members of the Management Committee, shall be necessary to constitute a quorum.
(c) Manager. The members of the Management Committee may from time to
time elect one or more "Managers" who shall, to the extent designated by the
Management Committee, have the primary responsibility for managing and directing
the day-to-day operations of the Company on behalf of the Management Committee.
Managers need not be members of the Management Committee. At any time when a
Manager is acting, such Manager shall have the exclusive right to exercise all
of the discretionary authority granted to the Management Committee under the
provisions of this Agreement and all powers of the Management Committee on
behalf of the Company, except to the extent, if any, such rights and powers are
restricted by the Management Committee when the Manager is appointed or
thereafter. Initially, Manager's duties shall include handling all special sales
projects (to non-retailers), including book clubs, book fairs, catalogers, party
planners, etc; provided, however, that Manager may retain the services of XYZ
Distributors ("XYZ"; which may be a division of Futech) to aid such activities,
and in which event the Company may enter into a commission or revenue sharing
arrangement with XYZ, upon terms and conditions to be agreed to by the members
of the Management Committee.
Any two members of the Management Committee may remove a Manager by
providing written notice of the removal to the Manager and the other members of
the Management Committee, and the removal shall be effective immediately unless
a later effective date is provided for in the notice; provided, however, that
said removal move only be done after a meeting of the Management Committee
occurs in which said removal is discussed. The appointment of a Manager must be
by unanimous decision of the Management Committee. If there shall at any time be
more than one person acting as Manager hereunder, then, unless otherwise
designated by unanimous vote of the Management Committee, the unanimous approval
of said persons shall be required for any act of the "Manager."
The Manager shall be under a fiduciary duty to conduct the affairs of
the Company in the best interests of the Company and its Members, including the
safe keeping of all Company property and the use thereof for the exclusive
benefit of the Company. The Manager shall devote such time and effort as is
necessary for the management of the Company in the conduct of its business in an
efficient, thorough and businesslike manner, devoting appropriate attention to
all matters affecting the conduct of the Company's business.
The fee, if any, paid to the Manager for acting as Manager hereunder
shall be determined by and subject to change from time to time by the unanimous
vote of the Management Committee.
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ is hereby appointed as the initial Manager, to
serve so long as he is able and willing to so serve, or until he is replaced or
removed pursuant to the terms of this Agreement.
(d) Meetings of Management Committee. The Management Committee shall
meet at least once every year or more frequently as appropriate. Management
Committee meetings may be held in person, by telephone conference, or by use of
similar communications equipment. Any action required or permitted to be taken
by the Management Committee may be taken without a meeting if all of the members
of the Management Committee consent thereto in writing.
Special meetings of the Management Committee may be held upon the call
of any member of the Management Committee for any purpose. Written notice of
each regular and special meeting shall be sent to each member of the Management
Committee not less than twenty-four (24) hours before such meeting. Notice of
any meeting need not be given to any member of the Management Committee who
shall submit, either before or after the meeting, a signed waiver of notice, or
who shall attend the meeting.
(e) Term of Office of Members of Management Committee. Each member of
the Management Committee shall hold office until death, resignation, retirement
or removal by the Member that appointed such member of the Management Committee.
If a vacancy shall occur in the Management Committee, the Member that appointed
such vacating member of the Management Committee may appoint his or her
successor by giving written notice thereof to the other Member and the
Management Committee. If either Member desires to replace its appointee, such
Member may remove or replace such appointee at any time by giving written notice
thereof to the other Member and to the Management Committee.
(f) Compensation of Management Committee. Members of the Management
Committee shall not receive any salaries, fees or other compensation from the
Company for their service on the Management Committee, except to the extent
approved by the unanimous vote of all Members of the Company; provided, however,
that nothing in this provision shall prevent the Member that designated the
member of the Management Committee from paying said member of the Management
Committee compensation or reimbursement from the Member's own funds, and not
from the funds of or to be reimbursed by the Company.
(g) Communications. The members of the Management Committee, and the
Manager, shall promptly advise and inform each other of any transaction, notice,
event or proposal, other than in the ordinary course of business of the Company,
of which they may become aware which directly relates to the management and
operation of the Company or to any assets of the Company, to the extent any such
matter does or could materially affect, either adversely or favorably, the
Company, its business or its assets.
5.2 MAJOR DECISIONS. Notwithstanding any other provision of this
Agreement, no action shall be taken or sum expended or obligation incurred by
the Company with respect to
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a matter within the scope of any of the major decisions (the "Major Decisions")
affecting the Company, as defined below, unless such action, expenditure or
obligation has been approved in writing by all of the Members of the Company.
"Major Decisions" shall be the following:
(a) Any amendment to this Agreement or the Certificate of Formation of
the Company;
(b) Any act in contravention of this Agreement or any undertaking on
behalf of the Company not reasonably related to the purpose of the Company;
(c) Any act which would make it impossible to carry on the business of
the Company, or any act which would violate applicable laws;
(d) The confession of any judgment against the Company;
(e) The execution or delivery of any general assignment for the benefit
of creditors of the Company;
(f) The admission of a person as a Member, except as may otherwise
expressly be provided for in this Agreement; and
(g) All other decisions relating to the Company for which this
Agreement specifically requires the approval of all Members.
5.3 MEMBER COMPENSATION. Except as may otherwise be agreed to by all of
the Members elsewhere in this Agreement, or elsewhere in writing, no Member
shall seek or be paid any compensation for being a Member in this Company or for
acting in any management capacity in this Company.
5.4 REIMBURSEMENT OF EXPENSES. The members of the Management Committee
(and Manager(s)) shall be reimbursed by the Company for reasonable direct costs
and expenses incurred in performing their responsibilities pursuant to this
Agreement, such as airfare lodging and meals (including meals for clients and
prospective clients), and incidentals such as parking and tips, all in
reasonable amounts, reasonably incurred, while on Company business; provided,
however, that such expenses shall not be in excess of the amount customarily
paid for like services in the county in which the expenses were incurred, and
shall, except for such things as cash tips, be supported by receipts; and
provided, further, that expenses exceeding $5,000 in any month for any person
shall require the approval of the Management Committee.
5.5 RELIANCE BY THIRD PARTIES. As between all of the members of the
Management Committee (acting on behalf of the Company) and all third parties
dealing with the Company and not having actual knowledge (but this provision
shall not create a duty in third parties to investigate any member's authority)
of any lack of authority of a member, the act or signature of all of the members
of the Management Committee shall be necessary and sufficient to convey
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title to any property owned by the Company or to execute any promissory notes,
trust deeds, mortgages or other instruments of hypothecation, or any other
document or instrument (including loans and guaranties of any type), and all of
the Members agree that a copy of this Agreement may be shown to the appropriate
parties in order to confirm the same.
Every contract and other instrument executed by all of the members of
the Management Committee shall be conclusive evidence in favor of every person
or entity relying thereon or claiming thereunder that at the time of the
delivery thereof: (i) this Company was in existence; (ii) this Agreement has not
been terminated or canceled or amended in any manner so as to restrict such
authority; and (iii) the execution and delivery of such instruments were duly
authorized under this Agreement. Any persons or entity dealing with the Company
may rely on a certificate signed by all, and only by all, of the members of the
Management Committee hereunder:
(a) As to who are the Members hereunder;
(b) As to the existence or non-existence of any fact or facts which
constitute conditions precedent to acts by the members of the Management
Committee or are in any other manner germane to the affairs of this Company;
(c) As to who is authorized to execute and deliver any instrument or
document of the Company;
(d) As to the authenticity and completeness of any copy of this
Agreement and amendments thereto; and/or
(e) As to any act or failure to act by the Company or as to any other
matter whatsoever involving the Company.
The statement of all of the members of the Management Committee that said
members are acting in accordance with the provisions of this Agreement shall
fully protect all persons dealing with said members. No person paying money or
delivering any property to all of the members of the Management Committee need
see to its application, and no person dealing with all of the members of the
Management Committee shall be obligated to inquire into the terms of this
instrument or the necessity or expediency of any act of said members.
Nothing in this Section shall be deemed to alter the rights, obligations, and
limitations placed upon the members as among themselves, or upon the members of
the Management Committee.
ARTICLE VI
ADMINISTRATIVE PROVISIONS
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6.1 LIMITATION OF LIABILITY. Each Member's liability for the debts and
obligations of the Company shall be limited to the maximum extent allowed by
law.
6.2 INDEMNIFICATION BY THE COMPANY. The Members shall perform their
duties, if any, under this Agreement with ordinary prudence and in a manner
characteristic of businessmen in similar circumstances. However, no Member shall
have any liability whatsoever to the Company or to any other Member for loss
caused by any act or by the failure to do any act if the loss suffered arises
out of a mistake in the business judgment of the Member, or if the Member, in
good faith, had determined that the action or lack of action giving rise to the
loss was in the best interests of the Company; provided, however, that a Member
shall not be released from liability hereunder for any loss caused by the gross
negligence, breach of this Agreement, breach of fiduciary duties, or intentional
misconduct of such Member or its agents, or for acts outside the Member's
authority under this Agreement. The Company, or its receiver or liquidating
trustee, shall indemnify, hold harmless and pay all judgments and claims against
a Member arising from any of the Member's actions or decisions performed or made
in good faith within the scope of the Member's authority under this Agreement,
provided that such actions or decisions do not constitute gross negligence, a
breach of this Agreement, a breach of fiduciary duties, or intentional
misconduct on the part of such Member. This indemnification shall include,
without limitation, payment of reasonable attorneys' fees incurred in connection
with the defense of any claim or proceeding based on any such action or
decision, which attorneys' fees shall be paid as incurred. The Manager and all
members of the Management Committee shall be indemnified by the Company to the
extent identified above for Members.
6.3 INDEMNIFICATION BY MEMBERS. Each Member (as "Indemnitor") shall
indemnify and hold harmless the Company and the other Members from and against
all claims, demands, actions and rights of action which shall or may arise by
virtue of anything done or omitted to be done by the Indemnitor (directly or
through or by agents, employees or other representatives) which is outside the
scope of, or in breach of, the terms of this Agreement, or which constitutes
gross negligence, breach of fiduciary duties, or intentional misconduct on the
part of such Member. A Member who desires to make a claim against an Indemnitor
under this Section shall notify the Indemnitor of the claim, demand, action or
right of action which is the basis of such claim, and shall give the Indemnitor
a reasonable opportunity to participate in the defense thereof. Failure to give
such notice shall not affect the Indemnitor's obligations hereunder, except to
the extent of any actual prejudice resulting therefrom. The obligations of the
Members under this Section shall survive and be enforceable against them
notwithstanding the dissolution or termination of the Company.
6.4 LOANS. Each of Futech and Magi shall provide the Company with
revolving debt in the amount of $500,000.00. The Company, and Futech and Magi,
will simultaneously with the execution of this Agreement, execute promissory
notes evidencing said indebtedness in the form of "Exhibit 6.4.1" and "Exhibit
6.4.2" attached hereto and hereby made a part hereof, and shall execute and file
Uniform Commercial Code Financing Statements evidencing the security interests
granted in said notes. The Financing Statements will be filed in the order of
priority identified in the first sentence of this Section. All funds borrowed by
Company under said
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promissory notes shall be borrowed in equal amounts from each of the Members.
All funds paid by Company in repayment of said promissory notes shall be paid in
proportion to the balances owing under said notes. The obligations of the
parties under said notes shall be effective on the Contingency Expiration Date
(defined in Section 10.1 below).
Any Company funds not required for the operation of the Company, as
determined in the discretion of the Members, shall be paid against the debt
described in this Section. No distributions shall be made to any Member unless
and until said debt has been fully repaid.
6.5 BANKING. All Company funds shall be deposited in the Company's name
in such bank account or accounts as shall be designated by the Members. All
withdrawals therefrom shall be made upon checks signed by a person(s) selected
by the Members. The Members currently intend that the Company will have its main
banking account(s) in Phoenix, Arizona, and a supplemental account in the State
of New York. All receipts will be deposited into the main account. The
supplemental account will be funded from the main account as necessary, and will
be used for paying day to day expenses not related to the purchase of inventory.
6.6 BOOKS AND RECORDS.
(a) The Members shall keep books of account with respect to the
business and affairs of the Company, which books shall be maintained at the
Company's principal office. All Members shall at all reasonable times have
access to such books for inspection and/or copying at the expense of the
requesting Member, after reasonable request is made therefor.
(b) At a minimum, the Company shall keep at its principal place of
business the following records:
(i) A current list of the full name and last known business,
residence, or mailing address of each Member, Manager, and member
of the Management Committee;
(ii) A copy of the Articles of Organization of the Company and all
amendments thereto, together with executed copies of any powers of
attorney pursuant to which any amendment has been executed;
(iii) Copies of the Company's federal, state, and local income tax
returns and reports, if any, for the three most recent years;
(iv) Copies of the Company's currently effective written Operating
Agreement and all amendments thereto, copies of any prior written
operating agreement no longer in effect, copies of any writings
permitted or required with respect to a Member's obligation to
contribute cash, property or services, and copies of any financial
statements of the Company for the three most recent years;
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(v) Minutes of every annual, special, and court-ordered meeting of
the Members; and
(vi) Any written consents obtained from Members for actions taken
by Members without a meeting, and any written consents obtained
from members of the Management Committee for actions taken by the
Management Committee without a meeting.
(c) The Members, at the Company's expense, shall cause annual financial
statements to be prepared by an independent accounting firm chosen by the
Members. Such statements shall be signed and verified by the Company or its duly
authorized agent and copies shall be furnished to each of the Members no later
than March 31 following the close of the Company's fiscal year.
6.7 TAX RETURNS. All federal, state and local income tax returns of
the Company required to be filed for any taxable year shall be timely prepared
and filed by the Members at the expense of the Company and furnished to the
Members as soon as is practical after the end of the taxable year.
6.8 ACCOUNTING PERIOD. The Company's accounting period shall be the
calendar year.
6.9 LIST OF MEMBERS. Upon written request of any Member, the Company
shall provide to such Member a list showing the names, last known addresses and
interests of all Members, Managers, and members of the Management Committee.
6.10 INSURANCE. The Company shall carry and maintain in force such
insurance as the Members deem appropriate, the premiums of which shall be a cost
and expense of the Company. All such policies of insurance shall name the
Company, and, if necessary, all of the Members, as named insureds as their
respective interests may appear.
6.11 EMPLOYMENT OF MEMBERS. All Members, and members of the Management
Committee, shall act in the best interests of the Company. The Company may
employ a Member or an Affiliate of a Member, and the fact that a Member is
directly or indirectly interested in or connected with any Person employed by
the Company to render or perform a service, or from which the Company may buy
merchandise or other property, shall not preclude the Company from employing
such Person or from otherwise dealing with such Person, so long as such
employment or interest is fully disclosed to all the Members and approved by all
Members, and provided that the expenses associated therewith shall not be in
excess of the amounts customarily paid for like services in the county in which
the expenses are incurred. Neither the Company nor the Members shall have any
rights in or to any income or profits derived from any such transaction with a
Member or any such entity in which a Member may have an interest.
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ARTICLE VII
MEETINGS OF MEMBERS
7.1 ANNUAL MEETING. An annual meeting of the Members may be held on the
second Tuesday of March of each year, or at such other time as shall be
determined by the Management Committee, commencing with the year 1998, for the
purpose of the transaction of such business as may come before the meeting.
7.2 SPECIAL MEETINGS. Special meetings of the Members, for any purpose
or purposes, unless otherwise prescribed by statute, may be called by any
Member, or by the Management Committee.
7.3 PLACE OF MEETING. The Members may designate any place, either
within or outside the State of Arizona, as the place of meeting for any meeting
of the Members; provided, however, that the agreement of all Members shall be
required for a meeting to be held outside of the State of Arizona. If no
designation is made, or if a special meeting is otherwise called, the meeting
shall be held at the principal office of the Company.
7.4 NOTICE OF MEETING. Except as provided in Section 7.5 below, written
notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less than three
nor more than fifty days before the date of the meeting, either personally or by
mail, by or at the direction of the Management Committee or person calling the
meeting, to each Member entitled to vote at such meeting and to the Management
Committee. If mailed, such notice shall be deemed to be delivered two calendar
days after being deposited in the United States mail, addressed to the Member at
the Member's address as it appears on the books of the Company, with postage
thereon prepaid. If transmitted by way of facsimile, such notice shall be deemed
to be delivered on the date of such facsimile transmission to the fax number, if
any, for the respective Member which has been supplied by such Member to the
Company and identified as such Member's facsimile number.
7.5 MEETING OF ALL MEMBERS. If all of the Members shall meet at any
time and place, either within or outside of the State of Arizona, and consent to
the holding of a meeting at such time and place, such meeting shall be valid
without call or notice, and at such meeting lawful action may be taken.
7.6 ADJOURNED MEETINGS. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Company may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Member entitled to vote at the meeting.
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7.7 RECORD DATE. For the purpose of determining Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or
Members entitled to receive payment of any distribution, or in order to make a
determination of Members for any other purpose, the date on which notice of the
meeting is mailed or the date on which the resolution declaring such
distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section, such
determination shall apply to any adjournment thereof.
7.8 MANNER OF ACTING; VOTING. The manner in which Members act for or on
behalf of the Company is set out in Section 5.1 and 5.2 above, and elsewhere in
this Agreement. Where votes of the Members are required, not acting through the
Management Committee, each Unit shall be entitled to one vote.
7.9 VOTING OF UNITS BY CERTAIN MEMBERS.
(a) Units belonging to the Company, or to a corporation the majority of
the shares of which are held by the Company, shall not be entitled to vote;
provided, however, that nothing herein shall be construed as limiting the right
of the Company to vote Units held by it in a fiduciary capacity.
(b) A Member whose Units are pledged shall be entitled to vote such
Units until the Units have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the Units so transferred, but
only if allowed by the other provisions of this Agreement.
(c) If Units stand in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety or tenants by community property or otherwise, or if two or more
persons have the same fiduciary relationship with respect to the same Units,
unless the Company is given written notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the effect of (i) if only one votes, his/her acts bind all, (ii) if more
than one votes, the act of the majority so voting binds all, and (iii) if more
than one votes, but the vote is evenly split on any one particular matter, each
fraction may vote the Units in question proportionally.
7.10 PROXIES. At all meetings of Members, a Member may vote in person
or by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the other Members of the
Company before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
7.11 ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted
to be taken at a meeting of Members may be taken without a meeting if the action
is evidenced by one
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or more written consents describing the action taken, signed by each Member.
Action taken under this Section is effective when said Members have signed the
consent, unless the consent specifies a different effective date. The record
date for determining Members entitled to take action without a meeting shall be
the date the first Member signs a written consent.
7.12 WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the Person entitled to such
notice, whether before, at, or after the time stated therein, shall be the
equivalent of the giving of such notice.
ARTICLE VIII
DISSOLUTION; TERMINATION; WITHDRAWAL
8.1 EVENTS CAUSING DISSOLUTION. The Company shall be dissolved only
upon the occurrence of any of the following events:
(a) The written consent or affirmative vote to dissolve of 100% of the
Company Units;
(b) The entry of a judgment of dissolution by a court of competent
jurisdiction or by dissolution by operation of law;
(c) The acquisition by any one Person of all of the Units of the
Company; or
(d) Upon the occurrence of any event which causes a dissolution of the
Company under applicable law, unless the business of the Company is continued by
the specific consent of all Members, given within 90 days after such event, and
there are at least two remaining Members. Reasonable expenses incurred in the
continuation, or attempted continuation, of the Company shall be deemed expenses
of the Company.
8.2 EVENTS NOT CAUSING DISSOLUTION. Except as may otherwise be provided
in Section 8.1 above, the Company shall not be terminated or dissolved by the
legal incapacity, death, insanity, bankruptcy, withdrawal or expulsion of any
Member, by the assignment of any Member of that Member's Units, or by the
admission of a new Member, or the admission of any additional or substitute
Member or Manager, but the Company shall continue thereafter as the Company with
the remaining Members and any new Members.
As used in this Section, the term "bankruptcy" shall mean: (i) the
voluntary filing of a petition in bankruptcy or petition pursuant to any
insolvency act; (ii) the making of an assignment for the benefit of creditors;
(iii) giving consent to the appointment of a receiver, liquidator, custodian, or
trustee for the whole or any substantial part of the property of the Member;
(iv) the voluntary filing of a petition or answer seeking or consenting to
reorganization under Chapter 11 of Title 11 of the United States Code or state
insolvency statutes; (v) the appointment, by order of a court of competent
jurisdiction, of a receiver, liquidator, custodian,
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or trustee for a Member for the whole or any substantial part of his or her
property, which appointment shall not have been discharged within sixty (60)
consecutive days thereafter; (vi) the institution against a Member of any
proceeding under Chapter 11 of Title 11 of the United States Code or any
amendment or successor thereto or under any other applicable law or statute of
the United States or any state (including state insolvency statutes), which
proceedings shall not have been dismissed within sixty (60) consecutive days
after the institution thereof; or (vii) if an insolvency petition is filed
against a Member and an order for relief is directed under Chapter 11 of Title
11 of the United States Code.
8.3 WINDING UP. In the event of dissolution without continuance, and
final termination of the Company:
(a) The Members shall:
(i) Wind up the affairs of the Company;
(ii) Subject to subparagraph (d) below, sell all
Company assets as promptly as is consistent with obtaining,
insofar as is possible, the fair value thereof; and
(iii) After paying all liabilities (including all
costs of dissolution), and subject to the right of the Members
to set up cash reserves to meet Company liabilities,
distribute the remaining Company assets to the Members
pursuant to the relevant provisions of this Agreement.
(b) The Members shall continue to share profits and losses
during the period of liquidation in the same proportions as before dissolution.
The proceeds from liquidation of Company assets shall to the extent allowed by
law be applied as follows in the following order of priority:
(i) To secured creditors of the Company;
(ii) To unsecured creditors of the Company;
(iii) To Futech in reimbursement of its capital
contributions made under Section 10.3 below; provided,
however, that such reimbursement shall be in the form of a
cash repayment equal to the value of the capital contribution
advanced by Futech under Section 10.3 below at the date of
such advance.
(iv) To the Members in the amounts of and in
proportion to positive balances in their capital accounts; and
(v) To the Members in accordance with Units owned.
(c) In the event a distribution of Company property in kind is
made, such property
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shall either: (i) be transferred and conveyed to the Members or their assigns so
as to vest in each of them, as tenants-in-common, a percentage interest in the
whole of said property equal to the percentage interest the Members would have
received had the foregoing property not been distributed in kind; or (ii) be
transferred and conveyed to the Members on an asset-by-asset determination, as
determined by the Members.
(d) Notwithstanding anything to the contrary in this
Agreement, upon a liquidation of the Company (for tax or state law purposes), if
any Member has a negative capital account balance (after giving effect to all
contributions, distributions, allocations and other capital account adjustments
for all taxable years, including the year during which such liquidation occurs),
such Member shall have no obligation to make any contribution to the capital of
the Company, and the negative balance of such Member's capital account shall not
be considered a debt owed by such Member to the Company or to any other person
for any purpose whatsoever.
(e) All documents and records of the Company, including
without limitation all financial records, vouchers, canceled checks, and bank
statements, shall upon termination of the Company be delivered to a person
selected by the Members. Unless otherwise approved by the other Members, such
person shall retain such documents and records for a period of not less than
seven (7) years and shall make such documents and records available during
normal business hours to the Members for inspection and copying at such Member's
cost and expense. In the event a Member for any reason ceases, as provided in
this Agreement, to be a Member at any time prior to termination of the Company,
and the Company is continued without such withdrawing, defaulting, or selling
Member, such documents and records of the Company up to the date of the
termination of the withdrawing Member's interest shall be maintained by the
Company for a period of not less than seven (7) years thereafter; provided,
however, that if there is an audit or threat of audit, such documents and
records shall be retained until the audit is completed and any tax liability is
finally determined. The documents and records shall be available for inspection,
examination, and copying by the withdrawing, defaulting, or selling Member upon
reasonable notice. Notwithstanding the foregoing, the Company may destroy
Company records prior to the expiration of the time periods described above in
this paragraph if it is not necessary to retain said records for tax or other
purposes.
8.4 MEMBER WITHDRAWALS. No Member shall, without the prior written
consent of all of the Members (which consent may be withheld for any or no
reason), be entitled to withdraw from the Company, or cease to be a Member of
the Company, except upon dissolution of the Company and as specifically provided
otherwise in this Agreement, and each Member covenants not to withdraw from the
Company. This shall be true notwithstanding any other provision of this
Agreement, including without limitation the provisions appearing below in this
Section 8.4. Any attempted withdrawal shall be a violation of this Agreement and
the Member attempting to withdraw shall be liable to the Company for all damages
resulting from or otherwise relating to the attempted withdrawal.
If the Company dissolves and winds up its business affairs as a result
of the withdrawal
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of the Member, any distributions to which the withdrawn Member is entitled under
this Agreement shall be reduced by the damages incurred by the Company and/or
its Members as a result of the withdrawal, and the withdrawn Member and his/her
personal representatives, successors and assigns shall have only the rights of
an assignee of the withdrawn Member's interest in the Company.
If the business of the Company is continued following the withdrawal of
the Member, the withdrawn Member and said Member's successors and assigns shall
have only the rights of an assignee of the withdrawn Member's interest, and
shall not be entitled to any allocations or distributions as a result of the
withdrawal, but instead shall be entitled only to distributions which would have
been made to the Member had the Member not withdrawn from the Company; provided,
however, that the Company may, in the Company's discretion, distribute to the
withdrawn Member as complete payment for said Member's interest in the Company,
the value of the withdrawn Member's interest in the Company, reduced however by
the damages incurred by the Company and/or its Members as a result of the
withdrawal, and the value of any goodwill of the Company shall be excluded in
determining the value of the withdrawn Member's interest in the Company. The
Company may defer payment of the amount so payable to the withdrawn Member for
such a period of time as is necessary or appropriate to prevent unreasonable
hardship to the Company, and in said event, the withdrawn Member shall be
entitled to request that the Company secure the deferred payment by agreed upon
collateral, and in the event the parties cannot agree upon the collateral to be
pledged, the collateral may be determined by a court of competent jurisdiction.
ARTICLE IX
TRANSFERS BY MEMBERS; ADDITIONAL MEMBERS
9.1 TRANSFER RESTRICTIONS.
(a) Notwithstanding any other provision of this Agreement, no
Member shall be entitled to transfer, assign or encumber all or any portion of
the Member's interest in the Company without the prior written consent (which
may be withheld for any reason or no reason) of all of the Members. Any
unauthorized attempt to so transfer or encumber a Member's interest shall be
void. The granting of consent to any transfer or encumbrance in one or more
instances shall not limit or waive the need for such consent in any other or
subsequent instances. The transferor shall pay all costs and expenses of the
Company, including attorney's fees and costs, associated with a transfer or
encumbrance, or requested transfer or encumbrance of a Member's Units.
(b) In the event a Member at any time transfers or attempts to
transfer the Member's interest in the Company in violation of the provisions of
this Agreement, then the Company shall be entitled in addition to all rights and
remedies at law and in equity, to a decree or order restraining and enjoining
such transfer. The offending Member shall not plead in
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defense that there is an adequate remedy at law, it being hereby expressly
acknowledged and agreed that damages at law shall be an inadequate remedy for a
breach or threatened breach of the provisions concerning transfer set forth in
this Agreement.
9.2 ADDITIONAL UNITS; ADDITIONAL MEMBERS. No additional Units will be
issued to Members without the prior written consent of all Members, and no
additional Members will be admitted to the Company without the prior written
consent of all Members.
9.3 INVOLUNTARY ASSIGNMENTS.
(a) In the event a Member's interest is taken or disturbed by
levy, foreclosure, charging order, execution, or other similar proceeding, the
Company shall not dissolve. The assignee of the Member's interest shall in no
event have any right to interfere in the management or the administration of the
Company business or affairs or to act as a Manager or to become a substituted
Member except as may otherwise be expressly provided for herein to the contrary.
The assignee shall only have the right to receive distributions attributable to
the Member's interest in the Company, if and to the extent any are made, along
with allocations of profits and losses attributable to the Member's interest in
the Company in accordance with the allocation provisions set out in this
Agreement.
(b) Any person or entity to which an interest in the Company
is assigned pursuant to the provisions of the bankruptcy code shall be deemed
without further act to have assumed all of the obligations arising under this
Agreement and relating to the interest assigned. Upon demand any such
assignee(s) shall execute and deliver to each other party to this Agreement an
instrument confirming such assumption. Failure to deliver such instrument shall,
at the election of the Company, be deemed a default hereunder by the assignee.
ARTICLE X
CONTINGENCIES; TRANSFERS; OPERATIONS
10.1 CONTINGENCIES TO THESE TRANSACTIONS. This Agreement is signed
prior to satisfaction of the contingencies identified below. This Agreement is
binding upon the parties once signed, but performance by the parties of their
obligations under this Agreement, including their obligations to make any
capital contributions, other than those shown on "Exhibit 2.1" attached hereto,
or any loans, are conditional upon prior satisfaction of the following
conditions:
(i) The closing by Futech of its contemplated Private
Placement Offering, or other financing acceptable to Futech;
and
(ii) The closing of the transactions wherein Futech, or its
successor, purchases the businesses of XYZ Distributors and
Premier Publishing.
If the foregoing conditions are not satisfied by April 30, 1998, this Agreement
and the
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agreements which are Exhibits hereto shall be terminated for all purposes at the
written election to so terminate made by any Member by notice given to the other
Member. The date the contingencies above are satisfied, or waived by all Members
in writing, is referred to in this Agreement as the "Contingency Expiration
Date".
Notwithstanding the foregoing, if this Agreement terminates as called
for the previous paragraph, then Futech shall reimburse Magi for Magi's
out-of-pocket costs, not exceeding $20,000.00 total, incurred to establish a New
York office, including travel expenses incurred to interview prospective
employees.
10.2 FUTECH PURCHASE OF NAME AND LOGO FROM MAGI. Immediately after the
Contingency Expiration Date, Futech shall purchase from Magi, and Magi shall
sell to Futech, all rights to use the Little Tiger Press imprint, logo,
trademark, and tradename (hereinafter collectively the "▇▇▇▇") for use in, and
only in, the North America. At the time of the transfer, Magi shall execute and
deliver to Futech any and all documents necessary to accomplish the transfer,
including without limitation a ▇▇▇▇ of sale and an assignment of all North
American federal and local registrations of the ▇▇▇▇, in form satisfactory to
Futech. The ▇▇▇▇ shall be transferred free and clear of any and all liabilities
or encumbrances.
The purchase price paid by Futech to Magi shall be payable immediately
at the time of the transfer, and shall be $350,000.00 in cash and $350,000.00 of
Futech stock, valued as of the Contingency Expiration Date. Said Futech stock
shall be unregistered stock subject to all restrictions required by law, and
subject to such reasonable restrictions as are required by Futech's underwriter,
and will be subject to a Registration Rights Agreement in the form of Exhibit
"10.2" attached hereto and hereby made a part hereof. Payment by Futech of said
purchase price shall automatically and without further action constitute a
transfer of the ▇▇▇▇ in accordance with this Section, but notwithstanding such
automatic transfer, Magi agrees to execute any and all documents necessary or
appropriate to consummate, or otherwise in connection with, said transfer.
As of the date of this Agreement, and the date the transfer of the ▇▇▇▇
occurs, Magi hereby represents and warrants the following regarding the ▇▇▇▇:
(i) There are no claims pending or threatened by or against
Magi alleging any improper use or infringement by Magi or any
third person relating in any manner to the ▇▇▇▇;
(ii) Magi owns the ▇▇▇▇ free and clear of any and all
liabilities or encumbrances of any type or nature, and has the
capacity and authority to transfer the ▇▇▇▇ as set forth in
this Section; and
(iii) Magi has sole and exclusive right to use the ▇▇▇▇ in the
United States, and has not granted any rights to use the ▇▇▇▇
in any manner to any person or entity.
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The parties acknowledge that Magi has filed applications for U.S. and
Canadian registrations of the ▇▇▇▇, but the applications are pending. Magi
expects registration of the ▇▇▇▇ to be completed shortly. If the ▇▇▇▇ is not by
the Contingency Expiration Date registered in the U.S. and Canada without
restriction, or is not saleable by Magi to Futech without restriction, then: (i)
Futech shall not be obligated to purchase the ▇▇▇▇ as called for herein, and/or
(ii) Futech may elect not to proceed with the transactions identified in this
Agreement, and if Futech so elects not to proceed, the Company shall be
liquidated.
10.3 FUTECH'S CONTRIBUTION TO THE COMPANY OF THE NAME AND LOGO.
Immediately after the transfer of the ▇▇▇▇ to Futech as described in Section
10.2 above, and effective automatically upon the consummation of the transfer,
Futech shall contribute the ▇▇▇▇ to the Company as an additional capital
contribution. Futech makes no warranty, express or implied, as to the use,
validity or enforceability of the ▇▇▇▇. Futech will transfer to the Company
whatever rights it received from Magi under Section 10.2 above, and only those
rights.
For the sake of convenience, instead of preparing two sets of transfer
papers, transferring the ▇▇▇▇ to Futech under Section 10.2 above and then to
this Company under this Section, the transfer papers will transfer the ▇▇▇▇
directly from Magi to this Company.
10.4 COMPANY'S USE OF MAGI ADDRESS AND FACILITIES. The Company shall be
entitled to use Magi's London, England address, telephone number and fax number
in and on identification materials of the Company (for example, letterhead). Any
Company communications received by Magi shall immediately be forwarded to the
Company at the Company's principal place of business as identified in Section
1.4 above. Magi shall further provide the Company's representatives with use of
Magi's London, England facilities, at no cost to the Company, from time to time
to the extent necessary for the business operations of the Company; provided,
however, that said use shall be at the convenience of Magi and Magi shall not
under this provision be obligated to provide any specific facilities at any
specific times, or for any specific amount of time, the intention of the parties
being that, other than the use of the facilities as a mail recipient, the
Company's use of Magi's facilities shall be solely at the convenience and
discretion of Magi.
10.5 CONSULTING AGREEMENT WITH ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ BHATIA. Simultaneously
with the execution of this Agreement, the Company and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
shall enter into a Consulting Agreement in the form of "Exhibit 10.5.1" attached
hereto and hereby made a part hereof, and a Confidentiality Agreement in the
form of "Exhibit 10.5.2" attached hereto and hereby made a part hereof, which
Agreements are to become effective immediately after the Contingency Expiration
Date, with compensation and other benefits under the Consulting Agreement
commencing on said effective date. If the Internal Revenue Service or any other
taxing authority determines that ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia is an employee for tax
purposes and not an independent contractor, then ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ shall
reimburse the Company for any and all taxes, interest, penalties and other
charges and costs incurred by Company as a result thereof (including but not
limited to legal and accounting fees relating to an audit on said issue), the
parties intending that ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia is to bear all costs associated
with the
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difference between ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ being an employee and him being an
independent contractor of Company.
10.6 This Section is reserved.
10.7 CO-PUBLISHING AGREEMENT WITH MAGI FOR U.K. MATERIALS.
Simultaneously with the execution of this Agreement, the Company and Magi shall
enter into a Co-Publishing Agreement in the form of "Exhibit 10.7" attached
hereto and hereby made a part hereof, allowing, among other things, the Company
the right to co-publish with Magi certain U.K. published materials. The
Co-Publishing Agreement includes the 1998 Spring and Fall front list, and its
pricing. Said agreement shall go into effect immediately and automatically on
the Contingency Expiration Date, but not before.
10.8 CO-PUBLISHING AGREEMENT WITH MAGI FOR U.S. MATERIALS.
Simultaneously with the execution of this Agreement, the Company and Magi shall
enter into a Co-Publishing Agreement in the form of "Exhibit 10.8" attached
hereto and hereby made a part hereof, allowing, among other things, Magi the
right to co-publish with the Company certain U.S. published materials. Said
agreement shall go into effect immediately and automatically on the Contingency
Expiration Date, but not before.
10.9 DISTRIBUTION AGREEMENT WITH XYZ. Simultaneously with the execution
of this Agreement, the Company and XYZ Distributors shall enter into a
Distribution Agreement in the form of "Exhibit 10.9" attached hereto and hereby
made a part hereof, calling for, among other things, XYZ Distributors to handle
certain warehousing, distribution and billing for the Company. The Distribution
Agreement includes the 1998 Spring and Fall front list, and its pricing. Said
agreement shall go into effect immediately and automatically on the Contingency
Expiration Date, but not before.
10.10 COMPANY'S OPTION REGARDING FORMATION OF LTP-UK. The intent is for
the Company originally to sell the US materials published by the Company in
Europe using Magi as the distributor (see Section 10.8 above). The parties
hereby agree that the Company shall have the option to do its own distribution
of U.S. materials in Europe or to form, or the Members of this Company may form,
a new entity to accomplish such distribution. If a new company is formed, it
will be formed using governing documents with the same format as those of the
Company, with ownership being 50% in Futech and 50% in Magi, with capital
contributions and loan commitments to be determined by the parties, with Magi to
sell to the operating company, without additional compensation, the right to use
the name "Little Tiger Press" in Europe and elsewhere world-wide, and with no
obligation of the parties currently to agree at the time as to the terms of any
employment agreement for any person.
10.11 POTENTIAL FUTURE MERGER WITH MAGI OPERATIONS. The Members agree
to consider a possible merger of this Company, Magi, the company if any formed
for marketing the Company's U.S. Materials in Europe as described in Section
10.10 above, and other related entities. This provision is merely a statement of
the current intent of the parties to discuss the
23
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matter, and the Members agree that this provision does not create any binding
obligations on the part of the parties with respect to any such merger, or set
out any terms or conditions relating thereto.
10.12 OVERHEAD REIMBURSEMENT TO FUTECH. The Company shall reimburse
Futech for all direct out-of-pocket costs incurred by Futech in connection with
the Company, including costs incurred in connection with accounting and other
administrative services, and will pay Futech an overhead reimbursement fee equal
to five percent (5%) of said reimbursed costs. Said amounts shall be paid to
Futech monthly within fifteen (15) days after invoiced by Futech.
ARTICLE XI
AMENDMENTS
This Agreement may be amended only in writing, and only by all Members.
ARTICLE XII
OTHER PROVISIONS
12.1 OTHER INTERESTS OF A MEMBER
(a) Notwithstanding any other provision of this Agreement, during the
term of this Agreement as it applies to each Member and for a period of two (2)
years thereafter, no Member shall, without the prior written consent of the
Company and all of the other Members, which consent may be withheld for any
reason, directly or indirectly, own, manage, operate, control, be employed by,
participate in, render services to, make loans to, or be connected in any manner
with the ownership, management, operation, or control of any business conducting
in North America a business publishing hard cover books, soft cover books, board
books, or flap books. (The Company will/may publish other book formats, but Magi
and Futech may also publish those formats). Notwithstanding the foregoing, Magi
and/or Futech may publish any individual book which the Company expressly elects
not to publish.
Notwithstanding any other provision of this Agreement, during the term
of this Agreement as it applies to Futech, and for a period of two (2) years
thereafter, Futech shall not, without the prior written consent Magi, which
consent may be withheld for any reason, directly or indirectly, own, manage,
operate, control, be employed by, participate in, render services to, make loans
to, or be connected in any manner with the ownership, management, operation, or
control of any business conducting in Europe a business publishing hard cover
books, soft cover books, board books, or flap books. Futech will/may publish
other book formats in Europe. Notwithstanding the foregoing, Futech may publish
in Europe any individual book which the Company expressly elects not to publish
there.
24
30
In the event of any actual or threatened breach of the
provisions of this paragraph, any party hereto shall be entitled to an
injunction restraining the actual or threatened breach. The parties further
agree that should any Member violate the provisions of this subparagraph (a),
the violating party: (i) shall be liable to the Company for, in addition to any
amounts pursuant to other remedies available against that party, two (2) times
the greater of the amount of profit earned by the violating party as a result of
the violation and the amount of profit which would have been earned by the
Company from the activities causing the violation had the Company conducted said
activities, plus interest on said greater amount from the date of the violating
activities until paid, as liquidated damages for only the Company's loss of
potential profits; and (ii) shall be in default of this Agreement. Said interest
shall be calculated at the lesser of (i) eighteen percent (18%) per annum, and
(ii) the highest rate of interest permitted by applicable law. Nothing in this
paragraph shall be construed as prohibiting any party from pursuing any other
available remedies for such breach or threatened breach, including pursuing a
recovery for damages. The parties agree that the liquidated damages provisions
set out above do not constitute a penalty, but rather reflect the estimate of
the parties as to the actual damages, including loss of profits, the Company
might or is likely to incur in the event of a violation of the restrictions
appearing herein.
Notwithstanding any other provision of this Agreement, the parties
acknowledge that Magi currently operates a publishing business operating in the
United Kingdom. Magi shall be entitled to operate said business unrestricted by
this Agreement, except that Magi shall not publish in North America in violation
of this Agreement hard cover books, soft cover books, board books, or flap
books. Notwithstanding any other provision of this Agreement, the parties
acknowledge that Futech currently operates a publishing business operating in
the United States. Futech shall be entitled to operate said business
unrestricted by this Agreement, except that Futech shall not publish in North
America in violation of this Agreement hard cover books, soft cover books, board
books, or flap books.
(b) All Members agree that, within ten (10) days after any Member is no
longer a Member of the Company and is no longer employed by the Company, such
Member shall return to the Company all notes, documents, models, samples,
catalogs, price books, customer cards, forms, lists, and invoices received in
connection with the business of the Company, and all other documents and things
relating to the Company, and all copies thereof, along with a complete list of
all accounts and prospective accounts, including names, addresses, persons
contacted, buying habits, and pending transactions.
(c) The parties acknowledge and agree that the restrictions contained
herein, including but not limited to the time period and geographical area
restrictions, are fair and reasonable and necessary for the successful operation
of the Company, that violation of any of them would cause irreparable injury,
and that the restrictions contained herein are not unreasonably restrictive of
any party's ability to earn a living. If the scope of any restriction in this
Section is too broad to permit enforcement of such restriction to its fullest
extent, then such restriction shall be enforced to the maximum extent permitted
by law, and all parties hereto consent and agree that such scope may be modified
judicially or by arbitration in any proceeding brought to
25
31
enforce such restriction. The parties hereto acknowledge and agree that remedies
at law for any breach or violation of the provisions in this Section would alone
be inadequate, and agree and consent that temporary and permanent injunctive
relief may be granted in connection with such violations, without the necessity
of proof of actual damage, and such remedies shall be in addition to other
remedies and rights the parties may have at law or in equity. The parties agree
that no party shall be required to give notice or post any bond in connection
with applying for or obtaining any such injunctive relief.
(d) The parties acknowledge and agree that the covenants in this
Section shall be construed as an agreement independent of any other provision of
this Agreement so that the existence of any claim or cause of action by a Member
against the Company or any other Member, whether predicated on this Section or
otherwise, shall not constitute a defense to the enforcement of this Section.
12.2 PARTITION. The interest of each Member in the Company shall be
personal property for all purposes. All property and interests in property,
whether real or personal, owned by the Company shall be deemed owned by the
Company as an entity, and no Member, individually, shall have any ownership of
such property or interest owned by the Company except as a Member in the
Company. Each of the Members irrevocably waives, during the term of the Company
and during any period of its liquidation following dissolution of the Company,
any right that such Member may have to maintain an action for partition with
respect to any of the assets of the Company.
12.3 NOTICES. All notices, requests, statements, or other
communications required or permitted to be given or furnished hereunder to a
Member or the Company shall be in writing and shall be deemed to have been
properly given and made if hand-delivered or sent by registered or certified
mail, postage prepaid, addressed to the Member (if notice is to the Member) at
the Member's address set forth on the attached Exhibit "A", or at such other
address or addresses as a Member may from time to time designate by notice to
all of the other Members, or the last known address of the Member reflected on
the Company's records, or to the Company (if the notice is to the Company) at
its principal place of business as set forth herein and as subsequently changed,
and shall be deemed effective and sufficiently given or made at the time
delivered or, if mailed, three days after the same is deposited in any post
office or branch post office regularly maintained by the United States
Government. Rejection or other refusal to accept, or the inability to deliver
because of change in address of which no notice was given to the Company, shall
be deemed to be receipt of the notice.
12.4 VALIDITY. If any portion of this Agreement shall be held invalid
or inoperative, then insofar as it is reasonable and possible, the remainder of
this Agreement shall be considered valid and operative, and effect shall be
given to the intent manifested by the portion held invalid or inoperative.
12.5 HEADINGS. The headings of the Articles and Sections in this
Agreement are for convenience of reference only, and shall not affect the
meaning or construction hereof.
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32
12.6 GOVERNING LAW. This Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the laws of the State of
Arizona, without giving effect to the conflict of laws rules thereof.
12.7 JURISDICTION. The courts of the State of Arizona shall have the
sole and exclusive jurisdiction in any case or controversy arising under this
Agreement or by reason of this Agreement. The parties agree that any litigation
or arbitration arising from the interpretation or enforcement of this Agreement
shall be either in Maricopa County Superior Court or in the United States
Federal District Court for the District of Arizona, and for this purpose each
party to this Agreement (and each person who shall become a party) hereby
expressly and irrevocably consents to the jurisdiction of such courts.
12.8 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and shall be binding upon the parties hereto and their respective heirs,
successors and assigns.
12.9 RIGHTS AND REMEDIES. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any Members
shall not preclude or waive his/her right to use any or all other remedies. The
rights and remedies of the Members under this Agreement shall not be mutually
exclusive. The exercise of one or more of the provisions shall not preclude the
exercise of any of the other provisions of this Agreement. Each of the Members
acknowledges and confirms that the respective rights and obligations of the
Members shall be enforceable by specific performance, injunction or other
equitable remedy. Nothing in this Section is intended to, nor shall it limit any
rights at law or by statute or otherwise of any aggrieved Member as against
another for a breach or threatened breach of any provision of this Agreement.
12.10 WAIVER. No consent or waiver, express or implied, by a Member to
or of any breach or default by any other Member in the performance by such
Member of its obligations under this Agreement shall be deemed or construed to
be a consent or waiver of any other breach or default in the performance by such
Member of the same or any other obligations of such Member. Failure on the part
of a Member to complain of any act or failure to act of another Member or to
declare such Member in default, irrespective of how long such failure continues,
shall not constitute a waiver. The giving of consent by a Member in any one
instance shall not limit or waive the necessity to obtain such Member's consent
in any future instance. No waiver by any Member of any provision or any breach
of any provision of this Agreement shall constitute a waiver of any other
provision or any other or future breach of this Agreement.
12.11 COUNTERPARTS. This Agreement may be signed in multiple
counterparts, each of which shall be deemed an original agreement, and all of
which shall constitute one agreement by each of the parties hereto,
notwithstanding that all of the parties are not signatories to the original or
the same counterpart.
12.12 ADDITIONAL ACTS. The parties agree to do such further acts and
things and to execute and deliver such additional agreements and instruments as
any party may reasonably
27
33
require to consummate, evidence, or confirm the agreement contained herein in
the manner contemplated hereby.
12.13 CONSTRUCTION. This Agreement shall be construed in accordance
with its fair meaning, and neither for nor against the drafting party.
12.14 INTEGRATION. This Agreement constitutes the entire agreement
among the Members and supersedes all agreements, representations, warranties,
statements, promises, and understandings, whether oral or written, with respect
to the subject matter of this Agreement. Neither the Company nor any Member
shall be bound by or charged with any oral or written agreements,
representations, warranties, statements, promises or understandings not
specifically set forth in this Agreement.
12.15 TIME IS OF ESSENCE. Time is expressly made of the essence of each
and every provision of this Agreement.
12.16 CREDITORS. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Company.
12.17 ATTORNEYS' FEES AND COSTS. In the event of any litigation or
other proceeding concerning this Agreement, the prevailing party(s) shall be
entitled to recover its costs, reasonable attorneys' fees, and other reasonable
expenses.
12.18 EXPENSES. All expenses incurred by any party to this Agreement in
connection with this transaction, including but not limited to legal expenses
and the cost of any investigations made by the parties, shall be borne by the
party which incurred the expense.
12.19. PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the transactions contemplated hereby
will be issued, if at all, at such time and in such manner as Futech determines.
Unless consented to by Futech in advance or required by legal requirements,
prior to the Contingency Expiration Date, Magi shall keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
person.
DATED the date first hereinabove written.
MEMBERS: FUTECH Educational Products, Inc., an
Arizona corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
28
34
Magi Publications, a partnership
By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia
------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Partner
ACCEPTED AND AGREED TO as of the date first
hereinabove written, as Section 10.5 above,
by:
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia
------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Partner
29
35
"EXHIBIT 2.1"
To Operating Agreement of Little Tiger Press USA, L.L.C., dated January 5, 1998.
INITIAL CAPITAL
NAME AND ADDRESS NUMBER OF UNITS CONTRIBUTION
---------------- --------------- ---------------
MEMBERS:
Futech Educational Products, Inc. 100,000 $10.00
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Magi Publications 100,000 $10.00
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
-------- ------
TOTAL 200,000 $20.00
======== ======
36
EXHIBIT 6.4.1
MULTIPLE ADVANCE PROMISSORY NOTE
$500,000.00 As of January 5, 1998
Phoenix, Arizona
THIS NOTE is made as of the date stated above by Little Tiger Press USA, L.L.C.,
a New York limited liability company ("Maker") to the order of Futech
Educational Products, Inc., an Arizona corporation ("Payee").
1. PAYMENT. For value received, Maker promises to pay, as hereinafter
set forth, without offset, such principal sum, up to a maximum of Five Hundred
Thousand Dollars ($500,000.00), as the holder hereof may advance to or for the
benefit of the undersigned, together with interest to the date paid on a daily
basis for the actual number of days any portion of said principal is
outstanding, calculated at the publicly announced prime rate of interest of Bank
One, Arizona, N.A., as such prime rate may be adjusted from time to time during
the time period this loan is outstanding.
Principal and interest are payable in lawful money of the United States
of America at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or
at such other address as the holder hereof may from time to time designate in
writing, interest only payable monthly on the first day of each month,
commencing on the first day of the first calendar month after the date funds are
first advanced under this Note, with the full outstanding principal payment due
and payable in full on December 31, 2002.
If requested by the holder of this Note at any time, Maker shall pay
payments due hereunder by cash, cashiers check, or money order only, and
payments in other forms may, in the holder's discretion, be refused and not
accepted.
All payments hereunder shall be applied first to interest and then to
principal. The unpaid balance of this obligation at any time shall be the total
amount advanced hereunder by the holder(s) hereof plus accrued interest added to
principal, less the amount of payments made hereon by or for Maker, which
balance may be endorsed hereon from time to time by the holder hereof.
Payee agrees to loan Maker amounts requested by Maker from time to time
up to the maximum amount specified in the first paragraph of this Section 1.
2. PREPAYMENT. Maker has the privilege, at any time, to prepay the
whole or any part of the unpaid balance hereof without penalty or forfeiture.
EXHIBIT 6.4.1, PAGE 1 OF 4
37
3. INTEREST. All interest payable pursuant to this Note shall be
computed on the basis of a 360-day year. In no event shall the aggregate of the
interest herein provided to be paid over the contractual term of the loan exceed
the highest rate to which a borrower and lender may agree in writing under the
laws of the State of Arizona.
4. DEFAULT. If the principal due under this Note, or under any
mortgage, deed of trust, security agreement, or other agreement between Maker
and Payee pertaining to the indebtedness evidenced hereby shall not be paid
within ten (10) days after it first becomes due, or if Maker fails to comply
with all of the other terms and conditions of this Note or any instrument
securing this Note, and such failure shall continue for twenty (20) days after
notice thereof is given to Maker, then the entire principal sum, accrued
interest, and all other amounts due hereunder shall, at the option of Payee,
become immediately due and payable without further notice.
5. COLLECTION COSTS. Maker agrees to reimburse Payee for all costs and
expenses, including without limitation, all reasonable attorneys' fees incurred
in the enforcement or collection of this Note or any judgment obtained hereon.
6. WAIVER, CONSENT, ETC. Except as may be expressly provided to the
contrary in this Note, Maker, sureties, guarantors, and endorsers hereof agree
to be jointly and severally bound, severally waive any homestead or exemption
rights against said debt, severally waive diligence, demand, presentment for
payment, protest, protest and demand, notice of protest, notice of nonpayment,
notice of default, notice of acceleration, and all other notices and demands of
any kind. Maker, sureties, guarantors and endorsers hereof hereby severally
consent to the extension of time for payment of this Note or any installment
hereof, any modification hereof, release from liability of any maker, endorser,
or any other person or entity at any time liable for the payment hereof, and the
modification or release of any collateral at any time held as security for this
Note, without notice and without affecting the liability of any maker,
guarantor, surety or endorser. Maker further waives, to the extent permitted by
law, the right to plead any and all statutes of limitations as a defense to any
demand on this Note.
Delay or failure in exercising any of Payee's rights or options
hereunder shall not constitute a waiver thereof, and any waiver of any rights or
options hereunder shall not constitute a waiver of the right to exercise the
same in the event of any subsequent default. By accepting payment of any sum
hereunder after its due date, the holder hereof shall not waive its rights
either to require prompt payment when due of all other sums hereunder or to
declare a default for failure to make prompt payment. No waiver by the holder of
this Note shall be effective unless it is in writing and signed by such holder.
7. SEVERABILITY. If any provision of this Note or any application of
such provision shall be declared by a court of competent jurisdiction to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other application of such provision nor the balance of the provisions hereof
which shall, to the fullest extent possible, remain in full force
2 EXHIBIT 6.4.1, PAGE 2 OF 4
38
and effect, and such court shall reform such unenforceable provision so as to
give maximum permissible effect to the intentions of the parties as expressed
therein.
8. SECURITY. As security for Maker's performance under this Note, Maker
hereby grants Payee a security interest in any and all assets now owned or
hereafter acquired by Maker. In the event of default by Maker hereunder, Payee
shall have all rights with respect to such collateral as are available to a
secured party under the Uniform Commercial Code in the State of Arizona, as the
same may from time to time be changed. Maker agrees to execute and deliver to
Payee and pay the costs of recording financing statements evidencing this
security agreement and other documents necessary or appropriate to perfect this
security interest, and Maker hereby irrevocably appoints Payee as Maker's
attorney-in-fact for the purpose of executing and filing said financing
statements. Maker shall reimburse Payee for all reasonable costs associated with
such filings.
9. MISCELLANEOUS. The provisions of this Note shall be binding upon
Maker and Maker's personal representatives, successors and assigns, and shall
inure to the benefit of Payee and Payee's successors and assigns. This Note
shall be governed by and construed and enforced in accordance with the laws of
the State of Arizona. The courts of the State of Arizona shall have the sole and
exclusive jurisdiction and venue in any case or controversy arising under this
Note or by reason of this Note. The parties agree that any litigation or
arbitration arising from the interpretation or enforcement of this Note shall be
only in either Maricopa County Superior Court or in the United States Federal
District Court for the District of Arizona, and for this purpose each party to
this Note (and each person who shall become a party) hereby expressly and
irrevocably consents to the jurisdiction and venue of such courts. This Note
shall be construed according to its fair meaning and neither for nor against the
drafting party. Time is of the essence of this Note and each and every term and
provision hereof.
DATED the date first hereinabove written.
Little Tiger Press USA, L.L.C.,
a New York limited liability company
By: Futech Educational Products, Inc.,
an Arizona corporation, Member
By
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
By: Magi Publications, a Partnership
By
------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia, Partner
3 EXHIBIT 6.4.1, PAGE 3 OF 4
39
ACCEPTED AND AGREED TO
as of the date first shown above, by
the undersigned Payee:
Futech Educational Products, Inc.,
an Arizona corporation
By
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
4 EXHIBIT 6.4.1, PAGE 4 OF 4
40
EXHIBIT 6.4.2
MULTIPLE ADVANCE PROMISSORY NOTE
$500,000.00 As of January 5, 1998
Phoenix, Arizona
THIS NOTE is made as of the date stated above by Little Tiger Press
USA, L.L.C., a New York limited liability company ("Maker") to the order of Magi
Publications, a Partnership ("Payee").
1. PAYMENT. For value received, Maker promises to pay, as hereinafter
set forth, without offset, such principal sum, up to a maximum of Five Hundred
Thousand Dollars ($500,000.00), as the holder hereof may advance to or for the
benefit of the undersigned, together with interest to the date paid on a daily
basis for the actual number of days any portion of said principal is
outstanding, calculated at the publicly announce prime rate of interest of Bank
One, Arizona, N.A., as such prime rate may be adjusted from time to time during
the time period this loan is outstanding.
Principal and interest are payable in lawful money of the United States
of America at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, or at such other
address as the holder hereof may from time to time designate in writing,
interest only payable monthly on the first day of each month, commencing on the
first day of the first calendar month after the date funds are first advanced
under this Note, with the full outstanding principal payment due and payable in
full on December 31, 2002.
If requested by the holder of this Note at any time, Maker shall pay
payments due hereunder by cash, cashiers check, or money order only, and
payments in other forms may, in the holder's discretion, be refused and not
accepted.
All payments hereunder shall be applied first to interest and then to
principal. The unpaid balance of this obligation at any time shall be the total
amount advanced hereunder by the holder(s) hereof plus accrued interest added to
principal, less the amount of payments made hereon by or for Maker, which
balance may be endorsed hereon from time to time by the holder hereof.
Payee agrees to loan Maker amounts requested by Maker from time to time
up to the maximum amount specified in the first paragraph of this Section 1.
2. PREPAYMENT. Maker has the privilege, at any time, to prepay the
whole or any part of the unpaid balance hereof without penalty or forfeiture.
EXHIBIT 6.4.2. PAGE 1 OF 4
41
3. INTEREST. All interest payable pursuant to this Note shall be
computed on the basis of a 360-day year. In no event shall the aggregate of the
interest herein provided to be paid over the contractual term of the loan exceed
the highest rate to which a borrower and lender may agree in writing under the
laws of the State of Arizona.
4. DEFAULT. If the principal due under this Note, or under any
mortgage, deed of trust, security agreement, or other agreement between Maker
and Payee pertaining to the indebtedness evidenced hereby shall not be paid
within ten (10) days after it first becomes due, or if Maker fails to comply
with all of the other terms and conditions of this Note or any instrument
securing this Note, and such failure shall continue for twenty (20) days after
notice thereof is given to Maker, then the entire principal sum, accrued
interest, and all other amounts due hereunder shall, at the option of Payee,
become immediately due and payable without further notice.
5. COLLECTION COSTS. Maker agrees to reimburse Payee for all costs and
expenses, including without limitation, all reasonable attorneys' fees incurred
in the enforcement or collection of this Note or any judgment obtained hereon.
6. WAIVER, CONSENT, ETC. Except as may be expressly provided to the
contrary in this Note, Maker, sureties, guarantors, and endorsers hereof agree
to be jointly and severally bound, severally waive any homestead or exemption
rights against said debt, severally waive diligence, demand, presentment for
payment, protest, protest and demand, notice of protest, notice of nonpayment,
notice of default, notice of acceleration, and all other notices and demands of
any kind. Maker, sureties, guarantors and endorsers hereof hereby severally
consent to the extension of time for payment of this Note or any installment
hereof, any modification hereof, release from liability of any maker, endorser,
or any other person or entity at any time liable for the payment hereof, and the
modification or release of any collateral at any time held as security for this
Note, without notice and without affecting the liability of any maker,
guarantor, surety or endorser. Maker further waives, to the extent permitted by
law, the right to plead any and all statutes of limitations as a defense to any
demand on this Note.
Delay or failure in exercising any of Payee's rights or options
hereunder shall not constitute a waiver thereof, and any waiver of any rights or
options hereunder shall not constitute a waiver of the right to exercise the
same in the event of any subsequent default. By accepting payment of any sum
hereunder after its due date, the holder hereof shall not waive its rights
either to require prompt payment when due of all other sums hereunder or to
declare a default for failure to make prompt payment. No waiver by the holder of
this Note shall be effective unless it is in writing and signed by such holder.
7. SEVERABILITY. If any provision of this Note or any application of
such provision shall be declared by a court of competent jurisdiction to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other application of such provision nor the balance of the provisions hereof
which shall, to the fullest extent possible, remain in full force
2 EXHIBIT 6.4.2, PAGE 2 OF 4
42
and effect, and such court shall reform such unenforceable provision so as to
give maximum permissible effect to the intentions of the parties as expressed
therein.
8. SECURITY. As security for Maker's performance under this Note, Maker
hereby grants Payee a security interest in any and all assets now owned or
hereafter acquired by Maker. In the event of default by Maker hereunder, Payee
shall have all rights with respect to such collateral as are available to a
secured party under the Uniform Commercial Code in the State of Arizona, as the
same may from time to time be changed. Maker agrees to execute and deliver to
Payee and pay the costs of recording financing statements evidencing this
security agreement and other documents necessary or appropriate to perfect this
security interest, and Maker hereby irrevocably appoints Payee as Maker's
attorney-in-fact for the purpose of executing and filing said financing
statements. Maker shall reimburse Payee for all reasonable costs associated with
such filings.
9. MISCELLANEOUS. The provisions of this Note shall be binding upon
Maker and Maker's personal representatives, successors and assigns, and shall
inure to the benefit of Payee and Payee's successors and assigns. This Note
shall be governed by and construed and enforced in accordance with the laws of
the State of Arizona. The courts of the State of Arizona shall have the sole and
exclusive jurisdiction and venue in any case or controversy arising under this
Note or by reason of this Note. The parties agree that any litigation or
arbitration arising from the interpretation or enforcement of this Note shall be
only in either Maricopa County Superior Court or in the United States Federal
District Court for the District of Arizona, and for this purpose each party to
this Note (and each person who shall become a party) hereby expressly and
irrevocably consents to the jurisdiction and venue of such courts. This Note
shall be construed according to its fair meaning and neither for nor against the
drafting party. Time is of the essence of this Note and each and every term and
provision hereof.
DATED the date first hereinabove written.
Little Tiger Press USA, L.L.C.,
a New York limited liability company
By: Futech Educational Products, Inc.,
an Arizona corporation, Member
By
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
By: Magi Publications, a Partnership
By
------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Partner
3 EXHIBIT 6.4.2, PAGE 3 OF 4
43
ACCEPTED AND AGREED TO
as of the date first shown above, by
the undersigned Payee:
Magi Publications, a Partnership
By
------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia, Partner
4 Exhibit 6.4.2. PAGE 4 OF 4
44
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT"), which shall be
effective as of January 5, 1998, is by and between Futech Educational Products,
Inc., an Arizona corporation (the "Company"), and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Shareholder");
RECITALS:
A. The Company and Magi Publications, a partnership ("MAGI") are
members of Little Tiger Press USA, LLC, a New York limited liability company
governed by an Operating Agreement dated January 5, 1998 (the "Operating
Agreement").
B. Pursuant to the Operating Agreement, Magi is acquiring shares of the
Company's common stock, no par value.
C. Shareholder shall acquire the shares from Magi as partner of Magi.
D. The shares of the Company's common stock which will or may be issued
pursuant to the Operating Agreement, as described in Recital B, are referred to
in this Agreement as the "Common Stock."
E. The Common Stock will not be registered under the Securities Act of
1933, as amended, or under the securities laws of any state, in reliance upon
exemptions from registration thereunder.
In consideration of the mutual covenants and obligations hereinafter
set forth, the Company and the Shareholder, hereby agree as follows:
SECTION 1. Definitions. As used in this Agreement, the terms listed in
this Section shall have the meanings set forth below:
(a) "Affiliate" of any Person means any other Person who
either directly or indirectly is in control of, is controlled by or is under
common control with such Person; provided that for purposes of this definition
an investment entity shall be deemed to be controlled by its investment manager,
investment advisor or general partner.
(b) "Business Day" shall mean any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a day on which banking institutions in the City
of Phoenix are authorized by law, regulation or executive order to close.
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are in effect from time to time.
Exhibit 10.2, page 1 of 12
45
(d) "Holder" shall mean the Shareholder and his successors,
assigns and transferees (subject to Section 10 hereof). For purposes of this
Agreement, the Company may deem the registered holder of a Registrable Security
as the Holder thereof (subject to Section 10 hereof).
(e) "Person" shall mean an individual, partnership,
corporation, limited liability company, joint venture, trust or unincorporated
organization, a government or agency or political subdivision thereof or any
other entity.
(f) "Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by a prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference in such prospectus.
(g) "Registrable Securities" shall mean (i) all shares of
Common Stock issued or issuable to the Shareholder pursuant to the Asset
Purchase Agreement as further described in Recital Section B; and (ii) any other
securities issued as a result of or in connection with any stock dividend, stock
split or reverse stock split, combination, recapitalization, reclassification,
merger or consolidation, exchange or distribution in respect of the shares of
Common Stock referred in to (i) above.
(h) "Registration Expenses" shall have the meaning set forth
in Section 6 hereof.
(i) "Registration Statement" shall mean any registration
statement which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus included therein, all
amendments and supplements to such Registration Statement including post
effective amendments, all exhibits and all material incorporated by reference in
such Registration Statement.
(j) "Registration Termination Date" shall mean the earlier to
occur of (i) the date that is five years following the date hereof or (ii) the
first date upon which the Registrable Securities may be sold without limitation
under Rule 144 under the Securities Act (as such Rule may be amended from time
to time), other than the limitations set forth in paragraphs (c), (f) and (h) of
such Rule, as determined by the opinion of counsel to the Company (which shall
be reasonably satisfactory to counsel to the Holders).
(k) "SEC" shall mean the U.S. Securities and Exchange
Commission, or any other U.S. federal agency at the time administering the
Securities Act.
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are in effect from time to time.
Exhibit 10.2, Page 2 of 12
46
(m) "Underwritten Offering" shall mean an offering that is
registered under the Securities Act in which securities of the Company are sold
pursuant to a firm commitment underwriting, to an underwriter at a fixed price
for reoffering to the public or pursuant to agency or best efforts arrangements
with an underwriter.
SECTION 2. Securities Subject to this Agreement. The Registrable
Securities are entitled to the benefits of this Agreement.
SECTION 3. Demand Registration
(a) Demand Registration (i) Upon the written request of
Holders owning not less than 50% of the Registrable Securities (excluding any
Registrable Securities that have previously been sold pursuant to a Registration
Statement hereunder or Rule 144 under the Securities Act), and provided that
there is then no effective Registration Statement in effect with respect to such
Registrable Securities, the Company will effect, in accordance with the terms of
this Agreement, the registration under the Securities Act of the Registrable
Securities which the Company has been so requested to register by such Holders,
subject to Section 3(c) hereof; provided that the number of securities requested
to be so registered shall be not less than 50% of the Registrable Securities
held by such requesting Holders. NO SUCH REQUEST MAY BE MADE PRIOR TO AN INITIAL
PUBLIC OFFERING OF THE COMPANY'S SECURITIES AND EARLIER THAN ONE YEAR AFTER THE
ACQUISITION OF THE COMMON STOCK BY THE HOLDER PURSUANT TO THE TERMS OF THE ASSET
PURCHASE AGREEMENT (THE "DEMAND COMMENCEMENT DATE"). In addition, no such
request shall be made during the 90-day period following the completion of any
Underwritten Offering of the Company's shares of Common Stock and no such
request shall be made to include any Registrable Securities in an initial public
offering of securities of the Company. The Company shall not be obligated to
effect more than two demand registrations pursuant to this Section 3, provided
that the Company shall not be required to effect registrations on a form other
than a Form S-3 (or any successor to such form).
(ii) Expenses. The Company shall pay all Registration
Expenses with respect to any demand registration pursuant to this Section 3.
(b) Effectiveness of Registration Statement. The Company agrees
to use its best efforts to (i) cause the Registration Statement relating to any
demand registration pursuant to this Section 3 to become effective under the
Securities Act as promptly as practicable (ii) thereafter keep such Registration
Statement effective continuously for the period specified in the next succeeding
paragraph; and (iii) prevent the happening of any event of the kinds described
in clauses (4) or (5) of Section 5(a)(ii) hereof.
A demand registration requested pursuant to this Section 3 will
not be deemed to have been effected unless the Registration Statement relating
thereto has become effective under the Securities Act and remain continuously
effective (except as otherwise permitted under this Agreement) for a period
ending on the earlier of:
Exhibit 10.2, Page 3 of 12
47
(A) in the case of a Registration Statement on Form S-3
(subject to Section 5(c) below), the Registration
Termination Date; or
(B) the date on which all Registrable Securities covered by
such Registration Statement have been sold and the
distribution contemplated thereby has been completed.
(c) Inclusion of Other Securities. The Company, and any
other holder of the Company's securities that has registration rights, may
include its securities in any demand registration effected pursuant to this
Section 3; provided, however, that if the managing underwriter or underwriters
of any Underwritten Offering contemplated thereby advise the Holders in writing
that the total amount or kind of securities which such Holder, the Company or
any such other holder intends to include in such proposed public offering is
sufficiently large to affect the success of the proposed public offering
requested by the Holder or Holders materially and adversely, then the amount or
kind of securities to be offered for the account of the Company or any such
other holder shall be reduced to the extent necessary to reduce the total amount
or kind of securities to be included in such proposed public offering to the
amount or kind recommended by such managing underwriter or underwriters.
(d) Form. Registrations under this Section 3 will be on a
form permitted by the rules and regulations of the SEC selected by the Company;
provided, however, the Company may use Form S-3 if at the time of filing such
Registration Statement the Company is eligible to use such Form.
(e) Manner of Sale. The Company may (but shall have no
obligation to) cause any Registrable Securities that are the subject of a demand
registration pursuant to this Section 3 to be sold in an Underwritten Offering
in which event the Company shall have the right to designate the managing
underwriter or underwriters thereof (which shall be reasonably satisfactory to
the Holders whose Registrable Securities are the subject of such demand
registration).
SECTION 4. Piggyback Registration.
(a) Piggyback Registration. If the Company at any time
proposes to file a registration statement with respect to any class of equity
securities, whether for its own account (other than a registration statement on
Form S-4 or S-8, or any successor or substantially similar form or a
registration statement covering (i) an employee stock option, stock purchase or
compensation plan or securities issued or issuable pursuant to any such plan or
(ii) a dividend reinvestment plan) or for the account of a holder of securities
of the Company pursuant to registration rights granted by the Company (a
"Requesting Securityholder"), then the Company shall in each case give written
notice of such proposed filing to all Holders of Registrable Securities at least
20 Business Days before the anticipated filing date of any such registration
statement by the Company, and such notice shall offer to all
Exhibit 10.2, page 4 of 12
48
Holders the opportunity to have any or all of the Registrable Securities held by
such Holders included in such registration statement. Each Holder of Registrable
Securities desiring to have his Registrable Securities registered under this
Section 4 shall so advise the Company in writing within 10 Business Days after
the date of receipt of such notice (which request shall set forth the amount of
Registrable Securities for which registration is requested), and the Company
shall include in such Registration Statement all such Registrable Securities so
requested to be included therein; provided, however, that if such Registration
Statement is for an Underwritten Offering, the Holders of Registrable Securities
included therein shall join in the underwriting on the same terms and conditions
as the Company or the requesting Securityholders except that the Holders of
Registrable Securities shall not be required to give any representations and
warranties relating to the Company, and shall execute any underwriting
agreement, "lock-up" letters or other customary agreements or documents executed
by the Company or the Requesting Securityholders, in connection therewith.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
any such proposed public offering advise the Holders in writing that the total
amount or kind of securities which the Holders of Registrable Securities, the
Company, the Requesting Securityholders and any other Persons intended to be
included in such proposed public offering is sufficiently large to affect the
success of such proposed public offering materially and adversely, then the
amount or kind of securities to be offered for the accounts of the Holders of
Registrable Securities shall be reduced pro rata, together with the amount or
kind of securities to be offered for the accounts of any other Persons
requesting registration of securities pursuant to rights similar to the rights
of the Holders under this Section 4, to the extent necessary to reduce the total
amount or kind of securities to be included in such proposed public offering to
the amount or kind recommended by such managing underwriter or underwriters
before the securities offered by the Company or any Requesting Securityholder
are so reduced. Notwithstanding the foregoing, however, the Holders shall have
no right to include any Registrable Securities in an initial public offering of
Company's securities.
(b) No Obligation. Neither the giving of notice by the
Company nor any request by the Holders to register Registrable Securities
pursuant to Section 4(a) shall in any way obligate the Company to file any such
Registration Statement. The Company may, at any time prior to the effective date
thereof, determine not to offer the securities to which Registration Statement
relates and/or withdraw the Registration Statement from the SEC, without
liability of the Company to the Holders.
SECTION 5. Registration Procedures and Other Agreements.
(a) General. In connection with the Company's registration
obligations pursuant to Section 3 and, to the extent applicable thereto, Section
4 hereof, the Company will:
(i) prepare and file with the SEC a new Registration
Statement or such amendments and post-effective amendments to an existing
Offering Registration
Exhibit 10.2, Page 5 of 12
49
Statement as may be necessary to keep such Registration Statement effective as
set forth in Section 3(b); provided, however, that no Registration Statement
shall be required to remain in effect after all Registrable Securities covered
by such Registration Statement have been sold and distributed as contemplated by
such Registration Statement;
(ii) notify each selling Holder promptly (1) when a
new Registration Statement, amendment thereto, Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to any
new Registration Statement or post-effective amendment, when it has become
effective, (2) of any request by the SEC for amendments or supplements to any
Registration Statement or Prospectus or for additional information, (3) of the
issuance by the SEC of any comments with respect to any filing, (4) of any stop
order suspending the effectiveness of any Registration Statement or the
initiation or threatening of any proceedings for such purpose, (5) of any
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (6) of the happening of any event which makes any statement of a
material fact made in any Registration Statement, Prospectus or any document
incorporated therein by reference untrue or which requires the making of any
changes in any Registration Statement, Prospectus or any document incorporated
therein by reference in order to make the statements therein (in the case of any
Prospectus, in the light of the circumstances under which they were made) not
misleading; and make every reasonable effort to obtain as promptly as
practicable the withdrawal of any order or other action suspending the
effectiveness of any Registration Statement or suspending the qualification or
registration (or exemption therefrom) of the Registrable Securities for sale in
any jurisdiction;
(iii) furnish to each selling Holder, without charge,
at least one manually signed or "edgarized" copy and as many conformed copies as
may reasonable be requested, of the then effective Registration Statement and
any post-effective amendment thereto, and one copy of all financial statements
and schedules, all documents incorporated therein by reference and all exhibits
thereto (including those incorporated by reference);
(iv) deliver to each selling Holder, without charge,
as many copies of the then effective Prospectus (including each prospectus
subject to completion) and any amendments or supplements thereto as such Holder
may reasonably request;
(v) use its best efforts to register or qualify under
the securities or blue sky laws of such jurisdictions as the selling Holders
reasonably request in writing and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the then effective Registration Statement;
provided, however, that the Company will not be required to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify, or (y) subject itself to general taxation in any such jurisdiction, or
(z) register or qualify such Registrable Securities under the securities or blue
sky laws of any jurisdiction in which the Company does not then maintain a
currently effective registration or qualification of any of its securities;
Exhibit 10.2, Page 6 of 12
50
(vi) upon the occurrence of any event contemplated by
clause (6) of Section 5(a)(ii) hereof, as promptly as practicable (in light of
the circumstances causing the occurrence of such event) prepare a supplement or
post-effective amendment to the Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
in the light of the circumstances under which they were made, not misleading;
(vii) use reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed on each securities
exchange (or quotation system operated by a national securities association) on
which identical securities issued by the Company are then listed, and enter into
customary agreements including, if necessary, a listing application and
indemnification agreement in customary form;
(viii) if the registration is in connection with an
Underwritten Offering, enter into an underwriting agreement with respect to the
Registrable Securities, which agreement shall contain provisions that are
customary in connection with underwritten secondary offerings, including
representations and warranties, opinions of counsel, letters of accountants and
indemnification provisions with underwriters that acquire Registrable
Securities;
(ix) otherwise use its best efforts to comply in all
material respects with all applicable rules and regulations of the SEC relating
to such registration and the distribution of the securities being offered and
make generally available to its securities holders earnings statements
satisfying the provisions of Section 11 (a) of the Securities Act and complying
with Rule 158 of the SEC thereunder;
(x) cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc.; and
(xi) make available for inspection by a representative
of selling Holders and any attorney or accountant retained by such selling
Holders, all financial and other records, pertinent corporate documents and
properties of the Company and cause the Company's officers, directors and
employees to supply all information reasonably requested by, and to cooperate
fully with, any such representative, underwriter, attorney or accountant in
connection with such registration, and otherwise to cooperate fully in
connection with any due diligence investigation; provided that such
representatives, underwriters, attorneys or accountants enter into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company, prior to the release or disclosure to them of any such information,
records or documents.
Exhibit 10.2, Page 7 of 12
51
(b) Each selling Holder shall furnish to the Company, upon
request, in writing such information and documents as, in the opinion of counsel
to the Company may be reasonably required to prepare properly and file such
Registration Statement in accordance with the applicable provisions of the
Securities Act.
SECTION 6. Registration Expenses. All expenses incident to the Company
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of one
counsel in connection with blue sky qualifications or registrations (or the
obtaining of exemptions therefrom) of the Registrable Securities), the
reasonable fees and disbursements of counsel retained by the Holders (which
counsel shall be reasonably satisfactory to the Company), printing expenses
(including expenses of printing Prospectuses), messenger and delivery expenses,
internal expenses (including all salaries and expenses of its officers and
employees performing legal or accounting duties), fees and disbursements of its
counsel and its independent certified public accountants (including the expenses
of any special audit or "comfort" letters required by or incident to such
performance or compliance), securities acts liability insurance (if the Company
elects to obtain such insurance), fees and expenses of any special experts
retained by the Company in connection with any registration hereunder and the
fees and expenses of any other Person retained by the Company (all such fees and
expenses being referred to as "Registration Expenses"), shall be borne by the
Company, whether or not any Registration Statement becomes effective.
SECTION 7. Suspension of Sales under Certain Circumstances.
(a) Upon receipt of any notice from the Company that
dispositions under the then current Prospectus must be discontinued and
suspended, whether as a result of an event described in Section 5(a)(ii)(4),(5)
or (6) hereof or otherwise, each Holder will forthwith discontinue and suspend
disposition of Registrable Securities pursuant to such Prospectus until (i) the
Holders are advised in writing by the Company that a new Registration Statement
covering the offer of Registrable Securities has become effective under the
Securities Act, or (ii) the Holders receive copies of a supplemented or amended
Prospectus contemplated by Section 5(a) hereof, or (iii) the Holders are advised
in writing by the Company that the use of the Prospectus may be resumed.
(b) If at any time following the date hereof any of the
Company's shares of Common Stock are to be sold pursuant to an Underwritten
Offering, then for the period commencing 45 days prior to, and expiring 180 days
after, the effective date of such Underwritten Offering, none of the Holders
will effect any public sale or distribution of any Registrable Securities or any
other shares of Common Stock of the Company then owned by such Holders, other
than pursuant to such Underwritten Offering (if any Registrable Securities are
included in such Underwritten Offering).
Exhibit 10.2, Page 8 of 12
52
SECTION 8. Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, but without
duplication, each Holder of Registrable Securities, any their respective
officers and directors, if any, and each Person who controls such Holder within
the meaning of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable legal fees and expenses) resulting from any untrue statement of a
material fact in, or any omission of a material fact required to be stated in,
any Registration Statement or in any preliminary or final Prospectus, or any
amendment or supplement thereto, or necessary to make the statements therein (in
the case of a Prospectus in light of the circumstances under which they were
made) not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by any Holder or any
underwriter expressly for use therein; provided that the Company will not be
liable pursuant to this Section 8(a) if such losses, claims, damages,
liabilities or expenses have been caused by the failure of any selling Holder to
deliver a copy of the Registration Statement or Prospectus, or any amendments or
supplements thereto, after the Company has furnished such copies to such Holder.
(b) Indemnification by the Holders of Registrable Securities.
In connection with any Registration Statement covering Registrable Securities of
any Holder, such Holder will furnish to the Company in writing such information
as the Company reasonably requests for use in connection with any such
Registration Statement or Prospectus and agrees to indemnify and hold harmless,
to the full extent permitted by law, but without duplication, the Company, its
officers, directors, shareholders, employees, advisors and agents, and each
Person who controls the Company (within the meaning of the Securities Act),
against any losses, claims, damages, liabilities and expenses resulting from any
untrue statement of a material fact in, or any omission of a material fact
required to be stated in, the Registration Statement or in any preliminary or
final Prospectus, or any amendment or supplement thereto, or necessary to make
the statements therein (in the case of a Prospectus in light of the
circumstances under which they were made) not misleading, but only to the extent
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
therein. If the offering to which the Registration Statement relates is an
Underwritten Offering, each Holder agrees to enter into an underwriting
agreement in customary form with such underwriters and to indemnify such
underwriters, their officers and directors, if any, and each Person who controls
such underwriters within the meaning of the Securities Act to the same extent as
hereinabove provided with respect to indemnification by such Holder of the
Company.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification,
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified
Exhibit 10.2, page 9 of 12
53
party; provided, however, that any Person entitled to indemnification hereunder
shall have the right to employ separate counsel and to participate in, but not
control, the defense of such claim, but the fees and expenses of such counsel
shall be at the expense of such indemnified Person, unless (A) the indemnifying
party shall have failed to assume the defense of such claim and employ counsel
reasonably, satisfactory to the indemnified party in a timely manner, or (B) in
the reasonable judgment of any such Person, based upon written advice of its
counsel, a conflict of interest may exist between such Person and the
indemnifying party with respect to such claims (in which case, if the Person
notifies the indemnifying party in writing, that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of any such claim as to
which such conflict of interest may exist). The indemnifying party will not be
subject to any liability for any settlement made without its consent. No
indemnified party will be required to consent to the entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of the claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, as well as one local counsel in each relevant jurisdiction.
(d) Contribution. If for any reason the indemnification
provided for in Section 8(a) or 8(b) hereof is unavailable to an indemnified
party or insufficient to hold it harmless as contemplated by Sections 8(a) and
8(b) hereof, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnifying party and the indemnified
party, but also the relative fault of the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11 (f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentations.
SECTION 9. Current Public Information. The Company agrees that
it will file all reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder
(or, if it ceases to be required to file such reports, it will, upon the request
of Holders owning not less than 51 % of the Registrable Securities [excluding
any Registrable Securities that have previously been sold pursuant to a
Registration Statement hereunder or Rule 144 under the Securities Act], make
publicly available other information), and it will take such further action as
may reasonably be required, in each case to the extent required from time to
time to enable the Holders to sell Registrable Securities without registration
under the Securities Act within the limitations of the applicable exemptions
provided by (x) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (y) any similar regulation hereinafter adopted by the SEC.
Exhibit 10.2, Page 10 of 12
54
SECTION 10. No Inconsistent Agreements. The Company has not previously
entered into and shall not in the future enter into any agreement, arrangement
or understanding with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement.
SECTION 11. Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, without the written
consent of (a) the Company and (b) the Holders owning not less than 51% of the
Registrable Securities (excluding any Registrable Securities that have
previously been sold pursuant to a Registration Statement hereunder or Rule 144
under the Securities Act).
SECTION 12. Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, facsimile, or air-courier guaranteeing overnight delivery:
(a) If to a Holder of Registrable Securities, at the most
current address for such Holder, as it appears on the books of the Company; and
(b) If to the Company: Futech Educational Products, Inc., ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive
Officer; facsimile no. 808-9863, or at such other address as may be designated
from time to time by notice given in accordance with the provisions of this
Section 11.
All such notices and other communications shall be deemed to
have been delivered and received (i) in the case of personal delivery or
facsimile, on the date of such delivery, (ii) in the case of air courier, on the
Business Day after the date when sent, and (iii) in the case of mailing, on the
fifth Business Day following such mailing.
SECTION 13. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, transferees and assigns of the
parties hereto; provided, however, that (a) no transferee in any transfer made
in reliance on Rule 144 under the Securities Act shall have any rights as a
Holder under this Agreement; and (b) no Person to whom the Registrable
Securities are transferred shall have any rights under this Agreement as a
Holder unless such Person agrees to be bound by the terms and conditions of this
Agreement.
SECTION 14. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
SECTION 15. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of Arizona without reference to principles of conflict of
laws. The parties to this Agreement
Exhibit 10.2, Page 11 of 12
55
hereby consent to the jurisdiction in personam of the Superior Court of the
State of Arizona, in and for the County of Maricopa or of the United States
District Court for the District of Arizona, in any legal proceeding to enforce
any obligations under this Agreement, and agree that venue in Maricopa County is
not inconvenient.
SECTION 16. Construction. The Section headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. All terms used in one number or
gender shall be construed to include any other number or gender as the context
may require. Whenever the words "include," "includes," or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 17. Entire Agreement. This Agreement, together with any other
documents and certificates delivered hereunder and the Asset Purchase Agreement,
state the entire agreement of the Company and the Shareholder with respect to
the subject matter hereof, merge all prior negotiations, agreements and
understandings, if any, and state in full all representations, warranties and
agreements which have induced this Agreement.
IN WITNESS WHEREOF, the Company and the Shareholder have duly executed
and delivered this agreement as of the date written above.
SHAREHOLDER:
---------------------------------------
FUTECH EDUCATIONAL PRODUCTS, INC.
By:
------------------------------------
Name:
-----------------------------
Title:
-----------------------------
Exhibit 10.2, Page 12 of 12
56
EXHIBIT 10.5.1
CONSULTING AGREEMENT
This Agreement, dated January 5, 1998, is made by and between ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ("Consultant") and Little Tiger Press USA, L.L.C., a New York limited
liability company ("Company").
1. APPOINTMENT; DUTIES. Company hereby hires and appoints Consultant
for the performance of services in connection with the publishing by Company of
certain materials to be published by Company, and Consultant hereby accepts such
appointment from Company, during the term of this Agreement, upon the terms and
subject to the conditions set forth below. Consultant shall supervise and as
necessary perform, manage and administer all aspects of Company's publishing
operations. Consultant's duties shall be subject to the direction and control of
the Management Committee of Company. Notwithstanding the foregoing, and not in
limitation of the generality of the foregoing, Consultant's duties shall include
establishing a Chicago office for Company, and substantial efforts toward the
development of United States publication titles to be released in the Spring of
1999.
2. ACTIVITIES RELATING TO THE COMPANY'S BUSINESS. At all times during
the term of this Agreement, Consultant shall devote that portion of his
energies, interest, abilities and productive time to the performance of his
duties and responsibilities hereunder as necessary or appropriate for the
efficient and successful operation of the business of Company. During the term
of this Agreement, and for a period of two (2) years thereafter, Consultant
shall not, without the prior written consent of Company, which consent may be
withheld for any or no reason, directly or indirectly, own, manage, operate,
control, be employed by, participate in, render services to, make loans to, or
be connected in any manner with the ownership, management, operation, or control
of any business operation located in North America, or any other country in
which Company, or any of its subsidiaries, does business or intends to do
business, which business operation publishes hard cover books, soft cover books,
board books, or flap books.
In the event of any actual or threatened breach of the provisions of
this Section, Company shall be entitled to an injunction restraining the actual
or threatened breach. The parties further agree that should Consultant violate
the provisions of this Section, Consultant shall be liable to Company for, in
addition to any amounts pursuant to other remedies available against Consultant,
two (2) times the greater of the amount of profit earned by Consultant as a
result of the violation and the amount of profit which would have been earned by
Company from the activities causing the violation had Company conducted said
activities, plus interest on said greater amount from the date of the violating
activities until paid, as liquidated damages for only Company's loss of
potential profits. Said interest shall be calculated at the lesser of: (i)
eighteen percent (18%) per annum, and (ii) the highest rate of interest
permitted by applicable law. Nothing in this Section shall be construed as
prohibiting Company from pursuing any other available remedies for such breach
or threatened breach, including pursuing a recovery for damages. The parties
agree that the liquidated damages provisions set out above do not
EXHIBIT 10.5.1, PAGE 1 OF 7
57
constitute a penalty, but rather reflect the estimate of the parties as to the
actual damages, including loss of profits, Company might or is likely to incur
in the event of a violation of the restrictions appearing herein.
Consultant shall not, during the term of this Agreement and for a
period of two (2) years thereafter, without the prior written consent of
Company, which consent may be withheld for any reason, directly or indirectly
induce, encourage or solicit or assist any person who was or is employed
(whether as employee or as independent contractor) by Company, during the time
period described above in this sentence, to leave Company's employ. If
Consultant has any control over, or responsibility with respect to, the hiring
of employees, agents or consultants at any facility or with any other employer,
Consultant shall do everything in Consultant's power to preclude the hiring of
or retention by such other employer or facility of any individual who was
employed by Company during the period of time described in the beginning of the
proceeding sentence.
Consultant acknowledges and agrees that the restrictions contained in
this Agreement, including but not limited to time period, scope, and
geographical area restrictions, are fair and reasonable and necessary for the
successful operation of Company, that violation of any of them would cause
irreparable injury, and that the restrictions contained herein are not
unreasonably restrictive of Consultant's ability to earn a living. If the scope
of any restriction in this Section is too broad to permit enforcement of such
restriction to its fullest extent, then such restriction shall be enforced to
the maximum extent permitted by law, and the parties hereto consent and agree
that such scope may be modified judicially or by arbitration in any proceeding
brought to enforce such restriction. Consultant acknowledges and agrees that
remedies at law for any breach or violation of the provisions of this Section
would alone be inadequate, and agrees and consents that temporary and permanent
injunctive relief may be granted in connection with such violations, without the
necessity of proof of actual damage, and such remedies shall be in addition to
other remedies and rights Company may have at law or in equity. Consultant
agrees that Company shall not be required to give notice or post any bond in
connection with applying for or obtaining any such injunctive relief.
The parties acknowledge and agree that the covenants in this Section
shall be construed as an agreement independent of any other provision of this
Agreement so that the existence of any claim or cause of action by Consultant
against Company, whether predicated on this Section or otherwise, shall not
constitute a defense to the enforcement of this Section.
This Agreement was specifically bargained for as a material portion of
the formation of Company. Consultant is an owner of Company. The consideration
includes, without limitation, the financial benefits received by Consultant from
said formation.
3. CONFIDENTIALITY AGREEMENTS. The obligations of the Consultant and
the rights of Company set forth herein are in addition to those set forth in a
certain Confidentiality Agreement executed by Consultant (the "Confidentiality
Agreement").
2 EXHIBIT 10.5.1, PAGE 2 OF 7
58
4. REPRESENTATIONS AND WARRANTIES. Consultant represents and warrants
to and covenants with Company that: (a) he has furnished to Company a true and
correct copy of any agreements with any prior Company in the securities industry
and is subject to no contractual or other restriction or obligation which is
inconsistent with the execution of this Agreement, the performance of his duties
hereunder, or any rights of Company hereunder or under the Confidentiality
Agreement, (b) upon information and belief, there are no regulatory,
self-regulatory, administrative, civil or criminal matters past or present,
affecting the employment of Consultant by Company.
5. COMPENSATION.
(a) Consultant will receive annual compensation of $100,000
(the "Base Compensation") for each year during the term of this Agreement. Such
compensation shall be payable in equal periodic installments not less frequently
than monthly.
(b) Consultant shall be entitled to additional compensation as
follows if the performance criteria set forth below are satisfied:
(i) If the Gross Sales (defined below) of the Company for
the calendar year 1998 exceed $2,000,000.00, then Consultant
shall, if Consultant is employed by Company under this
Agreement on December 31, 1998, be entitled to be paid (by
January 31, 1999) an amount equal to six percent (6%) of the
amount by which said Gross Sales exceed $2,000,000.00. For
example, if said Gross Sales are $2,100,000.00, then the
payment would be $6,000.00.
(ii) If the Gross Sales (defined below) of the Company for
the calendar year 1999 exceed $2,000,000.00, then Consultant
shall, if Consultant is employed by Company under this
Agreement on December 31, 1999, be entitled to be paid (by
January 31, 2000) an amount equal to three percent (3%) of the
amount by which said Gross Sales exceed $2,000,000.00. For
example, if said Gross Sales are $2,100,000.00, then the
payment would be $3,000.00.
In addition to the foregoing, if the Gross Sales of the
Company for the calendar year 1999 exceed $3,000,000.00, then
Consultant shall, if Consultant is employed by Company under
this Agreement on December 31, 1999, receive (by January 31,
2000) additional compensation in the amount of $100,000.00.
(iii) If the Gross Sales (defined below) of the Company for
the calendar year 2000 exceed the Gross Sales for the calendar
year 1999, then Consultant shall, if Consultant is employed by
Company under this Agreement on December 31, 2000, be entitled
to be paid (by January 31, 2001) an amount equal to three
percent (3%) of the excess of the Gross Sales for calendar
year 2000 over the Gross Sales for the calendar year 1999. For
example, if the Gross Sales for the year 2000 are
$3,000,000.00, and the Gross Sales for 1999 were 2,600,000.00,
3 EXHIBIT 10.5.1, PAGE 3 OF 7
59
then the payment would be $12,000.00.
In addition to the foregoing, if the Gross Sales of the
Company for the calendar year 2000 exceed $4,000,000.00, then
Consultant shall, if Consultant is employed by Company under
this Agreement on December 31, 2000, receive (by January 31,
2001) additional compensation in the amount of $150,000.00.
The term "Gross Sales" as used herein shall mean gross sales minus all
returns and allowances, calculated on an accrual basis.
6. REIMBURSEMENTS. Company shall pay or reimburse Consultant for all
out-of-pocket expenses for travel, meals, hotel accommodations and the like
reasonably incurred by him in accordance with Company's policies and directives
(including any required prior approvals) for such expenses in connection with
the performance of Company's business, each such payment for reimbursement to be
made upon submission of a statement and evidence documenting such expenses as
required by Company.
7. TERM. The term of this Agreement shall commence as specified in
Section 15 below, and shall continue in effect until December 31, 2000, or until
such time as terminated as provided in paragraphs 8, 9, 10 and/or 11. Upon
termination of this agreement pursuant to paragraphs 8 or 9, Company's sole
obligation to Consultant shall be to pay all salary and stock options, if any,
accrued by him up to the date of such termination. Upon termination of this
Agreement, Consultant's obligations under the Confidentiality Agreement shall
survive.
8. TERMINATION UPON DEATH. In the event of the death of Consultant, the
employment of, and this Agreement with respect to, such deceased Consultant
shall be terminated; provided always that Company shall pay any accrued
compensation as of the date of termination to the legal representative of
Consultant's estate.
9. TERMINATION FOR DISABILITY. Company may terminate the employment of,
and this Agreement with respect to, Consultant if Consultant becomes disabled,
including disability by reason of any emotional or mental disorders, physical
diseases or injuries, and as a result of such disability is unable to work on a
full-time basis for a continuous period of two months or more or any two months
in a twenty-four month period. Upon such termination, Company shall have no
further liability to Consultant hereunder, except to pay any accrued
compensation as of the termination date. Upon such termination, Consultant's
obligation to Company under the Confidentiality Agreement shall survive.
10. TERMINATION FOR CAUSE. Company may terminate the employment of, and
this Agreement with respect to, Consultant if: (a) Consultant breaches his
fiduciary duties to Company or is guilty of fraud or willful malfeasance, (b)
Consultant materially breaches any representation, warranty, covenant or
agreement contained in this Agreement or fails to perform any of the obligations
under this Agreement or duties assigned to him pursuant to this Agreement or
otherwise by Company, (c) Consultant materially misrepresents any statement to
Company,
4 EXHIBIT 10.5.1, PAGE 4 OF 7
60
(d) Consultant is convicted of a crime involving moral turpitude or a felony,
(e) Consultant knowingly commits a material violation of any law, rule,
regulation or by-law of a securities exchange or association or other regulatory
or self-regulatory body or agency applicable to any general policy or directive
of Company communicated in writing to Consultant, (f) Consultant fails to follow
reasonable instructions and/or policies of Company's Management Committee, or
(g) Consultant terminates this Agreement at any time.
Upon termination of this Agreement pursuant to this paragraph 10,
Company's sole obligation to Consultant shall be to pay all accrued
compensation.
Upon such termination, Consultant's obligation to Company under the
Confidentiality Agreement shall survive.
11. TERMINATION OTHER THAN FOR CAUSE. Company retains the right to
terminate this Agreement and/or Consultant's employment for cause as set forth
in paragraph 10, and notwithstanding anything to the contrary in this Agreement,
Company shall have the right to terminate this Agreement and/or Consultant's
employment hereunder at any time for any reason other than for cause. In such
event, Company shall pay to Consultant all compensation accrued during the term
of the Agreement through the termination date, and Company shall remain
obligated to pay Consultant salary through December 31 of the calendar year in
which the termination occurred, at the level of the Base Compensation at the
time of termination, as the compensation accrues between the termination date
and said December 31 (i.e., it is not payable in one lump sum at the date of
termination). The Base Compensation so payable does not include any compensation
under subparagraph 5(b) above. Consultant's obligation to Company under the
Confidentiality Agreement shall survive.
Consultant shall provide Company at least sixty (60) days notice of
Consultant's termination of this Agreement.
12. SUCCESSORS AND ASSIGNS. The rights and obligations of Company
hereunder shall inure to the benefit of and shall be binding upon the successors
and assigns of Company; provided, however, that Company's obligations or
liabilities hereunder may not be assigned without the prior written approval of
Consultant, except to an affiliate of Company (which assignment shall not
release Company from its obligations to Consultant hereunder) or to a successor
to all or substantially all of Company's assets, business or ownership
interests, that agrees to be bound hereby. This Agreement is personal to the
Consultant and may not be assigned by Consultant.
13. AMENDMENT OR WAIVER. This Agreement may not be amended or modified
except by an agreement in writing duly executed by Consultant and by all of the
"Members" of Company. The failure of Company, on the one hand, or Consultant, on
the other hand, at any time to enforce performance by the other of any provision
of this Agreement shall in no way affect Company's or the Consultant's, as the
case may be, rights thereafter to enforce the same, nor shall the waiver by
Company, on the one hand, or Consultant, on the other hand, of any breach of any
provision hereof be deeded to be a waiver by Company or Consultant, as the case
may
5 EXHIBIT 10.5.1, PAGE 5 OF 7
61
be, of any other breach of the same or any other provision hereof.
14. ARBITRATION. Except as set forth in the Confidentiality Agreement,
any controversy or claim arising out of or relating to this Agreement, or the
breach hereof, shall be settled in Arizona by arbitration in accordance with the
rules of the American Arbitration Association. Judgment upon the award of the
arbitrator(s) may be entered in any court having jurisdiction thereof.
15. EFFECTIVE DATE; CONTINGENCIES. The obligations of the parties under
this Agreement are conditional upon the happening of the "Contingency Expiration
Date," as that term is defined in Section 10.1 of that certain Operating
Agreement, dated of even date with this Agreement, relating to the formation of
the Company by Futech Educational Products, Inc. and Magi Publications. The
obligations of the parties under this Agreement, including the obligations of
Consultant to render services and Company to pay compensation, shall commence as
of said Contingency Expiration Date.
16. NATURE OF RELATIONSHIP. The relationship the parties intend to
create by this Agreement is that of principal and independent contractor, and
nothing herein is intended, nor shall it be construed, to create a relationship
of partnership, joint venture, or employer/employee between the parties.
Company shall not have the right to direct the specific activities or practices
of Consultant, nor the manner in which Consultant conducts himself, but Company
will have the right to direct the results of Consultant's efforts expended under
this Agreement. Consultant, as a self-employed individual, shall be responsible
for the payment of Consultant's own State and Federal income tax and
self-employment tax, and acknowledges that Consultant will not be entitled to
unemployment or worker's compensation benefits, holiday pay, sick or vacation
pay, health insurance, credit toward participation in a pension or profit
sharing plan of Company, or any other benefits to which any employees of the
Company may be or become entitled. Company will not withhold, and/or pay, or be
responsible to withhold and/or pay, any such taxes or benefits, or any penalties
or interest thereon.
17. MISCELLANEOUS. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision hereof. This Agreement shall be constructed, interpreted and enforced
in accordance with the laws of the State of Arizona, without giving effect to
the conflict of laws rules thereof. The parties agree that the State of Arizona
shall have sole and exclusive jurisdiction and venue over the parties and any
disputes arising under or otherwise relating to this Agreement. This Agreement
contains all of the terms and conditions agreed to by the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties, except those set forth in the Confidentiality Agreement.
DATED the date first hereinabove written.
CONSULTANT:
-------------------------------------
6 EXHIBIT 10.5.1, PAGE 6 OF 7
62
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
COMPANY: Little Tiger Press USA, L.L.C.,
a New York limited liability company
By: Futech Educational Products, Inc.,
an Arizona corporation, Member
By:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
By: Magi Publications, a partnership,
Member
By:
------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Partner
7 EXHIBIT 10.5.1, PAGE 7 OF 7
63
EXHIBIT 10.5.2
CONFIDENTIALITY AGREEMENT
This Agreement is made as of January 5, 1998, by and between Little Tiger Press
USA, L.L.C., a New York limited liability company ("LTP") and the undersigned
("Recipient").
LTP has developed or otherwise obtained, or will develop or otherwise
obtain, certain confidential information and proprietary technology. Recipient
wishes to negotiate with respect to, and possibly enter into, a business
relationship with LTP. However, in order to do so, it is necessary that
Recipient be made aware of confidential information and propriety technology
belonging to LTP. LTP does not wish to lose the confidentiality or diminish its
rights in the confidential information and technology, and requires assurances
that its rights therein will not be diminished or impaired by virtue of the
dealings with Recipient. In consideration of being made aware of the
confidential information and proprietary technology, RECIPIENT THEREFORE AGREES
AS FOLLOWS:
1. "Technology" means concepts, inventions, technological developments
and improvements, mask works, methods, techniques, systems, documentation, data
and information (irrespective of whether in human or machine-readable form),
works of authorship, and products, whether or not patentable, copyrightable, or
susceptible to any other form of protection and whether or not reduced to
practice.
2. "Confidential Information" means any and all Technology and/or
information which: (i) is provided to Recipient by LTP, (ii) is created,
developed, or otherwise generated by or on behalf of LTP, (iii) concerns or
relates to any aspect of LTP's business, or (iv) is, for any reason, identified
by LTP as confidential: except such information which Recipient can show,
clearly and convincingly: (a) is publicly and openly known and in the public
domain, (b) becomes publicly and openly known and in the public domain through
no fault of Recipient, or (c) is in Recipient's possession and documented prior
to this agreement, lawfully obtained by Recipient from a source other than from
LTP and not subject to any obligation of confidentiality or restrictions on use.
3. All Confidential Information and all Technology embodying or
comprising Confidential Information is and shall be the sole and exclusive
property of LTP. Any Technology embodying or derived from the Confidential
Information, or conceived or first made in connection with the business
relationship shall likewise be the sole and exclusive property of LTP.
Recipient shall not take or cause any action which would be inconsistent with or
tend to diminish or impair LTP's rights in the Confidential Information.
Recipient shall not, directly or indirectly, print, copy or otherwise reproduce,
in whole or in part, or embody in any product, any Confidential Information
without LTP's prior consent.
4. Confidential Information is revealed to Recipient in strict
confidence, and solely for the purpose of assessing (and perhaps performing
under) the business relationship. Recipient
EXHIBIT 10.5.2, PAGE 1 OF 2
64
shall not use, or induce others to use, any Confidential Information for any
other purpose whatsoever, nor shall it disclose or reveal any Confidential
Information to anyone except those of Recipient's employees directly involved in
the business relationship, with a specific need to know, and who have first
agreed to be bound by the terms of this agreement. Recipient acknowledges that
in view of the nature of the Confidential Information, the geographical scope
(universal), temporal scope (so long as information qualifies as Confidential
Information hereunder), and scope of restriction on use and disclosure are
reasonable. Recipient also acknowledges that any unauthorized disclosure or use
of Confidential Information would cause LTP immediate and irreparable injury
or loss.
5. Upon LTP's request, Recipient will deliver over to LTP all
Confidential Information, as well as all documents, media, items and Technology
comprising, embodying, or relating to the Confidential Information, as well as
any other documents or things belonging to LTP that may be in Recipient's
possession. Recipient shall not retain any copies.
6. This agreement may be amended only in writing signed by LTP, and
there are no other understandings, agreements, or representations, express or
implied. If any clause or provision of this agreement is or becomes illegal,
invalid, or unenforceable, such clause or provisions shall be interpreted to
call for the protection of LTP's rights to the greatest extent which is legal,
valid, and enforceable, unless such clause or provision cannot be so
interpreted, or a court of competent jurisdiction declines to permit such clause
or provision to be so interpreted, in which case such clause or provision shall
be severed and the remaining provisions of this agreement shall continue in full
force and effect. This agreement shall be governed by and construed in
accordance with the laws of the State of Arizona, and jurisdiction and venue
over the parties and any dispute arising under or otherwise relating to this
agreement shall solely and exclusively be in Arizona.
RECIPIENT:
Address:
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Date:
-----------------------------------
2 EXHIBIT 10.5.2, PAGE 2 OF 2
65
EXHIBIT 10.7
CO-PUBLISHING AGREEMENT
(U.K. MATERIALS)
THIS AGREEMENT is entered into as of the 5th day of January, 1998, by
and between Magi Publications, a partnership ("Publisher") and Little Tiger
Press USA, L.L.C., a New York limited liability company ("Co-Publisher").
R E C I T A L S:
A. Publisher publishes printed materials, and Co-Publisher is in the
business of publishing, marketing and distributing printed materials.
B. The parties desire to enter into an agreement for co-publication by
Co-Publisher of certain materials of Publisher, all on the terms and conditions
herein set forth.
T E R M S:
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. RIGHT OF FIRST REFUSAL. Publisher hereby grants Co-Publisher the
right of first refusal to co-publish with Publisher and distribute in the United
States any and all published materials Publisher desires to have published/
distributed in the United States (hereinafter individually a "Book" and
collectively "Books").
Publisher will supply Co-Publisher with three (3) folded and gathered
sheets, and/or three (3) review copies, of each Book Publisher wants
published/distributed in North America, at no cost to Co-Publisher. At the same
time, Publisher will supply Co-Publisher with the title, name of the author and
illustrator, Unit Price (defined below), and the proposed delivery date of the
Book.
Co-Publisher shall inform Publisher of Co-Publisher's election whether
to publish each Book within thirty (30) days after Co-Publisher receives the
Book from Publisher for review, and the other information described in the
preceding paragraph. Publisher will supply Co-Publisher with 130 folded and
gathered sheets, and/or 130 review copies, of each Book Co-Publisher elects to
publish in North America, at no cost to Co-Publisher.
Books selected by Co-Publisher for publication under this Agreement
will be published under and with the name and imprint "Little Tiger Press USA,
L.L.C."
If Co-Publisher elects not to publish any Book offered by Publisher,
then Publisher shall have the right to pursue alternative publication/
distribution for such Book; provided, however,
EXHIBIT 10.7, PAGE 1 OF 8
66
that the terms offered to an alternative co-publisher/distributor shall not be
more favorable than the terms offered by Publisher to Co-Publisher.
2. APPOINTMENT AND TERRITORY. Publisher hereby grants Co-Publisher the
right to publish, distribute and sell each Book selected by Co-Publisher under
Section 1 above exclusively throughout North America. Co-Publisher's right to
publish any Book in other territories shall be subject to the prior written
consent of Publisher.
Co-Publisher shall not, without the prior written consent of Publisher,
which consent may be withheld for any reason or no reason, print or authorize
the printing of copies of any Book other than by Publisher.
Co-Publisher shall promote the sale of each Book actively throughout
the territory granted to Co-Publisher under this Agreement.
Publisher and Co-Publisher agree to co-publish the 1998 Spring and Fall
Front Lists, copies of which are attached hereto as Exhibit "A" and hereby made
a part hereof, at the pricing shown on said Exhibit, and further agree that the
rights to reprints of Publisher's "back list" are covered by and subject to this
Agreement.
3. MANNER OF PURCHASING.
(a) Co-Publisher shall have the option to purchase copies of each Book,
on a title-by-title basis, from Publisher, on a firm sale basis, on terms for
said purchases as described in Section 4 below. The details of Book orders shall
be set out from time to time on purchase orders (hereinafter "Purchase Orders")
issued by Co-Publisher.
(b) As used in this Agreement, and on any Purchase Order, the following
terms shall have the following meanings:
(i) "Book": One of Publisher's book titles, copies of which are to
be published/purchased by Co-Publisher, as further described in
Section 1 above.
(ii) "Unit Price": The price to Co-Publisher, inclusive of royalty
and delivery (C.I.F. to New York), of each copy of a Book.
(iii) "Quantity": The initial quantity of copies of a Book ordered
by Co-Publisher, as specified in a Purchase Order for such Book.
(iv) "Delivery Date": The date for bulk delivery of the Quantity of
a Book, as specified in the Purchase Order for such Book.
(v) "Imprint": The "Little Tiger Press" imprint.
2 EXHIBIT 10.7, PAGE 2 OF 8
67
(c) Co-Publisher shall notify Publisher of the proposed release dates
of each Book. Co-Publisher shall release each Book within three (3) months of
delivery of the Quantity ordered of such Book, unless Co-Publisher is prevented
from doing so by circumstances beyond Co-Publisher's control, in which event
Publisher shall be notified in writing and the period permitted for release
shall be extended by the duration of such circumstances.
(d) Except as may otherwise be specified in this Agreement, all details
of publication, sale and advertisement of each Book, and the number and
destination of free copies, shall be at the sole discretion and expense of
Co-Publisher.
4. FIRM SALES.
(a) Unless otherwise agreed upon by the Publisher and Co-Publisher,
all sales under this Agreement will be firm sales. Firm sales are direct,
outright purchases of books from Publisher by Co-Publisher, as opposed to
consignment sales. The details of each purchase shall be identified on a
Purchase Order.
The Unit Price of each Book, as offered by Publisher, is based upon the
cost of paper and printing as of the date of the offer relating to such Book. If
such costs have increased by more than 5% at the time the Book goes to print,
one-half of the increase in cost per copy in excess of 5% shall be added to the
Unit Price per copy for such Book. If the increase in cost would not have been
incurred but for a delay in printing caused by Co-Publisher's failure to perform
its obligations under this Agreement, Co-Publisher shall bear the entire
increase in cost.
(b) Co-Publisher shall pay Publisher the total Unit Price for each
Book received, within fifteen (15) days after receipt of the Book by
Co-Publisher.
(c) Publisher shall supply to Co-Publisher, as ordered by
Co-Publisher, 10% additional jackets/covers for each hard cover Book purchased
by Co-Publisher, at no charge to Co-Publisher. The purchase price for
jackets/covers ordered in excess of said 10% shall be 100% of Publisher's direct
out-of-pocket costs for the jackets/covers, payable in full within fifteen (15)
days after receipt by Co-Publisher of the jackets/covers. Extra jackets/covers
sales, like Book sales, will be firm sales - not returnable.
(d) If Co-Publisher requires copies of any Book additional to those
ordered on any Purchase Order, such further copies shall be ordered from
Publisher and supplied to Co-Publisher at a price and on other terms subject to
mutual agreement by the parties.
(e) Legal title to copies of each Book and other materials
delivered to Co-Publisher shall pass to Co-Publisher upon receipt by
Co-Publisher of the Book or other materials. Risk of loss or damage with respect
to copies of each Book or other materials delivered to Co-Publisher shall pass
to Co-Publisher upon receipt by Co-Publisher of the Book or other materials.
3 EXHIBIT 10.7, PAGE 3 OF 8
68
(f) Initial and reorder quantities for Books will not be less than
5000 copies per Book, unless otherwise agreed to by the parties.
5. PRODUCTION, PRINTING AND DELIVERY.
(a) Publisher will send Co-Publisher for approval (such approval
not to be unreasonably withheld or delayed), ozalids of each Book.
(b) Subject to timely performance by Co-Publisher of Co-Publisher's
obligations under this Agreement, Publisher shall arrange for the printing of
the Quantity of Books ordered for delivery to Co-Publisher by the Delivery Date,
unless Publisher is prevented from doing so by circumstances beyond Publisher's
control, or unless otherwise mutually agreed.
(c) Delivery to Co-Publisher of up to 10% under or over the
Quantity of any Book shall constitute good delivery, and Co-Publisher shall pay
for the actual number of copies received.
(d) Co-Publisher shall notify Publisher in writing of
Co-Publisher's requirements, if any, with respect to advance copies, extra
covers or jackets, and folded and gathered sheets.
(e) Co-Publisher shall not insert within or on the cover or jacket
of any edition of any Book, any advertisement, other than information about
other Books published by Publisher, without the prior written consent of
Publisher.
(f) Each party will discuss with the other opportunities regarding
co-op and promotional advertising, as those opportunities arise, and the parties
may, but are not obligated to, agree to share the costs thereof.
6. ACCOUNTING MATTERS. All monies due to Publisher shall be paid by
mail or telegraphic transfer to Publisher's bank account at Barclays Bank,
Heathrow Airport Business Centre, Cardinal Point, Newall Road, Heathrow Airport
(London), ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ (Account #: ▇▇▇▇▇▇▇▇. Sort Code: 20-3883.
Shift code: BARC GB 22). Co-Publisher shall ensure that all remittances or
notifications of remittance shall detail the names of Co-Publisher and
Publisher, the title of the Book(s), and, if applicable, Publisher's invoice
number.
7. FREIGHT. All Books will be shipped C.I.F. to New York in care of
Co-Publisher's freight forwarder. Co-Publisher will be responsible for customs
and transportation charges from New York to Co-Publisher's facilities.
8. SHIPPING SERVICES. From time to time Publisher may request
Co-Publisher to ship stock of Co-Publisher's books held by Co-Publisher to fill
orders placed by Publisher's other customers. All such orders shall be for
full-case quantities to a single shipping location. Co-Publisher will charge
Publisher, in fulfillment of any such order, the actual cost of shipping
4 EXHIBIT 10.7, PAGE 4 OF 8
69
plus a handling charge of 1% of the value of such order. Publisher shall also
reimburse Co-Publisher for any portion of the purchase price paid by
Co-Publisher to Publisher for the Books so sold, and for all of Co-Publisher
out-of-pocket costs for such Books. Such charges shall be deducted from monthly
payments due to Publisher from Co-Publisher under this Agreement.
9. PACKAGING SPECIFICATIONS. Publisher agrees to package all Books
shipped to Co-Publisher under this Agreement in case packs of 30 copies unless
otherwise mutually agreed to by the parties. Each carton will have the following
information clearly marked on the outside of the carton: Publisher Imprint:
Little Tiger Press; ISBN: ; Title: ; Number of
Copies: ; Co-Publisher's Product No.: .
10. IMPRINT; COPYRIGHT. Co-Publisher shall inform Publisher promptly of
any infringement of the copyright in any Book of which Co-Publisher becomes
aware. Co-Publisher will take all reasonable steps, including registration where
applicable, to protect the copyright in each Book in the territories granted to
Co-Publisher under this Agreement.
11. RESERVED RIGHTS. All rights in each Book, other than those
specifically granted to Co-Publisher under this Agreement, are reserved by
Publisher.
12. TERM; TERMINATION. This Agreement shall be effective immediately
and automatically on the "Contingency Expiration Date," as that term is defined
in that certain Operating Agreement for Little Tiger Press USA, L.L.C., dated of
even date herewith, executed by Futech Educational Products, Inc. and Magi
Publications. This Agreement shall continue thereafter until terminated in any
one of the following ways:
(a) If Co-Publisher is at any time in breach of any of the terms
and conditions of this Agreement, and Co-Publisher fails to cure such breach
within thirty (30) days after receipt by Co-Publisher of written notice from
Publisher specifying the breach and requiring that it be cured.
(b) If Co-Publisher is declared bankrupt or goes into liquidation
(other than solvent voluntary liquidation for the purpose of reconstruction
only), or if a receiver or administrator or administrative receiver is appointed
to the whole or substantially the whole of Co-Publisher's business, or if
Co-Publisher shall make an assignment for the benefit of creditors, then
Publisher may terminate this Agreement if Co-Publisher fails to cure such breach
within thirty (30) days after receipt by Co-Publisher of written notice from
Publisher specifying the breach and requiring that it be cured.
(c) If Co-Publisher ceases to trade as a publisher/distributor or
is for any reason unable to perform and comply with the terms and conditions of
this Agreement.
(d) If Co-Publisher allows any Book to go out of stock (to the
extent that Co-Publisher has less than 50 copies of such Book in stock), and to
remain out of stock for 6 months, then Publisher may terminate this Agreement
with respect to such Book only.
5 EXHIBIT 10.7, PAGE 5 OF 8
70
(e) If Co-Publisher shall dispose of all remaining stock of a Book
by remaindering or destruction, then Publisher may terminate this Agreement with
respect to such Book only.
Any termination of this Agreement by either party shall not affect
the obligations of either party under this Agreement to pay the other party
amounts owing in connection with performance under this Agreement prior to the
termination. The termination of this Agreement by either party shall not
prejudice any claim which either party has against the other.
13. ASSIGNMENT. Co-Publisher shall not, without the prior written
consent of Publisher, assign or in any way transfer Co-Publisher's rights
granted hereunder, in whole or in part, nor issue or permit issue of any Book
over any imprint other than the Imprint.
14. NATURE OF RELATIONSHIP. The relationship the parties intend to
create is that of principal and independent contractor, and nothing herein is
intended, nor shall it be construed, to create a relationship of partnership,
joint venture, or employer/employee between the parties. Publisher shall not
have the right to direct the specific daily activities or practices of
Co-Publisher nor the manner in which Co-Publisher conducts Co-Publisher's
affairs.
15. NOTICES. Any notice or communication given under the terms of
this Agreement ("Notice") shall be in writing and shall be given by any of the
following means and shall be deemed to have been received as follows:
(i) If by hand delivery, upon delivery;
(ii) If by pre-paid mail, 48 hours after posting, or if the
intended recipient party is in a country other than that of the
sender, on the seventh day after dispatch (Saturdays, Sundays and
public holidays excluded); or
(iii) If by telex, facsimile or other system which prints the
notice at the receiving end, if the sender has an acknowledgment
from the recipient of its receipt in readable form, upon receipt of
such acknowledgment;
provided, however, that no Notice shall be deemed to have been received unless
addressed to the addresses appearing below, or such other address provided to
the other party by Notice:
If to Publisher:
Magi Publications
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
Facsimile: 011-44-171-486-0926
If to Co-Publisher:
6 EXHIBIT 10.7, PAGE 6 OF 8
71
Little Tiger Press USA, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notice given on a Saturday, Sunday or public holiday, or outside normal business
hours, shall not be deemed given until commencement of the next normal business
hours.
16. ENTIRE AGREEMENT. This Agreement is intended by the parties to be
the final expression of their agreement and a complete and exclusive statement
of its terms. No prior course of dealings between the parties and no usage of
trade shall be relevant or admissible to supplement, explain, or vary any of the
terms of this Agreement. Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement shall not be relevant or
admissible to determine the meaning of this Agreement even though the accepting
or acquiescing party has knowledge of the nature of the performance and an
opportunity to make objection. No representations, understandings, or agreements
have been made or relied upon in the making of this Agreement other than those
specifically set forth herein. This Agreement can be modified only by writing
signed by all of the parties hereto.
17. MISCELLANEOUS. This Agreement contains the entire Agreement between
the parties with respect to the subject matter discussed in this Agreement, and
any prior arrangements or negotiations relating thereto are superseded by this
Agreement. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Arizona, without giving effect to the
conflict laws thereof. The courts of the State of Arizona shall have the sole
and exclusive jurisdiction and venue in any case or controversy arising under
this Agreement or by reason of this Agreement. The parties agree that any
litigation or arbitration arising from the interpretation or enforcement of this
Agreement shall be only in either Maricopa County Superior Court or in the
United States Federal District Court for the District of Arizona, and for this
purpose each party to this Agreement (and each person who shall become a party)
hereby expressly and irrevocably consents to the jurisdiction and venue of such
courts. This Agreement shall be construed according to its fair meaning and
neither for nor against the drafting party. If arbitration or other legal action
is instituted in connection with this Agreement, the prevailing party in such
action shall be entitled to recover from the other party reasonable attorneys'
fees and costs. The parties agree to accept facsimile signatures in counterparts
to this Agreement, and that said facsimile signatures shall for all purposes be
binding upon the parties as if the same were originals. The failure of a party
to require the performance of any term of this Agreement, or the waiver by a
party of any breach of this Agreement, shall not prevent a subsequent
enforcement of such term nor be deemed a waiver of any subsequent breach. The
remedies and payments provided for in this Agreement are not exclusive of other
remedies available to the parties. Every provision of this Agreement is intended
to be severable. If any term of provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement. Time is of the essence of each and every
provision of this Agreement. Titles and headings of sections of this Agreement
are for convenience of reference only, are not intended
7 EXHIBIT 10.7, PAGE 7 OF 8
72
to define, limit or describe the scope or intent of any provision of this
Agreement, and shall not affect the construction of any provision of this
Agreement.
DATED the date first hereinabove written.
PUBLISHER: Magi Publications, a partnership
By
------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Partner
CO-PUBLISHER: Little Tiger Press USA, L.L.C.,
a New York limited liability company
By: Magi Publications,
a partnership, Member
By
--------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia, Partner
By: Futech Educational Products, Inc.,
an Arizona corporation, Member
By
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
List of Exhibits
1998 Spring and Fall Front List "A"
8 EXHIBIT 10.7, PAGE 8 OF 8
73
Exhibit "A", Page 1 of 2
LITTLE TIGER PRESS, USA
FRONT LIST AND REPRINT PUBLISHING SCHEDULE SPRING '98
Order Retail Futech/ W/S
Title Format Quantity Price LIP Cost Ext Cost XYZ Price Turnover Ex-Works
----- ------ -------- ------- -------- -------- --------- -------- --------
It Could Have Been Worse Hardback 15,000 $14.95 $3.75 56,250 $5.23 78,450 Dec '97
A Duck So Small Hardback 10,000 $14.95 $3.75 37,500 $5.23 52,300 Dec '97
You Won't Think of Me at All Hardback 10,000 $14.95 $3.75 37,500 $5.23 52,300 Dec '97
Beware of the Bears Hardback 15,000 $14.95 $3.75 56,250 $5.23 78,450 Dec '97
The Lion Who Wanted to Love Hardback 12,000 $14.95 $4.10 49,200 $5.23 62,760 Nov '97
Look Out for the Big Bad
Fish Hardback 15,000 $14.95 $3.75 56,250 $5.23 78,450 Dec '97
▇▇▇▇▇ Hardback 15,000 $16.95 $4.40 66,000 $5.93 88,950 Dec '97
I Don't Want to Take a Bath! Board Book 25,000 $ 6.95 $1.75* 43,750 $2.43 60,750 Jan '98
I Don't Want to Go to Bed! Board Book 25,000 $ 6.95 $1.75* 43,750 $2.43 60,750 Jan '98
Tim's Animal Stories 96-page H/B 15,000 $16.95 $4.25 63,750 $5.93 88,950 Jan '98
Animals All Around
Laura's Star Reprint** Hardback 50,000 $16.95 $4.40 220,000 $5.93 296,500 June '98
Rumble in the Jungle Reprint** Hardback 15,000 $14.95 $4.10 61,500 $5.23 78,450 June '98
Magi Various Reprints** Hardback 60,000 $14.95 $3.75 225,000 $5.23 313,800 June '98
PAPERBACK
I Don't Want to Take a Bath! Paperback 25,000 $ 5.95 $1.20 $2.08
Dora's Eggs Paperback 15,000 $ 5.95 $1.20 $2.08
TOTAL 307,000 960,450 1,390,860
* Price to be finalized
** Quantities, dates and titles to be finalized
74
Exhibit "A", Page 2 of 2
LITTLE TIGER PRESS, USA
FRONT LIST PUBLISHING SCHEDULE FALL '98
Order Retail Futech/
Title Format Quantity Price LIP Cost Ext Cost XYZ Price W/S Turnover Ex-Works
----- ------ -------- ----- -------- -------- --------- ------------ --------
Hurry Santa Hardback 40,000 $14.95 $3.60 144,000 $5.23 209,200 June '98
Mouse, Look Out Hardback 10,000 $14.95 $3.75 37,500 $5.23 52,300 June '98
One Two Three Oops** Hardback 15,000 $14.95 $3.75 56,250 $5.23 78,450 June '98
Little Bunny Bobkin Hardback 15,000 $14.95 $4.10 61,500 $5.23 78,450 March '98
Bedtime for Little Hare Hardback 20,000 $14.95 $3.75 75,000 $5.23 104,600 June '98
Smudge** Hardback 15,000 $14.95 $3.75 56,250 $5.23 78,450 July '98
Commotion in the Ocean Hardback 20,000 $14.95 $4.10 82,000 $5.23 104,600 July '98
A New Hardback*** Hardback 15,000 $14.95 $4.10 61,500 $5.23 78,450 July '98
Santa's Large Board Book Board Book 25,000 $12.95 $3.20* 80,000 $4.53 113,250 Aug '98
Tiger's Large Board Book Board Book 25,000 $12.95 $3.20* 80,000 $4.53 113,250 Aug '98
Tim's Bear Stories 96 page H/B 15,000 $16.95 $4.25 63,750 $5.93 88,950 June '98
Little Tiger Cloth Book 1 Cloth Book 25,000 $19.95 $6.00* 150,000 $8.00* 200,000 July '98
Little Tiger Cloth Book 2 Cloth Book 25,000 $19.95 $6.00* 150,000 $8.00* 200,000 July '98
PAPERBOOK
Beware of the Bears Paperback 25,000 $ 5.95 $1.20 $2.08
It Could Have Been Worse Paperback 15,000 $ 5.95 $1.20 $2.08
TOTAL 305,000 1,097,750 1,499,950
*Price to be finalized
**Pub date to be confirmed
***Titles to be confirmed
75
EXHIBIT 10.8
CO-PUBLISHING AGREEMENT
(U.S. MATERIALS)
THIS AGREEMENT is entered into as of the 5th day of January, 1998, by
and between Magi Publications, a partnership ("Co-Publisher") and Little Tiger
Press USA, L.L.C., a New York limited liability company ("Publisher").
R E C I T A L S:
A. Publisher publishes printed materials, and Co-Publisher is in the
business of publishing, marketing and distributing printed materials.
B. The parties desire to enter into an agreement for co-publication by
Co-Publisher of certain materials of Publisher, all on the terms and conditions
herein set forth.
T E R M S:
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. RIGHT OF FIRST REFUSAL. Publisher hereby grants Co-Publisher the
right of first refusal to co-publish with Publisher and distribute in Europe any
and all published materials Publisher desires to have published/distributed in
Europe (hereinafter individually a "Book" and collectively "Books").
Publisher will supply Co-Publisher with three (3) folded and gathered
sheets, and/or three (3) review copies, of each Book Publisher wants
published/distributed in Europe, at no cost to Co-Publisher. At the same time,
Publisher will supply Co-Publisher with the title, name of the author and
illustrator, Unit Price (defined below), and the proposed delivery date of the
Book.
Co-Publisher shall inform Publisher of Co-Publisher's election whether
to publish each Book within thirty (30) days after Co-Publisher receives the
Book from Publisher for review, and the other information described in the
preceding paragraph. As to each Book Co-Publisher elects to publish,
Co-Publisher shall at the same time inform Publisher in which Countries in
Europe Co-Publisher will Publish the Book. Publisher will supply Co-Publisher
with 130 folded and gathered sheets, and/or 130 review copies, of each Book
Co-Publisher elects to publish in Europe, at no cost to Co-Publisher.
Books selected by Co-Publisher for publication under this Agreement
will be published under and with the name and imprint "Little Tiger Press."
EXHIBIT 10.8, PAGE 1 OF 8
76
If Co-Publisher elects not to publish in any Country in Europe any Book
offered by Publisher, then Publisher shall have the right to pursue alternative
publication/distribution for such Book in said Country; provided, however, that
the terms offered to an alternative co-publisher/distributor shall not be more
favorable than the terms offered by Publisher to Co-Publisher.
2. APPOINTMENT AND TERRITORY. Publisher hereby grants Co-Publisher the
right to publish, distribute and sell each Book selected by Co-Publisher under
Section 1 above exclusively throughout Europe. Co-Publisher's right to publish
any Book in other territories shall be subject to the prior written consent of
Publisher.
Co-Publisher shall not, without the prior written consent of Publisher,
which consent may be withheld for any reason or no reason, print or authorize
the printing of copies of any Book other than by Publisher.
Co-Publisher shall promote the sale of each Book actively throughout
the territory granted to Co-Publisher under this Agreement.
3. MANNER OF PURCHASING.
(a) Co-Publisher shall have the option to purchase copies of each
Book, on a title-by-title basis, from Publisher, on a firm sale basis, on terms
for said purchases as described in Section 4 below. The details of Book orders
shall be set out from time to time on purchase orders (hereinafter "Purchase
Orders") issued by Co-Publisher.
(b) As used in this Agreement, and on any Purchase Order, the
following terms shall have the following meanings:
(i) "Book": One of Publisher's book titles, copies of which
are to be published/purchased by Co-Publisher, as further
described in Section 1 above.
(ii) "Unit Price": The price to Co-Publisher, inclusive of
royalty and delivery (C.I.F. to London), of each copy of a
Book.
(iii) "Quantity": The initial quantity of copies of a Book
ordered by Co-Publisher, as specified in a Purchase Order for
such Book.
(iv) "Delivery Date": The date for bulk delivery of the
Quantity of a Book, as specified in the Purchase Order for
such Book.
(v) "Imprint": The "Little Tiger Press" imprint.
(c) Co-Publisher shall notify Publisher of the proposed release
dates of each
2 EXHIBIT 10.8, PAGE 2 OF 8
77
Book. Co-Publisher shall release each Book within three (3) months of delivery
of the Quantity ordered of such Book, unless Co-Publisher is prevented from
doing so by circumstances beyond Co-Publisher's control, in which event
Publisher shall be notified in writing and the period permitted for release
shall be extended by the duration of such circumstances.
(d) Except as may otherwise be specified in this Agreement, all
details of publication, sale and advertisement of each Book, and the number and
destination of free copies, shall be at the sole discretion and expense of
Co-Publisher.
4. FIRM SALES.
(a) Unless otherwise agreed upon by the Publisher and Co-Publisher,
all sales under this Agreement will be firm sales. Firm sales are direct,
outright purchases of Books from Publisher by Co-Publisher, as opposed to
consignment sales. The details of each purchase shall be identified on a
Purchase Order.
The Unit Price of each Book, as offered by Publisher, is based upon the
cost of paper and printing as of the date of the offer relating to such Book. If
such costs have increased by more than 5% at the time the Book goes to print,
one-half of the increase in cost per copy in excess of 5% shall be added to the
Unit Price per copy for such Book. If the increase in cost would not have been
incurred but for a delay in printing caused by Co-Publisher's failure to perform
its obligations under this Agreement, Co-Publisher shall bear the entire
increase in cost.
(b) Co-Publisher shall pay Publisher the total Unit Price for each
Book received, within fifteen (15) days after receipt of the Book by
Co-Publisher.
(c) Publisher shall supply to Co-Publisher, as ordered by
Co-Publisher, 10% additional jackets/covers for each hard cover Book purchased
by Co-Publisher, at no charge to Co-Publisher. The purchase price for
jackets/covers ordered in excess of said 10% shall be 100% of Publisher's direct
out-of-pocket costs for the jackets/covers, payable in full within fifteen (15)
days after receipt by Co-Publisher of the jackets/covers. Extra jackets/covers
sales, like Book sales, will be firm sales - not returnable.
(d) If Co-Publisher requires copies of any Book additional to those
ordered on any Purchase Order, such further copies shall be ordered from
Publisher and supplied to Co-Publisher at a price and on other terms subject to
mutual agreement by the parties.
(e) Legal title to copies of each Book and other materials delivered
to Co-Publisher shall pass to Co-Publisher upon receipt by Co-Publisher of the
Book or other materials. Risk of loss or damage with respect to copies of each
Book or other materials delivered to Co-Publisher shall pass to Co-Publisher
upon receipt by Co-Publisher of the Book or other materials.
(f) Initial and reorder quantities for Books will not be less than
5000 copies
3 EXHIBIT 10.8, PAGE 3 OF 8
78
per Book, unless otherwise agreed to by the parties.
5. PRODUCTION, PRINTING AND DELIVERY.
(a) Publisher will send Co-Publisher for approval (such approval not
to be unreasonably withheld or delayed), ozalids of each Book.
(b) Subject to timely performance by Co-Publisher of Co-Publisher's
obligations under this Agreement, Publisher shall arrange for the printing of
the Quantity of Books ordered for delivery to Co-Publisher by the Delivery Date,
unless Publisher is prevented from doing so by circumstances beyond Publisher's
control, or unless otherwise mutually agreed.
(c) Delivery to Co-Publisher of up to 10% under or over the Quantity
of any Book shall constitute good delivery, and Co-Publisher shall pay for the
actual number of copies received.
(d) Co-Publisher shall notify Publisher in writing of Co-Publisher's
requirements, if any, with respect to advance copies, extra covers or jackets,
and folded and gathered sheets.
(e) Co-Publisher shall not insert within or on the cover or jacket
of any edition of any Book, any advertisement, other than information about
other Books published by Publisher, without the prior written consent of
Publisher.
(f) Each party will discuss with the other opportunities regarding
co-op and promotional advertising, as those opportunities arise, and the parties
may, but are not obligated to, agree to share the costs thereof.
6. ACCOUNTING MATTERS. All monies due to Publisher shall be paid by
mail or telegraphic transfer to Publisher's bank account. Co-Publisher shall
ensure that all remittances or notifications of remittance shall detail the
names of Co-Publisher and Publisher, the title of the Book(s), and, if
applicable, Publisher's invoice number.
7. FREIGHT. All Books will be shipped C.I.F. to London in care of
Co-Publisher's freight forwarder. Co-Publisher will be responsible for customs
and transportation charges from London to Co-Publisher's facilities.
8. SHIPPING SERVICES. From time to time Publisher may request
Co-Publisher to ship stock of Co-Publisher's books held by Co-Publisher to fill
orders placed by Publisher's other customers. All such orders shall be for
full-case quantities to a single shipping location. Co-Publisher will charge
Publisher, in fulfillment of any such order, the actual cost of shipping plus a
handling charge of 1% of the value of such order. Publisher shall also reimburse
Co-Publisher for any portion of the purchase price paid by Co-Publisher to
Publisher for the Books so sold, and for all of Co-Publisher's out-of-pocket
costs for such Books. Such charges shall
4 EXHIBIT 10.8, PAGE 4 OF 8
79
be deducted from monthly payments due to Publisher from Co-Publisher under this
Agreement.
9. PACKAGING SPECIFICATIONS. Publisher agrees to package all Books
shipped to Co-Publisher under this Agreement in case packs of 30 copies unless
otherwise mutually agreed to by the parties. Each carton will have the following
information clearly marked on the outside of the carton: Publisher Imprint:
Little Tiger Press; ISBN: ___________; Title:___________; Number of Copies:
__________; Co-Publisher's Product No.:____________.
10. IMPRINT; COPYRIGHT. Co-Publisher shall inform Publisher promptly of
any infringement of the copyright in any Book of which Co-Publisher becomes
aware. Co-Publisher will take all reasonable steps, including registration where
applicable, to protect the copyright in each Book in the territories granted to
Co-Publisher under this Agreement.
11. RESERVED RIGHTS. All rights in each Book, other than those
specifically granted to Co-Publisher under this Agreement, are reserved by
Publisher.
12. TERM; TERMINATION. This Agreement shall be effective immediately
and automatically on the "Contingency Expiration Date," as that term is defined
in that certain Operating Agreement for Little Tiger Press USA, L.L.C., dated of
even date herewith, executed by Futech Educational Products, Inc. and Magi
Publications. This Agreement shall continue thereafter until terminated in any
one of the following ways:
(a) If Co-Publisher is at any time in breach of any of the terms and
conditions of this Agreement, and Co-Publisher fails to cure such breach within
thirty (30) days after receipt by Co-Publisher of written notice from Publisher
specifying the breach and requiring that it be cured.
(b) If Co-Publisher is declared bankrupt or goes into liquidation
(other than solvent voluntary liquidation for the purpose of reconstruction
only), or if a receiver or administrator or administrative receiver is appointed
to the whole or substantially the whole of Co-Publisher's business, or if
Co-Publisher shall make an assignment for the benefit of creditors, then
Publisher may terminate this Agreement if Co-Publisher fails to cure such breach
within thirty (30) days after receipt by Co-Publisher of written notice from
Publisher specifying the breach and requiring that it be cured.
(c) If Co-Publisher ceases to trade as a publisher/distributor or is
for any reason unable to perform and comply with the terms and conditions of
this Agreement.
(d) If Co-Publisher allows any Book to go out of stock (to the
extent that Co-Publisher has less than 50 copies of such Book in stock), and to
remain out of stock for 6 months, then Publisher may terminate this Agreement
with respect to such Book only.
(e) If Co-Publisher shall dispose of all remaining stock of a Book
by remaindering or destruction, then Publisher may terminate this Agreement with
respect to such
5 EXHIBIT 10.8, PAGE 5 OF 8
80
Book only.
Any termination of this Agreement by either party shall not affect
the obligations of either party under this Agreement to pay the other party
amounts owing in connection with performance under this Agreement prior to the
termination. The termination of this Agreement by either party shall not
prejudice any claim which either party has against the other.
13. ASSIGNMENT. Co-Publisher shall not, without the prior written
consent of Publisher, assign or in any way transfer Co-Publisher's rights
granted hereunder, in whole or in part, nor issue or permit issue of any Book
over any imprint other than the Imprint.
14. NATURE OF RELATIONSHIP. The relationship the parties intend to
create is that of principal and independent contractor, and nothing herein is
intended, nor shall it be construed, to create a relationship of partnership,
joint venture, or employer/employee between the parties. Publisher shall not
have the right to direct the specific daily activities or practices of
Co-Publisher nor the manner in which Co-Publisher conducts Co-Publisher's
affairs.
15. NOTICES. Any notice or communication given under the terms of this
Agreement ("Notice") shall be in writing and shall be given by any of the
following means and shall be deemed to have been received as follows:
(i) If by hand delivery, upon delivery;
(ii) If by pre-paid mail, 48 hours after posting, or if the
intended recipient party is in a country other than that of
the sender, on the seventh day after dispatch (Saturdays,
Sundays and public holidays excluded); or
(iii) If by telex, facsimile or other system which prints the
notice at the receiving end, if the sender has an
acknowledgment from the recipient of its receipt in readable
form, upon receipt of such acknowledgment;
provided, however, that no Notice shall be deemed to have been received unless
addressed to the addresses appearing below, or such other address provided to
the other party by Notice:
If to Co-Publisher:
Magi Publications
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
Facsimile: 011-44-171-486-0926
If to Publisher:
Little Tiger Press USA, L.L.C.
6 EXHIBIT 10.8, PAGE 6 OF 8
81
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notice given on a Saturday, Sunday or public holiday, or outside normal business
hours, shall not be deemed given until commencement of the next normal business
hours.
16. ENTIRE AGREEMENT. This Agreement is intended by the parties to be
the final expression of their agreement and a complete and exclusive statement
of its terms. No prior course of dealings between the parties and no usage of
trade shall be relevant or admissible to supplement, explain, or vary any of the
terms of this Agreement. Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement shall not be relevant or
admissible to determine the meaning of this Agreement even though the accepting
or acquiescing party has knowledge of the nature of the performance and an
opportunity to make objection. No representations, understandings, or agreements
have been made or relied upon in the making of this Agreement other than those
specifically set forth herein. This Agreement can be modified only by writing
signed by all of the parties hereto.
17. MISCELLANEOUS. This Agreement contains the entire Agreement between
the parties with respect to the subject matter discussed in this Agreement, and
any prior arrangements or negotiations relating thereto are superseded by this
Agreement. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Arizona, without giving effect to the
conflict laws thereof. The courts of the State of Arizona shall have the sole
and exclusive jurisdiction and venue in any case or controversy arising under
this Agreement or by reason of this Agreement. The parties agree that any
litigation or arbitration arising from the interpretation or enforcement of this
Agreement shall be only in either Maricopa County Superior Court or in the
United States Federal District Court for the District of Arizona, and for this
purpose each party to this Agreement (and each person who shall become a party)
hereby expressly and irrevocably consents to the jurisdiction and venue of such
courts. This Agreement shall be construed according to its fair meaning and
neither for nor against the drafting party. If arbitration or other legal action
is instituted in connection with this Agreement, the prevailing party in such
action shall be entitled to recover from the other party reasonable attorneys'
fees and costs. The parties agree to accept facsimile signatures in counterparts
to this Agreement, and that said facsimile signatures shall for all purposes be
binding upon the parties as if the same were originals. The failure of a party
to require the performance of any term of this Agreement, or the waiver by a
party of any breach of this Agreement, shall not prevent a subsequent
enforcement of such term nor be deemed a waiver of any subsequent breach. The
remedies and payments provided for in this Agreement are not exclusive of other
remedies available to the parties. Every provision of this Agreement is intended
to be severable. If any term of provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement. Time is of the essence of each and every
provision of this Agreement. Titles and headings of sections of this Agreement
are for convenience of reference only, are not intended to define, limit or
describe the scope or intent of any provision of this Agreement, and shall not
7 EXHIBIT 10.8, PAGE 7 OF 8
82
affect the construction of any provision of this Agreement.
DATED the date first hereinabove written.
CO-PUBLISHER: Magi Publications,
a partnership
By______________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Partner
PUBLISHER: Little Tiger Press USA, L.L.C.,
a New York limited liability company
By: Magi Publications,
a partnership, Member
By__________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Bhatia, Partner
By: Futech Educational Products, Inc.,
an Arizona corporation, Member
By__________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
8 EXHIBIT 10.8, PAGE 8 OF 8
83
EXHIBIT 10.9
DISTRIBUTION AGREEMENT
THIS AGREEMENT is entered into as of the 5th day of January, 1998, by
and between Little Tiger Press USA, L.L.C., a New York limited liability company
("Publisher") and Futech Educational Products, Inc., an Arizona corporation, to
be operating as "XYZ Distributors" ("Distributor").
R E C I T A L S:
A. Publisher publishes printed materials, and Distributor is in the
business of marketing and distributing published materials.
B. The parties desire to enter into an agreement for distribution by
Distributor of certain materials published by Publisher, all on the terms and
conditions herein set forth.
T E R M S:
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. RIGHT OF FIRST REFUSAL. Publisher hereby grants Distributor the
right of first refusal to purchase from Publisher and distribute in the United
States any and all published materials Publisher desires to have distributed in
the United States (hereinafter individually a "Book" and collectively "Books").
Publisher will supply Distributor with three (3) folded and gathered
sheets, and/or three (3) review copies, of each Book Publisher wants distributed
in the United States, at no cost to Distributor. At the same time, Publisher
will supply Distributor with the title, name of the author and illustrator, Unit
Price (defined below), and the proposed delivery date of the Book.
Distributor shall inform Publisher of Distributor's election whether to
distribute each Book within thirty (30) days after Distributor receives the Book
from Publisher for review, and the other information described in the preceding
paragraph. Publisher will supply Distributor with 130 folded and gathered
sheets, and/or 130 review copies, of each Book Distributor elects to distribute
in the United States, at no cost to Distributor.
Books selected by Co-Publisher for distribution under this Agreement
will be distributed under and with the name and imprint "Little Tiger Press USA,
L.L.C."
If Distributor elects not to distribute any Book offered by Publisher,
then Publisher shall have the right to pursue alternative distribution for such
Book; provided, however, that the terms offered to an alternative distributor
shall not be more favorable than the terms offered by
EXHIBIT 10.9, PAGE 1 OF 9
84
Publisher to Distributor.
2. APPOINTMENT AND TERRITORY. Publisher hereby grants Distributor the
right to distribute and sell each Book acquired by Distributor under Section 1
above exclusively throughout the United States of America. Distributor's right
to distribute any Book in other territories shall be subject to the prior
written consent of Publisher.
Unless otherwise agreed to in writing by Publisher, Distributor is
excluded from selling any Book to book clubs, or from selling any Book by direct
marketing methods including, but not limited to, mail order, door-to-door,
direct mail, television advertising, or incentive, premium or coupon advertising
methods.
Distributor shall not, without the prior written consent of Publisher,
which consent may be withheld for any reason or no reason, print or authorize
the printing of copies of any Book other than by Publisher.
Distributor shall promote the sale of each Book actively throughout the
territory granted to Distributor under this Agreement.
Except as otherwise called for herein, during the term of this
Agreement, Distributor shall be entitled to market Books acquired pursuant to
this Agreement using the Imprint (defined in Section 3 below).
Publisher agrees to sell to Distributor, and Distributor agrees to
distribute, the 1998 Spring and Fall Front Lists, copies of which are attached
hereto as Exhibit "A" and hereby made a part hereof, at the pricing shown on
said Exhibit.
3. MANNER OF PURCHASING.
(a) Distributor shall have the option to purchase copies of each Book,
on a title-by-title basis, from Publisher, on a returnable basis, on terms for
said purchases as described in Section 4 below. The details of Book orders shall
be set out from time to time on purchase orders (hereinafter "Purchase Orders")
issued by Distributor.
(b) As used in this Agreement, and on any Purchase Order, the following
terms shall have the following meanings:
(i) "Book": One of Publisher's book titles, copies of which
are to be purchased by Distributor, as further described in
Section 1 above.
(ii) "Unit Price": The price to Distributor, inclusive of
royalty and delivery (C.I.F. to Distributor's warehouse in the
State of New York) of each copy of a Book.
2 EXHIBIT 10.9, PAGE 2 OF 9
85
(iii) "Quantity": The initial quantity of copies of a Book
ordered by Distributor, as specified in a Purchase Order for
such Book.
(iv) "Delivery Date": The date for bulk delivery of the
Quantity of a Book, as specified in a Purchase Order for such
Book.
(v) "Imprint": The "Little Tiger Press" imprint.
(c) Distributor shall notify Publisher of the proposed release dates of
each Book. Distributor shall release each Book within three (3) months of
delivery of the Quantity ordered of such Book, unless Distributor is prevented
from doing so by circumstances beyond Distributor's control, in which event
Publisher shall be notified in writing and the period permitted for release
shall be extended by the duration of such circumstances.
(d) Except as may otherwise be specified in this Agreement, all details
of sale and advertisement of each Book, and the number and destination of free
copies, shall be at the sole discretion and expense of Distributor.
4. RETURNABLE SALES.
(a) Unless otherwise agreed upon by the Publisher and Distributor,
all sales under this Agreement will be returnable sales. The details of each
purchase shall be identified on a Purchase Order.
The Unit Price of each Book, as offered by Publisher, is based upon the
cost of paper and printing as of the date of the offer relating to such Book. If
such costs have increased by more than 5% at the time the Book goes to print,
one-half of the increase in cost per copy in excess of 5% shall be added to the
Unit Price per copy for such Book. If the increase in cost would not have been
incurred but for a delay in printing caused by Distributor's failure to perform
its obligations under this Agreement, Distributor shall bear the entire increase
in cost.
(b) Distributor shall furnish Publisher with monthly sales reports
on a per Book basis, commencing within one (1) month after first distribution of
each Book by Distributor.
(c) Within sixty (60) days after delivery of each Book purchased by
Distributor, Distributor shall pay Publisher the Unit Price of the Book. The
parties intend that the Unit Price for each Book shall be 65% of the suggested
retail price of such Book. Distributor shall be responsible for all credit
checks, and all uncollected credit, for all purchasers of Publisher's books from
Distributor, and Publisher shall accept no responsibility for bad debts incurred
by Distributor.
(d) Publisher shall supply to Distributor, as ordered by
Distributor, 10% additional jackets/covers for each hard cover Book ordered by
Distributor, at no charge to
3 EXHIBIT 10.9, PAGE 3 OF 9
86
Distributor. The purchase price for jackets/covers ordered in excess of said 10%
shall be 100% of Publisher's direct out-of-pocket costs for the jackets/covers,
payable in full within sixty (60) days after receipt by Distributor of the
jackets/covers. Extra jackets/covers shall be firm sales - not returnable.
(e) Distributor shall, after taking possession of Books purchased on
a returnable basis, offer the Books for sale at prices not less than
Distributor's Unit Price from Publisher for the Books. Distributor shall use its
best efforts to sell the Books.
(f) Distributor shall pay all expenses incident to the receipt,
handling, storage, marketing, advertising, selling, and delivery to customers of
the Books purchased by Distributor, and shall pay all taxes and other charges
assessed and/or levied on said Books while in Distributor's possession,
including sales taxes and Distributor's income taxes, but not including
Publisher's income taxes.
(g) Initial and reorder quantities will not be less than 5000 copies
per Book, unless otherwise agreed to by the parties.
(h) Distributor may return to Publisher any Books purchased by
Distributor on a returnable basis, for full credit. All freight charges for
returned Books shall be paid by Publisher, unless the Books are being returned
as a result of an uncured breach by Distributor under the terms of this
Agreement, or unless Books are being returned as a result of Distributor
terminating this Agreement, in which event Distributor shall pay all said
freight charges.
5. PRODUCTION, PRINTING AND DELIVERY.
(a) Publisher will send Distributor for approval (such approval not
to be unreasonably withheld or delayed), ozalids of each Book.
(b) Subject to timely performance by Distributor of Distributor's
obligations under this Agreement, Publisher shall arrange for the printing of
the Quantity of Books ordered for delivery to Distributor by the Delivery Date,
unless Publisher is prevented from doing so by circumstances beyond Publisher's
control, or unless otherwise mutually agreed.
(c) Delivery to distributor of up to 10% under or over the Quantity
of any Book shall constitute good delivery, and Distributor shall pay for the
actual number of copies received.
(d) Distributor shall notify Publisher in writing of Distributor's
requirements, if any, with respect to advance copies, extra covers or jackets,
and folded and gathered sheets.
(e) Distributor shall not insert within or on the cover or jacket of
any edition of any Book, any advertisement, other than information about other
Books published by Publisher, without the prior written consent of Publisher.
4 EXHIBIT 10.9, PAGE 4 OF 9
87
6. ACCOUNTING MATTERS.
(a) Distributor shall prepare statements of the sale of each Book
yearly through December 31 of that year, and shall deliver such statements to
Publisher by March 31 of the next year. Such statements shall show clearly the
number of unsold copies of each Book in the possession or under the control of
Distributor at the end of such accounting.
(b) All monies due to Publisher shall be paid by mail or telegraphic
transfer to Publisher's bank account. Distributor shall ensure that all
remittances or notifications of remittance shall detail the names of Distributor
and Publisher, the title of the Book(s), and, if applicable, Publisher's invoice
number.
7. FREIGHT. Except as provided for in subparagraph 4(h) above, all
Books will be shipped C.I.F. to Distributor's warehouse in the State of New
York.
8. SHIPPING SERVICES. From time to time Publisher may request
Distributor to ship stock of Distributor's books held by Distributor to fill
orders placed by Publisher's other customers. All such orders shall be for
full-case quantities to a single shipping location. Distributor will charge
Publisher, in fulfillment of any such order, the actual cost of shipping plus a
handling charge of 1% of the value of such order. Publisher shall also reimburse
Distributor for any portion of the purchase price paid by Distributor to
Publisher for the Books so sold, and for all of Distributor's out-of-pocket
costs for such Books. Such charges shall be deducted from monthly payments due
to Publisher from Distributor under this Agreement.
9. PACKAGING SPECIFICATIONS. Publisher agrees to package all Books
shipped to Distributor under this Agreement in case packs of 30 copies unless
otherwise mutually agreed to by the parties. Each carton will have the following
information clearly marked on the outside of the carton: Publisher Imprint:
Little Tiger Press; ISBN: _________; Title:__________; Number of Copies:
__________; Distributor's Product No.:__________.
10. IMPRINT; COPYRIGHT.
(a) All Books purchased by Distributor from Publisher for
distribution by Distributor shall bear the Imprint.
(b) Distributor shall inform Publisher promptly of any infringement
of the copyright in any Book of which Distributor becomes aware. Any actions to
protect the copyright will be at the Publisher's expense and Distributor shall
take no such action without Publisher's prior written authorization.
11. RESERVED RIGHTS. All rights in each Book, other than those
specifically granted to Distributor under this Agreement, are reserved by
Publisher.
12. TERM; TERMINATION. This Agreement shall be effective immediately and
5 EXHIBIT 10.9, PAGE 5 OF 9
88
automatically on the "Contingency Expiration Date," as that term is defined in
that certain Operating Agreement for Little Tiger Press USA, L.L.C., dated of
even date herewith, executed by Futech Educational Products, Inc. and Magi
Publications. This Agreement shall continue thereafter until terminated in any
one of the following ways:
(a) If Distributor is at any time in breach of any of the terms and
conditions of this Agreement, and Distributor fails to cure such breach within
thirty (30) days after receipt by Distributor of written notice from Publisher
specifying the breach and requiring that it be cured.
(b) If Distributor is declared bankrupt or goes into liquidation
(other than solvent voluntary liquidation for the purpose of reconstruction
only), or if a receiver or administrator or administrative receiver is appointed
to the whole or substantially the whole of Distributor's business, or if
Distributor shall make an assignment for the benefit of creditors, then
Publisher may terminate this Agreement if Distributor fails to cure such breach
within thirty (30) days after receipt by Distributor of written notice from
Publisher specifying the breach and requiring that it be cured.
(c) If Distributor ceases to trade as a distributor or is for any
reason unable to perform and comply with the terms and conditions of this
Agreement.
(d) If Distributor allows any Book to go out of stock (to the extent
that Distributor has less than 50 copies of such Book in stock), and to remain
out of stock for 6 months, then Publisher may terminate this Agreement with
respect to such Book only.
(e) If Distributor shall dispose of all remaining stock of a Book by
remaindering or destruction, then Publisher may terminate this Agreement with
respect to such Book only.
Notwithstanding the foregoing, or any other provision of this
Agreement, Distributor shall be entitled to use the Imprint in connection with
sales of Books purchased from Publisher until such time as Distributor shall
have exhausted Distributor's stock of said Books, including Books received by
Distributor after a termination of this Agreement from orders placed by
Distributor prior to said termination. Except as so provided, upon termination
of this Agreement Distributor shall immediately cease using the Imprint.
Any termination of this Agreement by either party shall not affect
the obligations of either party under this Agreement to pay the other party
amounts owing in connection with performance under this Agreement prior to the
termination. The termination of this Agreement by either party shall not
prejudice any claim which either party has against the other.
13. ASSIGNMENT. Distributor shall not, without the prior written
consent of Publisher, assign or in any way transfer Distributor's rights granted
hereunder, in whole or in part, nor issue or permit issue of any Book over any
imprint other than the Imprint.
6 EXHIBIT 10.9, PAGE 6 OF 9
89
14. NATURE OF RELATIONSHIP. The relationship the parties intend to
create is that of principal and independent contractor, and nothing herein is
intended, nor shall it be construed, to create a relationship of partnership,
joint venture, or employer/employee between the parties. Publisher shall not
have the right to direct the specific daily activities or practices of
Distributor nor the manner in which Distributor conducts Distributor's affairs.
15. NOTICES. Any notice or communication given under the terms of this
Agreement ("Notice") shall be in writing and shall be given by any of the
following means and shall be deemed to have been received as follows:
(i) If by hand delivery, upon delivery;
(ii) If by pre-paid mail, 48 hours after posting, or if the
intended recipient party is in a country other than that of
the sender, on the seventh day after dispatch (Saturdays,
Sundays and public holidays excluded); or
(iii) If by telex, facsimile or other system which prints the
notice at the receiving end, if the sender has an
acknowledgment from the recipient of its receipt in readable
form, upon receipt of such acknowledgment;
provided, however, that no Notice shall be deemed to have been received unless
addressed to the addresses appearing below, or such other address provided to
the other party by Notice:
If to Distributor:
XYZ Distributors
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Publisher:
Little Tiger Press USA, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notice given on a Saturday, Sunday or public holiday, or outside normal business
hours, shall not be deemed given until commencement of the next normal business
hours.
16. ENTIRE AGREEMENT. This Agreement is intended by the parties to be
the final expression of their agreement and a complete and exclusive statement
of its terms. No prior course of dealings between the parties and no usage of
trade shall be relevant or admissible to supplement, explain, or vary any of the
terms of this Agreement. Acceptance of, or
7 EXHIBIT 10.9, PAGE 7 OF 9
90
acquiescence in, a course of performance rendered under this or any prior
agreement shall not be relevant or admissible to determine the meaning of this
Agreement even though the accepting or acquiescing party has knowledge of the
nature of the performance and an opportunity to make objection. No
representations, understandings, or agreements have been made or relied upon in
the making of this Agreement other than those specifically set forth herein.
This Agreement can be modified only by writing signed by all of the parties
hereto.
17. MISCELLANEOUS. This Agreement contains the entire Agreement between
the parties with respect to the subject matter discussed in this Agreement, and
any prior arrangements or negotiations relating thereto are superseded by this
Agreement. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Arizona, without giving effect to the
conflict laws thereof. The courts of the State of Arizona shall have the sole
and exclusive jurisdiction and venue in any case or controversy arising under
this Agreement or by reason of this Agreement. The parties agree that any
litigation or arbitration arising from the interpretation or enforcement of this
Agreement shall be only in either Maricopa County Superior Court or in the
United States Federal District Court for the District of Arizona, and for this
purpose each party to this Agreement (and each person who shall become a party)
hereby expressly and irrevocably consents to the jurisdiction and venue of such
courts. This Agreement shall be construed according to its fair meaning and
neither for nor against the drafting party. If arbitration or other legal action
is instituted in connection with this Agreement, the prevailing party in such
action shall be entitled to recover from the other party reasonable attorneys'
fees and costs. The parties agree to accept facsimile signatures in counterparts
to this Agreement, and that said facsimile signatures shall for all purposes be
binding upon the parties as if the same were originals. The failure of a party
to require the performance of any term of this Agreement, or the waiver by a
party of any breach of this Agreement, shall not prevent a subsequent
enforcement of such term nor be deemed a waiver of any subsequent breach. The
remedies and payments provided for in this Agreement are not exclusive of other
remedies available to the parties. Every provision of this Agreement is intended
to be severable. If any term of provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
of the remainder of this Agreement. Time is of the essence of each and every
provision of this Agreement. Titles and headings of sections of this Agreement
are for convenience of reference only, are not intended to define, limit or
describe the scope or intent of any provision of this Agreement, and shall not
affect the construction of any provision of this Agreement.
DATED the date first hereinabove written.
DISTRIBUTOR: Futech Educational Products, Inc., an
Arizona corporation, dba XYZ Distributors
By_______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
8 EXHIBIT 10.9, PAGE 8 OF 9
91
PUBLISHER: Little Tiger Press USA, L.L.C.,
a New York limited liability company
By: Magi Publications,
a partnership, Member
By___________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Partner
By: Futech Educational Products, Inc.,
an Arizona corporation, Member
By___________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO
List of Exhibits
1998 Spring and Fall Front List "A"
9 EXHIBIT 10.9, PAGE 9 OF 9
92
Exhibit "A", Page 1 of 2
LITTLE TIGER PRESS, USA
FRONT LIST AND REPRINT PUBLISHING SCHEDULE SPRING '98
Order Retail Futech/
Title Format Quantity Price LTP Cost Ext Cost XYZ Price W/S Turnover Ex-Works
----- ------ -------- ------ -------- -------- --------- ------------ --------
It Could Have Been Worse Hardback 15,000 $14.95 $3.75 56,250 $5.23 78,450 Dec '97
A Duck So Small Hardback 10,000 $14.95 $3.75 37,500 $5.23 52,300 Dec '97
You Won't Think of Me at All Hardback 10,000 $14.95 $3.75 37,500 $5.23 52,300 Dec '97
Beware of the Bears Hardback 15,000 $14.95 $3.75 56,250 $5.23 78,450 Dec '97
The Lion Who Wanted to Love Hardback 12,000 $14.95 $4.10 49,200 $5.23 62,780 Nov '97
Look Out for the Big Bad Fish Hardback 15,000 $14.95 $3.75 56,260 $5.23 78,450 Dec '97
▇▇▇▇▇ Hardback 15,000 $16.95 $4.40 66,000 $5.93 88,950 Dec '97
I Don't Want to Take a Bath! Board Book 25,000 $ 6.95 $1.75* 43,750 $2.43 60,750 Jan '98
I Don't Want to Go to Bed! Board Book 25,000 $ 6.95 $1.75* 43,750 $2.43 60,750 Jan '98
Tim's Animal Stories 96-page H/B 15,000 $16.95 $4.25 63,750 $5.93 88,950 Jan '98
Animals All Around
Laura's Star Reprint** Hardback 50,000 $16.95 $4.40 220,000 $5.93 295,500 June '98
Rumble in the Jungle Reprint** Hardback 15,000 $14.95 $4.10 61,500 $5.23 78,450 June '98
Magi Various Reprints** Hardback 60,000 $14.95 $3.75 225,000 $5.23 313,800 June '98
PAPERBACK
I Don't Want to Take a Bath! Paperback 25,000 $ 5.95 $1.20 $2.08
Dora's Eggs Paperback 25,000 $ 5.95 $1.20 $2.08
TOTAL 307,000 960,450 1,390,860
* Price to be finalized
** Quantities, dates and titles to be finalized
93
Exhibit "A", Page 2 of 2
LITTLE TIGER PRESS, USA
FRONT LIST PUBLISHING SCHEDULE FALL '98
ORDER RETAIL FUTECH/ EX-
TITLE FORMAT QUANTITY PRICE LTP COST EXT COST XYZ PRICE W/S TURNOVER WORKS
----- ----------- -------- ------ -------- --------- --------- ------------ ---------
Hurry Santa Hardback 40,000 $14.95 $3.60 144,000 $ 5.23 209,200 June '98
House, Look Out Hardback 10,000 $14.95 $3.75 37,500 $ 5.23 52,300 June '98
One Two Three Oops** Hardback 15,000 $14.95 $3.75 56,250 $ 5.23 78,450 June '98
Little Bunny Bobkin Hardback 15,000 $14.95 $4.10 61,500 $ 5.23 78,450 March '98
Bedtime for Little Hare Hardback 20,000 $14.95 $3.75 75,000 $ 5.23 104,600 June '98
Smudge** Hardback 15,000 $14.95 $3.75 56,250 $ 5.23 78,450 July '98
Commotion in the Ocean Hardback 20,000 $14.95 $4.10 82,000 $ 5.23 104,600 July '98
A New Hardback*** Hardback 15,000 $14.95 $4.10 61,500 $ 5.23 78,450 July '98
Santa's Large Board Book Board Book 25,000 $12.95 $3.20* 80,000 $ 4.53 113,250 Aug '98
Tiger's Large Board Book Board Book 25,000 $12.95 $3.20* 80,000 $ 4.53 113,250 Aug '98
Tim's Bear Stories 96 page H/B 15,000 $16.95 $4.25 63,750 $ 5.93 88,950 June '98
Little Tiger Cloth Book 1 Cloth Book 25,000 $19.95 $6.00* 150,000 $ 8.00* 200,000 July '98
Little Tiger Cloth Book 2 Cloth Book 25,000 $19.95 $6.00* 150,000 $ 8.00* 200,000 July '98
PAPERBACK
Beware of the Bears Paperback 25,000 $ 5.95 $1.20 $ 2.08
It Could Have Been Worse Paperback 15,000 $ 5.95 $1.20 $ 2.08
TOTAL 305,000 1,097,750 1,499,950
---------------
* Price to be finalized
** Pub date to be confirmed
*** Titles to be confirmed