EXHIBIT 2.2
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ASSET PURCHASE AGREEMENT
by and among
FLEER CORP.,
▇▇▇▇▇ ▇. ▇▇▇▇▇ CORP. and
SKYBOX INTERNATIONAL, INC.
and
GOLDEN CYCLE, LLC
Dated as of January 29, 1999
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TABLE OF CONTENTS
1. Purchase and Sale of Assets.............................................................. 1
(a) Generally......................................................................... 1
(b) Excluded Assets................................................................... 4
2. Assumption of Liabilities................................................................ 5
(a) Generally......................................................................... 5
(b) Excluded Liabilities.............................................................. 6
(c) Risk of Loss...................................................................... 8
(d) Assumption of Contractual Liabilities; Warranty Obligations....................... 8
3. Closing; Purchase Price Adjustment....................................................... 9
(a) Closing............................................................................. 9
(i) Payments by Buyer at Closing...................................................... 9
(ii) Deliveries by Sellers at Closing.................................................. 9
(iii) Determination of Closing Net Worth................................................ 9
(b) Determination and Allocation of Purchase Price.................................... 12
(c) Sales or Transfer Taxes and Recording Fees........................................ 13
(d) Other Taxes....................................................................... 13
(e) Definition of Taxes............................................................... 13
4. Conditions to Closing.................................................................... 13
(a) Buyer's Obligations............................................................... 13
(b) Sellers' Obligation............................................................... 15
5. Representations and Warranties of Sellers................................................ 16
(a) Organization and Authority of Seller.............................................. 16
(b) Financial Statements.............................................................. 16
(c) Taxes............................................................................. 17
(d) Title to Personal Property........................................................ 17
(e) Title to Real Property............................................................ 18
(f) Condition of Tangible Acquired Assets............................................. 18
(g) Intellectual Property............................................................. 18
(h) Contracts......................................................................... 19
(i) Litigation; Decrees............................................................... 20
(j) Insurance......................................................................... 21
(k) Employee Benefits; ERISA.......................................................... 21
(l) Compliance with Laws.............................................................. 22
(m) Employee and Labor Relations...................................................... 22
(n) Broker's Fees..................................................................... 22
(o) Business Assets................................................................... 22
(p) Inventory......................................................................... 22
(q) Conflict of Interest.............................................................. 22
(r) Absence of Certain Business Practices............................................. 23
6. Covenants of Seller...................................................................... 23
(a) Access............................................................................ 23
(b) Ordinary Conduct.................................................................. 23
(c) Insurance......................................................................... 24
(d) Delivery of Records............................................................... 24
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(e) Transfer of Intellectual Property................................................. 24
(f) Change of Name.................................................................... 24
(g) Bank Accounts..................................................................... 24
(h) Covenant Not to Compete........................................................... 24
(i) Real and Personal Property Adjustments After the Closing Date..................... 25
7. Representations and Warranties of Buyer.................................................. 25
(a) Organization and Authority of Buyer............................................... 26
(b) Litigation; Decrees............................................................... 26
(c) Availability of Funds............................................................. 26
(d) HSR Act........................................................................... 26
(e) Broker's Fees..................................................................... 27
8. Covenants of Buyer....................................................................... 27
(a) Agreement......................................................................... 27
(b) Buyer Cooperation................................................................. 27
(c) Assignment........................................................................ 27
9. Mutual Covenants......................................................................... 27
(a) Reasonable Best Efforts........................................................... 27
(b) Consents.......................................................................... 28
(c) Publicity......................................................................... 28
(d) Disclosure Supplements............................................................ 28
(e) Agreement to Negotiate License Arrangement........................................ 29
(f) Settlement of Avoidance Litigation Claims......................................... 29
(g) Cooperation....................................................................... 29
10. Employees and Employee Benefits.......................................................... 29
(a) Offers of Employment.............................................................. 29
(b) Continuation of Participation in Sellers' Plans................................... 30
(c) COBRA............................................................................. 30
(d) 401(k) Plan..,.................................................................... 30
(e) No Third Party Beneficiaries...................................................... 31
11. Indemnification.......................................................................... 31
(a) Survival of Representations....................................................... 31
(b) Sellers' Agreement to Indemnify................................................... 31
(c) Buyer's Agreement to Indemnify.................................................... 32
(d) Monetary Limitation of Liability.................................................. 32
(e) Conditions of Indemnification..................................................... 33
(f) Other Limitations................................................................. 33
(g) Bulk Sales........................................................................ 34
12. Further Assurances....................................................................... 34
13. Assignment............................................................................... 34
14. No Third-Party Beneficiaries............................................................. 34
15. Termination.............................................................................. 34
16. Expenses................................................................................. 35
17. Amendments............................................................................... 35
18. Notices.................................................................................. 35
19. Interpretation........................................................................... 36
20. Counterparts............................................................................. 37
21. Entire Agreement......................................................................... 37
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22. Severability............................................................................. 37
23. Governing Law............................................................................ 37
24. Disclosure Schedule...................................................................... 38
25. Related to the Business.................................................................. 38
26. Knowledge................................................................................ 38
DISCLOSURE SCHEDULE
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1(a)(xi) - Retained Litigation Claims
1(b)(iii) - Excluded Agreements
2(a)(x) - List of Licenses and Leases
4(b)(vi) - Consents
5(a) - Foreign Jurisdictions for Sellers
5(d) - Title to Personal Property
5(e) - Leased Property
5(g) - Intellectual Property
5(h) - Contracts
5(i) - Litigation
5(k)(i) - Employee Benefit Plans
5(k)(ii) - Employee Compensation
5(m) - Employee and Labor Relations
5(p) - Inventory
5(q) - Conflict of Interest
6(b) - Ordinary Conduct of Sellers
EXHIBITS
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Exhibit 5(b) Interim Statement
Exhibit 9(e)(ii) License Inventory Disposal
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of January 29, 1999, is
entered into by and among Fleer Corp., a Delaware corporation ("Fleer"), ▇▇▇▇▇
▇. ▇▇▇▇▇ Corp., a Delaware corporation ("▇▇▇▇▇ ▇▇▇▇▇ Corp."), and SkyBox
International, Inc., a Delaware corporation ("SkyBox," and together with Fleer
and ▇▇▇▇▇ ▇▇▇▇▇ Corp., "Sellers"), Marvel Enterprises, Inc., a Delaware
corporation and an affiliate of each Seller ("Marvel"), Golden Cycle, LLC, a
Pennsylvania limited liability company ("Buyer"), ▇▇▇▇▇ Grass and Alexander
Grass.
RECITALS
WHEREAS, Sellers are engaged in the business of manufacturing and
selling sports and entertainment trading cards (the "Business"); and
WHEREAS, Sellers desire to sell and Buyer desires to purchase
substantially all of the non-cash assets of Sellers on the terms and subject to
the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and conditions contained herein, and intending to be legally
bound, the parties hereby agree as follows:
1. Purchase and Sale of Assets.
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(a) Generally. On the terms and subject to the conditions of this
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Agreement, at the Closing (as defined in Section 3(a) hereof), Sellers hereby
agree to sell, transfer, convey and deliver to Buyer, free and clear of all
Liens, except for Permitted Liens which arise out of the Assumed Liabilities (as
defined in Section 2(a) hereof), and Buyer hereby agrees to purchase from
Sellers, all of Sellers' right, title and interest immediately prior to the
Closing in all property, assets and rights, wherever located (collectively, the
"Assets"), other than the Excluded Assets (as defined in Section 1(b) hereof)
(the Assets to be so conveyed shall hereafter be referred to as the"Acquired
Assets") and Buyer shall assume from Sellers the Assumed Liabilities. The
Acquired Assets shall include, without limitation, all of Sellers' right, title
and interest immediately prior to the Closing in the following, other than any
such property and assets specifically identified as Excluded Assets:
(i) all equipment, machinery, furniture and fixtures,
office equipment and fixed assets (collectively, "Equipment");
(ii) all warranties, guarantees by any manufacturer,
supplier or other transferor to the extent primarily related to any of the
Acquired Assets, whether express or implied ("Warranties" );
(iii) all unpaid accounts, notes and other receivables in
favor of Sellers which arose out of Sellers' conduct of the Business,
together with any security interests and all letters of credit in favor of
Sellers with respect thereto, but excluding (i) any account, account
receivable, note or note receivable payable to the Sellers by Marvel, or
any of its subsidiaries, (ii) any of the foregoing as to which Sellers
shall have received
actual notice, or shall have Knowledge, prior to the Closing that the
account debtor (A) has been declared a bankrupt by any court of competent
jurisdiction, (B) has commenced or is the subject of any proceeding to be
declared a bankrupt, (C) has declared itself insolvent in any court
proceedings, (D) has made an assignment for the benefit of creditors, (E)
has consented to the appointment of a trustee or receiver for a substantial
part of its property, (F) has had such a trustee or receiver appointed
without its consent or (G) has refused to make payment of any such account,
account receivable, note or note receivable in whole or in part because of
a disputed claim or otherwise, and (iii) any account, account receivable,
note or note receivable which prior to the Closing shall have been placed
by Sellers in the hands of a third party for collection (the accounts,
accounts receivable, notes and notes receivable to be transferred to Buyer
pursuant hereto are hereinafter called the "Receivables");
(iv) cash equal to the sum of (A) in the bank accounts of
Sellers on the Closing Date in an amount sufficient to cover all
outstanding checks written by Sellers on or prior to the Closing Date, and
(B) received by Sellers as advance payments on sales to customers
classified as "hobby direct customers," and not yet applied against
purchases by such "hobby direct customers" (such cash sum is hereinafter
referred to as the "Required Closing Date Cash Balance");
(v) all inventory (including raw materials, work in
process, parts, finished goods and inventory in transit), packaging
materials and supplies of Sellers ("Inventory");
(vi) all bids, proposals, customer orders, contracts,
leases, sale orders, purchase orders and commitments with respect thereto
issued by or to Sellers ("Purchase Orders");
(vii) all contracts, indentures, guarantees, leases,
licenses, commitments and other agreements related to the Business to which
any Seller is a party on the Closing Date or by which any of the Acquired
Assets is then bound, including, without limitation, employee secrecy
agreements between any of the Sellers and any employee thereof employed at
any time prior to the Closing Date, including the Contracts (as defined in
Section 5(h) hereof);
(viii) all foreign and domestic copyrights and other works
of authorship, patents, trademarks, trade names, trade dress, logos,
registrations and applications for any of the foregoing, trade secrets,
inventions, know how, other confidential or proprietary information,
designs, models, formulae (including product formulations), processes,
computer software (including both owned and licensed software) and other
intellectual property primarily related to the Business or owned by the
Sellers or which the Sellers have the right to use and assign to Buyer
("Intellectual Property"), including the right to ▇▇▇ for the infringement
of any Intellectual Property rights, provided, that Damages (as defined in
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Section 11(b) hereof) with respect to pending actions or lawsuits are to be
apportioned between Sellers and Buyer, pro rata based on the period of any
such infringement occurring pre-Closing and post-Closing, respectively;
provided, that prior to the apportionment of such Damages, each of Buyer
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and Sellers
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shall be reimbursed pro rata from such Damages for their respective costs
and expenses incurred by each of them in the prosecution of such
infringement of any Intellectual Property rights;
(ix) all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from any
Governmental Authority (as defined in Section 4(a)(v) hereof) primarily
related to the Business or the Assets ("Licenses and Permits");
(x) all sales records, purchase records, customer lists,
supplier lists, advertising and promotional materials, production records
and other records primarily related to the Business; all records regarding
the Occupational Safety and Health Act and other governmental examinations
and clearances primarily related to the Business; and all other books and
records primarily related to the Business (collectively, "Books and
Records"); provided that with respect to books and records relating both to
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the Business and to other businesses conducted by Sellers or any affiliate
of Sellers, the books and records shall constitute Books and Records and
Assets only to the extent they relate to the Business (and excerpts that do
not relate to the Business may be excised from the Books and Records that
are delivered to Buyer, provided that such excerpts are not required to
make such Books and Records useable and Sellers shall keep an accurate and
complete record of all such excised material); and provided further that
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Sellers shall have the right to keep, use and/or transfer to a third party
a copy of any books and records transferred hereunder that are not
exclusive to the Business to the extent that such Books and Records do not
relate to the Business and shall have the right to keep and use a copy of
all Tax (as defined in Section 3(e) hereof) and accounting Books and
Records;
(xi) all claims, and the right to any proceeds relating to
such claims that Sellers have or may have arising out of or relating to any
existing or contingent litigation, suit, action or arbitration, other than
(A) those claims (collectively, the "Retained Litigation Claims") specified
on Section 1(a)(xi) of the Disclosure Schedule accompanying this Agreement
(the "Disclosure Schedule") or (B) the Damages Sellers are entitled to in
Section 1(a)(viii) hereof;
(xii) all bank accounts of Sellers, excluding any and all
cash and cash equivalents contained in such accounts in excess of the
Required Closing Date Cash Balance;
(xiii) all prepaid expenses, goodwill and other intangible
assets primarily related to the Business;
(xiv) those certain leaseholds and other interests in real
property held by Sellers, and all of the Sellers' right, title and interest
in and to all leases, subleases, franchises, licenses, permits, easements
and rights-of-way which are appurtenant to said leased property; and
(xv) all other assets and properties of Sellers which
exist on the Closing Date whether tangible or intangible, real or personal.
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(b) Excluded Assets. The following properties and assets of Sellers
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are excluded from the Assets to be sold to Buyer pursuant to this Agreement (the
"Excluded Assets"), notwithstanding anything to the contrary provided in Section
1(a) hereof:
(i) cash, amounts in bank accounts and certificates of
deposit, together with all other cash equivalents, marketable securities
and short term investments, except for an amount of cash in excess of the
Required Closing Date Cash Balance;
(ii) all rights of Sellers to any deposits, refunds
(including any refund of Taxes required to be paid by Sellers pursuant to
this Agreement) and rights of set off and recoupment, other than as set
forth on the Interim Statement (as defined in Section 5(b) hereof); and
other than the deposit with Worldcom in the amount of $20,000;
(iii) Sellers' rights under the contracts, indentures,
guarantees, leases, licenses, commitments and other agreements listed on
Section 1(b)(iii) of the Disclosure Schedule hereto;
(iv) Sellers' rights under any policies of insurance
purchased by any member of the Seller Group (as defined in Section 11(c)
hereof), or any benefits, proceeds or premium refunds payable or paid
thereunder or with respect thereto, other than any proceeds payable in
respect of loss or damage (a) to any of the Acquired Assets which has not
been fully repaired or restored prior to the Closing or (b) resulting from
any liability assumed by Buyer pursuant to the terms of this Agreement;
(v) except as provided in Section 6(f) with respect to
corporate names, the corporate charter, qualifications to conduct business
as a foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, Tax
returns and other Tax records to the extent not primarily related to the
Business (including, without limitation, all Tax records of affiliates of
Sellers), seals, minute books, stock transfer books and similar documents
of Sellers;
(vi) the rights of Sellers under this Agreement or any other
agreement between Sellers and Buyer;
(vii) Licenses and Permits that are not transferable without
the consent of a Government Authority and with respect to which the
requisite consent is not obtained at or prior to the Closing;
(viii) assets held in Sellers' Plans (as defined in Section
5(k) hereof);
(ix) all Retained Litigation Claims and the right to the
proceeds relating to such claims;
(x) the intercompany receivable in the amount of
$37,827,000 owed to Sellers by Marvel reflected in the column headed "Cons.
11/30/98" on the Interim Statement, and all other account, account
receivable, note or note receivable payable to the Sellers by Marvel or any
of its subsidiaries; and
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(xi) assets related to any accounting, information systems,
legal, human resource, payroll, treasury, insurance, transportation, Tax or
other general and administrative services supplied by Marvel or one of its
affiliates both to Sellers and one or more other businesses of Marvel or
its affiliates (other than any such assets related primarily to the
Business or used primarily by employees of Sellers).
2. Assumption of Liabilities.
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(a) Generally. On the terms and subject to the conditions of
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this Agreement, at the Closing, Buyer shall assume all of the following
liabilities, obligations and commitments (whether actual or contingent, matured
or unmatured, liquidated or unliquidated, known or unknown) of Sellers
(collectively, the "Assumed Liabilities"), other than those liabilities and
obligations specifically identified as Excluded Liabilities, in clauses (i)
through (xvii) inclusive of Section 2(b) hereof:
(i) all liabilities of Sellers reflected in the column headed
"Adjusted 11/30/98" on the Interim Statement which are outstanding on the
Closing Date;
(ii) all liabilities of Sellers incurred after the date of the
Interim Statement and prior to the Closing Date, that were incurred by
Sellers (x) in the ordinary course since the date of the Interim Statement
and (y) in accordance with the terms of this Agreement, and (z) would be
included in a balance sheet of Sellers as of the Closing Date prepared in
accordance with the column headed "Adjusted 11/30/98" on the Interim
Statement;
(iii) all obligations and liabilities under the license
agreement (the "NBA License") between Sellers and the NBA Properties, Inc.,
arising on and after February 1, 1999 (exclusive of such obligations and
liabilities arising from a breach of such agreements prior to the Closing
Date), and all obligations and liabilities of Sellers arising after the
Closing Date under all other contracts, Purchase Orders, leases, licenses,
agreements, instruments, commitments and other binding arrangements of
Sellers which are included in the Acquired Assets;
(iv) subject to and except as provided in Section 10 hereof,
all obligations and liabilities of Sellers with respect to all employees of
Sellers who become employees of Buyer at the time of the Closing arising
after the time of the Closing, including, without limitation, all fringe
benefits, vacation pay and sick leave obligations and liabilities, and all
severance obligations and liabilities to such employees who are terminated
on or after the Closing Date;
(v) all sales, transfer or similar taxes or charges, if any,
resulting from the sale and transfer of the Acquired Assets to Buyer
(exclusive of any liabilities arising from the Bulk Sales Act and similar
laws);
(vi) all liabilities, obligations and commitments of any kind,
character or description, whether absolute, contingent, threatened or
otherwise, and whether or not reflected or reserved against on Sellers'
Financial Statements, Books or Records, arising from, or incurred in
connection with, acts or omissions occurring after the Closing Date with
respect to the Acquired Assets or Business;
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(vii) all liabilities and obligations relating to that portion
of Accrued Royalties (as defined in Section 3(a)(iii)(A) hereof) which do
not represent the product of Sellers' Portion of Accrued Royalties (as
defined in Section 3(a)(iii)(G) hereof) multiplied by the Accrued Royalties
("Buyer's Portion of Accrued Royalties");
(viii) all obligations for outstanding checks written by Sellers
on or prior to the Closing Date;
(ix) the liabilities, obligations and commitments of Sellers
with respect to which Sellers are entitled to indemnification from Buyer
pursuant to Section 11(c) hereof; and
(x) all of the obligations of Sellers under the licenses and
leases set forth on Section 2(a)(x) of the Disclosure Schedule hereof which
are not Excluded Assets.
(b) Excluded Liabilities. Notwithstanding any other provision
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of this Agreement, Buyer will not assume, or become liable in any way in respect
of, and Sellers shall retain and be responsible for, any and all liabilities and
obligations of Sellers (other than the Assumed Liabilities) (collectively, the
"Excluded Liabilities"), including:
(i) except for the liabilities set forth in the column headed
"Adjusted 11/30/98" on the Interim Statement, any liability or obligation
of Sellers, directly or as guarantor, for money borrowed or purchase money
indebtedness;
(ii) any liability or obligation of Sellers for unpaid Taxes
(with respect to the Business or otherwise) for periods or transactions
prior to the Closing or for unpaid income Taxes arising because Sellers are
transferring the Assets, but excluding from the definition of Excluded
Liabilities any liability or obligation of Sellers for transfer, sales, use
and similar Taxes with respect to the Acquired Assets arising in connection
with the consummation of the transactions contemplated hereby to the extent
that Buyer is obligated to pay such Taxes pursuant to Section 3(c) hereof;
(iii) except as provided in Section 16 hereof, any liability or
obligation of Sellers for costs and expenses (other than Taxes) in
connection with the negotiation and execution of this Agreement or the
consummation of the transactions contemplated hereby;
(iv) any liability or obligation of Sellers under this
Agreement or any other agreement between Sellers and Buyer;
(v) amounts due under that certain Settlement Agreement,
dated July 31, 1998 between NBA Properties, Inc., Marvel Entertainment
Group, Inc. and Sellers;
(vi) any liability or obligation arising from or relating to
the contracts, indentures, guarantees, leases, commitments and other
agreements listed on Section 1(b)(iii) of the Disclosure Schedule;
(vii) any liability or obligation arising from or relating to
Sellers' Plans, other than liabilities and obligations which Buyer is
obligated to pay pursuant to Section 10 hereof;
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(viii) except as reflected on the Interim Statement, any
obligations, liabilities or responsibilities of Sellers or any of their
affiliates with respect to any employee or spouse or dependent or family
member of any employee or former employee of any of the Sellers or any of
their respective affiliates resulting from or arising out of such
employee's or former employee's employment prior to the Closing or the
termination of such employment, including, without limitation, obligations,
liabilities or responsibilities with respect to any (a) deferred
compensation, overtime compensation, wages, salaries, stock option, stock
purchase, severance, retainer, consulting or incentive plan or agreement,
(b) plan or policy providing for "fringe benefits" to its employees, (c)
employment agreement, (d) any accident, event or other occurrence
compensable under any applicable workers' compensation or similar state
law, (e) civil rights laws, wrongful discharge claims or any other claim,
charge or complaint relating to employment with Sellers or any of their
affiliates prior to the time of the Closing or the termination of such
employment and (f) any employee benefit plan as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
currently or previously maintained or contributed to by any member of a
controlled group (within the meaning of Section 414(b), (c), (m) or (o) of
the Internal Revenue Code of 1986, as amended (the "Code"), or Section
4001(a)(14) of ERISA) which includes Sellers, other than liabilities which
Buyer is obligated to pay pursuant to Section 10 hereof;
(ix) any liabilities or obligations of any Seller or any of
their affiliates in the case captioned In Re: Marvel Entertainment Group,
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Inc., et al., Case No. 97-638-RRM, in the United States District Court in
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the District of Delaware, relating to or arising under or discharged
pursuant to the Fourth Amended Joint Plan of Reorganization Proposed by the
Secured Lenders and Toy Biz, Inc. (the "Plan") dated July 31, 1998 and
confirmed by order of the United States District Court for the District of
Delaware, dated July 31, 1998 ("Bankruptcy Claims");
(x) all liabilities and obligations relating to that portion
of the Accrued Royalties which represent Sellers' Portion of Accrued
Royalties;
(xi) all intercompany indebtedness between one or more of
Sellers, on the one hand, and one or more of Marvel and its affiliates on
the other hand;
(xii) all liabilities and obligations of Sellers with respect
to any contracts or agreements between Sellers and the National Hockey
League Players Association and NHL Enterprises, Inc.;
(xiii) all obligations and liabilities of Sellers with respect
to the NBA License arising prior to February 1, 1999;
(xiv) litigation, claims or proceedings by or before any court,
or governmental or regulatory agency or body, or any judicial or quasi-
judicial forum or mediation or arbitrations, whether or not existing at the
time of the Closing, (a) to the extent related to or based upon the actions
or failures to act of any Person prior to the time of the Closing in
connection with the Acquired Assets or the Business or (b) for infringement
of the Intellectual Property rights of any other Person which infringement
occurred prior to the time of the Closing in connection with the Acquired
Assets or the Business;
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(xv) all liabilities of Sellers reflected in the column headed
"Adj." on the Interim Statement;
(xvi) the liabilities, obligations and commitments of Sellers
with respect to which Buyer is entitled to indemnification from Sellers
pursuant to Section 11(b) hereof;
(xvii) except for Assumed Liabilities, all liabilities of
Sellers which exist at the time of the Closing, whether actual or
contingent, matured or unmatured, liquidated or unliquidated, known or
unknown; and
(xviii) liabilities and obligations primarily related to the
Excluded Assets.
provided, however, that nothing stated herein shall limit the provisions of,
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and the respective obligations of Sellers and Buyer under, Sections 5(f) and 11
hereof.
(c) Risk of Loss. Sellers shall bear the risk of loss of,
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and all obligations, if any, to insure, the tangible assets of the Business and
the property of any third parties in the possession, custody or control of the
Business or for which the Business is responsible, to the Closing Date, and such
risk of loss and obligation to insure with respect to the Acquired Assets shall
transfer from Sellers to Buyer on the Closing Date.
(d) Assumption of Contractual Liabilities; Warranty
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Obligations. At the Closing, Buyer shall assume all liabilities, warranty
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obligations and any other obligations with regard to the Contracts, and all
performance bonds or other bonds or guarantees relating thereto entered into or
made in the ordinary course of the Business which are described in Section 5(h)
of the Disclosure Schedule. Notwithstanding the foregoing, no Contracts shall be
assigned contrary to law or the terms of such Contracts. If there are Contracts
that cannot be assigned or novated to Buyer at the Closing and the failure to
assign or novate the Contract would result in the condition contained in Section
4(a)(iii) not being satisfied, the performance obligations of Sellers thereunder
shall, unless not permitted by such Contracts, be deemed to be subleased or
subcontracted to Buyer until such Contracts have been assigned or novated. Buyer
shall utilize its commercially reasonable efforts (which shall not include the
expenditure of money) and take all necessary actions, to assist the Sellers in
obtaining any necessary consents or approvals required to assign or novate such
Contracts. Each Seller shall utilize its commercially reasonable efforts (which
shall not include the expenditure of money) to obtain all necessary consents or
approvals required to assign or novate such Contracts and Buyer shall take all
necessary actions to perform and complete all Contracts in accordance with their
terms if neither assignment, novation, subleasing nor subcontracting is
permitted by the other party. Each Seller shall pay over to Buyer any amounts
received by any of the Sellers or their respective affiliates after the Closing
as a result of performance by Buyer of such Contracts, which payment shall be
made promptly, but in no event more than ten (10) days following receipt thereof
by any of the Sellers or any of their respective affiliates (without set off or
demand of any kind). Buyer shall indemnify and hold the Seller Group harmless,
in accordance with terms of Section 11 hereof, with respect to Contracts under
which Buyer has received the benefits pursuant to this Section 2(d). Buyer shall
not have any obligation to indemnify Sellers pursuant to the terms of this
Agreement with respect to any Contract for which Buyer cannot receive the
benefit of such Contract despite Buyer's reasonable commercial efforts to
perform thereunder.
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3. Closing; Purchase Price Adjustment.
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(a) Closing. The closing (the "Closing") of the purchase and sale of
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the Acquired Assets and the consummation of the transactions contemplated by
this Agreement shall be held at the offices of Battle ▇▇▇▇▇▇ LLP, located at ▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 11:00 a.m. Eastern Standard Time on
February 10, 1999, or, if the conditions to Closing set forth in Section 4 of
this Agreement shall not have been so satisfied or waived by the appropriate
party by such time on such date, at such time as the parties shall agree on the
fifth business day following the date on which all of the conditions to Closing
set forth in Section 4 shall have been so satisfied or waived. The date on which
the Closing shall occur is hereinafter referred to as the "Closing Date" and the
transfer shall for all purposes be considered effective as of the close of
business on the Closing Date.
(i) Payments by Buyer at Closing. In consideration of the sale,
----------------------------
transfer, conveyance and delivery of all of the Assets by Sellers to Buyer on
the Closing Date, and in reliance upon the representations, warranties,
covenants and agreements made herein by Seller, Buyer shall, in full payment
therefor, subject to Section 3(a)(iii) hereof, pay to Sellers by wire transfer
to the bank and account specified by Sellers in writing cash in the amount of
$26,000,000 (the $26,000,000 in cash paid by Buyer as adjusted pursuant to
Section 3(a)(iii) hereof is referred to in this Agreement as the "Purchase
Price"), and deliver to Sellers, the ▇▇▇▇ of Sale, General Assignment and
Assumption Agreement (the "General Assignment and Assumption Agreement"), in
form and substance reasonably satisfactory to Buyer and Sellers.
(ii) Deliveries by Sellers at Closing. To effect the transfer
--------------------------------
referred to in Section 1(a) hereof, Sellers shall, on the Closing Date, execute
and deliver to Buyer: the General Assignment and Assumption Agreement; and the
agreements and other instruments required to be delivered by Sellers to Buyer
pursuant to Section 4(a) hereof, together with such other instruments as may be
reasonably requested by Buyer (including UCC-3 termination statements on UCC-1
financing statements filed against Sellers or the Acquired Assets) to transfer
to Buyer Sellers' right, title and interest in the Acquired Assets, without
recourse or representation except as provided in this Agreement.
(iii) Determination of Closing Net Worth.
----------------------------------
A. It is the intention of the parties that the Purchase
Price shall be adjusted dollar-for-dollar to reflect
any difference between the actual Net Worth (as defined
in clause (E) below) as of the Closing Date and a
deficit Net Worth of $2,071,000. It is also the
intention of the parties that the Sellers bear a
portion of the Seller's accrued royalty payables as of
the Closing Date. Within 45 days after the Closing
Date, Buyer shall prepare in good faith (x) a statement
setting forth the actual Net Worth as of the close of
business on the Closing Date (including the components
thereof), after giving effect to the consummation of
the transactions between Sellers and Buyer contemplated
by this Agreement (the "Net Worth Statement"), and (y)
a statement (the "Accrued Royalties Statement") setting
forth the accrued royalties payable (other than
royalties payable in respect of the NBA License) of
Sellers as of the Closing Date ("Accrued Royalties").
The Net Worth Statement shall include a detailed
listing of the
9
accounts receivable shown on the Net Worth Statement
other than accounts receivable arising out of sales for
which royalties are or were payable under the NBA
License (the "Net Accounts Receivable"). Buyer shall
deliver a copy of both the Net Worth Statement and the
Accrued Royalties Statement to Sellers within 45 days
after the Closing Date. Throughout the period from the
date of delivery to Sellers of the Net Worth Statement
and the Accrued Royalty Statement until the date of
resolution of any disputed amounts or items thereon,
Buyer shall provide Sellers and Sellers' accountants,
attorneys, agents and representatives reasonable access
during normal business hours, upon reasonable advance
notice, to the Books and Records and employees of Buyer
and the work papers used by Buyer in preparing the Net
Worth Statement and the Accrued Royalty Statement;
provided, however, that Sellers shall schedule such
-------- -------
access through a representative of Buyer (who Buyer
agrees to designate in the Net Worth Statement) and in
such a way as to avoid material disruption of the
normal business of Buyer.
B. Unless Sellers notify Buyer in writing within thirty
(30) days after delivery to Sellers of the Net Worth
Statement or the Accrued Royalty Statement that Sellers
dispute one or more amounts or items shown on the Net
Worth Statement or the Accrued Royalty Statement, the
Net Worth Statement and the Accrued Royalty Statement
shall be final, conclusive and binding on the parties
hereto. If Sellers notify Buyer in writing within
thirty (30) days after delivery to Sellers of the Net
Worth Statement or the Accrued Royalty Statement that
Sellers dispute one or more amounts or items shown on
the Net Worth Statement or the Accrued Royalty
Statement, together with a brief description of such
dispute, then Buyer and Sellers shall promptly
thereafter meet in good faith to attempt to agree upon
a resolution of any and all such disputed amounts or
items. If Buyer and Sellers are unable to agree upon a
resolution of any disputed amount or item within
fifteen (15) days after receipt by Buyer of Sellers'
notice regarding the existence of such disputed amount
or item, then such disputed amount or item shall be
resolved by an independent nationally recognized
accounting firm, selected by mutual agreement of Buyer
and Sellers, which is not then providing, and has not
provided during the one-year period immediately
preceding the Closing Date, services to any of (i)
Buyer, or any of its affiliates or (ii) Marvel or any
of its subsidiaries, including Sellers (the
"Independent Accountants"). If Buyer and Sellers are
unable to agree upon mutually acceptable Independent
Accountants during the fifteen (15) day period referred
to in the immediately preceding sentence, then such
Independent Accountants shall be selected by mutual
agreement of Buyer's independent public accountant and
Sellers' independent public accountant. The Independent
Accountants shall resolve any and all disputed amounts
and items in accordance with the principles and
methodology set forth
10
herein within thirty (30) days after such amounts or
items are submitted for resolution by it and the
parties shall be notified of that resolution. The
resolution of such disputed amounts and items by the
Independent Accountants shall be final, conclusive and
binding upon the parties. The fees and expenses of the
Independent Accountants shall be borne equally by Buyer
and Sellers.
C. If the actual Net Worth reflected on the Net Worth
Statement minus Buyer's Portion of Accrued Royalties
(such amount, the "Adjusted Net Worth") is less than
($2,071,000), Sellers shall pay to Buyer the amount of
such deficit, and if the Adjusted Net Worth is more
than ($2,071,000), Buyer shall pay to Sellers the
amount of such excess, in each case, with interest
thereon from, but not including the Closing Date
through and including the date of payment computed as
set forth in clause (D) hereof; provided, however, that
-------- -------
if the difference between the Adjusted Net Worth and
($2,071,000) is not in excess of $50,000, then Sellers
shall not be required under this clause (C) to pay to
Buyer any amounts; and provided, further, that if the
-------- -------
difference between the Adjusted Net Worth and
($2,071,000) is not in excess of $50,000, then Buyer
shall not be required under this clause (C) to pay to
Sellers any amounts. Any amount required to be paid
pursuant to this clause (iii) shall be paid, by wire
transfer of immediately available funds to the bank and
account designated by the party to be paid, (I) if no
amounts or items shown on the Net Worth Statement have
been disputed as provided herein, within thirty-five
days after delivery to Sellers of the Net Worth
Statement or the Accrued Royalty Statement, and (II) if
any amounts or items shown on the Net Worth Statement
or the Accrued Royalty Statement have been disputed and
resolved as provided herein, within two business days
following the resolution, in accordance with clause (B)
hereof, of all such disputed amounts or items.
By way of illustration only, if the actual Net Worth is
($1,000,000) and Buyer's Portion of the Accrued
Royalties is $2,000,000, then the Adjusted Net Worth
would be ($3,000,000). As a result, Sellers would pay
to Buyer an amount equal to $929,000 (($3,000,000) -
$2,071,000). If the actual Net Worth is ($0) and
Buyer's Portion of the Accrued Royalties is $2,000,000,
then the Adjusted Net Worth would be ($2,000,000). As a
result, Buyer would pay to Sellers an amount equal to
$71,000 (($2,000,000) - $2,071,000).
D. Interest payable under clause (C) hereof shall be
payable at the rate of 7.50% per annum, calculated on
the basis of the actual number of days
__________________
* Brackets represent a negative number.
11
elapsed during the period from but not including the
Closing Date through and including the date of payment.
E. As used in this Agreement, the term "Net Worth" means
the amount by which the sum of the book value of the
Acquired Assets (exclusive of cash or cash equivalents)
exceeds the sum of the book value of the Assumed
Liabilities (exclusive of any amounts of Assumed
Liabilities (i) representing allowance for future sales
returns as set forth on the Net Worth Statement, (ii)
in connection with advance payments on sales to
customers classified as "hobby direct customers" and
not yet applied against purchases by such "hobby direct
customers;" (iii) representing outstanding checks
written by Sellers on or prior to the Closing Date; and
(iv) representing Accrued Royalties), calculated in
accordance with United States generally accepted
accounting principles ("GAAP") consistent with the
principles applied by Sellers in the preparation of the
Interim Statement and the methodology used in preparing
the Interim Statement.
F. The parties agree that any payments pursuant to
paragraph (iii) above shall be deemed to be an
adjustment of the Purchase Price.
G. On the same date as payment is made pursuant to
paragraph (C) hereof, if any, Sellers shall pay a
percentage, if any, of the Accrued Royalties ("Sellers'
Portion of Accrued Royalties") calculated in accordance
with this paragraph. The percentage representing
Sellers' Portion of Accrued Royalties shall be
calculated as follows:
SPAR = 1- (NAR x .22 /AR)
Where "SPAR" is the Sellers' Portion of the
Accrued Royalties, expressed as a decimal;"NAR" is
the Net Accounts Receivable; and "AR" is the
Accrued Royalty.
By way of illustration only, if the Net Accounts
Receivable are $10 million and Accrued Royalties
are $5 million, then Buyer would pay 44%, or $2.2
million of the Accrued Royalties set forth on the
Accrued Royalties Statement ($10 million
multiplied by .22, and divided by $5 million =
44%), and Sellers would pay 56%, or $2.8 million
of the Accrued Royalties set forth on the Accrued
Royalties Statement.
(b) Determination and Allocation of Purchase Price. Within 60 days after
----------------------------------------------
agreement is reached on the Net Worth Statement, Buyer shall deliver to Sellers
a schedule which allocates the Purchase Price and the Assumed Liabilities among
the Acquired Assets in accordance with their fair market value, which allocation
shall comply with Section 1060 of the Code. Such allocation shall be final,
conclusive and binding on each of Buyer and Sellers for purposes of federal and,
where applicable, foreign, state and local Tax returns and for the calculation
of Taxes, including the calculation of Taxes pursuant to Section
12
3(c), and neither party hereto shall voluntarily take any position inconsistent
therewith. Each of Buyer and Sellers shall timely file a Form 8594 in accordance
with the requirements of Section 1060 of the Code and this Section 3(b). Any
adjustment to the Purchase Price pursuant to Section 3(a) shall cause such
adjustment to the schedule which allocates the Purchase Price as the parties
shall mutually agree.
(c) Sales or Transfer Taxes and Recording Fees. Buyer shall execute and
------------------------------------------
deliver to Sellers at the Closing any appropriate exemption certificate relating
to an occasional sale exemption or an inventory resale exemption from sales,
use, transfer or similar Taxes. Buyer shall be responsible for the payment to
Sellers for remittance by Sellers of all sales, use, transfer and similar Taxes
specifically applicable to the sale by Sellers and the purchase by Buyer of the
other Acquired Assets. Any additional required payment of any such sales, use,
transfer or similar Tax or refund of any such Tax shall be paid by, or refunded
to, Buyer. Sellers and Buyer further agree that Buyer shall be liable for the
payment and remittance of all recording fees relating to the filing of
assignments of registered Intellectual Property, and that each of Sellers and
Buyer shall be liable as is the custom in the locality for the payment and
remittance of any other documentary stamps, recording fees or similar Tax whose
treatment is not specifically addressed herein.
(d) Other Taxes. Sellers shall pay and submit all other social security,
-----------
withholding, sales and unemployment insurance Taxes and returns to the
appropriate municipal, county, state and federal governments due or accrued
through the Closing Date.
(e) Definition of Taxes. For purposes of this Agreement, "Tax" or "Taxes"
-------------------
shall mean all federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customer duties, franchise, profits, withholding, social
security, unemployment, disability, real property, personal property, intangible
property, sales, use or transfer, registration, value added, alternative or add-
on minimum, estimated or other taxes of any kind whatsoever, any governmental
charge or impost of a same or similar nature including any interest, penalty or
additions thereto, whether disputed or not.
4. Conditions to Closing.
---------------------
(a) Buyer's Obligations. The obligations of Buyer to purchase and pay
-------------------
for the Assets pursuant to this Agreement is subject to the satisfaction (or
waiver by Buyer) on or prior the Closing of the following conditions:
(i) The representations and warranties of Sellers made in
Section 5 of this Agreement shall be true and correct in all material
respects immediately prior to the Closing with the same force and effect as
though made immediately prior to the Closing, and Sellers shall have
performed or complied in all material respects with all terms, agreements,
obligations and covenants required by this Agreement to be performed or
complied with by Sellers at the time of the Closing; and Sellers shall have
delivered to Buyer a certificate, dated the Closing Date, to such effect
certified by each of the Sellers.
(ii) Buyer shall have received an opinion, dated the Closing
Date, of Battle ▇▇▇▇▇▇ LLP, special counsel to Seller, reasonably
satisfactory to Buyer.
13
(iii) Sellers shall have (A) obtained all consents and approvals
required by the Contracts listed on Schedule 2(a)(x) to assign them to
Buyer and (B) either (x) obtained all consents and approvals required by
all other Contracts to assign them to Buyer, except where the failure to
obtain such consents and approvals would not have, individually or in the
aggregate, a material adverse effect on the results of operations,
condition (financial or otherwise), assets, properties or Business of the
Sellers or on the Acquired Assets taken as a whole ("Material Adverse
Effect"), and all of such consents and approvals shall have been obtained
in written instruments reasonably satisfactory to Buyer or (y) complied in
all respects with Section 2(d) hereof with respect to any Contracts
described in this clause (B) for which such consents and approvals have not
been obtained.
(iv) No action, suit or legal, administrative or arbitral
proceeding shall have been instituted by any third party before any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign ("Government Authority"), seeking to
enjoin or challenging, or seeking damages from Buyer in connection with,
the transactions contemplated by this Agreement, and no injunction or order
of any Government Authority of competent jurisdiction shall be in effect as
of the Closing which restrains or prohibits the purchase or sale of the
Acquired Assets hereunder.
(v) No damage, destruction or loss of any of the assets of the
Sellers has occurred or come to exist since the date of this Agreement,
after giving effect to any insurance, which has had or may reasonably be
expected to have a Material Adverse Effect, nor has any event, occurrence,
fact, condition, change or development occurred or come to exist since the
date of this Agreement, which has had or is reasonably likely to have a
Material Adverse Effect (other than those relating to the sports and
entertainment trading card industry generally or general business or
economic conditions).
(vi) Sellers shall have been released by UBS AG Stamford Branch
from the Liens referred to in the two Credit Agreements, each dated
September 28, 1998, by and among Sellers, and the borrowers named therein,
and Sellers shall have obtained the release of all other Liens covering any
of the Acquired Assets which are not Permitted Liens which arise out of the
Assumed Liabilities.
(vii) Buyer shall have entered into employment agreements with
each of ▇▇▇▇ Bordegon, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇.
(viii) All waiting periods, including any extension thereof,
applicable to the consummation of the transactions contemplated by this
Agreement under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended ("HSR Act") shall have expired.
(ix) Sellers shall have executed and delivered to Buyer, the
General Assignment and Assumption Agreement, dated as of the Closing Date.
(x) Sellers shall have executed and delivered to Buyer,
Assignments of Intellectual Property, dated as of the Closing Date, in form
and substance reasonably satisfactory to Buyer.
14
(xi) An officer of Sellers shall have executed and delivered a
certificate to Buyer certifying that the aggregate amount of the cash on
the Closing Date in the bank accounts of Sellers equals or exceeds the
Required Closing Date Cash Balance.
(b) Sellers' Obligation. The obligation(s) of Sellers to sell,
-------------------
transfer, convey and deliver the Assets to Buyer pursuant to this Agreement is
subject to the satisfaction (or waiver by Sellers) on or prior to the Closing of
the following conditions:
(i) The representations and warranties of Buyer made in
Section 7 of this Agreement shall be true and correct in all material
respects immediately prior to the Closing with the same force and effect as
though made immediately prior to the Closing, and Buyer shall have
performed or complied in all material respects with all terms, agreements,
obligations and covenants required by this Agreement to be performed or
complied with by Buyer at the time of the Closing; and Buyer shall have
delivered to Sellers a certificate, dated the Closing Date, to such effect
certified by Buyer.
(ii) Sellers shall have received an opinion, dated the Closing
Date, of Wolf, Block, ▇▇▇▇▇▇ & ▇▇▇▇▇-▇▇▇▇▇ LLP, special counsel to Buyer,
reasonable satisfactory to Sellers.
(iii) No action, suit or legal, administrative or arbitral
proceeding shall have been instituted by any third party before any
Government Authority seeking to enjoin or challenging, or seeking damages
from Sellers, Marvel or any of their respective affiliates in connection
with, the transactions contemplated by this Agreement, and no injunction or
order of any Government Authority of competent jurisdiction shall be in
effect as of the Closing which restrains or prohibits the purchase or sale
of the Acquired Assets hereunder.
(iv) Sellers shall have been released by UBS AG Stamford
Branch from the Liens referred to in the two Credit Agreements, each dated
September 28, 1998, by and among Sellers, and the borrowers named therein.
(v) Delivery by Buyer to Sellers of the Purchase Price in
immediately available funds.
(vi) Sellers shall have received the consents set forth on
Schedule 4(b)(vi) hereof.
-----------------
(vii) The waiting periods (and any extension thereof)
applicable to the transactions contemplated hereby under the HSR Act shall
have been terminated or shall have otherwise expired.
(viii) Buyer shall have executed and delivered to Sellers, the
General Assignment and Assumption Agreement, dated as of the Closing Date.
(ix) Buyer shall have executed and delivered to Sellers,
Assignments of Intellectual Property, dated as of the Closing Date.
15
5. Representations and Warranties of Sellers. Each Seller, jointly
-----------------------------------------
and severally, hereby represents and warrants to Buyer that the statements
contained in this Section 5 are true and correct in all respects.
(a) Organization and Authority of Seller. Each Seller is a
------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each Seller is duly qualified and in good standing to
do business as a foreign corporation in each of the States listed in Section
5(a) of the Disclosure Schedule, and Section 5(a) of the Disclosure Schedule
sets forth a true and complete list of the other jurisdictions in which each
Seller is qualified to do business as a foreign corporation. Each Seller has all
corporate power and authority necessary to own and lease its properties and to
carry on its respective businesses as now conducted, to enter into this
Agreement and to consummate the transactions contemplated hereby. All corporate
acts and proceedings required to be taken to authorize the execution, delivery
and performance by Sellers and Marvel of this Agreement and the consummation by
Sellers and Marvel of the transactions contemplated hereby have been duly and
properly taken. This Agreement has been duly executed and delivered by each
Seller and Marvel. Assuming due authorization, execution and delivery by Buyer
of this Agreement, this Agreement constitutes legal, valid and binding
obligations of each Seller and Marvel, enforceable against each Seller and
Marvel in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium and other similar laws affecting
creditors' rights generally and by general principles of equity. The execution,
delivery and performance by Sellers and Marvel of this Agreement does not, and
the consummation by Sellers and Marvel of the transactions contemplated hereby
will not, (i) conflict with, or result in any violation of, any provision of the
Certificates of Incorporation or by-laws of Sellers and Marvel, or (ii) conflict
with, result in any violation of, or constitute a default (or an event or
condition which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or the acceleration of the
maturity of any liability or obligation pursuant to, or result in the creation
of any Lien on any of the Acquired Assets under any instrument, contract,
commitment or agreement to which Sellers or any of their respective affiliates,
or Marvel, is a party or by which Sellers or any of their respective affiliates,
or Marvel, or any of the Acquired Assets are bound, or any judgment, order,
writ, injunction or decree to which Sellers or any of their respective
affiliates, or Marvel, have been specifically identified as subject, or any
statute, law, ordinance, rule or regulation applicable to Sellers, any of their
respective affiliates, Marvel or the Acquired Assets (except where such
conflict, violation, default, termination, acceleration or Lien would not
materially impair the ability of Sellers or Marvel to consummate the
transactions contemplated hereby, or would not have, individually or in the
aggregate, a Material Adverse Effect). Except for the filing of premerger
notification and report forms under the HSR Act with respect to the transactions
contemplated hereby, if applicable, no material consent, approval, license,
permit, order or authorization of, notice to or registration, declaration or
filing with (collectively, "Government Approvals") any Government Authority is
required to be obtained or made by or with respect to Sellers in connection with
the execution, delivery and performance by Sellers or Marvel of this Agreement
or the consummation by Sellers or Marvel of the transactions contemplated hereby
or compliance by Sellers or Marvel with the terms hereof, other than those which
if not obtained or made (A) would not materially impair Sellers' or Marvel's
ability to consummate the transactions contemplated hereby or (B) would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) Financial Statements. Sellers have delivered to Buyer true and
--------------------
correct copies of the following financial statements (collectively, the
"Financial Statements"): (i) an unaudited consolidated Balance Sheet of Sellers
as of November 30, 1998 (the "Interim Statement") attached hereto as Exhibit
-------
5(b), and (ii) an unaudited combined Statement of Income of Sellers for the
----
eleven-month period ended
16
November 30, 1998. The Financial Statements (i) fairly present, in all material
respects, the assets, liabilities and financial condition of Sellers at their
respective dates and the results of operations of Sellers for the respective
periods covered thereby, (ii) have been prepared in conformity with GAAP (except
for the absence of notes) applied on a consistent basis throughout the periods
presented in the Financial Statements, (iii) were prepared in accordance with
the Books and Records of the Sellers; (iv) contain and reflect all necessary
adjustments and accruals for a fair presentation of its financial condition and
the results of its operations for the period covered by said financial
statements (except for year-end audit adjustments); (v) contain and reflect
provisions for all reasonably anticipated liabilities for all Taxes, with
respect to the period then ended and all prior periods; and (vi) with respect to
contracts and commitments for the sale of goods or the provision of services by
Sellers, contain and reflect reserves for all reasonably anticipated returns and
material losses and costs and expenses in excess of expected receipts.
(c) Taxes.
-----
(i) Each Seller has timely filed all material Tax returns
and reports required to be filed by it with respect to the Business.
Sellers have made available to Buyer true and complete copies of each
Seller's Tax returns for the years 1995, 1996 and 1997 relating solely to
the Business.
(ii) Other than Taxes relating to Bankruptcy Claims, all
Taxes related to the Business shown to be due on such Tax returns have been
paid to the proper taxing authority or an adequate reserve (in conformity
with GAAP) has been established therefor.
(iii) Other than Taxes relating to Bankruptcy Claims, no
material deficiencies for Taxes related to the Business have been claimed,
proposed or assessed in writing prior to the date of this Agreement against
Sellers or any of its affiliates by any taxing or other Government
Authority other than deficiencies paid or settled in writing.
None of the Assets is "tax exempt use property" within the meaning of
Section 168(h) of the Code. No Seller is a party to any lease relating to the
Business made pursuant to Section 168(f)(8) of the Internal Revenue Code of
1954, as amended.
(d) Title to Personal Property. There is listed in Section 5(d) of
--------------------------
the Disclosure Schedule (i) a description and the location of each item of
tangible personal property (other than Inventory or motor vehicles) owned by
Sellers or in the possession of any Seller which is to be transferred to Buyer
pursuant hereto having on the date hereof a depreciated book value per unit in
excess of Ten Thousand Dollars ($10,000); (ii) an identification of the owner
of, and any agreement relating to the use of, each item of tangible personal
property (other than motor vehicles) the rights to which are to be transferred
to Buyer pursuant hereto under leases or other similar agreements which provide
for rental payments at a rate in excess of Twenty Five Hundred Dollars ($2,500)
per month; and (iii) an identification of the owner of, and any agreement
relating to the use of, each motor vehicle not owned by Sellers the rights to
which are to be transferred to Buyer pursuant hereto. Except as set forth on
Schedule 5(d) of the Disclosure Schedule, each Seller has or will have at the
time of the Closing good and valid title to all Equipment, Inventory and
Receivables which are owned by it, and valid leasehold interests in, or other
rights to use or derive benefits from, all Equipment which is not owned by such
Seller, in each case free and clear of
17
all liens, claims, charges, security interests, mortgages, restrictive covenants
and encumbrances of any nature whatsoever ("Liens"), except for Permitted Liens.
As used in this Agreement, the term "Permitted Liens" means (i) mechanics',
materialmen's, carriers', workmen's, warehousemen's, repairmen's or other like
liens on tangible Assets securing obligations incurred in the ordinary course of
Business that are not delinquent; (ii) liens for Taxes and other governmental
charges which are not yet due and payable; (iii) in the case of Leased Property
(as defined in Section 5(e) hereof), Liens on, or defects in, the ownership or
other interests of the lessor of the leased property; and (iv) other than Liens
which do not, individually or in the aggregate, materially impair the value or
the continued use and operation, in the manner as currently used or operated by
Sellers, of the Acquired Assets to which they relate.
(e) Title to Real Property. Section 5(e) of the Disclosure Schedule
----------------------
contains a complete and accurate list of all leaseholds and other interests in
real property held by Sellers (the "Leased Property"). Sellers have no fee title
to and do not own any real property. All leases pursuant to which Sellers may
hold or use any interest owned or claimed by Sellers in or to Leased Property
are in full force and effect with Sellers and, free and clear of all Liens,
except Permitted Liens. Each of the leases described in Section 5(e) of the
Disclosure Schedule is a valid and binding obligation of the respective Seller
referred to therein, and Sellers do not have any Knowledge that any of said
leases is not a valid and binding obligation of each of the other parties
thereto; Sellers are not, and to the Knowledge of Sellers no other party to any
such lease is, in default with respect to any material term or condition
thereof, and the Knowledge of Sellers no event has occurred which through the
passage of time or the giving the notice, or both, would constitute a default
thereunder or would cause the acceleration of any obligation of any party
thereto or the creation of a Lien, other than a Permitted Lien, upon any of the
Acquired Assets.
(f) Condition of Tangible Acquired Assets. To Sellers' Knowledge, all
-------------------------------------
material tangible Acquired Assets owned, leased, used or employed by Sellers, is
in operating condition as required for the proper operation and use thereof in
the ordinary course of Business free from any material defects, except such
defects as require routine maintenance and such defects as do not materially
interfere with the continued use thereof in the conduct of the Business
conducted in connection therewith. No further representation is made concerning
the physical condition of any tangible Acquired Assets. Except as otherwise
provided in this Agreement, the tangible Acquired Assets are being acquired by
Buyer "AS IS AND WHERE IS" as of the Closing Date. EXCEPT AS SET FORTH EXPRESSLY
IN THIS AGREEMENT, SELLER DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY WITH RESPECT
TO THE TANGIBLE ACQUIRED ASSETS, INCLUDING IMPLIED WARRANTIES OF FITNESS,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(g) Intellectual Property. Section 5(g) of the Disclosure Schedule
---------------------
hereto sets forth a true, complete and correct list of all patents and patent
applications, and all registrations of trademarks, trade names, trade dress,
service marks and copyrights, and applications for such registrations, that are
held by Sellers or any of its affiliates worldwide and are primarily related to
the Business. To the Knowledge of Sellers, Sellers own or will own at the time
of Closing (free and clear of all Liens, other than (i) Permitted Liens, and
(ii) other Liens, if any, described in Section 5(g) of the Disclosure Schedule)
or have or will have at the time of the Closing the right to use in the current
manner without payment to any other party (other than pursuant to a license,
coexistence agreement, undertaking, declaration, limitation of use or consent to
use (collectively, "Licenses") described in Section 5(h) of the Disclosure
Schedule), the Intellectual Property used by Sellers in the operation of the
Business. Except as set forth on Section 5(g) of the Disclosure Schedule, to the
Knowledge of Sellers, (i) there are no pending claims which have been made in
writing by any person challenging or questioning either the right of Sellers to
18
use, or the validity of, any patent, trademark, trade name, trade dress, service
▇▇▇▇ or copyright included in the Intellectual Property in any jurisdiction,
domestic or foreign, (ii) there are no pending claims by any person which have
been asserted in writing alleging that such person has the right to use any
patent, trademark, trade name, trade dress, service ▇▇▇▇ or copyright included
in the Intellectual Property other than pursuant to a License described in
Section 5(h) of the Disclosure Schedule, (iii) except for Bankruptcy Claims,
there are no pending claims of patent, trademark, trade name, trade dress,
service ▇▇▇▇ or copyright infringement which have been asserted in writing by
any person with respect to the right of Sellers to continue to sell any product
or service of the Business without payment of a royalty, license fee or similar
fee to such person (other than payments that are currently subject to a License
described in Section 5(h) of the Disclosure Schedule, and (iv) no product or
service of the Business infringes any patent, trademark, trade name, service
▇▇▇▇ or copyright of any person. Sellers have not received any notice that any
patent, trademark, trade name, trade dress, service ▇▇▇▇ or copyright included
in the Intellectual Property has been declared unenforceable or otherwise
invalid by any Government Authority. The Intellectual Property and the
intellectual property described in Section 1(b)(x) hereof comprise all of the
intellectual property necessary to conduct and operate the Business as now being
conducted by Sellers, subject to statutory terms of duration, renewal,
termination of transfer or similar statutory provisions.
(h) Contracts. Section 5(h) of the Disclosure Schedule sets forth the
---------
following agreements or contracts, whether oral or written, to which Sellers are
a party or by which Sellers or any of the Assets are bound, other than the
agreements and contracts described in Exhibit 1(b)(iii):
-----------------
(i) any employment contract or consulting agreement with any
consultant or employee earning more than $75,000 per year or having a term
in excess of twelve months other than those that are or at the Closing will
be terminable by a Seller at will and without payment of any penalty or
severance thereunder;
(ii) any lease of Equipment or other personal property involving
payment by a Seller of annual rental in excess of $30,000 or any series of
leases for substantially similar types of Equipment or other personal
property involving payment by a Seller of annual aggregate rentals in
excess of $30,000;
(iii) any contract, agreement or commitment for the purchase of
Equipment involving the expenditure by a Seller of more than $10,000
individually or $25,000 in the aggregate for related purchases;
(iv) any contract or agreement evidencing or related to
indebtedness for borrowed money (other than Purchase Orders for raw
material and inventory);
(v) any commission or broker contract with a commission or
brokerage structure providing for sales requirements for the Business'
products in excess of $20,000 annually;
(vi) any contract, agreement or commitment to sell, lease or
otherwise dispose of any Assets other than in the ordinary course of
Business;
19
(vii) any contract, agreement or commitment with any affiliate
of Sellers or any director or officer of Sellers or, to the Knowledge of
Seller, any affiliate of any such director or officer (other than
employment agreements and Seller's Plans);
(viii) any contract or agreement purporting to limit the freedom
of Sellers to compete in the Business, in any geographic area or with any
person, except for commission or broker contracts or agreements with
distributors or sales representatives disclosed in paragraph (xi) below,
and except as set forth in the Licenses disclosed on Schedule 2(a)(x);
(ix) any contract, agreement or commitment to use the
intellectual property of non-Sellers which involves payments by Sellers
after the Closing Date in excess of $25,000;
(x) any contract, agreement or commitment which relates
primarily to sales agency or distributorship;
(xi) any contract, agreement or commitment, other than
distributorship agreements, pursuant to which any of Sellers have licensed
any of the Intellectual Property to third parties;
(xii) any contract, agreement or commitment which relates to
partnership, strategic alliance, joint venture or other similar
arrangements involving sharing of profit or expenses; and
(xiii) any contract, agreement or commitment not of the type
covered by any of the foregoing subsections (i) through (xii) which have a
remaining term exceeding one year, except for those which by their terms
are or at the Closing will be terminable by a Seller at will or on 90 or
fewer days' notice and without payment of any penalty or premium thereunder
and except for those which involve aggregate payments per contract,
agreement or commitment of $10,000 or less.
"Contracts" shall mean any such agreement, contract or understanding
required to be disclosed pursuant to this Section 5(h). Each Seller has provided
to Buyer a true and correct copy of each of the written Contracts and a summary
of the material terms of each of the oral Contracts. With respect to any
Contract, there is no existing material default on the part of Sellers or, to
Sellers' Knowledge, on the part of any other party thereto, and such Contracts
are in full force and effect and enforceable in all material respects in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium and other similar laws affecting
creditors' rights generally and by general principles of equity. To the Sellers'
Knowledge, (A) Sellers are not in default under any of the Contracts, and (B) it
is not probable that Sellers will, prior to the Closing Date, default under any
of the Contracts, except in the case of (A) or (B), where such defaults would
not, individually or in the aggregate, constitute a Material Adverse Effect.
(i) Litigation; Decrees.
-------------------
(i) Except as set forth on Section 5(i) of the Disclosure
Schedule, no action, lawsuit, proceeding or investigation is pending (with
respect to which Sellers have been notified or served) or, to the Knowledge
of Sellers, threatened against Sellers by or before any Government
20
Authority (other than worker's compensation claims) which, if adversely
determined, would, individually or in the aggregate, (a) adversely affect
the ability of Sellers to consummate the transactions contemplated by this
Agreement or to comply with the terms hereof or thereof or (b) have a
Material Adverse Effect. The representations in this Section 5(i)(i) do not
relate to Taxes or Sellers' Plans, all representations with respect to
which are the subject of Sections 5(c) and (k), respectively.
(ii) Sellers are not specifically identified as a party subject
to any material restrictions or limitations under any judgment, order or
decree of any Government Authority.
(j) Insurance. Sellers are insured under policies presently issued in
---------
favor of Sellers and/or Marvel. None of such insurance policies will be
transferred or assigned to Buyer, and Buyer will not be named as an additional
insured under or entitled to the benefits of any such policy.
(k) Employee Benefits; ERISA.
------------------------
(i) Section 5(k)(i) of the Disclosure Schedule identifies each
of Sellers' Plans. "Sellers' Plans" means each material employee pension,
retirement, stock bonus, stock option, stock purchase, variable pay,
deferred compensation, welfare, hospitalization, medical, dental, vision,
vacation, insurance, sick pay, disability, severance, fringe benefit,
incentive or bonus plan and any other policy, plan, agreement, contract or
arrangement for benefits (including any "employee benefit plan" as defined
in Section 3(3) of ERISA), whether or not subject to ERISA, providing
employee benefits to current or former employees, officers or directors of
the Sellers or any ERISA Affiliate. For purposes of this Agreement, "ERISA
-----
Affiliate" means all persons and entities which are treated as being under
---------
common control with the Sellers, its subsidiaries or any affiliate under
Section 414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) of
ERISA.
(ii) Section 5(k)(ii) of the Disclosure Schedule sets forth a
true and complete description of the salary or hourly compensation, date of
hire, and accrued vacation as of a recent date for employees of Seller.
(iii) Each of Sellers' Plans that is intended to be a tax-
qualified plan under Section 401(a) of the Code has been determined by the
Internal Revenue Service to qualify under Section 401 of the Code, and the
trusts created thereunder have been determined to be exempt from tax under
the provisions of Section 501 of the Code, and nothing has occurred,
including the adoption of or failure to adopt any Plan amendment, which
would adversely affect such qualified or tax-exempt status.
(iv) Except as required by law, the execution of this Agreement
and the consummation of the transactions contemplated hereby, do not
constitute a triggering event under any of Sellers' Plans (as defined in
Section 5(k) herein), whether or not legally enforceable, which (either
alone or upon the occurrence of any additional or subsequent event) will
result in any obligation of the Buyer or any affiliate of Buyer to make any
payment (whether of severance pay, including, and not limited to, salary,
related vacation pay, pension pay and other similar payments and costs, or
otherwise) or to accelerate, vest or increase the amount of benefits
payable to any employee or former employee, officer or director of Sellers
or any ERISA Affiliate of Sellers, except to the extent otherwise provided
in Section 10 hereof.
21
(l) Compliance with Laws. Sellers are in compliance with all
--------------------
applicable statutes, laws, ordinances, rules, orders and regulations of any
governmental authority or instrumentality, domestic or foreign, except for
noncompliance which would not have, individually or in the aggregate, a Material
Adverse Effect. This Section 5(l) does not relate to Taxes and Sellers' Plans,
all representations with respect to which are the subject of Sections 5(c) and
(k).
(m) Employee and Labor Relations. None of Sellers nor any of their
----------------------------
respective affiliates is a party to or is bound by any collective bargaining
agreements or other contracts with any labor union representing employees of
Sellers. Except as set forth in Section 5(m) of the Disclosure Schedule, there
are no unfair labor practice complaint against Sellers pending before the
National Labor Relations Board or any state or local agency; pending labor
strike or other material labor trouble affecting the Sellers; material labor
grievance pending against the Sellers or pending representation question
respecting the employees of the Sellers.
(n) Broker's Fees. There are no brokerage commissions, finders' or
-------------
agents' fees or similar fees or commissions payable in connection with the
transactions contemplated by this Agreement based on any agreement, arrangement
or understanding with Sellers, or any action taken by or on behalf of Buyer.
(o) Business Assets. Except for the Excluded Assets and except for
---------------
licenses, permits, approvals, authorizations and similar rights which are not
transferable to Buyer, all properties, interests, contracts, assets, licenses,
transferable permits, rights and franchises (of every kind, nature character and
description, real, personal or mixed, tangible or intangible, whether or not
reflected in the Interim Statement) which are utilized primarily in the conduct
of the Business as presently conducted are included in the Acquired Assets and
are either owned by the Sellers or licensed or leased to the Sellers.
(p) Inventory. Except as set forth in Section 5(p) of the Disclosure
---------
Schedule, the Inventory of Sellers consists of merchandise of a quality and
quantity useable and saleable in the ordinary course of business.
(q) Conflict of Interest. Except as set forth in Section 5(q) of the
--------------------
Disclosure Schedule, no officer or director of Sellers or any affiliate of any
such person (other than Marvel or any subsidiary of Marvel) now has, either
directly or indirectly:
(i) any material equity or debt interest in any corporation,
partnership, joint venture, association, organization or other person or
entity which furnishes or sells or during such period furnished or sold
services or products to the Sellers, or purchases or during such period
purchased from Sellers any goods or services, or otherwise does or during
such period did business with the Sellers; or
(ii) any material beneficial interest in any contract, commitment
or agreement to which Sellers are or were a party or under which they were
obligated or bound or to which their properties may be or may have been
subject, other than stock options and other contracts, commitments or
agreements between the Sellers and such persons in their capacities as
employees, officers or directors of Sellers.
22
(r) Absence of Certain Business Practices. Except as set forth on
-------------------------------------
Section 5(r) of the Disclosure Schedule, to the Knowledge of Sellers, none of
the Sellers or any affiliate thereof, or any officer, director, employee or
agent of such company or such affiliate acting on behalf of such company or
affiliate, has made, directly or indirectly, any offer, payment, promise to pay,
or authorization of the payment of any money, or offer, gift, promise to give,
or authorization of the giving of anything of value to:
(i) any official or employee of a Governmental Body or a Sports
Body,
(ii) any political party or official thereof or any candidate
for political office, or
(iii) any customer, supplier, or competitor of the Sellers or any
employee, officer or director thereof,
in order to assist such company or affiliate in obtaining or retaining business
for or with, or directing business to, or obtaining a license of any
intellectual property from, any Person, not engaged in any other practice
(including but not limited to violation of any anti-trust law or law regulating
minority business enterprises), which in any case would subject the Sellers to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding or which would be grounds for the termination or modification of any
material contract, license or other instrument to which any of the Sellers is a
party. "Governmental Body" means any government or governmental or regulatory
body thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private). "Sports Body" means any body responsible for the
organization or oversight of any sport, whether professional or amateur, or
collectively representing the participants in such sport.
6. Covenants of Seller. Sellers covenant and agree as follows:
-------------------
(a) Access. Subject to Buyer's obligations under the Confidentiality
------
Agreement (as defined in Section 8(a) hereof), prior to the Closing, Sellers
will give Buyer and its officers, employees, agents and representatives
reasonable access, during normal business hours and upon reasonable notice, to
the personnel, properties, and Books and Records; provided, however, that (i)
-------- -------
such access shall not unreasonably disrupt the normal operations of Sellers or
their respective affiliates, (ii) neither Buyer nor any of its officers,
employees, agents or representatives shall have access to any personnel of
Sellers or their respective affiliates other than the employees identified
pursuant to Section 25 of this Agreement without Sellers' prior written consent,
which shall not be unreasonably withheld, and (iii) Sellers may excise from any
books and records to which Buyer and its officers, employees, agents and
representatives have access all information that does not relate to the
Business.
(b) Ordinary Conduct. Except as expressly contemplated by this
----------------
Agreement or as set forth on Section 6(b) of the Disclosure Schedule, from the
date hereof to the Closing, Sellers shall (i) conduct the Business in the
ordinary course in substantially the same manner as presently conducted, (ii)
maintain proper business and accounting records for the Business, and (iii) make
all reasonable efforts consistent with past practices to preserve the business
organization of the Business and relationships of the Business with its material
customers and suppliers, key employees and others with whom it has a material
business relationship and without limiting the generality of the foregoing
Sellers shall not (except with the
23
prior written consent of Buyer): (A) sell or transfer any of the Acquired
Assets, including, without limitation, Intellectual Property or other intangible
Acquired Assets, except sales in the ordinary course of the Business of
inventory or of immaterial amounts of other tangible personal property not
required in the Business; (B) mortgage, pledge, or encumber any of the
properties or assets of the Seller, except for Permitted Liens; (C) materially
amend, modify, or terminate any material Contract affecting the Business other
than in the ordinary course of the Business; or (D) make any increase in, or any
commitment to increase, the compensation payable to any of the Sellers'
officers, directors, employees or agents, other than routine increases made in
the ordinary course of the Business not exceeding the greater of seven percent
(7%) per annum or Five Thousand Dollars ($5,000) per annum for any of them
individually; or (vi) materially alter the manner of keeping its Books and
Records or the accounting practices therein reflected.
(c) Insurance. Sellers shall keep, or cause to be kept, all insurance
---------
policies of Sellers or Marvel relating to the Business, or substantially
equivalent replacements therefor, in full force and effect through the Closing.
(d) Delivery of Records. At the Closing or as soon thereafter as
-------------------
practicable, but in no event later than 30 days after the Closing Date, Sellers
will deliver or cause to be delivered to Buyer all Warranties, Purchase Orders,
Contracts, Licenses and Permits, and Books and Records included in the Assets,
subject to Sellers' retention rights provided in Section 1(a) hereof.
(e) Transfer of Intellectual Property. Immediately after the Closing,
---------------------------------
Buyer will own all of the Intellectual Property subject to the representations
and warranties of Section 5(g). At and following the Closing, Sellers shall
deliver or cause to be delivered instruments of assignment, assumption and
transfer of the Intellectual Property as may reasonably be requested by Buyer.
(f) Change of Name. As soon as is practicable after Closing, Sellers
--------------
shall change their organizational names to eliminate the use of the names
"Fleer" or "SkyBox" or any derivations thereof in their organizational names and
shall thereafter provide Buyer with reasonably satisfactory evidence thereof
and, except as otherwise provided herein, shall not thereafter use such word or
any derivations thereof in its organizational name.
(g) Bank Accounts. Sellers shall use their reasonable best efforts to
-------------
cause Seller's bank accounts existing immediately prior to the Closing Date to
be transferred to Buyer on the Closing Date, including providing Buyer as the
sole signatory on such accounts.
(h) Covenant Not to Compete.
-----------------------
(i) Subject to the Closing having occurred, without the prior
written consent of Buyer, neither Sellers, Marvel or any subsidiary of
Marvel (the "Non-Compete Group") will, directly or indirectly (whether
through any partnership of which it or any such person is a member, through
any trust in which it or any such person is a beneficiary or trustee, or
through a corporation or other association in which it or any such person
has any interest, legal or equitable, or in any other capacity whatsoever),
engage in any business competitive with the Business as conducted on the
Closing Date in any county or any other political subdivision of any state
of the United States of America or of any other country in the world where
the Sellers conduct its Business as of the Closing Date; provided, however,
-------- -------
that nothing in this Section 6(h) shall be
24
construed to prevent Marvel from licensing its characters in any manner,
including without limitation, for trading and/or entertainment card
purposes. This covenant not to compete shall extend for a period of three
(3) years from the Closing Date, or until such earlier time as Buyer, its
successors or assigns, shall cease to carry on or have an interest in the
Business and the Acquired Assets acquired hereunder.
(ii) Sellers on behalf of themselves and the Non-Compete Group
acknowledge that they intend that the Non-Compete Group shall fully and
effectively convey to Buyer all rights to be transferred to Buyer pursuant
to Section 1(a)(vii) hereof, including, without limitation, each process,
invention, trade secret, formula and other item of know-how relating to the
Business. Accordingly, notwithstanding the expiration of the covenant not
to compete set forth in this Section 6(h), at all times thereafter the Non-
Compete Group shall keep confidential and shall not disclose to others any
proprietary rights and shall not use or permit to be used any proprietary
rights; provided, however, that such proprietary rights do not include
-------- -------
information which (i) was generally available to the public other than as a
result of a disclosure by any member of the Non-Compete Group in violation
of this Agreement, (ii) was independently developed after the Closing Date
by the Non-Compete Group or becomes known after the Closing Date to any
member of the Non-Compete Group or any of their respective directors or
officers, or (iii) is or becomes available to any member of the Non-Compete
Group or any of their respective directors or officers by a third party
having a lawful right to disclose such information.
(iii) The parties hereto agree that the duration and area for
which the covenant not to compete set forth in this Section 6(h) is to be
effective are reasonable. In the event that any court of competent
jurisdiction determines that the time period or the area, or both of them,
are unreasonable and that such covenant is to that extent unenforceable,
the parties hereto agree that the covenant shall remain in full force and
effect for the greatest time period and in the greatest area that would not
render it unenforceable. The parties intend that this covenant shall be
deemed to be a series of separate covenants, one for each and every county
of each and every state of the United States of America and each and every
political subdivision of each and every county outside the United States of
America where this covenant is intended to be effective. Sellers on behalf
of themselves and the Non-Compete Group agree that damages are an
inadequate remedy for any breach of this covenant and that Buyer shall,
whether or not it is pursuing any potential remedies at law, be entitled to
equitable relief in the form of preliminary and permanent injunctions upon
any actual or threatened breach of this covenant.
(iv) The parties hereto acknowledge that the covenant not to
compete set forth in this Section 6(h) has not been bargained for separate
and apart from the Purchase Price to be paid for the Acquired Assets and
that no part of such Purchase Price is allocable to such covenant not to
compete.
(i) Real and Personal Property Adjustments After the Closing Date.
-------------------------------------------------------------
Real estate and personal property taxes with respect to the Acquired Assets to
be conveyed to Buyer pursuant hereto shall be prorated through the Closing Date.
7. Representations and Warranties of Buyer. Buyer hereby represents
---------------------------------------
and warrants to Sellers that the statements contained in this Section 7 are true
and correct in all respects.
25
(a) Organization and Authority of Buyer. Buyer is a limited liability
-----------------------------------
company duly organized, validly existing and in good standing under the laws of
the Commonwealth of Pennsylvania. Buyer has all power and authority necessary to
enter into this Agreement and to consummate the transactions contemplated
hereby. All acts and proceedings required to be taken to authorize the
execution, delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby have been duly and
properly taken. This Agreement has been duly executed and delivered by Buyer.
Assuming due authorization, execution and delivery by Sellers of this Agreement,
this Agreement constitutes legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and by general
principles of equity. The execution, delivery and performance by Buyer of this
Agreement do not, and the consummation by Buyer of the transactions contemplated
hereby will not, (i) conflict with, or result in any violation of, any provision
of the certificate of formation, operating agreement or other organizational
documents of Buyer, or (ii) conflict with, result in any violation of, or
constitute a default (or an event or condition which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination of
or the acceleration of the maturity of any liability or obligation pursuant to,
any instrument, contract, commitment, agreement or arrangement to which Buyer or
any of its affiliates is a party or by which Buyer or any of its affiliates or
the property or assets of Buyer are bound, or any judgment, order, writ,
injunction or decree to which Buyer or any of its affiliates has been
specifically identified as subject, or any statute, law, ordinance, rule or
regulation applicable to Buyer, any of its affiliates or the property or assets
of Buyer (except where such conflict, violation, default, termination,
acceleration or Lien would not materially impair the ability of Buyer to
consummate the transactions contemplated hereby or have, individually or in the
aggregate, a material adverse effect on the business, assets, financial
condition or results of operations of Buyer, taken as a whole). Except for the
filing of premerger notification and report forms under the HSR Act, if
applicable, no material Government Approval of or with any Government Authority
is required to be obtained or made by or with respect to Buyer in connection
with the execution, delivery and performance by Buyer of this Agreement or the
consummation by Buyer of the transactions contemplated hereby or compliance by
Buyer with the terms hereof, other than those which if not obtained or made (A)
would not materially impair Buyer's ability to consummate the transactions
contemplated hereby or (B) would not, individually or in the aggregate, have a
material adverse effect on Buyer.
(b) Litigation; Decrees. Buyer is not specifically identified as a
-------------------
party subject to any material restrictions or limitations under any judgment,
order or decree of any Governmental Authority. There are no actions, lawsuits,
proceedings or investigations pending (with respect to which Buyer has been
served or otherwise notified) or, to the knowledge of Buyer, threatened against
Buyer by or before any Government Authority which, if decided adversely to
Buyer, would adversely affect the ability of Buyer to consummate the
transactions contemplated hereby or have, individually or in the aggregate, a
material adverse effect on the business, assets, financial condition or results
of operations of Buyer, taken as a whole.
(c) Availability of Funds. Buyer has sufficient funds on hand, or
---------------------
access to sufficient funds, to consummate the transactions contemplated hereby
without any financing whatsoever.
(d) HSR Act. No filing will be required under the HSR Act for the
-------
transactions contemplated hereby.
26
(e) Broker's Fees. There are no brokerage commissions, finder's or
-------------
agent's fees or similar fees or commissions payable in connection with the
transaction contemplated by this Agreement based on any agreement, arrangement
or understanding with Buyer, or any action taken by or on behalf of Buyer.
8. Covenants of Buyer.
------------------
(a) Confidentiality Agreement. Buyer acknowledges that the
-------------------------
information being provided to it by Sellers is subject to the terms of a
confidentiality agreement between Buyer and Marvel dated November 20, 1998 (the
"Confidentiality Agreement"), the terms of which are incorporated herein by
reference. The Confidentiality Agreement shall remain in effect after the
Closing as to all confidential information that does not relate to the Business.
(b) Buyer Cooperation. Following the Closing Date, upon the written
-----------------
request of Sellers or Marvel, Buyer shall, and shall cause its affiliates,
officers, employees, agents and representatives to, reasonably assist (i)
Sellers and Marvel in defending against or objecting to any Bankruptcy Claims,
and (ii) the Avoidance Litigation Trustee (as defined in the Plan) and the MAFCO
Litigation Trustees (as defined in the Plan), as applicable, in prosecuting
Litigation Claims (as defined in the Plan) to the extent and only to the extent
that Seller or Marvel are obligated to assist the Avoidance Litigation Trustee
and the MAFCO Litigation Trustee pursuant to the Plan. Buyer hereby agrees that
following the Closing Date it will take all reasonable precautions and actions,
including, without limitation, such precautions as Buyer employs with respect to
its own books and records, to avoid the destruction or damage to the Books and
Records of Sellers until the final resolution of all Bankruptcy Claims and
Litigation Claims. Sellers shall provide Buyer and its affiliates, officers,
employees, agents and representatives with reasonable notice under the
circumstances within which to provide such assistance. Sellers agree to
reimburse Buyer and its affiliates, officers, employees, agents and
representatives for their reasonable and documented out-of-pocket expenses (and
reasonable reimbursement for the time of senior employees of Buyer pursuant to
which extraordinary demands have been placed upon such senior employees in
accordance with this Section 8(b)) incurred in connection with providing such
assistance.
(c) Assignment. Buyer acknowledges that it has executed this
----------
Agreement as the sole general partner to a newly formed limited partnership.
Buyer agrees that it shall assign its rights hereunder to such limited
partnership.
9. Mutual Covenants. Each of Sellers and Buyer covenants and
----------------
agrees as follows:
(a) Reasonable Best Efforts. Subject to the terms and conditions of
-----------------------
this Agreement, each of the parties hereto shall use its reasonable best efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable consistent with applicable laws and
regulations to satisfy all conditions to Closing set forth in this Agreement
that are within such parties' control at the earliest practicable date
thereafter, provided, however, that nothing in this Agreement shall obligate
-------- -------
Buyer, Sellers, Marvel, or any of their respective affiliates to sell, transfer
or otherwise dispose of any of their respective assets to cause a termination of
any applicable waiting period under the HSR Act. In addition, Sellers agree to
use reasonable best efforts to assist Buyer in providing information, including
financial information as reasonably requested by Buyer, relating to the Acquired
Assets, the Assumed Liabilities and the Business to bank lenders to Buyer and
its affiliates in connection with the transactions contemplated by this
Agreement. Prior to the Closing Date, Sellers agree to provide Buyer with (i)
27
reviewed financial statements of Sellers prepared by Ernst & Young for the three
months ended December 31, 1998, and (ii) reviewed financial statements of
Sellers prepared by Ernst & Young for the nine months ended December 31, 1998.
(b) Consents. Without limiting the generality of Section 9(a) hereof,
--------
each of the parties hereto shall use its reasonable best efforts to obtain all
licenses, permits, authorizations, consents and approvals of all third parties
and Government Authorities, including without limitation, those required under
the HSR Act, if any, necessary in connection with the consummation of the
transactions contemplated by this Agreement prior to the Closing.
Notwithstanding the foregoing or Section 9(a) hereof, except for the fee to be
paid for the filing of premerger notification and report forms under the HSR
Act, if any, which fee will be paid by Buyer, neither Buyer nor Sellers shall
have any obligation to commence any litigation or pay any fee or offer or grant
any other financial accommodation to any third party for the purpose of
obtaining any such license, permit, authorization, consent or approval or pay
any costs and expenses of any third party resulting from the process of
obtaining any such license, permit, authorization, consent or approval. Each of
the parties hereto shall make or cause to be made all filings and submissions
under laws and regulations applicable to it or them as may be required for the
consummation of the transactions contemplated by this Agreement, including
without limitation, those required under the HSR Act, if any. In addition,
Sellers and Buyer will each use their reasonable best efforts, and will
cooperate fully with each other to cause a termination of any applicable waiting
period under the HSR Act without the entry by a court of competent jurisdiction
of an order enjoining the consummation of the transactions contemplated hereby
at as early a date as possible. Buyer and Sellers shall coordinate and cooperate
with each other in exchanging such information and assistance as any of the
parties hereto may reasonably request in connection with the foregoing.
(c) Publicity. Effective from the date of this Agreement, Sellers and
---------
Buyer agree that no public release or announcement concerning the transactions
contemplated hereby shall be issued by either party prior to the Closing without
the prior written consent of the other party, except as such release or
announcement may be required by law or the rules or regulations of any United
States or foreign securities exchange, in which case the party required to make
the release or announcement shall, if practicable under the circumstances, allow
the other party reasonable time to comment on such release or announcement in
advance of such issuance.
(d) Disclosure Supplements. From time to time prior to the Closing,
----------------------
Sellers and Buyer will promptly supplement or amend the Disclosure Schedule with
respect to any matter which would make any representation or warranty set forth
in Section 5 or Section 7, as the case may be, inaccurate if updated immediately
prior to the Closing or as is necessary to correct any information in the
Disclosure Schedule or in any representation or warranty of Sellers or Buyer
made in Section 5 or Section 7, as the case may be. For purposes of determining
the fulfillment of the conditions set forth in Section 4(a)(i) or Section
4(b)(i), as the case may be, as of the Closing and the accuracy of the
representations and warranties contained in Section 5 or Section 7, as the case
may be, if the Closing does not occur, the Disclosure Schedule shall be deemed
to include only that information contained therein on the date of this Agreement
and shall be deemed to exclude any information contained in any subsequent
supplement or amendment thereto. However, for purposes of determining the
accuracy of the representations or warranties of Sellers or Buyer contained in
Section 5 or Section 7, as the case may be, or the liability of Sellers or Buyer
with respect thereto under Section 11(b) or Section 11(c), as the case may be,
should the Closing occur, the Disclosure Schedule shall be deemed to include all
information contained in any subsequent supplement or amendment thereto.
28
(e) Agreement to Negotiate License Arrangement. (i) For a period of
------------------------------------------
thirty (30) days immediately following the Closing Date (the "License
Negotiation Period"), Marvel will negotiate in good faith with Buyer on an
exclusive basis a license agreement (the "Marvel License Agreement") pursuant to
which Marvel would grant a license right to Buyer to utilize certain characters
and properties of Marvel in which Marvel owns copyrights, trademarks or
tradenames, solely upon and in connection with the sale and distribution of
"standard size" character-identified ink-on-paper trading cards (the "Trading
Cards"), subject to terms and conditions to be mutually agreed upon between
Marvel and Buyer. Nothing contained in this paragraph shall be construed to
obligate Marvel or Buyer to enter into or execute such Marvel License Agreement.
Unless the Marvel License Agreement is entered into, Buyer shall have no right
with respect to any such characters or properties and no such rights shall be
included in the Assets. During the License Negotiation Period, Marvel will not
to enter into any negotiations with any third party other than Buyer concerning
such a license agreement.
(ii) If Marvel and Buyer shall not have entered into and executed the
Marvel License Agreement within the License Negotiation Period, Buyer shall have
the right to dispose on a non-exclusive basis of its then existing inventory (on
hand or in process) of Trading Cards; provided that such disposal shall be
conducted in accordance with the terms and conditions set forth in Section
9(e)(ii) of the Disclosure Schedule attached hereto.
(f) Settlement of Avoidance Litigation Claims. Following the Closing
-----------------------------------------
Date, Marvel shall, if directed by Buyer, exercise its rights under Section 7.2
of the Plan solely with respect to claims against any person or entity which is
a provider of goods or services to the Business or party to any licensing
agreement with Sellers relating to the Business as of the Closing Date;
provided, that Marvel shall not be obligated to comply with such direction of
--------
Buyer if such action would, in the discretion of Marvel, have a material adverse
effect on the business of Marvel.
(g) Cooperation. Sellers and Buyer shall cooperate fully with each
-----------
other and make available or cause to be made available to each other for
consultation, inspection and copying in a timely fashion such personnel, Tax
returns, files, books and records, documents and other information as may be
reasonably requested (i) for the preparation of any Tax return, election,
consent or certificate required to be prepared or filed by Sellers or Buyer (or
their respective affiliates) or (ii) in connection with any audit or proceeding
relating to Taxes, and the requesting party shall pay any reasonable out-of-
pocket expenses incurred in connection therewith. Sellers and Buyer shall retain
all Tax returns, schedules and workpapers, and all material records or other
documents relating thereto, until the expiration of the statute of limitations
(including any waivers or extensions thereof) of the taxable periods to which
such Tax returns or other documents relate.
10. Employees and Employee Benefits.
-------------------------------
(a) Offers of Employment. Buyer will offer employment, effective
--------------------
immediately after the Closing, to all active employees of Sellers. The employees
of Sellers or any affiliate of Sellers who become employees of Buyer are
referred to in this Section 10 as the "Employees". Buyer shall grant all
Employees credit for all service with Sellers and their affiliates and their
respective predecessors prior to the Closing Date for purposes of eligibility,
vesting, and benefit differential determined on the basis of
29
length of service under any benefit plan maintained or contributed to by Buyer
(or any affiliate of Buyer) that covers any such Employees.
(b) Continuation of Participation in Sellers' Plans. Buyer and
-----------------------------------------------
Sellers agree that for a period of commencing on the Closing Date and continuing
for the remainder of the month in which the Closing occurs and continuing for a
period of one month thereafter, or, if sooner with respect to any plan, until
the establishment by Buyer of its own comparable medical plan or decision not to
provide such coverage and notification thereof to Sellers by Buyer, Buyer (or
any affiliate of Buyer) shall, for the benefit of the Employees (and their
spouses, dependents and family members), including any Employee or covered
dependent who is a qualified beneficiary entitled to coverage under Section
4980B of the Code or Sections 601 through 608 of ERISA, participate in each
Employee Welfare Benefit Plan (as such term is defined under Section 3(1) of
ERISA) listed in Section 10(b) of the Disclosure Schedule sponsored or
maintained by one or more of the Sellers under which any of the Employees
benefitted on or prior to the Closing Date. In consideration, Buyer (or any
affiliate of Buyer) shall pay to Sellers the amounts set forth as follows. For
benefits covered by insurance, Buyer (or any affiliate of Buyer) will pay to
Sellers an amount equal to the per-individual (or per-family, as appropriate)
cost of the related premiums for the period after the Closing Date during which
the Employees (or any of their spouses, dependents or family members)
participate under such Plans, multiplied by the number of such individuals (or
families, as appropriate) participating under the appropriate Employee Welfare
Benefit Plans during such period. For benefits which are self-insured, Buyer (or
any affiliate of Buyer) will pay to Sellers an amount equal to one hundred and
five percent (105%) of the actual costs incurred by one or more of the Sellers
of maintaining such programs during the period after the Closing Date which
Buyer (or any affiliate of Buyer) participates under the appropriate programs
multiplied by a fraction, the numerator of which is the number of Employees (and
their spouses, dependents and family members) participating under each such
program during such period and the denominator of which is the average number of
all individuals participating under such program during such period.
(c) COBRA. Buyer (or any affiliate of Buyer), or any plan maintained
-----
by Buyer (or by any affiliate of Buyer), at Buyer's cost (or at the cost of any
affiliate of Buyer), will provide continued health and medical coverage as
required under Section 4980B of the Code, Part 6 of Title I of ERISA or any
other applicable federal, state or local law or ordinance to all Employees (and
their spouses, dependents and beneficiaries) with respect to whom a "qualifying
event" (as such term is defined under Sections 4980B(f)(3) of the Code or 603 of
ERISA) or other triggering event described under the applicable federal, state
or local laws or ordinances occurred after the Closing Date.
(d) 401(k) Plan. The following is hereby agreed with respect to the
-----------
cash-or-deferred profit sharing plan listed on Section 5(k)(i) of the Disclosure
Schedule (the "Marvel 401(k) Plan"):
(i) As soon as practicable after the Closing Date, Buyer
(or any affiliate of Buyer or a limited partnership of which Buyer is the sole
general partner) will adopt a cash-or-deferred profit sharing plan (the "New
401(k) Plan") under the applicable sections of the Code. If necessary, and as
soon as practicable thereafter, but in any event within the remedial amendment
period for the applicable plan year of the New 401(k) Plan, Buyer (or any
affiliate of Buyer or a limited partnership of which Buyer is the sole general
partner) will cause the New 401(k) Plan and related funding arrangement to be
submitted to the IRS for a determination letter providing that the new 401(k)
Plan and related funding arrangement are qualified under the applicable
provisions of the Code and will take all action required by
30
the IRS (including the adoption of plan amendments) as a condition to issuing
such favorable determination.
(ii) As soon as practicable following the Closing Date, but
following the adoption of the New 401(k) Plan and subject to all IRS notice
requirements, Sellers (or the parent of Sellers) will direct the trustee of the
trust related to Marvel 401(k) Plan to effectuate a transfer to the trustee of
the New 401(k) Plan of amounts, in cash equal to the aggregate total account
balances for all Employees who are employed by Buyer as of such date, the amount
of such account balances being determined as of the valuation date occurring on,
or immediately prior to, the date of such transfer. Buyer and Sellers will
cooperate in the filing of all documents required in connection with the
transfer of assets described herein.
(e) No Third Party Beneficiaries. Without limiting the generality of
----------------------------
Section 14, the preceding subsections of this Section 10 shall not confer any
rights or remedies upon any employee of Sellers, its affiliates or Buyer or any
other person other than the parties and their respective successors and assigns.
11. Indemnification.
---------------
(a) Survival of Representations. The representations and warranties
---------------------------
in this Agreement and in any other document delivered in connection herewith
shall survive the Closing Date until April 30, 2000; provided, however, that the
representations and warranties made by Sellers set forth in Sections 5(c) and
5(k) hereof shall survive the Closing Date until the expiration of all
applicable statutes of limitation with respect to claims made with respect
thereto. The covenants in this Agreement shall survive the Closing Date.
(b) Sellers' Agreement to Indemnify. Upon the terms and subject to
-------------------------------
the conditions of this Section 11, Sellers and Marvel shall, jointly and
severally, indemnify and hold harmless Buyer and its affiliates (collectively,
the "Buyer Group"), from and after the Closing, from and against any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses (collectively, "Damages"), resulting to, imposed
upon or incurred by the Buyer Group or any member thereof, directly or
indirectly, by reason of or resulting from:
(i) the breach of, or any inaccuracy of any representation or
warranty of Sellers contained in this Agreement (giving effect to any
notices given by the Sellers and any update or supplement to the Disclosure
Schedule delivered to Buyer at Closing);
(ii) the breach of any covenant or other agreement of Sellers
contained herein;
(iii) any Excluded Liabilities;
(iv) any Bulk Sales Act or similar law as provided in Section
11(g); and
(v) infringement claims or actions brought by the licensors to
the agreements set forth as Items 9, 10, 11 and 12 to Section 2(a)(x) of
the Disclosure Schedule.
31
(c) Buyer's Agreement to Indemnify. Upon the terms and subject to the
------------------------------
conditions of this Section 11, Buyer shall indemnify and hold harmless Sellers
and its affiliates (collectively, the "Seller Group"), at any time after the
Closing, from and against any and all Damages resulting to, imposed upon or
incurred by the Seller Group or any member thereof, directly or indirectly, by
reason of or resulting from:
(i) the breach or inaccuracy of any representation or warranty
of Buyer contained in this Agreement (giving effect to any notices given by
Buyer and any update or supplement to the Disclosure Schedule delivered to
Sellers at Closing);
(ii) the breach of any covenant or other agreement of Buyer
contained herein;
(iii) the Assumed Liabilities;
(iv) Contracts under which Buyer has received benefits pursuant
to Section 2(d) hereof; and
(v) the Worker Adjustment and Retraining Notification Act of
1988 as a result of the transactions contemplated by this Agreement.
(d) Monetary Limitation of Liability.
--------------------------------
(i) A claim for indemnity for Damages by the Buyer Group or any
member thereof under Section 11(b)(i) hereof shall be effective only after
the aggregate amount of all Damages suffered by members of the Buyer Group
of the type described in Section 11(b)(i) hereof exceeds $500,000 and then
only to the extent of such excess.
(ii) A claim for indemnity for Damages by the Seller Group or
any member thereof under Section 11(c)(i) hereof shall be effective only
after the aggregate amount of all Damages suffered by members of the Seller
Group of the type described in Section 11(c)(i) hereof exceeds $500,000 and
then only to the extent of such excess.
(iii) The aggregate liability of Sellers for claims by the Buyer
Group or any member thereof or by the Seller Group or any member thereof
for indemnity for Damages pursuant to Section 11(b)(i) or 11(c)(i) under
this Agreement is limited to $4,000,000.
(iv) The indemnifying party shall calculate in good faith any
net Tax benefit accruing to the indemnified party due to the occurrence of
Damages. The net Tax benefit, if any, shall be deducted from the Damages
otherwise payable by the indemnifying party to the indemnified party. In
the event all or any portion of the net Tax benefit deducted from the
Damages paid to the indemnified party is later denied by the Internal
Revenue Service (the "IRS"), the indemnifying party shall pay, in addition,
Damages in the amount of the net Tax benefit to the extent denied by the
IRS, plus interest thereon from the date the indemnifying party gives
notice to the indemnified party of the amount of such net Tax benefit to
the date of payment at the per annum IRS rate for Taxes past due in effect
from time to time during that period, as published in the IRS Bulletin. The
amount of any insurance proceeds received or receivable (and not subject
32
to any dispute with the insurer) by the indemnified party to cover Damages
shall be deducted from the Damages otherwise payable by the indemnifying
party to the indemnified party.
(e) Conditions of Indemnification.
-----------------------------
(i) In the event that any person or entity not a party to this
Agreement (including a Government Authority) shall levy an assessment or
commence or file, or threaten to commence or file, any lawsuit or
proceeding, which pending or threatened lawsuit or proceeding or assessment
may result in any Damages subject to indemnification under this Agreement
(collectively, the "Proceedings"), then the indemnified party will give
prompt written notice of such Proceeding to the indemnifying party, and the
indemnifying party shall have the right to undertake the defense thereof by
representatives chosen by it; provided, however, that the failure to give
-------- -------
such prompt written notice shall not rescind or revoke the indemnifying
party's obligation to indemnify but shall only reduce the amount of the
indemnification to the extent that the indemnifying party is damaged by
such delay.
(ii) If the indemnifying party undertakes the defense of any
such Proceeding, (A) the indemnifying party will not be liable to the
indemnified party for legal or other expenses incurred by the indemnified
party in connection with such defense (other than as provided in the
following clause (B)), (B) the indemnified party shall, to the best of its
ability, assist the indemnifying party, at the expense of the indemnifying
party, in the defense of such Proceeding, and shall promptly send to the
indemnifying party, at the expense of the indemnifying party, copies of any
documents received by the indemnified party which relate to such
Proceedings and (C) the indemnified party shall have the right to
participate in the defense of such Proceeding, at its own cost and expense;
(iii) If the indemnifying party, within a reasonable time after
notice of any such Proceeding, fails to elect to defend the indemnified
party against which such Proceeding has been asserted, the indemnified
party shall (upon further notice to the indemnifying party) have the right
to undertake the defense, compromise or settlement of such Proceeding on
behalf of and for the account and risk of the indemnifying party, subject
to the right of the indemnifying party to assume the defense of such
Proceeding at any time prior to settlement, compromise or final
determination thereof; and
(iv) Anything in this Section 11 to the contrary
notwithstanding, whether or not the indemnifying party shall have assumed
the defense thereof, the indemnified party shall not, without the written
consent of the indemnifying party (which consent shall not be unreasonably
withheld or delayed), settle or compromise any Proceeding or consent to the
entry of any judgment.
(f) Other Limitations. Except as provided in Section 6(h)(iii)
-----------------
hereof, Buyer and Sellers acknowledge and agree that their sole and exclusive
remedies with respect to any and all claims relating to the subject matter of
this Agreement (including without limitation claims for breaches of
representations, warranties, covenants and agreements contained in this
Agreement) shall be pursuant to the indemnification provisions set forth in this
Section 11. In furtherance of the foregoing, Buyer and Sellers hereby waive, to
the fullest extent permitted under applicable law, any and all rights, claims
and causes of action of either of them against the other or any of their
respective affiliates as a matter of equity
33
or under or based upon any federal, state, local or foreign statute, law,
ordinance, rule or regulation or arising under or based upon common law or
otherwise, except to the extent provided in this Section 11.
(g) Bulk Sales. It may not be practicable to comply or attempt to
----------
comply with the procedures of the "Bulk Sales Act" or similar law of any or all
of the States in which the Assets are situated or of any other state which may
be asserted to be applicable to the transactions contemplated hereby.
Accordingly, to induce Buyer to waive any requirements for compliance with any
or all of such laws (which Buyer hereby waives), Sellers hereby agree that,
except for Assumed Liabilities of Sellers, the indemnity provisions of Section
11 shall apply to any Damages incurred by Buyer arising out of or resulting from
the failure of Buyer or Sellers to comply with any such laws or any similar law
that may be asserted to be applicable and Sellers' obligations to indemnify
Buyer with respect to such Damages shall survive the Closing Date.
12. Further Assurances. From time to time after the Closing, as and
------------------
when requested by either party hereto, the other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to give
full effect to this Agreement.
13. Assignment. This Agreement and the rights hereunder shall not be
----------
assignable or transferable by Buyer or Sellers without the prior written consent
of the other party hereto; provided, however, that upon delivery of written
-------- -------
notice to Sellers, Buyer shall have the right to assign its rights under this
Agreement to any affiliates of Buyer or any limited partnership of which Buyer
is the sole general partner.
14. No Third-Party Beneficiaries. Except as expressly provided in
----------------------------
Section 10 with respect to affiliates of Buyer and Sellers, this Agreement is
for the sole benefit of the parties hereto and their successors and permitted
assigns, and nothing herein expressed or implied shall give or be construed to
give to any person, other than the parties hereto and such successors and
assigns, any legal or equitable rights hereunder.
15. Termination. (a) Anything contained herein to the contrary
-----------
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of Sellers and Buyer;
(ii) by Sellers if any of the conditions set forth in Section
4(b) hereof shall have become incapable of fulfillment, and shall not have
been waived in writing by Sellers;
(iii) by Buyer if any of the conditions set forth in Section 4(a)
hereof shall have become incapable of fulfillment, and shall not have been
waived in writing by Buyer; or
(iv) by either party hereto, if the Closing does not occur on or
prior to March 1, 1999;
provided, however, that the failure to satisfy the conditions or consummate the
transactions contemplated by this Agreement did not result from the breach in
any material respect by the party seeking termination
34
pursuant to clause (ii), (iii) or (iv) of any of its representations,
warranties, covenants or agreements contained in this Agreement.
(b) In the event of termination by Sellers or Buyer pursuant to this
Section 15, written notice thereof shall forthwith be given to the other party
and the transactions contemplated by this Agreement shall be terminated, without
further action by either party. If the transactions contemplated by this
Agreement are terminated as provided herein:
(i) Buyer shall return to Sellers all documents and other
material received from or on behalf of Sellers relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof; and
(ii) all confidential information received by Buyer shall be
treated in accordance with the Confidentiality Agreement which shall remain
in full force and effect in accordance with the terms thereof
notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated and the transactions contemplated
hereby are abandoned as described in this Section 15, this Agreement shall
become void and of no further force and effect, except for the provisions of (i)
Section 8(a) hereof relating to the obligation of Buyer to keep confidential
certain information and data obtained by it from Seller, (ii) Section 16 hereof
relating to certain expenses, (iii) Section 9(e) hereof relating to publicity,
and (iv) this Section 15. Nothing in this Section 15 shall be deemed to release
either party from any liability for any breach by such party of the terms and
provisions of this Agreement.
16. Expenses. Whether or not the transactions contemplated hereby are
--------
consummated, and except as otherwise provided in this Agreement, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs or expenses;
provided, however, that following the Closing, Sellers shall be reimbursed by
-------- -------
Buyer for the fees and expenses of its outside counsel incurred in connection
with the transactions contemplated by this Agreement, in an amount not to exceed
$100,000, within thirty days of the delivery to Buyer by Sellers of a copy of
one or more written bills for such services; provided, further, that Buyer shall
-------- -------
pay the fee to be paid for the filing of the premerger and notification forms
under the HSR Act, if any, with respect to the transactions contemplated hereby.
17. Amendments. No amendment to this Agreement shall be effective
----------
unless it shall be in writing and signed by all parties hereto.
18. Notices. All notices or other communications required or
-------
permitted to be given hereunder shall be in writing and shall be delivered by
hand, or sent by telecopy, or sent, postage prepaid, by United States
registered, certified or express mail, or reputable overnight courier service,
and shall be deemed given, if delivered by hand, when so delivered, or if sent
by facsimile, when received, or if sent by mail, three business days after
mailing (two business days in the case of express mail), or if sent by overnight
courier service, one business day after delivery to such service, as follows:
35
(i) if to Sellers, to:
Fleer Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Tuck Hardie, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Battle ▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
(ii) if to Buyer, to:
Golden Cycle, LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Alexander Grass
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wolf, Block, ▇▇▇▇▇▇ & ▇▇▇▇▇-▇▇▇▇▇ LLP
Twelfth Floor, Packard Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Either party hereto may change the address to which notices and other
communications are to be delivered or sent by giving the other party notice in
the manner herein set forth.
19. Interpretation. In this Agreement, the Disclosure Schedule and
--------------
any exhibits annexed hereto:
(a) words denoting the singular include the plural and vice versa and
words denoting any gender include all genders;
(b) the word "including" shall mean "including without limitation";
(c) the word "affiliate" shall have the meaning set forth in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended;
36
(d) the word "business day" shall mean any day other than a Saturday,
Sunday or a day on which banks in the City of New York are generally closed for
business.
(e) the word "person" shall mean an individual, partnership, joint
venture, corporation, limited liability company, trust, unincorporated
organization, government, or governmental department or agency;
(f) the use of headings is for convenience of reference only and
shall not affect the meaning or interpretation of this Agreement, the Disclosure
Schedule or any exhibits annexed hereto;
(g) when calculating the period of time within which or following
which any act is to be done or step taken, the date which is the reference day
in calculating such period shall be excluded and, if the last day of such period
is not a business day, the period shall end on the next day which is a business
day;
(h) all dollar amounts are expressed in United States funds; and
(i) unless otherwise expressly provided herein or therein, money
shall be tendered hereunder by wire transfer of immediately available federal
funds to the account designated in writing by the party that is to receive such
money.
20. Counterparts. This Agreement may be executed in counterparts, all
------------
of which shall be considered one and the same agreement, and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other party.
21. Entire Agreement. This Agreement (including the Disclosure
----------------
Schedule and the Exhibits annexed hereto) and the Confidentiality Agreement
contain the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter.
22. Severability. If any provision of this Agreement or the
------------
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
23. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such state, without regard
to the conflicts of law principles of such state. The parties hereto hereby
irrevocably submit to the jurisdiction of the United States District Court for
the Southern District of New York (or, if subject matter jurisdiction in that
court is not available, in any state court located within the City of New York)
over any dispute arising out of or relating to this Agreement or any of the
transactions contemplated hereby and each party hereby irrevocably agrees that
all claims in respect of such dispute or proceeding shall be heard and
determined in such court. The parties hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum.
37
24. Disclosure Schedule. Matters reflected in the Disclosure Schedule
-------------------
are not necessarily limited to matters required by this Agreement to be
reflected in the Disclosure Schedule. Such additional matters are set forth for
informational purposes only and do not necessarily include any other matters of
a similar nature. Items disclosed in any one Section of the Disclosure Schedule
are deemed to be disclosed in such other Sections of the Disclosure Schedule as
is necessary for purposes of the completeness and accuracy of the related
representation or warranties, but only to the extent it is readily apparent from
the description of the particular item or disclosure that such item or
disclosure would be applicable to such other such Section of the Disclosure
Schedule.
25. Related to the Business. For all purposes of this Agreement, the
-----------------------
phrase "related to the Business" shall mean related to, used in or necessary to
the conduct of the Business as conducted by Sellers on the date of this
Agreement or immediately prior to the Closing, as the context may require.
26. Knowledge. For all purposes of this Agreement, "Knowledge" of
---------
Sellers or a similar phrase shall mean the actual knowledge of facts or other
information of the senior officers of Sellers, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
38
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
FLEER CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
----------------------------------
Name:
Title:
▇▇▇▇▇ ▇. ▇▇▇▇▇ CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
----------------------------------
Name:
Title:
SKYBOX INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
----------------------------------
Name:
Title:
GOLDEN CYCLE, LLC
By /s/ ▇▇▇▇▇ GRASS
------------------------------------
Name: ▇▇▇▇▇ Grass
Title: Vice President
Marvel Enterprises, Inc. hereby unconditionally guarantees all of the
obligations and covenants of the Sellers set forth in this Agreement and agrees
to be bound by Sections 6(h), 9(e), 9(f) and 11(b) hereof.
MARVEL ENTERPRISES, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
----------------------------------
Name:
Title:
Each of Alexander Grass and ▇▇▇▇▇ Grass, jointly and severally, hereby
unconditionally guarantees the obligations of Buyer solely with respect to (i)
Buyer's (or its assignee's) obligations under this Agreement to consummate the
transactions contemplated hereby and (ii) any of the actions required to by
taken by Buyer (or its assignee) pursuant to Sections 8(a) and 9 (exclusive of
Section 9(e)) of this Agreement.
/s/ ALEXANDER GRASS /s/ ▇▇▇▇▇ GRASS
-------------------------- --------------------------
Alexander Grass ▇▇▇▇▇ Grass
39