Exhibit 10.2
EXECUTION COPY
================================================================================
ASSET PURCHASE AND CONSIGNMENT AGREEMENT
dated as of
May 31, 1997
by and among
MCM LIMITED PARTNERSHIP,
ART RENAISSANCE, INC.
and
ART RENAISSANCE CHICAGO, INC.
================================================================================
ASSET PURCHASE AND CONSIGNMENT AGREEMENT
TABLE OF CONTENTS
Page
----
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Agreement to Sell and Purchase ............................... 1
1.2 Acquired Assets .............................................. 2
1.3 Excluded Assets .............................................. 3
1.4 Assumed Liabilities .......................................... 4
1.5 Retained Liabilities ......................................... 5
1.6 Purchase Price; Allocation of Purchase Price ................. 6
1.7 Agreement Regarding TBO's .................................... 7
1.8 [Intentionally Omitted] ...................................... 7
1.9 Additional Provisions ........................................ 7
ARTICLE II
CONSIGNMENT OF CERTAIN INVENTORY
2.1 Grant of Rights .............................................. 10
2.2 Consignment Fee .............................................. 10
2.3 Labelling of Consigned Inventory ............................. 14
2.4 Costs ........................................................ 14
2.5 Insurance; Storage of Consigned Inventory .................... 14
2.6 Title; UCC Filings ........................................... 15
2.7 Removal of Consigned Inventory; Inspection ................... 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MCM
3.1 Organization and Good Standing ............................... 15
3.2 Authority .................................................... 16
3.3 No Conflicts ................................................. 16
3.4 Consents and Approvals ....................................... 16
3.5 No Interest in Other Entities ................................ 16
3.6 Compliance with Law ..... .................................... 16
3.7 Compliance with Material Agreements and Leases ............... 17
3.8 Ordinary Course ...... ....................................... 17
3.9 Litigation ................................................... 17
3.10 Fairness of Financial Statements............................. 17
3.11 Tax Returns ........... ..................................... 18
3.12 Proprietary Rights ........................................... 18
3.13 Employees .................................................... 18
3.14 Environmental Matters ........................................ 18
3.15 Brokers and Finders .......................................... 18
i
Page
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ARI AND SUB
4.1 Organization and Good Standing ............................... 19
4.2 Authority .................................................... 19
4.3 No Conflicts ................................................. 19
4.4 Consents and Approvals ....................................... 20
4.5 Subsidiaries ................................................. 20
4.6 Compliance with Law .......................................... 20
4.7 Litigation ................................................... 20
4.8 Solvency ..................................................... 20
4.9 Brokers and Finders .......................................... 21
ARTICLE V
ADDITIONAL COVENANTS
5.1 Certificate of Incorporation and By-Laws of Sub;
Agreement to Appoint MCM Director ............................ 21
5.2 Compliance with Bulk Sales Laws .............................. 21
5.3 Agreement Regarding Employees ................................ 21
5.4 Agreement Regarding Computer Files ........................... 22
5.5 Publicity; Disclosure ........................................ 22
5.6 Notice of Litigation ......................................... 22
5.7 Additional Agreements Regarding Certain Actions by Sub ....... 23
5.8 Agreement to Negotiate Subordination Agreement ............... 24
ARTICLE VI
CLOSING DELIVERIES OF ARI AND SUB
6.1 Sub Security Agreement ....................................... 25
6.2 ARI Pledge and Security Agreement ............................ 25
6.3 Subleases .................................................... 25
6.4 ARI Guaranty ................................................. 26
6.5 Certificate of Incorporation; By-Laws ........................ 26
6.6 [Intentionally Omitted] ...................................... 26
6.7 Authorizing Resolutions of ARI and Sub ....................... 26
6.9 Evidence of Insurance ........................................ 26
6.10 UCC Consignment Statements ................................... 26
6.11 ▇▇▇▇ of Assumption ........................................... 26
6.12 Purchase Price; Other Payments ............................... 26
ARTICLE VII
CLOSING DELIVERIES OF MCM
7.1 Sub Security Agreement ....................................... 27
ii
Page
----
7.2 ARI Pledge and Security Agreement ............................ 27
7.3 Subleases .................................................... 27
7.4 ▇▇▇▇ of Sale ................................................. 27
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by MCM ....................................... 27
8.2 Indemnification by ARI and Sub ............................... 27
8.3 Indemnification Payments ..................................... 28
8.4 Procedure for Third Party Claims ............................. 28
8.5 Limitation of Indemnification ................................ 29
8.6 Survival ..................................................... 30
ARTICLE IX
MISCELLANEOUS
9.1 Agreement to Govern .......................................... 30
9.2 Severability ................................................. 30
9.3 Notices and Other Communications ............................. 30
9.4 Law to Govern ................................................ 31
9.5 Successors and Assigns ....................................... 31
9.6 Further Assurances ........................................... 32
9.7 Gender, Number and Headings .................................. 32
9.8 Modification or Amendment .................................... 32
9.9 Waiver of Provisions ......................................... 32
9.10 Expenses ..................................................... 32
9.11 Counterparts ................................................. 32
iii
INDEX OF DEFINED TERMS
Page
defined
-------
Acquired Assets ...............................................................2
Actual Annual Payment ........................................................13
Aggregate Consignment Fees ...................................................11
Aggregate Weekly Payments ....................................................11
Agreement .....................................................................1
ARI ...........................................................................1
ARI Guaranty .................................................................26
ARI Indemnified Parties ......................................................27
Assumed Liabilities ...........................................................4
Business ......................................................................1
CAW Agreement .................................................................3
COBRA ........................................................................22
COBRA Beneficiaries ..........................................................22
Confidentiality Agreement .....................................................4
Consigned Inventory ..........................................................10
Consignment Fees .............................................................10
Consignment Period ...........................................................10
Contracts .....................................................................2
Escrow Agreement ..............................................................6
Excluded Assets ...............................................................3
Financial Statements .........................................................17
Flat-Rate Payment ............................................................10
Georgetown Location ...........................................................4
Indemnified Party ............................................................28
Indemnifying Party ...........................................................28
Interim Financial Statements .................................................17
iv
Page
defined
-------
Inventory .....................................................................3
Layaways ......................................................................2
Liens .........................................................................1
Losses .......................................................................27
MCM ...........................................................................1
MCM Indemnified Parties ......................................................28
Minimum Annual Payment .......................................................13
Organic Transaction ..........................................................13
Permitted Liens ...............................................................1
Permitted Locations ..........................................................14
Pledge and Security Agreement ................................................25
Proprietary Rights ...........................................................18
Purchase Price ................................................................6
Reconciliation Statement .....................................................11
Retained Liabilities ..........................................................5
Security Agreement ...........................................................25
Sub ...........................................................................1
Sublease Agreements ..........................................................25
Subordination Agreement ......................................................24
Taxes .........................................................................5
TBO Payment ...................................................................7
TBO's .........................................................................2
Third Party Consigned Inventory ...............................................3
UCC Consignment Statements ...................................................15
Weekly Payment ...............................................................12
v
EXECUTION COPY
ASSET PURCHASE AND CONSIGNMENT AGREEMENT
THIS ASSET PURCHASE AND CONSIGNMENT AGREEMENT (this "Agreement") is made
and entered into as of May 31, 1997, by and among MCM LIMITED PARTNERSHIP, an
Illinois limited partnership d/b/a ▇▇▇▇▇▇▇ ▇▇▇▇▇ Galleries and Gallery Lara
("MCM"), ART RENAISSANCE, INC., a Delaware corporation ("ARI"), and ART
RENAISSANCE CHICAGO, INC., a Delaware corporation and wholly-owned subsidiary of
ARI ("Sub").
W I T N E S S E T H:
WHEREAS, MCM is engaged in the sale and other distribution of works of art
and various materials related thereto (the "Business");
WHEREAS, ARI is engaged in a business similar to the Business;
WHEREAS, ARI has heretofore organized Sub as a single-purpose wholly-owned
subsidiary for the purpose of consummating the transactions contemplated hereby
and for the purpose of operating certain Chicago-area art galleries currently
operated by MCM, and is willing to execute this Agreement indicating its
agreement to be jointly and severally liable for Sub's obligations hereunder;
WHEREAS, Sub desires to purchase from MCM, and MCM desires to sell to Sub,
certain of the assets used in the Business on an "as is-where is" basis for the
consideration and upon the terms and conditions hereinafter set forth; and
WHEREAS, MCM agrees to consign to Sub certain inventory of MCM, and Sub
agrees to act as consignee with respect to such inventory, on the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Agreement to Sell and Purchase. Upon the terms and subject to the
conditions set forth herein, MCM hereby sells, transfers, assigns, conveys and
delivers to Sub, and Sub hereby purchases from MCM, the Acquired Assets (as
defined in Section 1.2 hereof), excluding only the Excluded Assets (as defined
in Section 1.3 hereof), free and clear of all mortgages, liens, security
interests or encumbrances (collectively, "Liens"), other than Liens with respect
to the Assumed Liabilities (as defined in Section 1.4 hereof) or Liens set forth
on Schedule 1.1 hereto (collectively, the "Permitted Liens")
1.2 Acquired Assets. As used herein, the term "Acquired Assets" shall mean
all right, title and interest of MCM in and to any and all current and long-term
assets associated with the Business on the date hereof, whether real, personal
or mixed, tangible or intangible, excluding only the Excluded Assets. Without
limiting the generality of the foregoing, the Acquired Assets shall include the
following:
(a) all current and long-term assets listed on Schedule 1.2(a)
attached hereto, together with all of MCM's office supplies, general
supplies, packing materials and framing materials (i.e., miscellaneous
framing samples and supplies, but excluding completed frames);
(b) all accounts receivable of MCM listed on Schedule 1.2(b) hereto;
(c) all right, title and interest of MCM in, to and under each of
the open customer layaway orders (collectively, the "Layaways") identified
on Schedule 1.2(c) hereto, it being agreed that, notwithstanding the
foregoing, any item of inventory relating to Layaways in the possession of
MCM on the date hereof shall remain the property of MCM and shall be
included in the Consigned Inventory (as defined in Section 2.1);
(d) all right, title and interest of MCM in, to and under each of
the open customer orders classified as "To Be Ordered's" (collectively,
"TB0's"), identified on Schedule 1.2(d) hereto;
(e) all right, title and interest of MCM in, to and under each of
the contracts, agreements, understandings, policies and arrangements
listed on Schedule 1.2(e) hereto (collectively the "Contracts"), a copy of
each of which has previously been provided or otherwise made available to
ARI and/or Sub;
(f) all right, title and interest of MCM in, to and under any
trademarks, trade names or assumed names currently used by MCM in the
Business, including, without limitation, the names "▇▇▇▇▇▇▇ ▇▇▇▇▇
Galleries," "Gallery Lara" and "The Artique" and any marks associated
therewith and derivatives thereof;
(g) the MCMLP 401(k) Plan, together with the trust related thereto;
and
(h) all books of account, records (other than partnership or
corporate records), research and resource materials, plans, files,
invoices, order files, customer lists, supplier lists, catalogs,
information sheets, pricing sheets, advertising and display materials and
brochures, financial and inventory software, and all other files, records
and data of MCM used in or related to the Business,
2
except to the extent such materials relate to the Excluded Assets and/or
Retained Liabilities and, in each case, subject to the access provisions
of Section 1.9(d)(ii).
1.3 Excluded Assets. Notwithstanding the foregoing, the Acquired Assets
shall not include, and neither ARI nor Sub shall purchase, the following assets
(collectively, the "Excluded Assets"), which Excluded Assets shall be retained
by MCM and shall not be sold, assigned or transferred to either of ARI or Sub:
(a) all cash and cash reserves of MCM, including all temporary cash
investments, bank deposits, rights to funds generated from credit card
receipts relating to sales made prior to the date hereof (without regard
to when such funds are actually received by MCM), marketable securities,
certificates of deposit, commercial paper, treasury bills, notes and other
similar investments;
(b) all inventory owned by MCM, including, without limitation, the
Consigned Inventory (as defined in Section 2.1) (collectively, the
"Inventory"), and all proceeds of the foregoing;
(c) all customer deposits made on or prior to the date hereof in
respect of any item of Inventory, any Layaway or any of the TBO's;
(d) all lease or rental prepayments, or security or other deposits
of MCM;
(e) all inventory or other property held by MCM on a consignment
basis or otherwise in the possession of MCM but owned by third parties
(collectively, "Third Party Consigned Inventory"), it being understood
that Sub shall take physical possession of, but not legal title to, any of
such consigned property the consignor of which consents to the transfer to
Sub thereof;
(f) all right, title and interest of MCM in, to and under that
certain Consignment, Royalty and Asset Purchase Agreement, dated November
10,1995 (the "CAW Agreement"), between MCM and Corporate Artworks Ltd.,
including, without limitation, any assets, inventory or other property of
MCM consigned thereunder or rights to receive proceeds pursuant thereto;
(g) all right, title and interest of MCM in, to and under any claims
and/or rights against third parties that (i) relate to MCM or the Business
prior to the date hereof, to any Excluded Asset or to any Retained
Liability, whether or not currently existing or asserted, and (ii) do not
directly relate to the Assumed Liabilities;
3
(h) all partnership and/or corporate records, books of account, tax
returns and other records and documents of MCM and its partners not
specifically related to the operation of the Business;
(i) all right, title and interest of MCM in and to its Washington,
D.C. (Georgetown) location (the "Georgetown Location") and any assets or
property of MCM located at or directly related to conduct of business by
MCM at such location (it being understood that MCM will not use the name
▇▇▇▇▇▇▇ ▇▇▇▇▇ or any derivatives thereof with respect to the Georgetown
Location, other than as may be required in connection with documentation
relating to the leasing or subleasing thereof);
(j) all insurance premiums prepaid by MCM prior to the date hereof;
provided, however, that such premiums may be retained by ARI or Sub to the
extent any of such policies is transferred to ARI and/or Sub and MCM is
reimbursed in full for the remaining amount of any such prepayments;
(k) all prepaid taxes and any rights of MCM to any federal, state,
local or foreign tax refunds or carrybacks or any payment under any tax
sharing, tax allocation or similar agreements;
(l) all right, title and interest of MCM in and to each of the
assets identified on Schedule 1.3(1) hereto;
(m) all right, title and interest of MCM in, to and under this
Agreement, that certain Confidentiality Agreement, dated May 9, 1996 (the
"Confidentiality Agreement"), between ARI and MCM, and under any other
agreement between or among MCM, ARI and/or Sub entered into on or after
the date of this Agreement; and
(n) all right, title and interest of MCM in and to any and all
assets and properties relating to the Business to the extent such assets
and properties are not transferable pursuant to applicable law or
contract.
1.4 Assumed Liabilities. Except as set forth in Section 1.5 and
notwithstanding anything to the contrary contained in this Agreement, Sub hereby
assumes and agrees to pay, perform and discharge all operating liabilities of
MCM incurred in connection with, or as a result of, the ordinary course of
business and associated with the Business on or after the date hereof,
including, without limitation, the following (collectively, the "Assumed
Liabilities"):
(a) except as otherwise provided herein, any liabilities or
obligations of MCM arising under or related to (i) any of the Contracts
constituting Acquired Assets, (ii) Layaways, (iii) TBO's, (iv) Third Party
Consigned Inventory (including any obligation to make payments or return
artwork to a consignor), or
4
(v) any open vendor orders, including, without limitation, those listed on
Schedule 1.4(a) hereto, in each case to the extent that such obligations
or liabilities remain unperformed or unfulfilled on, or by their terms
continue in effect after, the date hereof;
(b) all trade payables and accrued expenses of MCM on or as of the
date hereof; provided, however, that the aggregate amount of trade
payables and accrued expenses assumed by Sub shall not exceed $546,460;
(c) except as otherwise provided in Section 1.5(d), any liabilities
or obligations of MCM related to compensation currently in force between
MCM and any of its employees, sales persons, agents or representatives,
including, without limitation, liabilities and obligations in respect of
salary, regular and quarterly bonuses, commissions, accrued vacation,
benefits and insurance;
(d) all liabilities and obligations that arise pursuant to Section
5.3, including, without limitation, any liabilities and obligations in
respect of the MCMLP 401(k) Plan; and
(e) except as otherwise specifically set forth herein, all
liabilities or obligations relating to any sales, use, purchase, transfer,
real estate, payroll, unemployment compensation or similar taxes, fees,
levies, duties, imposts and other charges of any kind (together with any
and all interest, penalties, additions to tax and additional amounts
imposed with respect thereto) (collectively, "Taxes") imposed by any
governmental or taxing authority arising from or related to (i) the
consummation of any of the transactions contemplated hereby, (including
the consignment of the Consigned Inventory) or (ii) any period on or after
the date hereof.
Sub shall pay, discharge and perform all of the Assumed Liabilities
promptly and when due, except to the extent contested by Sub in good faith
(provided that such liabilities shall continue to be Assumed Liabilities). MCM
will use its reasonable efforts to assist Sub in the assumption of the foregoing
liabilities, including, without limitation, the execution and delivery of any
agreements, instruments or other documents reasonably necessary or desirable to
accomplish the foregoing.
1.5 Retained Liabilities. Neither ARI nor Sub is assuming, and neither
shall be liable for, any of the following liabilities or obligations of MCM
(collectively, the "Retained Liabilities") and none of the following liabilities
or obligations shall be Assumed Liabilities for purposes of this Agreement:
(a) any liabilities or obligations of MCM under the CAW Agreement;
5
(b) any liabilities or obligations of MCM relating to the Georgetown
Location;
(c) any liabilities or obligations of MCM relating to any Taxes
arising from or related to any period prior to the date hereof, including,
any sales taxes due or to become due with respect to sales of Inventory by
MCM prior to the date hereof;
(d) any liabilities or obligations of MCM in respect of salary or
commissions payable to MCM's employees prior to the date hereof, including
the payment of any amounts payable to hourly employees for services
performed prior to the date hereof (it being agreed that, except for the
foregoing, Sub shall assume and be solely responsible for the payment of
all liabilities and obligations relating to regular and quarterly bonuses,
commissions, accrued vacation and other employee compensation and
benefits, regardless of whether such amounts relate to periods on or prior
to the date hereof);
(e) any liabilities or obligations of MCM related to the Excluded
Assets or which are not Assumed Liabilities; and
(f) any liabilities or obligations of MCM under the Confidentiality
Agreement, this Agreement or under any other agreement between or among
MCM, ARI and/or Sub entered into on or after the date of this Agreement.
MCM hereby acknowledges that it is retaining the Retained Liabilities and
MCM shall pay, discharge and perform all such liabilities and obligations
promptly when due, except to the extent contested by MCM in good faith (provided
that such liabilities and obligations shall continue to be Retained
Liabilities).
1.6 Purchase Price; Allocation of Purchase Price. The aggregate purchase
price to be paid to MCM by or on behalf of Sub for the Acquired Assets shall be
the assumption by Sub of the Assumed Liabilities plus cash in the amount of
$1,000,000 (the "Purchase Price"), which shall be payable concurrently herewith
in immediately available federal funds (it being agreed that such amount may be
reduced by any amounts delivered to MCM pursuant to that certain Amended and
Restated Escrow Agreement, dated as of May 15, 1997 (the "Escrow Agreement"),
among ARI, MCM and First Trust National Association, as escrow agent) to the
extent such amounts are paid to MCM by the Escrow Agent on the date hereof. The
Purchase Price shall be allocated among the Acquired Assets as shall be agreed
upon by the parties as soon as practicable hereafter, which allocation shall be
set forth on Schedule 1.6 to be attached hereto. MCM, ARI and Sub each hereby
covenants and agrees that none of them will take a position on any income Tax
return or with any governmental authority that is in any way inconsistent with
the terms of this Section 1.6 or the allocation set forth on Schedule 1.6 to be
attached hereto. The parties hereto agree that such allocation shall be revised
in a manner consistent with Temporary Treasury Regulation ss.1.1060-1T(f) or any
successor thereto to reflect
6
any adjustments to the Purchase Price made pursuant to this Article I and any
indemnification payments made under Article VIII.
1.7 Agreement Regarding TBO's. With respect to TBO's, the parties hereby
agree as follows:
(a) concurrently herewith, Sub shall assume responsibility for the
administration and completion of each of the TBO's listed on Schedule
1.2(d) hereto, including, without limitation, remitting any remaining
amounts due to vendors and/or artists, collecting amounts due from
customers, paying any commissions due sales personnel, paying any Taxes,
expenses or other charges related thereto, and providing, in a
professional manner, any and all framing, shipping and related services as
may be necessary to complete such TB0;
(b) Sub shall use its best efforts to collect any and all amounts
due in respect of TB0's in a professional, timely and diligent manner;
(c) as consideration for the transfer of the TBO's to Sub, MCM shall
be entitled to receive a commission equal to 11.30% of any amounts paid to
Sub by customers in respect of the TB0's (each, a "TB0 Payment");
(d) so long as any amounts remain due from customers in respect of
TB0's, Sub shall submit to MCM a report at least once per month (which
report shall be delivered concurrently with the monthly reconciliation
statement in respect of Consigned Inventory pursuant to Section 2.2(c)(i))
setting forth the status of each TB0, any amounts collected from customers
and Sub's calculation of the TB0 Payment due MCM in respect thereof; and
(e) concurrently with Sub's delivery of the report referred to in
Section 1.7(d), Sub shall remit to MCM the amount of the TB0 Payment, if
any, in immediately available federal funds.
1.8 [Intentionally Omitted]
1.9 Additional Provisions.
(a) Instruments of Conveyance, Transfer and Assumption, Etc. (i)
from time to time and at any time at the request of Sub, MCM shall execute
and deliver to Sub such deeds, bills of sale, endorsements, assignments
and other good and sufficient documents and instruments of conveyance and
transfer, in form and substance reasonably satisfactory to Sub, as Sub
shall deem reasonably necessary or appropriate to effectively confirm to
and vest in Sub all right, title and interest in and to all of the
Acquired Assets, free and clear of all Liens together with all third party
consents and approvals relating thereto, and
7
(ii) concurrently herewith, Sub shall deliver to MCM such instruments of
assumption, in form and substance reasonably satisfactory to MCM, as MCM
shall deem reasonably necessary and appropriate to evidence the assumption
by Sub of the Assumed Liabilities pursuant to Section 1.4.
(b) Further Assurances, Etc. MCM shall, at any time and from time to
time after the date hereof, upon the reasonable request of Sub, do,
execute, acknowledge and deliver, or cause to be done, executed,
acknowledged or delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney or assurances as may be
reasonably required by Sub for the effective transferring, assigning,
conveying, granting, assuring and confirming to Sub, or for aiding and
assisting in the collection of or reducing to possession by Sub, any of
the Acquired Assets, or to confirm to and vest in Sub all of MCM's right,
title and interest in and to the Business and to all of the Acquired
Assets. Sub shall, at any time and from time to time after the date
hereof, upon the reasonable request of MCM, do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged or delivered, all
such further acts, assumptions or assurances as may be reasonably required
for the effective assumption by Sub of the Assumed Liabilities.
(c) Assignment of Contracts, Rights, Etc. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall not
constitute an assignment or attempted assignment of any Contract, lease,
commitment, agreement, purchase or sale order, technology, intellectual
property, concession, grant, franchise or any other asset or property
included in the Business or Acquired Assets, or any claim or right or any
benefit arising thereunder or resulting therefrom, to the extent that an
assignment or attempted assignment thereof, without the consent or waiver
of a third party, cannot lawfully be made or if made would constitute a
breach thereof or in any way materially adversely affect the rights of Sub
thereunder, unless and until such consent or waiver of such third party
has been duly obtained or become effective by operation of law. MCM shall
use its reasonable efforts to obtain such consent or waiver of such third
party to the assignment thereof to Sub in all cases in which such consent
or waiver is necessary or required for assignment or transfer as
contemplated herein. If such consent is not obtained or if,
notwithstanding such consent, an assignment or attempted assignment
thereof would be ineffective or would materially adversely affect the
rights of MCM thereunder so that Sub would not, in fact, receive all such
rights, MCM will use its reasonable efforts and cooperate with Sub in any
lawful arrangements necessary or desirable to provide for Sub the benefit
thereunder. If and to the extent that such arrangements cannot be made,
Sub shall not have any liability or obligation with respect to such
affected Acquired Asset, any other provision of this Agreement or any
assumption agreement executed by Sub to the contrary notwithstanding. If
and to the extent that such arrangement can be made so as to afford Sub
the benefit thereof, Sub
8
shall be liable for the corresponding obligations (except to the extent
herein otherwise provided).
(d) Access to Information by Sub and MCM.
(i) Those books and records the possession of which is not
being transferred to Sub pursuant to this Agreement and which relate
to the Business shall be preserved and maintained by MCM for at
least five (5) years after the date hereof. Upon prior notice from
Sub to such effect, MCM shall provide Sub and its authorized
representatives, during normal business hours, such access to such
books and records retained by MCM and MCM's agents or
representatives, and which relate to the Business as may be
reasonably requested by Sub from time to time. Sub shall be
entitled, at its own expense, to make extracts and copies thereof
and MCM shall cooperate with Sub in connection with accomplishing
the same. Prior to disposing of any such books and records after the
end of such five (5) year period, MCM shall offer to Sub the right
to obtain the originals of such books and records at Sub's cost and
expense of shipping.
(ii) Those books, records, computer files and related
materials, the possession of which is being transferred to Sub
pursuant to this Agreement and which relate to the Business, any of
the Excluded Assets and/or any Retained Liability (including,
without limitation, the Inventory) shall be preserved and maintained
by Sub for at least five (5) years after the date hereof. Upon prior
notice from MCM to such effect, Sub shall provide MCM and its
authorized representatives, during normal business hours, such
access to such books, records, computer files and related materials,
and any hardware or software necessary to access and review the
foregoing, in the possession of Sub and/or Sub's agents or
representatives, and which relate to the Business, any of the
Excluded Assets and/or any Retained Liability (including, without
limitation, the Inventory) as may be reasonably requested by MCM
from time to time. MCM shall be entitled, at its own expense, to
make extracts and copies, including, without limitation, copies of
any relevant computer files, thereof and Sub shall cooperate with
MCM in connection with accomplishing the same. Prior to disposing of
any such books, records, computer files and related materials, after
the end of such five (5) year period, Sub shall offer to MCM the
right to obtain the originals of such books, records, computer files
and related materials, at MCM's cost and expense of shipping.
(iii) Notwithstanding the foregoing, within forty-five (45)
days after the date hereof, MCM and Sub shall identify those books,
records
9
and related materials located at the Schaumburg, Illinois corporate
office which do not relate to the ongoing operation of the Business,
which books, records and related materials shall be removed from
such location by MCM and retained in accordance with the provisions
of Section 1.9(d)(i) hereof.
ARTICLE II
CONSIGNMENT OF CERTAIN INVENTORY
2.1 Grant of Rights. Effective upon the date hereof and, except as
provided in Section 2.2(g), for a period of five (5) years hereafter (the
"Consignment Period"), MCM hereby grants to Sub the sole and exclusive right,
throughout the world, to offer and sell all or any item of inventory listed on
Schedule 2.1 hereto (collectively, the "Consigned Inventory"). The Consigned
Inventory shall remain in the possession of Sub, as consignee, on a consignment
basis in accordance with the provisions of this Article II.
2.2 Consignment Fee.
(a) Amount of Fee. In consideration for the rights granted by MCM to
Sub in Section 2.1, MCM shall be entitled to receive the following fees in
connection with sales of Consigned Inventory:
(i) with respect to any item of serialized Consigned Inventory
purchased by MCM prior to January 1, 1996, 64.88% of the "Total
Original Cost" of such item (as listed on Schedule 2.1 hereto);
(ii) with respect to any item of serialized Consigned
Inventory purchased by MCM on or after January 1, 1996, 100% of the
"Total Original Cost" of such item (as listed on Schedule 2.1
hereto) (all amounts payable pursuant to clauses (i) and (ii)
referred to, collectively, as the "Consignment Fees"); and
(iii) MCM shall also be entitled to receive, with respect to
those items of Consigned Inventory that consist of non-serialized
Inventory or The Artique merchandise, loose frames, frames on
consigned artwork and non-allocated "freight-in" costs for all
Consigned Inventory, the amount of $1,905 per week, which shall be
paid at the same time as, and in conjunction with, each of the first
130 Weekly Payments (as defined below), but shall not be subject to
adjustment (the "Flat-Rate Payment").
(b) Weekly Payments and Reports. All amounts payable pursuant to
this Section 2.2 shall be made by wire transfer of immediately available
federal funds to an account designated by MCM in weekly installments equal
to the
10
Weekly Payment (as defined in Section 2.2(d)) plus the Flat-Rate Payment,
together with a report of all items of Consigned Inventory sold during the
week to which such Weekly Payment relates. For the purposes of this
Agreement, the term "week" shall mean a calendar week beginning at 12:01
a.m. Monday. Sub shall remit each Weekly Payment and Flat-Rate Payment due
MCM hereunder on the Thursday following the week to which such Weekly
Payment relates (or, if such Thursday is not a business day the next
succeeding business day); provided, however, that the first Weekly Payment
hereunder shall be due on Thursday, June 12, 1997 in respect of the
eight-day period from Sunday, June 1, 1997 through Sunday, June 8, 1997,
inclusive. Any Weekly Payment or Flat-Rate Payment that is not paid when
due shall bear interest from the date when due until such amount is paid
in full, at an interest rate per annum, compounded weekly, which is equal
to the lesser of (a) ten percent (10%) per annum and (b) the highest rate
allowable under applicable law.
(c) Reconciliation. The Consignment Fees paid to MCM pursuant to
this Section 2.2 shall be subject to reconciliation on a monthly basis as
follows:
(i) no later than the fifteenth (15th) day following the last
day of each month during the Consignment Period, Sub shall remit to
MCM a written statement setting forth: (A) a list of all serialized
Consigned Inventory sold during such month, which list shall include
the artist's name, title, serial or other inventory tracking number,
and the Total Original Cost of each item sold; (B) the payments
received by or on behalf of Sub with respect to each such item of
Consigned Inventory sold during such month; (C) the aggregate amount
of Consignment Fees applicable to such Consigned Inventory sold
during such month, as determined pursuant to Sections 2.2(a)(i) and
(ii) (the "Aggregate Consignment Fees"); and (D) the aggregate
amount of Weekly Payments made by Sub to MCM pursuant to Section
2.2(b) applicable to such month (the "Aggregate Weekly Payments"),
which amounts shall be adjusted as necessary to account for Weekly
Payments applicable to more than one month (e.g., if a Weekly
Payment is due on Thursday June 5, 1997 for the week of May 26, 1997
through June 1, 1997, one-seventh of the Weekly Payment would be
allocated to the month of June);
(ii) in the event that the Aggregate Consignment Fees for any
month are less than the amount of the Aggregate Weekly Payments for
such month, then Sub shall be entitled to acquire from MCM, at no
additional cost, items of serialized Consigned Inventory for Sub's
own account, subject to the following conditions: (A) Sub shall
notify MCM in writing of the items of serialized Consigned Inventory
it desires to acquire; (B) the aggregate amount of Consignment Fees
(as determined
11
pursuant to Sections 2.2(a)(i) or (ii)) which would otherwise be
payable by Sub to MCM in respect of such items of serialized
Consigned Inventory to be acquired by Sub pursuant to this Section
2.2(c)(ii) shall not exceed the amount by which the Aggregate Weekly
Payments exceed the amount of the Aggregate Consignment Fees for
such month; and (C) at least one-third of the aggregate amount of
Consignment Fees (as determined pursuant to Sections 2.2(a)(i) and
(ii)) which would otherwise be payable by Sub to MCM in respect of
such items of serialized Consigned Inventory to be acquired by Sub
pursuant to this Section 2.2(c)(ii) shall be attributable to
Consigned Inventory purchased by MCM prior to January 1, 1995;
provided, however, that in the event that none of the remaining
serialized Consigned Inventory was purchased by MCM prior to January
1, 1995, then this clause (C) shall cease to be applicable;
provided, further, that Sub shall have the right to defer any
acquisitions of serialized Consigned Inventory pursuant to this
Section 2.2(c)(ii) until such time or times as Sub shall determine,
it being understood that in the event Sub defers such acquisitions
the parties shall maintain (and update on a monthly basis) a record
of the amount of Consigned Inventory that Sub may acquire hereunder;
and
(iii) in the event that the amount of the Aggregate
Consignment Fees for any month exceeds the amount of the Aggregate
Weekly Payments for such month, then Sub will pay to MCM the amount
by which the Aggregate Consignment Fees exceeds the amount of
Aggregate Weekly Payments for such month, which payment shall be
made by Sub in immediately available federal funds and shall be paid
to MCM on or before the date on which the next Weekly Payment is
due, it being understood that any amounts paid by Sub to MCM
pursuant to this Section 2.2(c)(iii) shall not be included as part
of any Weekly Payment nor in the determination of the Aggregate
Weekly Payments for any month; provided, however, that any amount
payable hereunder that is not paid when due shall bear interest from
the date when due until such amount is paid in full, at an interest
rate per annum, compounded weekly, equal to the lesser of (a) ten
percent (10%) per annum and (b) the highest rate allowable under
applicable law.
(d) Weekly Payments. The amount of the weekly payment payable by Sub
to MCM pursuant to Section 2.2(b) shall be $11,886 (as such amount may be
adjusted from time to time pursuant to this Section 2.2(d), the "Weekly
Payment"). Following the first year of the Consignment Period, in the
event that the Minimum Annual Payment (as defined in Section 2.2(e))
applicable to any year is reduced pursuant to Section 2.2(e), then the
amount of the Weekly Payment for such year shall be reduced to an amount
equal to 1.923% (i.e., 1/52nd) of the Minimum Annual Payment applicable to
such year.
12
(e) Minimum Annual Payments. In the event that the aggregate amount
of Weekly Payments paid by Sub to MCM in respect of serialized Consigned
Inventor; pursuant to Section 2.2(b) plus reconciliation payments paid by
Sub to MCM pursuant to Section 2.2(c)(iii), if any, during any of the
first four years of the Consignment Period (the "Actual Annual Payment")
exceeds $618,058 (as such amount may be adjusted from time to time
pursuant to this Section 2.2(e), the "Minimum Annual Payment"), then the
Minimum Annual Payment for the following year shall be reduced by an
amount equal to 75% of the amount by which the Actual Annual Payment
exceeded the Minimum Annual Payment with respect to such year, it being
agreed that each year of the Consignment Period shall be measured from
anniversary date of this Agreement.
(f) Termination of Consignment; Return of Consigned Inventory. At
such time as Sub shall have paid MCM all Consignment Fees due in respect
of Consigned Inventory, the provisions of this Article II shall terminate
and shall cease to be of any further force or effect. In addition, the
provisions of this Article II may be terminated by MCM in the event of a
breach of or default by either of ARI or Sub in respect of any of their
respective covenants, representations or warranties contained in this
Agreement or in any of the other agreements, instruments, certificates of
documents contemplated hereby. Following a termination of the provisions
of this Article II, ARI and Sub agree that they shall promptly return all
Consigned Inventory to MCM and shall cooperate with MCM to effect the
termination of the consignment relationship created hereunder.
(g) Acceleration of Consignment Fee following an Organic
Transaction. In the event of an Organic Transaction (as defined below),
all Consignment Fees in respect of any serialized Consigned Inventory
which is unsold as of the date of the Organic Transaction (as determined
pursuant to Sections 2.2(a)(i) and (ii)), together with any remaining
Flat-Rate Payments payable pursuant to Section 2.2(a)(iii), shall become
immediately due and payable by Sub to MCM and shall be paid by Sub in full
in immediately available federal funds to an account designated by MCM.
Following such payment, title to all remaining Consigned Inventory shall
be transferred from MCM to Sub and the provisions of this Article II shall
terminate. For the purposes of this Section 2.2(g), an "Organic
Transaction" means (i) the sale, lease, exchange, transfer or other
disposition of all or substantially all of ARI's or Sub's assets to a
person or group of persons; (ii) any merger, consolidation, refinancing,
recapitalization, or other transaction or series of transactions that
results in the holders of the issued and outstanding voting securities of
either of ARI or Sub (including any affiliate of such holders) immediately
prior to such transaction(s) owning or controlling less than a majority of
the voting securities of the continuing or surviving entity immediately
following such transaction(s); and/or (iii) any event, occurrence, or
transaction or series of transactions following or as a result of
13
which ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is no longer (A) a director of each of ARI and
Sub, (B) the Chairman of the Board, Chief Executive Officer or President
of each of ARI and Sub, and (C) the record and beneficial owner of the
largest aggregate number of issued and outstanding shares of the capital
stock of ARI.
(h) Sample Calculation; Intent of this Section 2.2. A sample
calculation of the payment and payment adjustment provisions is set forth,
for illustrative purposes only, as Exhibit 2.2(h) to this Agreement. This
Section 2.2 is intended to ensure that, subject to the acceleration
provisions of Section 2.2(g), by the end of the Consignment Period, all
Consigned Inventory will have been sold (or acquired by Sub pursuant to
Section 2.2(c)(ii)) and all provisions hereof shall be interpreted
consistently with such intent.
2.3 Labelling of Consigned Inventory. Sub will affix a label on each item
of Consigned Inventory, which label shall be clearly visible and shall read as
follows:
NOTICE: THIS ARTICLE IS HELD ON A CONSIGNMENT BASIS ONLY AND IS THE
PROPERTY OF MCM LIMITED PARTNERSHIP. ANY REMOVAL OF THIS ARTICLE
FROM THESE PREMISES IS SUBJECT TO AN ASSET PURCHASE AND CONSIGNMENT
AGREEMENT AND MAY REQUIRE THE PRIOR WRITTEN CONSENT OF MCM LIMITED
PARTNERSHIP.
2.4 Costs. MCM shall not be responsible for any costs which Sub may incur
in connection with its efforts to sell, maintain, store, insure or otherwise
handle the Consigned Inventory.
2.5 Insurance; Storage of Consigned Inventory. During the Consignment
Period the Consigned Inventory will be stored only at the locations set forth on
Schedule 2.5 hereto (collectively, the "Permitted Locations"). At all times from
the date hereof through the later of the expiration of the Consignment Period
and the full performance by Sub of its obligations under this Article II, Sub
shall obtain and maintain, at its sole cost and expense, such casualty and other
insurance as MCM shall require from one or more insurance carriers satisfactory
to MCM, in an amount not less than the aggregate "Total Original Cost" of the
serialized Consigned Inventory as set forth on Schedule 2.1 hereto plus the
total amount of Flat-Rate Payments to be made pursuant to Section 2.2(a)(iii).
Each of such policies shall (a) name MCM as an additional named insured and loss
payee; (b) provide that it may not be terminated or amended without thirty (30)
days' prior written notice to MCM; and (c) provide that it is primary to any
other valid and collectible insurance policies applicable to MCM and/or the
Consigned Inventory and is not subject to contribution. Concurrently herewith,
and from time to time at MCM's request hereafter, Sub shall deliver to MCM
evidence that such insurance policies are in full force and effect, and a
certificate of insurance naming MCM as an additional named insured and loss
payee.
14
2.6 Title; UCC Filings.
(a) Title to the Consigned Inventory is reserved in MCM until sale
of and payment in full to MCM with respect to the Consigned Inventory in
accordance with the terms hereof or until such Consigned Inventory is
acquired and paid for by Sub pursuant to Section 2.2(c)(ii) hereof.
(b) Concurrently with the execution of this Agreement, Sub and/or
ARI shall execute and deliver to MCM for filing such UCC-1 financing
statements as MCM shall reasonably request showing MCM as consignor and
Sub as consignee with respect to the Consigned Inventory (collectively,
the "UCC Consignment Statements").
2.7 Removal of Consigned Inventory; Inspection. Except in connection with
delivery of Consigned Inventory to a customer following receipt by Sub of all
amounts due from such customer in respect thereof (or until such Consigned
Inventory is acquired and paid for by Sub pursuant to Section 2.2(c)(ii)
hereof), Sub shall not remove, and shall not permit any third party to remove,
any item of the Consigned Inventory from any Permitted Location without MCM's
prior written consent. At reasonable times and upon reasonable notice from MCM,
Sub shall allow MCM or its representatives access to and the right to inspect
the Consigned Inventory, together with any and all records or reports in
connection therewith, including, without limitation, computer files and related
software. Notwithstanding the foregoing, Sub shall be entitled to remove items
of Consigned Inventory, without prior notice to or consent from MCM, to and from
any of the Permitted Locations, provided, and on the condition, that Sub shall
provide MCM with a report listing the location of each item of Consigned
Inventory concurrently with the monthly reconciliation statement delivered to
MCM pursuant to Section 2.2(c)(i). Upon at least thirty (30) days' prior written
notice to MCM, Sub shall have the right to remove the Consigned Inventory or a
part thereof to a location other than a Permitted Location; provided, however,
that, Sub shall have provided MCM with such documentation and other information
as MCM may request, in its sole discretion, to amend or file any UCC consignment
filings of Sub, ARI, MCM or any other party in respect of the Consigned
Inventory and to provide appropriate notice to the secured creditors of Sub
and/or ARI, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MCM
MCM represents and warrants to each of ARI and Sub as follows:
3.1 Organization and Good Standing. MCM is a partnership duly organized,
validly existing and in good standing under the laws of the State of Illinois
and has full power and authority to enter into and perform this Agreement and to
carry on the Business as it is currently being conducted. MCM is duly qualified
to do business and is in good standing as a foreign partnership in each
jurisdiction in which the nature of its business or properties requires
15
such qualification, except where the failure to be so qualified or in good
standing would not have a material adverse effect on the Business.
3.2 Authority. The execution, delivery and performance by MCM of this
Agreement, and each of the other agreements, documents and instruments
contemplated hereby, have been duly authorized by all necessary action of MCM
and by all necessary action of each of its partners. This Agreement, and each
other agreement, document and instrument contemplated hereby, have been duly
authorized, executed and delivered by MCM and constitute the legal, valid and
binding obligations of MCM enforceable against MCM in accordance with their
respective terms, except as such enforceability may be limited by (a) applicable
bankruptcy, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium, insolvency or other similar laws affecting the rights and remedies
of creditors generally, (b) general principles of equity (regardless of whether
considered in a proceeding in equity or at law) and the discretion of the court
before which any proceeding therefor may be brought, and (c) an implied covenant
of good faith and fair dealing.
3.3 No Conflicts. The execution, delivery and performance by MCM of this
Agreement and the other agreements, documents and instruments contemplated
hereby do not and will not (a) conflict with, or result in the breach or
termination of, or constitute a default under, the certificate of limited
partnership or agreement of limited partnership of MCM or any lease, agreement,
license, commitment or other instrument or any order, judgment or decree to
which MCM is a party or is otherwise bound (assuming that each of the consents
referred to in Section 3.4 are obtained); (b) constitute a violation by MCM of
any law or regulation applicable to MCM; or (c) result in the creation or
imposition of any Lien upon any of the Acquired Assets, except, in each case,
where such conflict, breach, termination, default, violation or Lien would not
reasonably be expected to have a material adverse effect upon the Business or
the Acquired Assets.
3.4 Consents and Approvals. Except as set forth on Schedule 3.4 hereto, no
consent, approval or other action by, or notice to, or registration or filing
with, any governmental or administrative agency or authority, or any other
person, is required or necessary in connection with the execution, delivery and
performance by MCM of this Agreement and each other agreement, document and
instrument contemplated hereby, or the consummation by MCM of the transactions
contemplated hereby and thereby (including the assignment of Contracts).
3.5 No Interest In Other Entitles. MCM has no subsidiaries. The Acquired
Assets do not include shares of capital stock of any corporation or any
ownership or other investment interest, either of record, beneficially or
equitably, in any other entity and MCM does not hold, directly or indirectly,
any of the foregoing.
3.6 Compliance with Law. MCM is not in violation, and no event has
occurred which, with the passage of time, would constitute a violation, of any
statute, law, rule, regulation, ordinance, decree, order, franchise, permit or
license of any governmental body or
16
court applicable to MCM or the Business, and which violation would reasonably be
expected to have a material adverse effect on the Business or the Acquired
Assets.
3.7 Compliance with Material Agreements and Leases. Except as set forth on
Schedule 3.7 attached hereto, to MCM's knowledge, it is not in default under any
material agreement or lease and, to MCM's knowledge, no event has occurred or is
reasonably likely to occur which (after notice or lapse of time or both) would
constitute a breach or default under, or otherwise permit modification,
cancellation, acceleration or termination of, any material agreement or lease or
would result in the creation of any Lien upon of the Business or the Acquired
Assets, except, in each case, where such default, breach or Lien would not
reasonably be expected to have a material adverse effect upon the Business or
the Acquired Assets.
3.8 Ordinary Course. Except as set forth in Schedule 3.8 attached hereto,
since October 31, 1996, MCM has operated the Business in the ordinary course
consistent with past practices and has not made or instituted any material
change in its methods of purchase, sale, consignment, lease, management,
marketing, accounting, financing, or operations.
3.9 Litigation. There is no suit, claim, investigation, action or
proceeding against MCM which is now pending or, to the knowledge of MCM,
threatened before any court, administrative or regulatory body or governmental
agency, nor to the knowledge of MCM is there any reasonable basis therefor,
which will or could prevent or interfere with the consummation of the
transactions contemplated hereby, and which would reasonably be expected to have
a material adverse effect on the Business or the Acquired Assets.
3.10 Fairness of Financial Statements. True and complete copies of (a) the
audited balance sheets of MCM for the fiscal years ended January 31, 1996 and
January 31, 1995, and the related audited statements of operations, changes in
partners' capital and cash flows of MCM, together with all related notes
thereto, accompanied by the reports thereon of BDO ▇▇▇▇▇▇▇ LLP (collectively
referred to herein as the "Financial Statements"), and (b) the unaudited
consolidated balance sheet of MCM for the month of October 31, 1996 and the
related income and expense statements and consolidated profit and loss
comparisons (collectively referred to herein as the "Interim Financial
Statements") have been delivered by MCM to ARI. Except as disclosed on Schedule
3.10 attached hereto and, with respect to the Financial Statements, based solely
on the report of BDO ▇▇▇▇▇▇▇ LLP, the Financial Statements and the Interim
Financial Statements (i) were prepared in accordance with the books of account
and other financial records of MCM; (ii) present fairly in all material respects
the consolidated financial condition and results of operations of the periods
covered thereby; (iii) have been prepared in accordance with United States
generally accepted accounting principals and practices as in effect during the
relevant period and consistently applied throughout the periods involved; and
(iv) include all adjustments that are necessary for a fair presentation of the
consolidated financial condition of MCM and the results of the operations of MCM
as of the dates thereof or for the periods covered thereby, subject, in the case
of the Interim Financial Statements, to normal year-end adjustments.
17
3.11 Tax Returns. Except as set forth on Schedule 3.11 attached hereto (i)
all returns and reports in respect of Taxes required to be filed with respect to
MCM prior to the date hereof have been timely filed; (ii) all Taxes required to
be shown on such returns and reports or otherwise due have been timely paid;
(iii) all such returns and reports are true, correct and complete in all
material respects; (iv) no adjustment relating to such returns has been proposed
by any Tax authority; (v) there are no pending or, to the knowledge of MCM,
threatened actions or proceedings for the assessment or collection of Taxes
against MCM; (vi) all Taxes required to be withheld, collected or deposited by
or with respect to MCM have been timely withheld, collected or deposited, as the
case may be, and, to the extent required, have been paid to the relevant taxing
authority; and (vii) MCM has established in accordance with its normal
accounting practices and procedures accruals and reserves that, in the
aggregate, are adequate for the payment of all Taxes not yet due and payable and
attributable to any period preceding the date hereof.
3.12 Proprietary Rights. MCM owns or possesses valid and binding licenses
or other rights to use, all trademarks, trade and business names, service marks,
service names that are used in or related to the Business and listed on Schedule
3.12 attached hereto (collectively, the "Proprietary Rights").
3.13 Employees. Set forth on Schedule 3.13 attached hereto is a list of
the name and job title of each of the current employees of MCM, which schedule
also sets forth each employee's: (a) hire date; (b) salary and/or draw against
commissions; (c) commission and/or bonus structure; (e) insurance and 401(k)
plan participation; and (f) estimated accrued vacation at April 30, 1997.
Notwithstanding the foregoing, the parties acknowledge that any information
contained in Schedule 3.13 is qualified in its entirety by reference to the
employment and/or wage agreements between MCM and each of its employees, copies
of which have been made available to ARI.
3.14 Environmental Matters. To MCM's knowledge, it has substantially
complied with all applicable laws relating to the environment, safety, health or
the regulation of or imposition of standards of conduct concerning discharges,
emissions, releases or threatened releases of noises, odors or any pollutants,
contaminants or hazardous or toxic wastes, hazardous materials, whether as
matter or energy, into ambient air, water or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants or
hazardous or toxic wastes, hazardous substances or hazardous materials, except,
in each case, where any lack of compliance has not had or would not reasonably
be expected to have a material adverse effect upon the Business or the Acquired
Assets.
3.15 Brokers and Finders. MCM has not engaged, consented to or authorized
any broker, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement.
18
MCM IS SELLING THE ACQUIRED ASSETS TO SUB AND IS CONSIGNING THE CONSIGNED
INVENTORY TO SUB HEREUNDER ON AN "AS IS WHERE IS" BASIS. THE REPRESENTATIONS AND
WARRANTIES OF MCM SET FORTH IN THIS ARTICLE III ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES OF MCM, WHETHER ORAL OR WRITTEN, EXPRESS OR
IMPLIED, WARRANTIES OR CONDITIONS OF MERCHANTABLE QUALITY AND FITNESS FOR A
PARTICULAR PURPOSE OR THOSE ARISING BY STATUTE OR OTHERWISE IN LAW OR FROM THE
COURSE OF DEALING OR USAGE OF TRADE. EXCEPT AS SET FORTH ABOVE, MCM HEREBY
EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ARI AND SUB
Each of ARI and Sub hereby, jointly and severally, represents and warrants
to MCM as follows:
4.1 Organization and Good Standing. Each of ARI and Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the full corporate power and authority to enter into
and to perform this Agreement. ARI is the sole owner of all of the issued and
outstanding equity interests of Sub. Each of ARI and Sub is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business or properties requires such qualification,
except where the failure to be so qualified or in good standing would not have a
material adverse effect on its business or properties. A true and complete copy
of the Restated Certificate of Incorporation and By-Laws of Sub are set forth as
Exhibit 4.1(a) and Exhibit 4.1(b) hereto, respectively.
4.2 Authority. The execution, delivery and performance by ARI and Sub of
this Agreement, and each of the other agreements, documents and instruments
contemplated hereby, have been duly authorized by all necessary corporate action
of ARI and Sub. This Agreement, and each other agreement, document and
instrument contemplated hereby, have been duly authorized, executed and
delivered by ARI and Sub and constitute the legal, valid and binding obligations
of ARI and Sub, enforceable against each of ARI and Sub in accordance with their
respective terms, except as such enforceability may be limited by (a) applicable
bankruptcy, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium, insolvency or other similar laws affecting the rights and remedies
of creditors generally, (b) general principles of equity (regardless of whether
considered in a proceeding in equity or at law) and the discretion of the court
before which any proceeding therefor may be brought, and (c) an implied covenant
of good faith and fair dealing.
4.3 No Conflicts. The execution, delivery and performance by each of ARI
and Sub of this Agreement, the other agreements, documents and instruments
contemplated hereby do not and will not (a) conflict with, or result in the
breach or termination of, or constitute a default
19
under, the certificates of incorporation or by-laws of either of ARI or Sub or
any lease, agreement, license, commitment or other instrument, or any order,
judgment or decree, to which ARI or Sub is a party or by which it is otherwise
bound; (b) constitute a violation by ARI or Sub of any law or regulation
applicable to ARI and/or Sub; or (c) result in the creation or imposition of any
Lien upon any of the Acquired Assets, except, in each case, where such conflict,
breach, termination, default violation or Lien could not reasonably be expected
to have a material adverse effect upon the Business or the Acquired Assets.
4.4 Consents and Approvals. No consent, approval or other action by, or
notice to, or registration or filing with, any governmental or administrative
agency or authority, or any other person, is required or necessary in connection
with the execution, delivery and performance by ARI and/or Sub of this Agreement
and each other agreement, document and instrument contemplated hereby, or the
consummation by ARI and/or Sub of the transactions contemplated hereby and
thereby.
4.5 Subsidiaries. Schedule 4.5 hereto sets forth a list of each entity in
which ARI and/or Sub, directly or indirectly, owns any equity interest and their
respective ownership thereof.
4.6 Compliance with Law. Neither ARI nor Sub is in violation, and no event
has occurred which, with the passage of time, would constitute a violation, of
any statute, law, rule, regulation, ordinance, decree, order, franchise, permit
or license of any governmental body or court applicable to ARI and Sub's
business or properties, and which could reasonably be expected to have a
material adverse effect on the Business or the Acquired Assets.
4.7 Litigation. There is no suit, claim, investigation, action or
proceeding against ARI or Sub which is now pending or, to the knowledge of
either of ARI or Sub, threatened before any court, administrative or regulatory
body or governmental agency, nor to the knowledge of either ARI or Sub is there
any reasonable basis therefor, which will or could prevent or interfere with the
consummation of any transaction contemplated hereby, and which could reasonably
be expected to have a material adverse effect on the Business or the Acquired
Assets.
4.8 Solvency. ARI and each of its subsidiaries, including, without
limitation, Sub, (a) has assets, both at present fair salable value and at fair
valuation, greater than the amount of its liabilities; (b) has capital
sufficient to carry on its respective business and transactions and all business
and transactions in which it is about to engage; (c) has not engaged in and is
not about to engage in a business or transaction for which its remaining assets
are unreasonably small in relation to the business or the transaction; (d) is
able to pay its respective debts as they mature and does not intend to incur, or
believe that it is incurring, debts beyond its ability to pay as they mature;
and (e) has no actual intent to hinder, delay or defraud either present or
future creditors.
20
4.9 Brokers and Finders. Neither ARI nor Sub has engaged, consented to or
authorized any broker, investment banker or other third party to act on its or
their behalf, directly or indirectly, as a broker or finder in connection with
the transactions contemplated by this Agreement.
ARTICLE V
ADDITIONAL COVENANTS
5.1 Certificate of Incorporation and By-Laws of Sub; Agreement to Appoint
MCM Director. ARI and Sub agree that, so long as any obligations remain due to
MCM (or any assignee or successor in interest thereto) under this Agreement or
any agreement or instrument contemplated hereby or any claim for indemnification
remains outstanding MCM shall have, in its sole and absolute discretion (a) the
right, upon delivery of written notice to Sub, to designate one person to the
Board of Directors of Sub, in which case each of ARI and Sub shall immediately
take any and all actions, including, without limitation the execution and
delivery of appropriate stockholder consents necessary to cause such person
designated by MCM to be named as a director of Sub or (ii) the right to (A)
receive prior notice of any action proposed to be taken by the Board of
Directors of Sub, (B) receive such notices as are given to directors of Sub of
any meeting of the Board of Directors of Sub, (C) designate one person to attend
or participate in any meeting of the Board of Directors of Sub as an observer,
(D) receive, promptly upon completion, all written management reports and
written management accounts relating to Sub, to the extent such reports and
accounts are provided to the Board of Directors of Sub and (B) have reasonable
access to the statutory books and minute books of Sub upon reasonable prior
written notice to an executive officer of Sub or ARI, but only to the extent
such statutory books and minute books would be available to all members of the
Board of Directors of Sub.
5.2 Compliance with Bulk Sales Laws. The parties hereby waive compliance
with the bulk sales law and any other similar laws in any applicable
jurisdiction in respect of the transactions contemplated by this Agreement,
including, but not limited to, any applicable state Tax law that may require
notification of state taxing authorities and related actions in respect of bulk
sales of assets outside of the ordinary course of business.
5.3 Agreement Regarding Employees.
(a) Concurrently herewith, Sub shall offer employment to each person
currently employed by MCM for substantially the same amount of
compensation and on substantially the same terms and conditions of
employment as currently applicable to such employees. For a period of at
least six (6) months following the date hereof, Sub shall provide or make
available to any person who accepts an offer of employment with Sub such
employee benefits (including, without limitation, insurance, severance and
other benefits) of such types and amounts as made available to such person
by MCM immediately prior to the date hereof and without respect to any
preexisting conditions, waiting periods or other
21
qualification requirements. Length of service for all former employees of
MCM who are hired by Sub shall be 100% convened to, and shall for all
purposes be deemed to be, length of service for the purpose of determining
benefits to be provided to such employees by Sub. Effective as of the date
hereof, Sub shall assume sponsorship of the MCMLP 401(k) Plan.
(b) Except as otherwise provided in Section 1.4(c) hereof, MCM shall
be responsible for all compensation due to MCM's employees or former
employees with respect to their employment with MCM prior to the date
hereof, whether or not hired by Sub.
(c) Sub shall be responsible for perpetuating group health plan
continuation coverage pursuant to Section 4980B of the Code and Section
601 through 609 of EPISA ("COBRA") for all employees, former employees and
their dependents who are eligible for COBRA (the "COBRA Beneficiaries")
under MCM's group health plan as of the date hereof. Sub shall indemnify
and hold MCM harmless for any liability MCM incurs at any time after the
Closing under the provisions of COBRA with respect to any COBRA
Beneficiary who had or has a "qualifying event" (within the meaning of
COBRA) before, on or after the date hereof.
5.4 Agreement Regarding Computer Files. ARI and Sub acknowledge that MCM's
access and inspection rights in respect of Consigned Inventory pursuant to
Section 2.7 may require MCM to access and review certain computer files,
together with certain software related thereto. Each of ARI and Sub agrees that
it shall not change, or cause to be changed, the configuration of any computer
files, software or hardware relating to the Consigned Inventory without the
prior written consent of MCM; provided, however, that ARI and/or Sub may modify
or reconfigure any existing software system, or convert to a new software system
and cease to maintain the existing system, with the prior written consent of
MCM, which consent shall not be unreasonably withheld.
5.5 Publicity; Disclosure. Except as required by applicable law, none of
ARI, Sub or MCM shall disclose or permit their respective shareholders,
partners, officers, directors, representatives, agents or employees to disclose
the existence, terms or conditions of this Agreement or any of the transactions
contemplated herein to any third party without the prior written consent of the
other. The parties hereto will mutually agree in advance on the form, timing and
contents of announcements and disclosures regarding the transactions
contemplated herein.
5.6 Notice of Litigation. Each of ARI, Sub and MCM shall notify the other
parties immediately in the event that it receives notice, or otherwise becomes
aware, of any suit, claim, investigation, action or proceeding, whether pending
or threatened, against it which prevents, interferes with or adversely effects,
or could reasonably be expected to prevent, interfere with or adversely effect
the transactions contemplated hereby.
22
5.7 Additional Agreements Regarding Certain Actions by Sub. Each of ARI
and Sub hereby agree and covenant that, except with the prior written consent of
MCM (or, in the event MCM nominates a director to the Board of Directors of Sub
pursuant to Section 5. 1(b)(i), the consent of such MCM-nominated director), Sub
shall not:
(a) create, assume, incur or suffer any mortgage, pledge, security
interest, adverse claim or other encumbrance in respect of any of its
properties or assets;
(b) sell, assign, lease (as lessor), or otherwise transfer or
dispose of all or a substantial portion of its properties or assets,
except for the sale of works of art and related merchandise and materials
acquired from MCM hereunder in the ordinary course of Sub's business;
(c) except for those employees of MCM who are offered employment by
Sub concurrently herewith, employ any person, firm, corporation or other
entity, whether as an employee, consultant or otherwise, for annual
renumeration or compensation (including benefits) in excess of $100,000
per year;
(d) increase, reduce or reclassify the authorized or issued shares
of capital stock of Sub, or issue, sell, grant, commit or otherwise
obligate Sub to issue, sell or grant to any person, firm, corporation or
other entity (i) any shares of its capital stock, (ii) any securities
convertible into or exchangeable for or carrying any rights to acquire
from Sub any shares of its capital stock of any class, or (iii) any
options, warrants or any other rights to acquire from Sub any shares of
capital stock;
(e) fail to take all steps necessary to maintain, preserve and
protect Sub's proprietary right, title and interest in and to the
properties and assets of Sub, including, without limitation, any patents,
trade secrets, trademarks, trade names, assumed names, brand names,
copyrights and other intellectual property rights, whether now owned or
hereafter acquired;
(f) enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or make any material change in the nature or line of, or its
method of conducting, its business;
(g) incur or assume any indebtedness of any kind other than
indebtedness to trade creditors incurred in the ordinary course of
business of Sub consistent with past practice, or agree to act, as a
surety or guarantor for any other person, firm, corporation or other
entity, or with respect to any other indebtedness;
23
(h) do any of the following: (i) take any action for the
commencement of a voluntary case under any applicable bankruptcy,
insolvency or similar law, now or hereafter in effect, (ii) consent to the
entry of any order for relief in an involuntary case under any such law,
(iii) consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of Sub or any substantial part of its properties, (iv) make a
general assignment for the benefit of creditors, or (v) make any other
arrangement or composition with creditors generally to modify the terms of
payment of, or otherwise restructure Sub's obligations;
(i) make any investments in any person, firm or corporation, whether
affiliated or unaffiliated, or, except in the ordinary course of business
of Sub consistent with past practice, purchase or acquire any business,
property or assets of any person, firm, corporation or other entity;
(j) enter into any transaction, including without limitation any
purchase, sale, lease or exchange of any property or the rendering of any
service, with an affiliate of Sub unless such transaction is in the
ordinary course of business, and is upon fair and reasonable terms no less
favorable to Sub than Sub would be able to obtain in a comparable arm's
length transaction with a person not an affiliate;
(k) declare or pay any dividend on, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of any
capital stock of Sub, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash, property, or obligations
of Sub;
(l) amend, terminate, cancel or compromise any claims of Sub or
waive any other rights of substantial value to Sub; or
(in) amend, restate, change, revoke, cancel or otherwise modify any
provision of the Restated Certificate of Incorporation or the By-Laws of
Sub, attached hereto as Exhibit 4.1(a) and Exhibit 4.1(b), respectively,
or take or cause to be taken any action in respect thereof.
5.8 Agreement to Negotiate Subordination Agreement. MCM, Sub and ARI
hereby covenant and agree to negotiate in good faith and use their reasonable
best efforts to cause the execution and delivery of a Subordination Agreement
among MCM, ARI and the Bank of Bloomfield Hills, in form and substance
satisfactory to MCM (the "Subordination Agreement"), within thirty (30) days
after the date hereof. In the event that the Subordination Agreement has not
been executed and delivered within such 30-day period, then the Flat-Rate
Payment referred to in Section 2.2(a)(iii) hereof shall be accelerated and
become immediately due and payable in full to MCM.
24
ARTICLE VI
CLOSING DELIVERIES OF ARI AND SUB
Concurrently herewith, ARI and Sub shall deliver, or cause to be
delivered, to MCM, each of the following documents:
6.1 Sub Security Agreement. A Security Agreement, in form and substance
satisfactory to MCM (the "Security Agreement"), duly executed by Sub and
acknowledged by ARI, pursuant to which Sub shall grant to MCM a first priority
security interest in all of Sub's assets, rights and properties on the terms and
conditions described therein, together with such duly executed UCC-1 financing
statements in connection therewith as MCM shall reasonably request.
6.2 ARI Pledge and Security Agreement. A Pledge and Security Agreement, in
form and substance satisfactory to MCM (the "Pledge and Security Agreement"),
duly executed by ARI, pursuant to which ARI shall pledge all of the capital
stock of Sub to MCM and grant to MCM a subordinated security interest in all of
ARI's assets, rights and properties on the terms and conditions described
therein, together with (i) one or more certificates evidencing the capital stock
of Sub, (ii) one or more assignments separate from certificate duly executed by
ARI in blank sufficient to transfer such stock to MCM, and (iii) duly executed
UCC-1 financing statements in connection therewith as MCM shall reasonably
request.
6.3 Subleases. Sublease Agreements between Sub, as sublessee, and MCM, as
sublessor (the "Sublease Agreements"), duly executed by Sub, which shall be in
form and substance reasonably satisfactory to Sub and MCM, and pursuant to which
ARI shall agree to sublease from MCM each of MCM's Water Tower, Gallery Lara,
Woodfield Mall and Oak Brook retail gallery locations and Schaumburg facility.
In connection with each Sublease Agreement, Sub shall deliver to MCM
concurrently herewith: (a) a cash security deposit in an amount equal to the
security deposit of MCM currently held by the lessor of such property, if any,
which security deposit shall be treated, on a pass-through basis, in the same
manner as MCM's security deposit under the primary lease, and (b) evidence of
liability insurance policies from one or more insurance carriers reasonably
satisfactory to MCM with respect to each property subject to a Sublease
Agreement, each of which policies shall (i) name MCM as an additional named
insured and loss payee; (ii) provide that it may not be terminated or amended
without thirty (30) days' prior written notice to MCM; and (iii) provide that it
is primary to any other valid and collectible insurance policies applicable to
MCM and/or such premises and is not subject to contribution.
6.4 ARI Guaranty. A Guaranty, in form and substance satisfactory to MCM
(the "ARI Guaranty"), duly executed by ARI, guaranteeing to MCM the payment and
performance of Sub's obligations under this Agreement and each of the agreements
contemplated hereby, including, without limitation, the Security Agreement and
each of the Sublease Agreements.
25
6.5 Certificate of Incorporation; By-Laws. Evidence satisfactory to MCM
that the Restated Certificate of Incorporation and By-Laws of Sub are in the
form of Exhibit 4.1(a) and Exhibit 4.1(b) hereto, respectively, and that the
same have not been amended, modified, rescinded, revoked, cancelled or otherwise
changed since the date each was filed or adopted, as the case may be.
6.6 [Intentionally Omitted].
6.7 Authorizing Resolutions of ARI and Sub. A copy of such resolutions
adopted by the board of directors of each of ARI and Sub, duly certified by the
Secretary or Assistant Secretary thereof, authorizing ARI and Sub, as the case
may be, to execute, deliver and perform each of their respective obligations
under this Agreement and each other agreement, instrument, certificate and
document contemplated hereby.
6.8 Incumbency Certificate. One or more certificates, duly executed by the
Secretary or Assistant Secretary of each of ARI and Sub, certifying to the
incumbency of any officer or other person signing this Agreement or any other
document related to the transactions contemplated hereby on behalf of each of
ARI and Sub.
6.9 Evidence of Insurance. One or more certificates of insurance naming
MCM as an additional insured and loss payee with respect to the Consigned
Inventory pursuant to Section 2.5 hereof.
6.10 UCC Consignment Statements. The UCC Consignment Statements in respect
of the Consigned Inventory pursuant to Section 2.6 hereof, duly executed by Sub
and/or ARI.
6.11 ▇▇▇▇ of Assumption. A ▇▇▇▇ of Assumption, duly executed by Sub,
evidencing Sub's assumption of the Assumed Liabilities hereunder.
6.12 Purchase Price; Other Payments. Cash in the amount of the Purchase
Price (subject to reduction to account for any amounts paid to MCM pursuant to
the Escrow Agreement as provided in Section 1.6), together with any other
amounts payable to MCM pursuant to Section 6.3 (replacement security deposits).
ARTICLE VII
CLOSING DELIVERIES OF MCM
Concurrently herewith, MCM shall deliver, or caused to be delivered, to
ARI and Sub the following documents:
7.1 Sub Security Agreement. The Security Agreement duly executed by MCM.
7.2 ARI Pledge and Security Agreement. The Pledge and Security Agreement
duly executed by MCM.
26
7.3 Subleases. Each of the Sublease Agreements, duly executed by MCM.
7.4 ▇▇▇▇ of Sale. A ▇▇▇▇ of Sale, duly executed by MCM, evidencing the
transfer of the Acquired Assets to Sub hereunder.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by MCM. Subject to the terms of this Article VIII, MCM
covenants and agrees to indemnify and hold harmless ARI and Sub and their
respective affiliates, shareholders, officers, directors, agents and employees
(collectively, the "ARI Indemnified Parties") from and against any liability,
loss, damage or expense (including, but not limited to, reasonable attorneys'
and accountants' fees and expenses), whether or not resulting from third party
claims (collectively, "Losses"), suffered by any of the ARI Indemnified Parties,
which arise out of or result from:
(a) any inaccuracy or misrepresentation in or breach of any of the
representations, warranties, covenants or agreements made by MCM in this
Agreement or in any agreement, instrument, certificate or other document
delivered by MCM pursuant to the provisions of this Agreement;
(b) any of the Retained Liabilities;
(c) any other matter related to the conduct of the Business by MCM
or the use or ownership of the Acquired Assets and the Excluded Assets
prior to the date hereof (or the Excluded Assets following the date
hereof) other than the Assumed Liabilities; or
(d) any Taxes arising from or related to any period prior to the
date hereof.
8.2 Indemnification by ARI and Sub. Subject to the terms of this Article
VIII, each of ARI and Sub, jointly and severally, covenants and agrees to
indemnify and hold harmless MCM and its affiliates, partners, officers,
directors, agents and employees (collectively, the "MCM Indemnified Parties")
from and against any Losses suffered by any of the MCM Indemnified Parties which
arise out of or result from:
(a) any inaccuracy or misrepresentation in or breach of any of the
representations, warranties, covenants or agreements made by ARI and/or
Sub in this Agreement or in any agreement, instrument, certificate or
other document delivered by ARI and/or Sub pursuant to the provisions of
this Agreement;
(b) the Assumed Liabilities;
27
(c) the conduct by ARI and/or Sub of its business and the use of the
Acquired Assets after the date hereof, but excluding Losses that arise
from any events or conditions existing prior to the date hereof; or
(d) any Taxes arising from or related to (i) the consummation of any
of the transactions (including the consignment of the Consigned Inventory)
contemplated hereby, or (ii) any period on or after the date hereof.
8.3 Indemnification Payments. All indemnity payments, whether by ARI, Sub
or MCM, to be made under this Agreement shall be made in immediately available
funds.
8.4 Procedure for Third Party Claims.
(a) Each Person entitled to indemnification under this Agreement
(the "Indemnified Party") shall give notice to the party or parties
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party (at its
expense) to assume the defense of any claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be reasonably
satisfactory to the Indemnified Party. The Indemnified Party may
participate in such defense at the Indemnified Party's expense, except
that the fees and expenses of the Indemnified Party's counsel shall be
paid by the Indemnifying Party as they are incurred if:
(i) the employment has been specifically authorized by the
Indemnifying Party in writing;
(ii) the Indemnifying Party has (A) declined to assume the
defense and employ counsel or (B) has not, within ten (10) days
after being notified of a potential claim for indemnification
hereunder, provided notice of its election to assume the defense of
the relevant claim or litigation; or
(iii) the named parties to any action (including any impleaded
parties) include both an ARI Purchaser Indemnified Party and a MCM
Indemnified Party, and the Indemnified Party has been advised by
counsel that representation of such parties by the same counsel
would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them
(in which case, if the Indemnified Party notifies the Indemnifying
Party in writing that the Indemnified Party elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall have neither the right nor the obligation
to assume the defense of such action on behalf of the
28
Indemnified Party). For purposes of this Section 8.4(a)(iii) solely,
counsel for the Indemnified Party shall be counsel selected by the
Indemnified Party and reasonably acceptable to the Indemnifying
Party.
The omission by any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification
obligations under this Agreement. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which (I) does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability with respect to such claim or litigation or (II) would
impose an injunction or other equitable relief upon the Indemnified Party.
Notwithstanding the foregoing, the Indemnified Party shall have the right
at all times to take over and assume control of the defense, settlement,
negotiations or lawsuit relating to any claim or demand; provided,
however, that if the Indemnified Party does so take over and assume
control, the amount of the indemnity by the Indemnifying Party shall be
limited to the amount which the Indemnifying Party is able to demonstrate
that it and the claimant could have settled the matter for immediately
prior to the time of assumption. In the event that the Indemnifying Party
does not accept the defense of any matter as provided above, the
Indemnified Party shall have the full right to defend against such claim
or demand, and shall be entitled to settle or agree to pay in full such
claim or demand, in its sole discretion.
(b) The Indemnified Party shall cooperate with the Indemnifying
Party in defending any such claim and provide any books, records,
information or testimony requested, which is in the hands of or under the
control of the Indemnified Party.
8.5 Limitation of Indemnification. Notwithstanding anything contained in
this Article VIII to the contrary, the parties hereto agree that (a) the maximum
liability of MCM, on the one hand, and ARI and Sub, on the other hand, pursuant
to this Article VIII shall in no event exceed an amount equal to the cash
portion of the Purchase Price, and (b) that MCM shall not be required to
indemnify any ARI Indemnified Party, and neither of ARI or Sub shall be required
to indemnify any MCM Indemnified Party, in either case, until the aggregate
amount of Losses claim by the party seeking indemnification exceeds $30,000, and
then only to the extent by which such Losses exceed $30,000.
8.6 Survival. Regardless of any investigation at any time made by or on
behalf of any party hereto, (a) all representations and warranties made herein
shall survive the date hereof for a period of two (2) years and (b) all
covenants, agreements and indemnities made hereunder or pursuant to or in
connection with the transactions contemplated hereby shall survive the date
hereof indefinitely.
29
ARTICLE IX
MISCELLANEOUS
9.1 Agreement to Govern. This Agreement, including all of the Exhibits and
Schedules hereto, which are incorporated herein by this reference, sets forth
the entire understanding of the parties hereto and supersedes all prior oral or
written agreements between them with respect to the subject matter contained
herein, including, without, limitation, that certain letter agreement, dated
December 3, 1996, between ARI and MCM, as the same has been extended or amended
from time to time.
9.2 Severability. The parties hereto expressly agree that it is not the
intention of any party hereto to violate any public policy, statutory or common
laws, rules, regulations or decisions of any court, government or agency
thereof. If any provision of this Agreement is judicially or administratively
interpreted or construed as being in violation thereof, such provision shall be
inoperative to the minimum extent necessary and the remainder of this Agreement
shall remain binding upon the parties hereto.
9.3 Notices and Other Communications. Every notice or other communication
required or desired to be given hereunder shall be in writing and shall be
delivered either by personal delivery, telegram, a nationally recognized courier
service, postage-prepaid, return receipt requested, certified or registered
mail, or facsimile transmission with acknowledgment of receipt, addressed to the
party to whom intended at the following address:
(a) If to MCM: MCM Limited Partnership
c/o HKL Investors, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇, Gerber & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Pucker
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to ARI or Sub: Art Renaissance, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
30
with a copy to: Seyburn, Kahn, Gin, Bess,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. May
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as the intended recipient previously shall have
designated by written notice. Notice by courier or certified or registered mail
shall be effective on the date it is officially recorded as delivered to the
intended recipient by return receipt or the date of attempted delivery where
delivery is refused by the intended recipient. All notices and communications
delivered in person shall be deemed to have been delivered to and received by
the addressee, and shall be effective, on the date of personal delivery. Any
notice transmitted by telegram or facsimile transmission shall be deemed to have
been delivered to and received by the addressee, and shall be effective, on the
date said notice is delivered to the telegram company for transmission or
received by the recipient, respectively.
9.4 Law to Govern. The validity, construction and enforceability of this
Agreement shall be governed in all respects by the laws of the State of
Illinois, without regard to its conflict of laws principles. The parties hereby
irrevocable and unconditionally submit to the exclusive jurisdiction of the
courts of ▇▇▇▇ County in the State of Illinois and of the United States of
America located in the City of Chicago, Illinois for any actions, suits or
proceedings arising out of or relating to this agreement and the transactions
contemplated hereby and agree not to commence any action, suit or proceeding
relating thereto except in such courts.
9.5 Successors and Assigns. The rights and privileges under this Agreement
may not be assigned and the duties and obligations under this Agreement may not
be delegated by any party hereto without the prior written consent of the other
parties hereto. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective personal and legal
representatives, successors and assigns. Notwithstanding any provision herein to
the contrary, this Agreement and all of MCM's right, title and interest
hereunder, including its right to receive payments from Sub hereunder, shall be
fully assignable by MCM to any corporation, partnership, limited liability
company, trust, person or entity.
9.6 Further Assurances. At any time on or after the date hereof, the
parties hereto shall each perform such acts, execute and deliver such
instruments, assignments, endorsements and other documents and do all such other
things consistent with the terms of this Agreement as may be reasonably
necessary to accomplish the transactions contemplated by, or otherwise carry out
the purposes of, this Agreement.
9.7 Gender. Number and Headings. The masculine, feminine or neuter
pronouns used herein shall be interpreted without regard to gender, and the use
of the singular or plural shall be deemed to include the other whenever the
context so requires. The headings in this
31
Agreement are inserted for convenience of reference only and shall not be a part
of or control or affect the meaning of this Agreement.
9.8 Modification or Amendment. This Agreement may be modified or amended
only by a written instrument executed by all of the parties hereto.
9.9 Waiver of Provisions. The terms, covenants, representations,
warranties and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provision hereof shall in no manner
affect the right at a later date to enforce the same. No waiver by any party of
any condition or breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
9.10 Expenses. Each party shall bear its own expenses incident to this
Agreement and the transactions contemplated hereby, including without
limitation, all fees of counsel, accountants and other consultants.
9.11 Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument.
32
IN WITNESS WHEREOF, the parties hereto executed this Agreement as of the
date first written above.
MCM:
MCM LIMITED PARTNERSHIP, an Illinois
limited partnership
By: HKL Investors, Inc., its General
Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
President
ARI:
ART RENAISSANCE, INC., a Delaware
corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Executive Officer
SUB:
ART RENAISSANCE CHICAGO, INC., a
Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name:
Title: C.E.O.
[SIGNATURE PAGE TO ASSET PURCHASE AND CONSIGNMENT AGREEMENT]
33