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Exhibit 2.1
Execution Version
ASSET PURCHASE
AGREEMENT
This Asset Purchase Agreement
(the “ Agreement ”) is made as of
September 6, 2007, between Mad Catz Interactive, Inc., a
Canadian corporation (“ Buyer ”), and Take-Two
Interactive Software, Inc., a Delaware corporation (“
Seller ”).
RECITALS
WHEREAS, Seller,
either directly or through certain of its subsidiaries, is engaged
in the business of designing, manufacturing, marketing and selling
video game accessories in North America, Europe and other parts of
the world;
WHEREAS, Jack of All
Games, Inc., a New York corporation and a subsidiary of Seller, and
Jack of All Games (Canada), Inc., an Ontario corporation and a
subsidiary of Seller, are engaged, directly or indirectly, in the
distribution of video games and video game accessories manufactured
by Seller or Seller’s other subsidiaries (including the
Selling Subsidiaries), as well as by third parties (the “
Distribution Business ”);
WHEREAS, on the terms
and subject to the conditions of this Agreement, Buyer desires to
purchase, and Seller desires to sell, certain assets of the
Business (as defined in Section 1.1 below) and Buyer
wishes to assume certain liabilities of the Business that arise or
relate to the Purchased Assets as more particularly set forth
herein;
NOW, THEREFORE, in
consideration of the mutual covenants, representations and
warranties made herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
AGREEMENT
1. Defined Terms; Selling
Subsidiaries; Buying Subsidiaries .
1.1 Defined Terms .
Capitalized terms contained herein and not otherwise defined shall
have the meaning set forth below in this Section 1.1
.
“ Actual Inventory
Amount ” shall have the meaning as set forth in
Section 5.2(b) herein.
“ Actual Inventory
Statement ” shall have the meaning as set forth in
Section 5.2(b) herein.
“ Assigned
Contracts ” shall have the meaning as set forth in
Section 2.4 herein.
“ Assumed
Liabilities ” shall have the meaning as set forth in
Section 4.1 herein.
“ Audit Notice
” shall have the meaning as set forth in
Section 5.2(b) herein.
“ Benefit Plans
” shall have the meaning as set forth in
Section 7.13 herein.
“ Books and
Records ” shall have the meaning as set forth in
Section 2.7 herein.
“ Business
” means the business of designing, manufacturing, marketing
and selling video game accessories in North America, Europe and
other parts of the world, which is conducted by Seller, either
directly or through certain of its subsidiaries, provided,
however, that in no event shall it be deemed to include the
Distribution Business.
“ Business
Employee ” shall have the meaning as set forth in
Section 9.6(a) herein.
“ Business Material
Adverse Effect ” means any event, change, development or
occurrence that, individually or in the aggregate, has resulted in
or would reasonably be expected to result in a material adverse
effect on the business, results of operations, assets,
liabilities or financial condition of the Business, taken as a
whole, but excluding any such event, change, development or
occurrence resulting from or arising out of (i) general
national, international or regional economic, financial, political
or business conditions (so long as the Business and the Selling
Subsidiaries are not disproportionately affected thereby),
(ii) conditions (including changes in economic, financial
market, regulatory or political conditions and any change in Law or
GAAP or the interpretation thereof) affecting generally the
industry or industries in which the Seller and its Subsidiaries
participate (so long as the Business and the Selling Subsidiaries
are not disproportionately affected thereby), (iii) any
failure, in and of itself, to meet internal projections for the
Business, or (iv) the execution or announcement of this
Agreement.
“ Buyer Disclosure
Letter ” shall have the meaning as set forth in
Section 8 herein.
“ Buyer
Indemnitees ” shall have the meaning as set forth in
Section 12.2 herein.
“ Buying
Subsidiary ” shall have the meaning as set forth in
Section 1.3 herein.
“ Closing
” shall have the meaning as set forth in
Section 6 herein.
“ Closing Date
” shall have the meaning as set forth in
Section 6 herein.
“ Code ”
shall have the meaning as set forth in Section 5.7
herein.
“ Contract
” means any legally binding agreement, contract, lease,
consensual obligation, promise or undertaking (whether written or
oral).
“ Damages
” shall have the meaning as set forth in
Section 12.2 herein.
“ Dispute Notice
” shall have the meaning as set forth in
Section 5.2(b) herein.
“ Encumbrances
” shall have the meaning as set forth in
Section 7.4 herein.
“ Environmental
Laws ” shall have the meaning as set forth in
Section 7.14 herein.
“ Escrow Agent
” shall have the meaning as set forth in
Section 5.3 herein.
“ Excluded
Assets ” shall have the meaning as set forth in
Section 3 herein.
“ Excluded
Damages ” shall have the meaning as set forth in
Section 12.5(b) herein.
“ Final Actual
Inventory Amount ” shall have the meaning as set forth in
Section 5.2(b) herein.
“ Financial
Statements ” shall have the meaning as set forth in
Section 7.7 herein.
“ GAAP ”
means United States generally accepted accounting
principles.
“ Indemnified
Party ” shall have the meaning as set forth in
Section 12.4(a) herein.
“ Indemnifying
Party ” shall have the meaning as set forth in
Section 12.4(a) herein.
“ Indemnity Escrow
Agreement ” shall have the meaning as set forth in
Section 5.3 herein.
“ Indemnity Escrow
Amount ” shall have the meaning as set forth in
Section 5.3 herein.
“ Knowledge
”, or words or phrases of similar import, when used in
reference to the Seller or any of the Selling Subsidiaries, means
the actual knowledge of the following officers of Seller after due
and reasonable inquiry: Greg Gibson, James Ellingford, Steve Lux,
Tim Brion, Simon Little and Victor Li.
“ Liability
” means with respect to any person or entity, any liability
or obligation of such person or entity of any kind, character or
description, whether known or unknown, absolute or contingent,
accrued or unaccrued, disputed or undisputed, liquidated or
unliquidated, secured or unsecured, joint or several, due or to
become due, vested or unvested, executory, determined or
determinable, and whether or not the same is required to be accrued
on the financial statements of such person or entity.
“ Molds ”
shall have the meaning as set forth in Section 2.1
herein.
“ Molds Escrow
Agreement ” shall have the meaning as set forth in
Section 5.4 herein.
“ Molds Escrow
Amount ” shall have the meaning as set forth in
Section 5.4 herein.
“ Neutral
Auditor ” shall have the meaning as set forth in
Section 5.2(b) herein.
“ Notice ”
shall have the meaning as set forth in Section 14.4
herein.
“ Notice of
Claim ” shall have the meaning as set forth in
Section 12.4(b) herein.
“ Permitted
Encumbrances ” means (i) Encumbrances for taxes not
yet due and payable or that are being contested in good faith and
by appropriate proceedings and for which the Company has maintained
adequate reserves in accordance with GAAP, (ii) statutory
mechanics’, materialmen’s or other liens arising in the
ordinary course of business for sums that are not material in
amount and not yet due and payable and for which the Company has
maintained adequate reserves in accordance with GAAP,
(iii) any other Encumbrances, easements, rights-of-way,
encroachments, restrictions, conditions and similar items on real
property arising in the ordinary course of business and that are
not material in amount and do not materially detract from the value
of or materially impair the existing use of the property affected
thereby, or (iv) the Encumbrances under Seller’s and its
subsidiaries’ credit agreement dated as of July 3,
2007.
“ Post-Closing
Period ” means any taxable period applicable to the
ownership and operation of the Purchased Assets beginning on or
after the Closing Date and the portion of any Straddle Period
beginning on the Closing Date and ending on the last day of the
Straddle Period.
“ Pre-Closing
Period ” means any taxable period applicable to the
ownership and operation of the Purchased Assets ending on or before
the date immediately before the Closing Date and the portion of any
Straddle Period beginning on the first day of the Straddle Period
and ending on the date immediately before the Closing
Date.
“ Proceeding
” means any litigation, claim or proceeding.
“ Proprietary
Rights ” shall have the meaning as set forth in
Section 7.9 herein.
“ Purchase Price
” shall have the meaning as set forth in
Section 5.1 herein.
“ Purchased
Assets ” shall have the meaning as set forth in
Section 2 herein.
“ Retained
Liabilities ” shall have the meaning as set forth in
Section 4.2 herein.
“ Seller Disclosure
Letter ” shall have the meaning as set forth in
Section 7 herein.
“ Seller
Indemnitees ” shall have the meaning as set forth in
Section 12.3 herein.
“ Selling
Subsidiary ” shall have the meaning as set forth in
Section 1.2 herein.
“ Services
Agreement ” shall have the meaning as set forth in
Section 11.6 herein.
“ Straddle
Period ” means a tax period beginning on or before the
date immediately before the Closing Date and ending on or after the
Closing Date.
“ Transaction
Documents ” means, with respect to Seller or Buyer, this
Agreement, the Indemnity Escrow Agreement, the Molds Escrow
Agreement and the Services Agreement, together with any other
agreements, instruments, certificates and documents executed by
such person in connection herewith or therewith.
“ Transferred
Employee ” shall have the meaning as set forth in
Section 9.6(a) herein.
“ TUPE ”
shall have the meaning as set forth in Section 9.6(b)
herein.
“ UK Employees
” shall have the meaning as set forth in
Section 9.6(b) herein.
“ UK Selling
Subsidiary ” shall have the meaning as set forth in
Section 9.10(c) herein.
“ VAT ”
shall have the meaning as set forth in Section 9.10
herein.
“ VATA ”
shall have the meaning as set forth in Section 9.10
herein.
1.2 Selling
Subsidiaries . The parties acknowledge and agree that Seller
conducts a portion of the Business through and in conjunction with
its subsidiaries listed on Schedule 1.2 of Seller’s
Disclosure Letter (each a “ Selling Subsidiary ”
and, collectively, the “ Selling Subsidiaries
”). To the extent that any of the Purchased Assets are owned
by or in the possession of the Selling Subsidiaries, then Seller,
on behalf of itself and the Selling Subsidiaries, hereby covenants
to take or cause to be taken all such actions as may be necessary
to cause such Purchased Assets to be conveyed to Buyer at the
Closing. Seller, as agent for the Selling Subsidiaries, shall
receive from
Buyer, the portion of the Purchase Price
allocable to the Purchased Assets held by the Selling Subsidiaries
and sold to Buyer pursuant to this Agreement. The Purchase Price
shall be allocated among Seller and the Selling Subsidiaries as set
forth in a statement to be prepared by Seller and delivered by
Seller to Buyer on or prior to the Closing Date.
1.3 Buying
Subsidiaries . The parties acknowledge and agree that Buyer
conducts its business through its wholly owned subsidiaries Mad
Catz, Inc., a Delaware corporation, Mad Catz Europe, Limited, a
corporation incorporated under the laws of England and Wales, and
Mad Catz Interactive Asia Limited, a corporation incorporated under
the laws of Hong Kong (each such subsidiary a “ Buying
Subsidiary ” and collectively, the “ Buying
Subsidiaries ”). To the extent that any of the Purchased
Assets are to be owned by one or more of the Buying Subsidiaries,
then the Purchased Assets shall be transferred to the Buying
Subsidiaries as set forth in a statement to be prepared by Buyer
and delivered by Buyer to Seller on or prior to the Closing
Date.
2. Purchase of Assets
. Subject to and upon the terms and conditions set forth in this
Agreement, at the Closing, Buyer shall purchase, acquire and accept
and Seller and the Selling Subsidiaries shall irrevocably sell,
convey, assign, transfer and deliver to Buyer, free and clear of
all encumbrances all of Seller’s and the Selling
Subsidiaries’ right, titles and interest in and to the
following assets and properties of the Business as the same may
exist as of the Closing Date (collectively, the “
Purchased Assets ”):
2.1 all equipment and other
tangible personal property listed on Schedule 2.1 of
Seller’s Disclosure Letter; provided , however
, that neither Seller nor the Selling Subsidiaries may have the
full and unencumbered right to transfer possession of or legal
title to the molds listed on Schedule 2.1 of
Seller’s Disclosure Letter (the “ Molds ”)
to Buyer at Closing, in which case Seller or the applicable Selling
Subsidiary will only transfer possession of and legal title to the
Molds to Buyer in accordance with Section 5.4
;
2.2 all inventories of the
types described on Schedule 2.2 of Seller’s Disclosure
Letter;
2.3 all Proprietary Rights
that (i) are owned by Seller or any Selling Subsidiary and
used exclusively in the Business, or (ii) are owned by third
parties and are used exclusively in the Business, including without
limitation, those Proprietary Rights listed on Schedule 2.3
of Seller’s Disclosure Letter;
2.4 all rights (a) under
the Contracts of any of Seller or the Selling Subsidiaries listed
on Schedule 2.4(a) of Seller’s Disclosure Letter (the
“ Assigned Contracts ”), and (b) under the
Contracts of any of Seller or any the Selling Subsidiaries listed
on Schedule 2.4(b) of Seller’s Disclosure Letter, that
pertain to the Purchased Assets set forth in Sections 2.1 ,
2.2 , 2.3 , 2.5 , 2.6 , and 2.7
of this Agreement;
2.5 all prepaid expenses,
advance commissions, payments and deposits that arise from or
relate to the Purchased Assets set forth in Sections 2.1 ,
2.2 , 2.3 , 2.4 , 2.6 , and 2.7
of this Agreement listed on Schedule 2.5 of Seller’s
Disclosure Letter;
2.6 all rights to insurance
proceeds, net of any deductible and any expense to obtain such
proceeds, with respect to any tangible Purchased Assets that have
been damaged or destroyed after the date hereof and on or prior to
the Closing and not replaced with assets of equivalent value on or
prior to the Closing;
2.7 all books and records
(including financial, operational and customer data records
(including without limitation, lists of customers, suppliers,
vendors and sources, computer software (if any) and files; all
information, drawings, sales and promotional materials, and
telephone and telecopier numbers and listings)) exclusively
pertaining to the Purchased Assets set forth in Sections 2.1
through and including Section 2.6 of this Agreement
(collectively “ Books and Records ”) (it being
understood and agreed that Seller shall have the right to retain
copies of such Books and Records), other than (i) Books and
Records and other materials that Seller is required by law to
retain (it being understood and agreed that, to the extent
permitted by applicable law, Seller shall deliver to Buyer copies
of such Books and Records), (ii) Books and Records relating
exclusively to any Excluded Asset or Retained Liability, and
(iii) minute books and corporate books and records of Seller.
Seller shall deliver or cause to be delivered to Buyer copies of
all customer lists primarily pertaining to the Business as promptly
as practicable after the Closing.
3. Excluded Assets .
Unless specifically identified in Section 2 , the
Purchased Assets to be transferred to Buyer pursuant to this
Agreement shall not include any other assets of Seller or the
Selling Subsidiaries (the “ Excluded Assets ”).
Seller agrees that all such assets that are not Purchased Assets
are not part of the sale and purchase contemplated hereunder, are
excluded and shall remain the property of Seller or the Selling
Subsidiaries after the Closing. Notwithstanding any provision in
this Agreement, Seller and the Selling Subsidiaries shall retain
all their rights, title and interest in and to any tax refund
attributable to any Pre-Closing Period, together with any interest
receivable with respect thereto. In the case of a refund of a
property tax for a Straddle Period, the portion of the refund
attributable to the Pre-Closing Period included in the Straddle
Period shall be determined by applying the proration procedures set
forth in Section 5.6 .
4. Liabilities
.
4.1 Assumption of
Liabilities . Upon the terms and subject to the conditions of
this Agreement, at the Closing Date, Buyer shall accept, assume and
agree to pay, perform or otherwise discharge when due, only the
following direct or indirect Liabilities of Seller or the Selling
Subsidiaries (collectively, the “ Assumed Liabilities
”):
(a) Any and all Liabilities
of Seller or any Selling Subsidiary under any Assigned Contract
that arise or are to be discharged after the Closing (other than,
in each case, any Liabilities arising out of or relating to any
occurrence or circumstance (whether known or unknown) which occurs
or exists prior to the Closing and which constitutes, or which by
the lapse of time or delivery of notice (or both) would constitute,
a breach or default under such Contracts);
(b) Any and all trade or
other accounts payable of the types described on Schedule
4.1(b) of Seller’s Disclosure Letter;
(c) Any and all Liabilities
arising under or relating to environmental laws or relating to
hazardous substances, in each case, arising from conditions
existing or acts or omissions occurring after the Closing in
connection with the Purchased Assets or the Assumed Liabilities
(other than any Liabilities that result from, arise out of, or
relate to acts, conditions, events or omissions (whether known or
unknown) occurring or in existence prior to the Closing, except to
the extent that Seller can establish that any such Liability is
caused by or at the direction of a Buyer Indemnitee);
(d) Any obligation incurred
in the ordinary course of business with respect to the Purchased
Assets to accept returns, perform product warranty work and make
allowances or price protection obligations;
(e) With respect to periods
commencing after the Closing, all Liabilities, including severance,
termination, compensation or damages payments relating to the
employment or termination of the Transferred Employees;
(f) All Liabilities for taxes
related to the ownership or operation of the Purchased Assets if
such taxes relate to or are imposed with respect to any
Post-Closing Period;
(g) All Liabilities in
respect of any Proceeding initiated after the Closing that arises
out of the ownership or operation of the Purchased Assets after the
Closing, in each case, except with respect to any Liabilities that
result from, arise out of, or relate to acts, events or omissions
occurring on or prior to the Closing except to the extent that
Seller can establish that any such Liability is caused by or under
the direction of a Buyer Indemnitee and excluding any such
Liability that is enumerated as an Assumed Liability in
Section 4.1(a) , 4.1(b) , 4.1(c) ,
4.1(d) , 4.1(e) , 4.1(f) , or 4.1(h) );
and
(h) All other Liabilities
that arise out of the ownership or operation of the Purchased
Assets or the Assumed Liabilities after the Closing Date (in each
case, except with respect to any Liabilities that result from,
arise out of, or relate to acts, events or omissions (whether known
or unknown) occurring or in existence on or prior to the Closing,
except to the extent that Seller can establish that any such
Liability is caused by or at the direction of a Buyer Indemnitee
and excluding any such Liability that is enumerated as an Assumed
Liability in Section 4.1(a) , 4.1(b) ,
4.1(c) , 4.1(d) , 4.1(e) , 4.1(f) , or
4.1(g) ).
4.2 Retained
Liabilities . Except as specifically identified in
Section 4.1 , Buyer is not assuming any Liabilities,
and all such Liabilities (the “ Retained Liabilities
”) shall remain the sole responsibility of and shall be
retained and paid, performed and discharged when and as due solely
by Seller or the Selling Subsidiaries.
4.3 Consent of Third
Parties . Notwithstanding anything to the contrary in this
Agreement, (a) this Agreement shall not constitute an
agreement to assign or transfer any Assigned Contract or consent or
any claim, right or benefit arising thereunder or resulting
therefrom if an assignment or transfer or an attempt to make such
an assignment or transfer without the consent or approval of a
third party would constitute a breach or violation thereof, and
(b) any transfer or assignment to the Buyer by Seller of any
interest under any such Assigned Contract or consent that requires
the consent of a third party shall be made subject to such consent
being obtained. If any consent is not obtained on or prior to the
Closing, then Seller shall, at Seller’s expense (i) if
requested by Buyer, continue to use its commercially reasonable
efforts to obtain any such consent or approval after the Closing in
cooperation with Buyer until such time as such consent or approval
has been obtained, and (ii) cooperate with Buyer in any lawful
arrangement to provide that Buyer shall receive the benefits under
any such Assigned Contract or consent.
5. Purchase Price
.
5.1 Consideration . In
full and complete consideration for the sale, transfer, assignment,
conveyance and delivery of the Purchased Assets by Seller to Buyer,
upon the terms and subject to the conditions set forth in this
Agreement, Buyer (i) will pay to Seller $3,033,000 (the
“ Purchase Price ”) and (ii) will assume at
the Closing the Assumed Liabilities.
5.2 Purchase Price
Adjustment .
(a) The Purchase Price shall
be: (i) increased dollar-for-dollar by the amount that the
Final Actual Inventory Amount is greater than $3,093,660 and
(ii) decreased dollar-for-dollar by the amount that the Final
Actual Inventory Amount is less than $2,972,340. If the Final
Actual Inventory Amount is equal to or greater than $2,972,340 and
is equal to or less than $3,093,660, then there shall be no
adjustment to the Purchase Price pursuant to this
Section 5.2 .
(b) Buyer shall cause the
inventory included in the Purchased Assets to be shipped to Buyer,
at Buyer’s sole cost and expense (including with respect to
insurance), as soon as practicable after the Closing Date. Title
to, and risk in respect of, such inventory shall pass to Buyer at
the Closing upon delivery of such inventory to Buyer at
Seller’s locations prior to the loading of such inventory
unto the shipping trucks hired by Buyer. The loading of such
inventory unto such shipping trucks shall be made in the presence
of, and shall be coordinated by, representatives of each of Buyer
and Seller. Such inventory shall be unloaded from such shipping
trucks at Buyer’s locations in the presence of
representatives of Seller (and Buyer shall give at least three
Business Days’ prior written notice to Seller of the arrival
of the shipping trucks to Buyer’s locations). Upon the
unloading of such inventory from the shipping trucks, Buyer’s
representatives shall, in the presence of Seller’s
representatives, count, classify and review the inventory actually
included in the Purchased Assets and, based upon such count,
classification and review, Buyer shall subsequently prepare and
deliver to Seller a written statement (the “ Actual
Inventory Statement ”) setting forth the value of the
inventory included in the Purchased Assets (determined by
multiplying the agreed purchase price per unit (as set forth on
Schedule 2.2 of Seller’s Disclosure Letter) by the
number of each unit of inventory actually included in the Purchased
Assets received by Buyer (the “ Actual Inventory
Amount ”); provided , however , that the
counting, classifying and reviewing of the inventory included in
the Purchased Assets that is located in the United Kingdom shall be
made at Seller’s locations. After receipt of the Actual
Inventory Statement, Seller shall have 20 days to review it. If
Seller disagrees with Buyer’s calculation of the Actual
Inventory Amount (or any component thereof) set for the in the
Actual Inventory Statement, Seller shall give Buyer a written
notice (a “ Dispute Notice ”) explaining in
detail the basis of such disagreement within 20 days after
Seller’s receipt of the Actual Inventory Statement. Buyer and
Seller shall cooperate in good faith to resolve such dispute as
promptly as possible. If Seller agrees in writing with
Buyer’s calculation of the Actual Inventory Amount set forth
in the Actual Inventory Statement, or if Seller does not timely
give Buyer a Dispute Notice as provided above, Seller’s
calculation of the Actual Inventory Amount set forth in the Actual
Inventory Statement shall be deemed to be final, binding,
conclusive and non-appealable on the parties. If Seller and Buyer
shall fail to reach an agreement relating to the Actual Inventory
Statement within 30 days from the date Seller provided the Dispute
Notice to Buyer, then at the written election of Seller or Buyer
delivered to the other party (the “ Audit Notice
”), Seller and Buyer shall submit any unresolved issues to a
nationally or regionally recognized accounting firm that does not
represent Seller or Buyer, as mutually agreed to by Seller and
Buyer, for determination (the “ Neutral Auditor
”). Each party agrees to execute, if requested by the Neutral
Auditor, a reasonable and customary engagement letter. All fees and
expenses relating to the work, if any, to be
performed by the Neutral Auditor shall
be borne equally by Seller and Buyer. Except as provided above, all
other costs and expenses incurred by the parties in connection with
resolving any dispute hereunder before the Neutral Auditor shall be
borne by the party incurring such cost and expense. The Neutral
Auditor shall act as an arbitrator to determine only those issues
still in dispute at the time of delivery of the Audit Notice by
either party to submit the objections to the Neutral Auditor. The
Neutral Auditor’s determination shall be made within 45 days
after its engagement (which engagement shall be made no later than
15 days after the delivery of the Audit Notice by either party to
the other party), and shall be set forth in a written statement
delivered to Buyer and Seller. The determination of the Final
Actual Inventory Amount pursuant to this Section 5.2(b)
(whether by the Neutral Auditor, agreement (or deemed agreement) of
the parties or a combination thereof) shall be final, binding,
conclusive and non-appealable for all purposes under this
Agreement. The term “ Final Actual Inventory Amount
” shall mean the definitive Actual Inventory Amount agreed to
(or deemed by the provisions hereof to be agreed to) by Seller and
Buyer in accordance with this Section 5.2(b) or the
definitive Actual Inventory Amount resulting from the determination
made by the Neutral Auditor in accordance with this
Section 5.2(b) (in addition to those items theretofore
agreed to (or deemed by the provisions hereof to be agreed to) by
Seller and Buyer in accordance with this Section 5.2(b)
). Buyer shall provide Seller with reasonable access to the work
papers it generates in connection with the preparation of the
Actual Inventory Statement.
(c) Buyer shall not be
obligated to purchase an amount of each type of inventory listed on
Schedule 5.2(c) of Seller’s Disclosure Letter in
excess of 110% of the quantity for such inventory as listed on
Schedule 5.2(c) of Sellers Disclosure Letter.
(d) Upon determination of the
Final Actual Inventory Amount in accordance with the provisions of
Section 5.2(b) :
(i) if there is a decrease in
the Purchase Price pursuant to Section 5.2(a) , Seller
shall promptly (and in any event within five Business Days after
such determination of the Final Actual Inventory Amount) pay to
Buyer the amount of such decrease by wire transfer of immediately
available funds to a bank account designated by Buyer at least
three Business Days prior to the scheduled date of payment;
or
(ii) if there is an increase
in the Purchase Price pursuant to Section 5.2(a) ,
Buyer shall promptly (and in any event within five Business Days
after such determination of the Final Actual Inventory Amount) pay
to Seller the amount of such increase by wire transfer of
immediately available funds to a bank account designated by Seller
at least three Business Days prior to the scheduled date of
payment.
5.3 Indemnity Escrow
Arrangement . Subject to the terms and conditions herein, at
the Closing, Buyer shall deposit with The Bank of New York, as
escrow agent (the “ Escrow Agent ”), $250,000
(the “ Indemnity Escrow Amount ”). The Indemnity
Escrow Amount shall be held by the Escrow Agent until June 30,
2008. The Indemnity Escrow Amount shall be distributed in
accordance with the terms of the Indemnity Escrow Agreement, to be
entered into among Seller, Buyer and the Escrow Agent at the
Closing, substantially in the form attached hereto as Exhibit
A (as the same may be amended from time to time, the “
Indemnity Escrow Agreement ”). The Indemnity Escrow
Amount shall be exclusively used to cover claims of the Buyer
Indemnitees under Section 12 of this Agreement. Claims
related to the failure of Seller to deliver to Buyer full and
unencumbered possession of and title to the Molds shall be
exclusively governed by Section 5.4
5.4 Delivery of Molds;
Molds Escrow Arrangements
(a) Subject to the terms and
conditions herein, at the Closing, Buyer shall deposit with the
Escrow Agent $300,000 (the “ Molds Escrow Amount
”). The Molds Escrow Amount shall be held by the Escrow Agent
in accordance with the terms of the Molds Escrow Agreement, to be
entered into among Seller, Buyer and the Escrow Agent at the
Closing, substantially in the form attached hereto as
Exhibit B (as the same may be amended from time to
time, the “ Molds Escrow Agreement ”), and shall
be exclusively used to cover claims relating to the failure of
Seller to deliver to Buyer full and unencumbered possession of and
title to the Molds.
(b) Following the Closing
Date, Seller shall use commercially reasonable efforts to,
(i) for no less than 30 days, obtain and deliver to Buyer full
and unencumbered legal title to and possession of the Molds, and
(ii) until the earlier of (A) the date that Seller
delivers to Buyer such title and possession, and (B) December
31, 2007, cause to be manufactured on behalf and at the cost (at
the bill of material cost) of Buyer any inventory of the types set
forth on Schedule 2.2 of Seller’s Disclosure Schedule
requested by Buyer that requires the use of such Molds.
(c) The Molds Escrow Amount
shall be released, subject to the terms and conditions of the Molds
Escrow Agreement, (i) to Seller, if Seller shall have
delivered to Buyer full and unencumbered legal title to and
possession of the Molds on or prior to the 30 th day following the Closing Date, such
release to be made as soon as practicable following such delivery,
and (ii) to Buyer, if Seller shall not have delivered to Buyer
full and unencumbered legal title to and possession of the Molds on
or prior to the 30 th day
following the Closing Date, such release to be made on the 31
st
day following the Closing
Date.
(d) If Seller does not
deliver to Buyer full and unencumbered legal title to and
possession of the Molds on or prior to the 30 th day following the Closing Date, Seller
shall have the right to use the Molds Escrow Amount until
January 31, 2008 to cover all Damages incurred or accrued by
Buyer arising out of, resulting from or in connection with
Seller’s failure to deliver such title and possession. On
January 31, 2008, Buyer shall deliver to Seller (i) any
portion of the Molds Escrow Amount that remains unused on such date
and (ii) a reasonably detailed accounting of any portion of
the Molds Escrow Amount actually used by Buyer to cover such
Damages.
5.5 Payment of Purchase
Price . At the Closing, Buyer shall deliver (a) to Seller,
an amount equal to the Purchase Price less the Escrow Amount, and
(b) to the Escrow Agent, the Escrow Amount. Such amounts shall
be paid in cash by wire transfer of immediately available
funds.
5.6 Prorations .
Personal property taxes for the Purchased Assets relating to a
Straddle Period shall be prorated in the following manner: the
amount of personal property taxes allocated to the portion of any
Straddle Period that is the Pre-Closing Period shall be equal to
the total amount of such personal property taxes for the Straddle
Period multiplied by a fraction, the numerator of which is the
number of days in the Pre-Closing Period and the denominator of
which is the total number of days in the Straddle Period. The
amount of personal property taxes attributable to the portion of
any Straddle Period that is the Post-Closing Period shall be equal
to the total amount of personal property taxes for the Straddle
Period less the amount of personal property taxes attributable to
the Pre-Closing Period. Seller shall be responsible for the
personal property taxes attributable to the Pre-Closing Period and
Buyer shall be responsible for the personal property taxes
attributable to the Post-Closing Period.
5.7 Purchase Price
Allocation . Buyer shall prepare an allocation of all the
amounts constituting consideration (within the meaning of
Section 1060 of the Internal Revenue Code of 1986, as amended
(the “ Code ”) and the regulations thereunder)
among the Purchased Assets in the manner required by
Section 1060 of the Code, the regulations thereunder and all
applicable laws. Buyer shall deliver such allocation to Seller
within ninety (90) calendar days after the Closing Date. The
allocation shall become final and binding on the parties twenty
(20) calendar days after Buyer provides the allocation to
Seller unless Seller objects in writing to Buyer. If Seller objects
in writing to the allocation, Seller and Buyer shall attempt in
good faith to resolve any dispute with respect to the allocation.
If the parties cannot reach a resolution within thirty
(30) calendar days, the parties shall be free to apply any
allocation for tax purposes.
6. Closing
.
6.1 Closing and Closing
Date . Subject to the satisfaction or waiver of each of the
conditions set forth in Sections 10 and 11 hereof,
the closing (the “ Closing ”) of the purchase
and sale of the Purchased Assets shall take place at 10:00 a.m.,
local time, on September 7, 2007 or at such other date as the
parties may mutually agree (the “ Closing Date
”), at the offices of Buyer, 7480 Mission Valley Road, Suite
101, San Diego, California 92108, or at such other time and place
as may be mutually agreed to by Buyer and Seller, including, but
not limited to, Closing via mail or facsimile. The Closing shall be
effective as of 12:01 a.m. on the Closing Date.
6.2 Deliveries at
Closing . To effect the sale, transfer and assumption referred
to in Section 2 and Section 4 hereof, the
parties will, on or prior to the Closing Date, execute and/or
deliver or cause to be executed and/or delivered the
following:
(a) Seller shall execute and
deliver to Buyer a bill of sale conveying title to the Purchased
Assets to Buyer;
(b) Seller shall execute and
deliver to Buyer an assignment of proprietary rights in recordable
form to the extent necessary to assign the Proprietary
Rights;
(c) Pursuant to
Section 5.5 , Buyer shall deliver (i) to Seller
the Purchase Price less the Indemnity Escrow Amount and the Molds
Escrow Amount, and (ii) to the Escrow Agent the Indemnity
Escrow Amount and the Molds Escrow Amount;
(d) Buyer shall deliver to
Seller an assumption agreement with respect to the Assumed
Liabilities in form and substance reasonably satisfactory to
Seller; and
(e) Buyer shall deliver to
Seller, and Seller shall deliver to Buyer, such certificates and
consents as are required by Sections 10 and 11
).
In addition, after the Closing, the
parties agree to execute such additional documents as shall be
reasonably necessary, from time to time, to consummate the
transactions contemplated by this Agreement.
7. Representations and
Warranties of Seller . Except as set forth in the corresponding
sections of the Disclosure Letter delivered to Buyer by Seller
concurrently with entering into this Agreement (the “
Seller Disclosure Letter ”) (it being understood that
any information set forth in a particular section of the Seller
Disclosure Letter shall be deemed to be disclosed to each other
section or subsection thereof or hereof to which the relevance of
such information is reasonably apparent), Seller hereby represents
and warrants to Buyer as follows:
7.1 Organization .
Each of Seller and the Selling Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization, with full
corporate (or if not a corporation, the applicable form of entity)
power and authority to conduct its business as it is now being
conducted, and to own or use the properties and assets that it owns
or uses. Each of Seller and the Selling Subsidiaries is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used
by it, or the nature of the activities conducted by it, requires
such qualification, except for such failure to be so qualified
that, individually or in the aggregate would not result in a
Business Material Adverse Effect.
7.2 Authorization;
Enforceability. Seller has full power and authority to enter
into this Agreement and the other Transaction Documents to which it
is a party, to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby,
including, without limitation, the execution and delivery of this
Agreement and the Escrow Agreement, in accordance with the terms
and conditions hereof and thereof. The execution and delivery by
Seller of this Agreement and the other Transaction Documents to
which it is a party, and the performance by Seller of each of its
obligations contained herein and therein, have been duly authorized
by all necessary corporate action on the part of Seller. This
Agreement and all other Transaction Documents to which Seller is a
party (assuming the due authorization, execution and delivery
hereof and thereof by Buyer) are or, upon the execution and
delivery thereof by Seller will be, the valid and binding
obligations of Seller, enforceable in accordance with their terms,
subject in each case to the effect of applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting
creditors’ rights generally and subject to the effect of
general principles of equity, including, without limitation, the
possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity
or at law.
7.3 Conflicting
Obligations; Consents . The execution and delivery of this
Agreement and the other Transaction Documents to which Seller is a
party by Seller do not, and the consummation of the transactions
contemplated hereby and thereby does not (i) conflict with or
violate any provision of the Certificate of Incorporation or Bylaws
of Seller or the organizational documents of any Selling
Subsidiary, (ii) violate any material provisions of, or result
in a material breach or default under, any obligations under any
Contract included in the Purchased Assets or any other material
Contract to which Seller or any Selling Subsidiary is bound,
(iii) constitute a violation in any material respects of any
order, license or law, to which Seller is subject or to which
Seller is a party. No material third party consents, approvals or
authorizations are necessary for the execution and consummation of
the transactions contemplated hereby, nor are any such material
consents, approvals or authorizations required in order for any of
the Purchased Assets to be assigned or transferred to
Buyer.
7.4 Purchased Assets;
Title and Condition . Seller or a Selling Subsidiary owns good
and valid title to, a valid leasehold interest in, or valid rights
under a Contract to use, as applicable, all of the Purchased
Assets, free and clear of all security interests, liens, claims,
charges, pledges, title exceptions, and defects of title and other
encumbrances of any kind (“ Encumbrances ”),
except for Permitted Encumbrances. Seller warrants to Buyer that,
at the time of Closing, all Purchased Assets shall be free and
clear of all Encumbrances. Seller does not own any real property
that is exclusively used in the Business. The molds that are part
of the Purchased Assets represent all of the molds used by the
Business in the manufacture of the Purchased Assets.
7.5 Condition of Personal
Property . Each item of tangible personal property that is part
of the Purchased Assets is in good repair and good operating
condition (ordinary wear and tear excepted) and is adequate for the
uses to which it is being put. No item of tangible personal
property included in the Purchased Assets is in need of material
repair or replacement other than as part of routine maintenance in
the ordinary course of business.
7.6 Inventories .
Schedule 7.6 of Seller’s Disclosure Letter sets forth
a true and correct list of all finished goods inventories that are
part of the Purchased Assets as of August 30, 2007. All items
included in the inventories that are part of the Purchased Assets
consist of raw materials and supplies, manufactured and processed
parts, work-in-process, finished goods, and packaging materials all
of which are of a quality and quantity usable and saleable in the
ordinary course of business and none of which are below standard
quality, damaged, defective, refurbished or returns (other than
mint returns). None of the items included in the inventories have
been consigned to others. All finished goods inventories are of no
lesser quality than finished goods previously sold in the ordinary
course of business by the Business.
7.7 Financial
Statements . Seller has provided t
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