ASSET PURCHASE AGREEMENT

Exhibit 10.1

ASSET PURCHASE AGREEMENT

BY AND AMONG

CRAVE ENTERTAINMENT GROUP, INC.,

CRAVE ENTERTAINMENT, INC. and SVG DISTRIBUTION, INC.

and

FILLPOINT LLC

Dated as of February 10, 2009

LIST OF EXHIBITS AND SCHEDULES

 

 

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of February 10, 2009 by and among Crave Entertainment Group, Inc., Crave Entertainment, Inc. and SVG Distribution, Inc., each a California corporation (each a “ Seller ” and collectively the “ Sellers ”), and Fillpoint LLC, a Delaware limited liability company (“ Purchaser ”). Capitalized terms used in this Agreement without definition shall have the meaning given to such terms in Article 1 hereof.

The parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

1.1 When used in this Agreement, the following terms shall have the meanings assigned to them in this Section 1.1, or in the applicable Section of this Agreement to which reference is made in this Section 1.1.

“ Affiliate ” means, with respect to any specified Person, any other Person directly or indirectly controlling, controlled by or under common control with such specified Person.

“ Authorization ” means any authorization, approval, consent, certificate, license, permit or franchise of or from any Governmental Entity or pursuant to any Law.

“ Best Efforts ” means such commercially reasonable efforts that a prudent person desiring to achieve a particular result would use in order to ensure that such result is achieved as expeditiously as possible.

“ Business ” means the full-service distribution of video game software, hardware and related accessories, and specialty video game publishing business of Sellers as currently conducted.

“ Capital Stock ” means (a) in the case of a corporation, its shares of capital stock, (b) in the case of a partnership or limited liability company, its partnership or membership interests or units (whether general or limited), and (c) any other interest that confers on a Person the right to receive a share of the profits and losses, or distribution of assets, of the issuing entity.

“ Charter Documents ” means, with respect to any entity, the certificate of incorporation, the articles of incorporation, by-laws, articles of organization, limited liability company agreement, partnership agreement, formation agreement, joint venture agreement or other similar organizational documents of such entity (in each case, as amended).

“ Contract ” means any agreement, contract, license, lease, commitment, arrangement or understanding, written or oral, including any sales order or purchase order.

“ Environmental Laws ” means all foreign, federal, state and local laws, statutes, codes, regulations, rules, ordinances, orders, standards, permits, licenses, actions, principles of common law and requirements (including consent decrees, judicial decisions, administrative orders and self-implementing closure requirements) relating to the protection, preservation or conservation of the environment and to public or worker health and safety, all as amended, hereafter amended or reauthorized, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (“ CERCLA ”), 42 U.S.C. § 9601 et seq. , the Resource Conservation and Recovery Act (“ RCRA ”), 42 U.S.C. § 6901 et seq. , the Emergency Planning and Community Right to Know Act, 42 U.S.C. § 11001 et seq. , the Clean Air Act, 42 U.S.C. § 7401 et seq. , the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq. , the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq. , the Safe Drinking Water Act, 42 U.S.C. § 300f et seq. , and the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.

“ GAAP ” means generally accepted accounting principles, consistently applied, in the United States as promulgated by all relevant accounting authorities as of the date of this Agreement.

“ Governmental Entity ” means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to United States federal, state, local, or municipal government, including any department, commission, board, agency, bureau, subdivision, instrumentality, official or other regulatory, administrative or judicial authority thereof, and any non-governmental regulatory body to the extent that the rules and regulations or orders of such body have the force of Law.

“ Government Licenses ” means all permits, licenses, franchises, orders, registrations, certificates, variances, approvals and other authorizations obtained from federal, state or local governments or governmental agencies or other similar rights, and all data and records pertaining thereto, including, without limitation, those listed on the attached “License Schedule”, but excluding any such permits or licenses which are specifically identified on the License Schedule as not transferable.

“ Hazardous Substances ” means (a) “hazardous substances,” as defined by CERCLA . ; (b) “hazardous wastes,” as defined by RCRA; (c) petroleum or petroleum products, natural gas, synthetic gas and any mixtures thereof; (d) radioactive material, including, without limitation, any source, special nuclear, or by-product material, as defined in 42 U.S.C. §2011 et seq. ; (e) asbestos in any form or condition; (f) polychlorinated biphenyls; (g) biomedical wastes, mold spores or myotoxins; and (h) any other material, substance or waste regarding which liabilities or standards of conduct may be imposed under any Environmental Law.

 

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“ Indemnitee ” means any Person that is seeking indemnification from an Indemnitor pursuant to the provisions of this Agreement.

“ Indemnitor ” means any party hereto from which any Indemnitee is seeking indemnification pursuant to the provisions of this Agreement.

“ Knowledge ” of Sellers or any similar phrase means, with respect to any fact or matter, the actual Knowledge of any officer or director of any Seller or such knowledge as would be reasonably known after reasonable inquiry.

“ Law ” means any statute, law (including common law), constitution, treaty, ordinance, code, order, decree, judgment, rule, regulation and any other binding requirement or determination of any Governmental Entity.

“ Leased Real Property ” means all of Sellers’ right, title and interest under all leases, subleases, licenses, concessions and other agreements (written or oral) (the “Leases”), pursuant to which any Seller holds a leasehold or sub-leasehold estate in, or is granted the right to use or occupy, any land, buildings, improvements, fixtures or other interest in real property which is used in the operation of the Business.

“ Leasehold Improvements ” means all buildings, improvements and fixtures located on any Leased Real Property which are owned by any Seller, regardless of whether such buildings, improvements or fixtures are subject to reversion of the landlord or other third parties upon the expiration or termination of the Lease for such Leased Real Property. Leasehold Improvements shall include all leasehold improvements located on the Premises.

“ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, adverse claim or other encumbrance in respect of such property or asset.

“ Operating Subsidiaries ” means Crave Entertainment, Inc., (“ Crave ”) and SVG Distribution, Inc., (“ SVG ”)

“ Order ” means any award, injunction, judgment, decree, order, ruling, subpoena or verdict or other decision issued, promulgated or entered by or with any Governmental Entity of competent jurisdiction.

“ Permitted Liens ” means (a) Liens for current real or personal property taxes not yet due and payable and with respect to which Sellers maintain adequate reserves, (b) workers’, carriers’ and mechanics’ or other like liens incurred in the ordinary course of business with respect to which payment is not due and that do not impair the conduct of the businesses of Sellers or the present or proposed use of the

 

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affected property and (c) liens that are immaterial in character, amount, and extent and which do not detract from the value or interfere with the present or proposed use of the properties they affect.

“ Person ” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body.

“ Premises ” means that certain parcel of real property which is the subject of the real property lease attached hereto as Exhibit-Premises.

“ Proprietary Rights ” means all of the following owned by, issued to, or licensed to any Seller, or used in the Business, along with all associated income, royalties, damages and payments due from or payable by any third party (including, without limitation, damages and payments for past, present or future infringements or misappropriations thereof), all other associated rights (including, without limitation, the right to sue and recover for past, present or future infringements or misappropriations thereof), and any and all corresponding rights that, now or hereafter, may be secured throughout the world: (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice) and any reissues, continuations, continuations-in-part, divisions, extensions or reexaminations thereof; (ii) trademarks, service marks, trade dress, internet domain names or uniform resource locators, logos, slogans, trade names and corporate names and all registrations and applications for registration thereof, together with all goodwill associated therewith; (iii) copyrights and works of authorship, and all registrations and applications for registration thereof; (iv) mask works and all registrations and applications for registration thereof; (v) computer software (including, without limitation, data, data bases, database rights and documentation); (vi) trade secrets, confidential information and proprietary data and information (including, without limitation, compilations of data (whether or not copyrighted or copyrightable), ideas, formulae, compositions, blends, processes, know-how, manufacturing and production processes and techniques, financial and accounting data, business and marketing plans, and customer and supplier lists and related information).

“ Stockholder ” means Handleman Company, a Michigan corporation.

“ Subsidiary ” or “ Subsidiaries ” means any Person of which (a) such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interest in such partnership), or (b) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such Person is directly or indirectly owned or controlled by such party and/or by any one or more of its Subsidiaries.

 

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“ Tax ” or “ Taxes ” means any and all federal, state, or local net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits, transaction, license, lease, service, service use, occupation, severance, energy, unemployment, social security, workers’ compensation, capital, premium, and other taxes, assessments, customs, duties, fees, levies or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax, or additional amounts with respect thereto.

“ Tax Returns ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Taxing Authority ” means any Governmental Entity having jurisdiction with respect to any Tax.

“ $ ” means United States dollars.

Certain other terms are defined throughout this Agreement and shall have the meanings set forth by such definitions.

ARTICLE 2

PURCHASE AND SALE OF ASSETS

2.1 Purchase and Sale of Assets .

(a) On the terms and subject to the conditions contained in this Agreement, on the Closing Date, Purchaser shall purchase from Sellers, and Sellers shall sell, convey, assign, transfer and deliver to Purchaser, free and clear of all Liens by appropriate warranty bills of sale, warranty deeds, assignments and other instruments satisfactory to Purchaser and its counsel, all of the following assets of Sellers (collectively, the “ Purchased Assets ”):

(i) all accounts receivable, including without limitation, all trade accounts receivable, notes receivable from customers, vendor credits and accounts receivable from employees and all other obligations from customers with respect to sales of goods or services, whether or not evidenced by a note and whether current or non-current (all of the foregoing are collectively referred to herein as “ Accounts Receivable ”);

(ii) all prepayments and prepaid expenses that are transferable and related to exclusive distribution or publishing contracts or to inventory;

 

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(iii) all inventory, including raw materials, finished goods, and contract rights with regard to inventory in development or in process, including finished goods returned by customers of Sellers post-Closing (“ Inventory ”);

(iv) all furniture, equipment, office supplies, production supplies, spare parts, other miscellaneous supplies and other tangible property of any kind wherever located (including all such property located in any building, office, warehouse or other space leased, owned or occupied by any Seller and related to the Business or in any warehouse where any of the properties and assets related to the Business may be located);

(v) the data processing equipment and, to the extent assignable, related software of the Business;

(vi) all lists, records and other information pertaining to customer accounts (whether past or current), suppliers, personnel and agents and all reports, studies, plans, books, ledgers, files and financial, business and accounting records of every kind (including all financial, business and marketing plans), in each case whether evidenced in writing, electronic data, computer software or otherwise (provided that Sellers shall be entitled to keep a copy of any such items);

(vii) all claims, deposits, prepayments, warranties, guarantees, refunds, causes of action, rights of recovery, rights of setoff and rights of recoupment of every kind and nature, other than those relating exclusively to Excluded Assets or Excluded Liabilities;

(viii) the right to bill and receive payment for products shipped or delivered and/or services performed but unbilled or unpaid as of the Closing;

(ix) all Proprietary Rights;

(x) all goodwill as a going concern and all other intangible property, including trademarks, copyrights and corporate names of Sellers, and all goodwill associated with any of them;

(xi) all Government Licenses (but excluding any such permits or licenses which are specifically identified on the License Schedule as not transferable);

(xii) all insurance, warranty and condemnation proceeds received after the date hereof with respect to damage to, nonconformance of or loss to the Purchased Assets;

 

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(xiii) all rights to receive mail and other communications addressed to Sellers including, without limitation, Accounts Receivable payments;

(xiv) all telephone numbers (e.g. “800” numbers) used by Sellers;

(xv) all signs and advertising, marketing and promotional materials;

(xvi) all web sites and e-mail accounts;

(xvii) all Contracts listed on the attached “Assumed Contracts Schedule”; and

(xviii) all choses in action, rights and benefits under any warranties, and rights and benefits under any indemnity provision other than those arising under this Agreement.

The purchase and sale of the Purchased Assets is referred to in this Agreement as the “ Acquisition .”

(b) Notwithstanding the foregoing, the following properties, assets, rights and interests of Sellers are expressly excluded from the purchase and sale contemplated hereby (the “ Excluded Assets ”) and, as such, are not included in the Purchased Assets:

(i) Sellers’ rights under or pursuant to this Agreement;

(ii) Sellers’ general ledger, accounting records, minute books and corporate seal; provided that Purchaser shall be given copies of the general ledger and accounting records as such documents exist as of the Closing Date;

(iii) any right to receive mail and other communications addressed to Sellers relating exclusively to the Excluded Assets or the Excluded Liabilities;

(iv) all contracts, agreements and arrangements which are not listed in the Assumed Contracts Schedule;

(v) cash, cash equivalents and checks in Sellers’ bank accounts at the effective time of the Closing, all of which shall be distributed to Sellers in the ordinary course from the bank accounts;

(vi) except as provided by Section 2.1(a)(xi), rights and benefits under all insurance policies;

(vii) all interests in real estate (including, without limitation, fixtures, fittings and improvements thereon, and easements, licenses, rights of way,

 

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permits, and the other appurtenants thereto, including appurtenant rights in and to public streets, whether or not vacated), whether, owned, leased, subleased or otherwise;

(viii) the rights to that part of the Business which is the subject of the MLA (as hereinafter defined); and

(ix) the properties, assets, rights and interests listed on the attached “Excluded Assets Schedule.”

2.2 Limited Assumption of Liabilities .

(a) On the terms and subject to the conditions set forth in this Agreement, in addition to the Purchase Price payable hereunder and as additional consideration for the Purchased Assets, as of the Closing, Purchaser shall assume and agree to pay, defend, discharge and perform as and when due only the following specific liabilities and obligations of Sellers that relate exclusively to the Business (the “ Assumed Liabilities ”):

(i) all obligations relating to any performance obligation due after the Closing or to any fact or circumstance arising after the Closing Date under the Contracts on the Assumed Contracts Schedule, it being understood that any and all performance obligations due before the Closing Date with respect to the Contracts on the Assumed Contracts Schedule shall remain the obligation of Sellers;

(ii) such other liabilities as are specifically identified on the “Assumed Indebtedness Schedule.”

(b) Notwithstanding anything to the contrary in this Agreement, Purchaser shall not assume or in any way become liable for any of Sellers’ debts, liabilities or obligations of any nature whatsoever other than the Assumed Liabilities, whether accrued, absolute or contingent, whether known or unknown, whether due or to become due and whether or not related to the Business or the Purchased Assets, and regardless of when or by whom asserted and whether or not set forth on the Schedules hereto (collectively, the “ Excluded Liabilities ”). Without limiting the generality of the foregoing, Purchaser shall have no obligation to accept the return of any inventory sold by any Seller prior to the Closing Date but, if it does so, such inventory shall be credited and paid as provided by Section 2.3.

2.3 Purchase Price .

(a) In addition to the assumption of the Assumed Liabilities set forth in Section 2.2(a) above, the purchase price for the Purchased Assets (the “ Purchase Price ”) shall be equal to the sum of:

(i) 95% of the Accounts Receivable aged 90 days or less from the date of the invoice on the Closing Date (excluding such Accounts Receivable due from Kmart or Sears (“ Kmart/Sears Current Accounts Receivable ”)) (“ Current Accounts Receivable ”) collected by Purchaser after the Closing;

 

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(ii) Except as set forth in Section 2.3(b)(iii), 50% of the difference between (x) Accounts Receivable aged over 90 days from the date of the invoice on the Closing Date (“ Non-Current Accounts Receivable ”) collected by Purchaser after the Closing and (y) reasonable fees, commissions and other collection costs paid to third-parties, if Sellers consent to the retention of the third party, which consent Sellers shall not unreasonably withhold;

(iii) 95% of the Kmart/Sears Current Accounts Receivable if and as collected by Purchaser after closing;

(iv) 95% of the Non-Current Accounts Receivable listed on the attached Schedule 2.3(a)(iv) (“ Special Non-Current Accounts Receivable ”), if collected by Purchaser within 14 days after the date the customer has committed for payment, as set forth on such Schedule; provided that, if the customer does not pay within such time frame but makes a firm commitment for payment by a new date certain, the parties shall attempt to agree in good faith (considering, among other factors, the reasons why the original commitment was not met and the anticipated costs of collection) as to whether to keep such receivable as a Special Non-Current Account Receivable, with the prior agreement that the account shall cease to be a Special Non-Current Account Receivable and will be re-classified as a Non-Current Account Receivable if it is not paid within 3 days after the new commitment date;

(v) (X) 75% of the net appraised value of the Inventory at Closing (the “ Inventory Value ”) plus (Y) 75% of the net appraised value of re-salable Inventory returned to Purchaser after the Closing, less a 5% restocking fee. On the close of business on the third business day prior to Closing, Sellers shall, at Sellers’ expense, conduct a physical count of the Inventory. Purchaser and/or its representatives shall have the right to be present and observe the taking of such count. The value of the Inventory shall be based on such physical count (adjusted for transactions between the date of the count and the Closing Date) and the appraisal by Tiger Valuation Services dated February 9, 2009 provided that, if an item of returned Inventory was not on the appraisal because Sellers did not have any at the time of the appraisal, then such item shall be valued at 42.675% of Sellers’ cost of such item; and

(vi) $100,000.

 

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(b) The Purchase Price shall be paid by Purchaser to Sellers as follows:

(i) At the Closing, by wire transfer of immediately available funds, the sum of (X) $100,000, (Y) 50% of the Inventory Value, and (Z) 75% of the Current Accounts Receivable, net of reserves and allowances, as set forth in an Account Receivable Statement prepared by Sellers as of the Closing, which shall be prepared in accordance with GAAP and reasonably acceptable to Purchaser; plus the amount of pre-paid salary acquired by Purchaser, less a credit for the amount of the accrued vacation assumed by Purchaser;

(ii) 12.50% of the Inventory Value at each of April 10, June 10, August 10, and October 10, 2009;

(iii) Bi-weekly on the 10 ^th and 24 ^th day of each month commencing March 10, 2009, during the remainder of 2009, and quarterly, on the 10 ^th day of each calendar quarter thereafter commencing with January 10, 2010 and through April 10, 2011, Sellers’ share of the amount by which the aggregate net amount collected by Purchaser from the Closing Date through the end of the immediately preceding calendar month with respect to Accounts Receivable (whether such Accounts Receivable are Current Accounts Receivable, Non-Current Accounts Receivable, Special Non-Current Accounts Receivable or Kmart/Sears Current Accounts Receivable) exceeds the sum of (X) the amount paid by Purchaser to Sellers pursuant to Section 2.3(b)(i)(Z) and (Y) Purchaser’s share of the aggregate net amount of the Accounts Receivable collected (examples of the application of this Section 2.3(b)(iii) are set forth on the attached “Schedule 2.3(b)(iii)”);

(iv) Bi-weekly, the payment due under Section 2.3(a)(v)(Y);

(v) By a credit equal to the full amount of the selling price of any returned Inventory accepted by Purchaser, in its discretion, if such Inventory was sold by any Seller prior to the Closing Date and the amount of the return exceeds the reserve establish as of the Closing; provided that, if Purchaser has sold the identical item after the Closing to the customer making the return, returns shall first be applied against Purchaser’s sales and only to the extent of the excess against Sellers. Such credit shall be applied by Purchaser to the next payment(s) due pursuant to this Section 2.3(b); and

(vi) Any payment not made when due shall bear interest at a variable the rate of interest equal to two percent (2%) in excess of the prime rate of interest as set forth in the Wall Street Journal from time to time, from the due date to the payment date.

(c) At the end of four months after the Closing, if the net amount collected with respect to Accounts Receivable has not totaled 105.263% of the amount paid to Sellers at the Closing for Current Accounts Receivable pursuant to Section 2.3(b)(i)(Z)

 

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less a $250,000 de minimus basket (such deficit, as it may be reduced by future collections of Current Accounts Receivable, the “ Shortfall ”), Purchaser may withhold payments due thereafter (but not payments already due) from Purchaser to Sellers relating to all Accounts Receivable, Inventory and Net Publishing and Distribution Profit pursuant to Section 2.3(b)(ii), (iii) and (iv) and may, to the extent of the then Shortfall, set off against the Shortfall the withheld payments. Whenever the Shortfall has been eliminated (whether by collections or by setoff), Purchaser shall resume making payments pursuant to Section 2.3(b)(ii), (iii) and (iv), and the amount of the setoff shall be included as a collection of Accounts Receivable in determining the amount payable to Sellers pursuant to Section 2.3(b)(iii). If the Shortfall is not recouped by Purchaser within two (2) years of the Closing Date then fifty percent (50%) of the Shortfall shall be repaid by Sellers to Purchaser upon demand together with interest from the Closing Date to the payment date at the rate set forth in Section 2.3(b)(vi).

(d) For two years following the Closing, Purchaser agrees to use its Best Efforts to collect the Accounts Receivable; provided that, (i) Purchaser is not obligated to (X) engage any third party collection agency or engage any attorneys or other third parties to collect the Accounts Receivable except for the account of Sellers and Purchaser pro rata in proportion to the Purchase Price of an Account Receivable and with Sellers’ express consent, (Y) do business with any particular customer or (Z) have or attempt to have a given sales volume with any customer and (ii) at any time, Purchaser and Sellers may agree upon an amount to be paid by Purchaser to Sellers in full satisfaction of Sellers’ rights with respect to the Accounts Receivable. On the 90 ^th and 180 ^th days after the Closing Date Sellers and Purchaser shall meet to review the status of Purchaser’s collection of the Accounts Receivable and, as a result of those meetings or otherwise may agree to transfer any Accounts Receivable to Sellers with an appropriate adjustment in the Purchase Price. At the end of two years following the Closing, if there has not been an agreement pursuant to the previous sentence, all remaining Accounts Receivable shall be transferred to Sellers. In addition, at Sellers’ expense, there shall be a monitor at Purchaser’s place of business for six months following the Closing who shall advise Sellers whether Purchaser is adhering to its sales and collections process in order to meet its obligations to Sellers and whose approval is necessary before Purchaser may authorize the return of any inventory for the account of Sellers, which approval will not be unreasonably withheld or delayed.

2.4 Allocation . The parties agree to allocate the aggregate of the Purchase Price as adjusted herein (and all other capitalizable costs) among the Purchased Assets for all purposes (including financial accounting and tax purposes) in the manner required by Section 1060 of the Internal Revenue Code as shown on the attached “Allocation Schedule”. Purchaser and Sellers agree that the form of the transactions and the consideration provided for in this Agreement were arrived at on the basis of arm’s length negotiation between Purchaser, on the one hand, and Sellers, on the other hand, and shall be respected by each of them for federal, state, local and other tax reporting purposes, including filings on Internal Revenue Service Form 8594, and that none of them will assert or maintain a position inconsistent with the foregoing.

 

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2.5 Closing and Closing Date . The closing of the Acquisition (the “ Closing ”) shall take place at Sellers’ offices at 10:00 a.m. simultaneously with the execution of this Agreement. The date upon which the Closing occurs is herein referred to as the “ Closing Date .” The Closing shall be effective as of 11:59 p.m., Pacific Standard Time, on the Closing Date.

2.6 Transactions to be Effected at the Closing .

(a) At the Closing Purchaser shall deliver to Sellers the payment due to Sellers at the Closing pursuant to Section 2.3(b)(i) in immediately available funds by wire transfer to an account of Sellers designated in writing by Sellers to Purchaser.

(b) At the Closing, each Party shall deliver to the other Party all documents, instruments or certificates required to be delivered by it at or prior to the Closing pursuant to this Agreement.

ARTICLE 3

CONDITIONS TO CLOSING

3.1 Conditions to Sellers’ Obligations . The obligation of Sellers to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions on or before the Closing Date:

(a) The representations and warranties set forth in Article 5 to the extent qualified by materiality shall be true and correct in all respects, and all representations and warranties set forth in Article 5 not so qualified shall be true and correct in all material respects, at and as of the Closing as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties.

(b) Purchaser shall have performed in all material respects all the covenants and agreements required to be performed by it under this Agreement prior to the Closing.

(c) All necessary filings with regulatory authorities shall have been made and all waiting periods shall have expired or shall have been terminated, including all notices and publications.

(d) No action or proceeding before any court or government body shall be pending or threatened which, in the reasonable judgment of Sellers, makes it inadvisable or undesirable to consummate the transactions contemplated by this Agreement by reason of the probability that the action or proceeding will result in a judgment, decree or order that would prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated hereby or cause such transactions to be rescinded.

 

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(e) Purchaser shall have delivered the portion of the Purchase Price payable at Closing and shall have assumed the Assumed Liabilities by delivery of an Assumption Agreement, in the form attached hereto as Exhibit 3.1(e) (the “ Assumption Agreement ”).

(f) Purchaser shall have subleased from Sellers the property located at 5000 Birch Street, Suite 6500, Newport Beach, CA 92660, for three months with an option to extend for up to an additional three months, if notice is given within two months after the Closing, the terms of which shall be Purchaser’s agreement to pay all of Sellers’ verified expenses with respect to such property. At the end of such sublease, Purchaser shall vacate the subleased premises and shall leave them in broom-clean condition. In addition, Purchaser shall cease using the Canadian facility of Anderson Merchandisers-Canada, Inc. by March 2, 2009, unless Purchaser and Anderson Merchandisers-Canada otherwise agree.

(g) On or prior to the Closing Date, Purchaser shall have delivered to Sellers each of the following:

(i) a certificate from an officer of Purchaser in the form set forth as Exhibit 3.1(g) attached hereto, dated the Closing Date, stating that the applicable preconditions have been satisfied;

(ii) certified copies of the resolutions duly adopted by Purchaser’s Manager and members authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby, and the consummation of all transactions contemplated hereby and thereby;

(iii) such other documents or instruments as Sellers reasonably request to effect the transactions contemplated hereby.

(h) Any condition specified in this Section 3.1 may be waived by Sellers; provided that no such waiver will be effective against Sellers unless it is set forth in a writing executed by Sellers.

3.2 Conditions to Purchaser’s Obligations . The obligation of Purchaser to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions on or before the Closing Date:

(a) The representations and warranties set forth in Article 4 to the extent qualified by materiality shall be true and correct in all respects, and all representations and warranties set forth in Article 4 not so qualified shall be true and correct in all material respects, at and as of the Closing as though then made and as though the Closing Date were substituted for the date of this Agreement throughout such representations and warranties.

 

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(b) Sellers shall have performed in all material respects all of the covenants and agreements required to be performed by them under this Agreement prior to the Closing.

(c) No action or proceeding before any court or government body shall be pending or threatened which, in the reasonable judgment of Purchaser, makes it inadvisable or undesirable to consummate the transactions contemplated by this Agreement by reason of the probability that the action or proceeding will result in a judgment decree or order that would prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated hereby or cause such transactions to be rescinded.

(d) On or prior to the Closing Date, Sellers shall have delivered to Purchaser each of the following:

(i) a certificate from an officer of Sellers in the form set forth as Exhibit 3.2(d)(i) attached hereto, dated the Closing Date, stating that the applicable preconditions have been satisfied;

(ii) certified copies of the resolutions duly adopted by Sellers’ boards of directors and stockholders authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby, and the consummation of all transactions contemplated hereby and thereby;

(iii) copies of all necessary governmental and third party consents, approvals, releases and filings required in order to effect the transactions contemplated by this Agreement and the other agreements contemplated hereby;

(iv) such instruments of sale, transfer, assignment, conveyance and delivery, in form and substance reasonably satisfactory to counsel for Purchaser, as are required in order to transfer to Purchaser good and marketable title to the Purchased Assets, free and clear of all Liens, including, without limitation a Trademark and Service Marks Agreement in the form set forth as Exhibit 3.2(d)(iv), collectively, the “ Transfer Documents ”);

(v) such other documents or instruments as Purchaser reasonably requests to effect the transactions contemplated hereby.

(e) Sellers shall pay the balance due the lessor pursuant to the Balboa Lease.

(f) All proceedings to be taken by Sellers in connection with the consummation of the transactions contemplated hereby and all certificates, instruments and other documents required to effect the transactions contemplated hereby reasonably requested by Purchaser will be reasonably satisfactory in form and substance to Purchaser and its counsel.

 

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(g) Any condition specified in this Section 3.2 may be waived by Purchaser; provided that no such waiver shall be effective unless it is set forth in a writing executed by Purchaser.

3.3 Conditions to Obligations of Purchaser and Sellers . The obligations of Purchaser and Sellers to consummate the Acquisition are subject to the satisfaction on or prior to the Closing Date of the following conditions:

(a) Sellers and Purchaser shall have entered into a mutually acceptable Transition Services Agreement (“ TSA ”) and a mutually acceptable Management and License Agreement (“ MLA ”).

(b) No temporary restraining order, preliminary or permanent injunction or other Order preventing the consummation of the Acquisition shall be in effect. No Action shall be pending or threatened before any court or other Governmental Entity or oth