SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
November 1, 1999
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Date of Report (Date of earliest event reported)
REFAC
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-7704 13-1681234
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
Hudson River Pier, 115 River Road, Edgewater, New Jersey 07020-1099
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(Address of Principal Executive Offices) (Zip Code)
(201) 943-4400
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On November 1, 1999, Refac International Ltd. (the "Company"), a
wholly owned subsidiary of Refac (the "Registrant"), entered into an Asset
Purchase Agreement ("Purchase Agreement") with David Morris Creative, Inc.,
David Morris Associates, Inc., David Morris Creative Associates Ltd.
(collectively, the "Sellers") and David M. Annunziato, President of each of
the Sellers. Pursuant to the Purchase Agreement, the Company purchased
substantially all of the business and assets and assumed substantially all
of the liabilities of each of the Sellers for an aggregate purchase price of
approximately $1.75 million in cash, including certain post-closing contingent
payments. The closing of the transaction also took place on November 1, 1999.
A press release (the "Press Release") describing the transaction was released
on November 2, 1999.
The Purchase Agreement and Press Release are attached hereto as
Exhibits 99.1 and 99.2 and each is incorporated herein by reference in its
entirety. The foregoing discussion is qualified in its entirety by
reference to such Exhibits.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Asset Purchase Agreement, dated as of November 1, 1999, by and
among Refac International Ltd., David Morris Creative, Inc.,
David Morris Associates, Inc., David Morris Creative Associates
Ltd. and David M. Annunziato.
99.2 Press Release issued by the Registrant, dated November 2, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: November 3, 1999
REFAC
By: /S/ ROBERT L. TUCHMAN
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Name: Robert L. Tuchman
Title: President
EXHIBIT INDEX
Exhibit No. Description
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99.1 Asset Purchase Agreement, dated as of November 1, 1999, by
and among Refac International Ltd., David Morris Creative,
Inc., David Morris Associates, Inc., David Morris Creative
Associates Ltd. and David M. Annunziato.
99.2 Press Release issued by the Registrant, dated November 2,
1999.
____________________________________________________________________
ASSET PURCHASE AGREEMENT
Dated as of November 1, 1999
by and among
DAVID MORRIS CREATIVE, INC.,
DAVID MORRIS ASSOCIATES, INC.,
DAVID MORRIS CREATIVE ASSOCIATES LTD. and
DAVID M. ANNUNZIATO
and
REFAC INTERNATIONAL, LTD.
___________________________________________________________________
TABLE OF CONTENTS
Section Page
ARTICLE I
Sales of Assets and Assumption of Liabilities . . . . . . 1
SECTION 1.01 Sales of Assets. . . . . . . . . . . . . . . . . . . 1
(a) Purchased Assets. . . . . . . . . . . . . . . . . . . . . 1
(b) Excluded Assets . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02 Assumption of Liabilities . . . . . . . . . . . . . . 2
(a) Assumed Liabilities . . . . . . . . . . . . . . . . . . . 2
(b) Excluded Liabilities . . . . . . . . . . . . . . . . . . . 3
SECTION 1.03 Closing . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.04 The Purchase Price . . . . . . . . . . . . . . . . . 4
(a) Purchase Price . . . . . . . . . . . . . . . . . . . . . . 4
(b) Payment of Purchase Price . . . . . . . . . . . . . . . . 4
SECTION 1.05 Allocation of Purchase Price . . . . . . . . . . . . 5
SECTION 1.06 Further Cooperation . . . . . . . . . . . . . . . . . 6
ARTICLE II
Representations and Warranties . . . . . . . . . . 6
SECTION 2.01 Representations and Warranties of the Sellers . . . . 6
(a) Organization . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Binding Obligation . . . . . . . . . . . . . . . . . . . . 6
(c) Purchased Assets . . . . . . . . . . . . . . . . . . . . . 7
(d) Title to Personal Property . . . . . . . . . . . . . . . . 7
(e) Real Property . . . . . . . . . . . . . . . . . . . . . . 7
(f) Contracts . . . . . . . . . . . . . . . . . . . . . . . . 8
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . 8
(h) Absence of Changes or Events . . . . . . . . . . . . . . . 8
(i) Compliance with Laws . . . . . . . . . . . . . . . . . . . 9
(j) No Broker's or Finder's Fees . . . . . . . . . . . . . . . 9
(k) Employee Benefit Plans . . . . . . . . . . . . . . . . . . 9
(l) Environmental Matters . . . . . . . . . . . . . . . . . . 9
(m) Financial Statements . . . . . . . . . . . . . . . . . . 10
(n) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 11
(o) Intellectual Property . . . . . . . . . . . . . . . . . 12
(p) Computer Software . . . . . . . . . . . . . . . . . . . 14
SECTION 2.02 Representations and Warranties of Buyer . . . . . . 14
(a) Organization . . . . . . . . . . . . . . . . . . . . . . 14
(b) Binding Obligation . . . . . . . . . . . . . . . . . . . 14
ARTICLE III
Covenants . . . . . . . . . . . . . . 15
SECTION 3.01 Covenants of Executive and the Sellers . . . . . . 15
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . 15
(b) No Other Bids . . . . . . . . . . . . . . . . . . . . . 16
(c) Confidentiality, Non-Competition, etc. . . . . . . . . 17
(d) Office Location. . . . . . . . . . . . . . . . . . . . 23
SECTION 3.02 Covenants of Buyer. . . . . . . . . . . . . . . . 23
(a) Professional Fees . . . . . . . . . . . . . . . . . . . 23
(b) Financing . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Board of Directors . . . . . . . . . . . . . . . . . . . 24
(d) Board of Directors . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV
Additional Agreements . . . . . . . . . . . 25
SECTION 4.01 Access to Information . . . . . . . . . . . . . . . 25
SECTION 4.02 Expenses . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.03 Press Releases . . . . . . . . . . . . . . . . . . 26
ARTICLE V
Conditions Precedent . . . . . . . . . . . 26
SECTION 5.01 Conditions to Each Party's Obligation . . . . . . . 26
(a) Approvals . . . . . . . . . . . . . . . . . . . . . . . 26
(b) Legal Action . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.02 Conditions of Obligations of Buyer . . . . . . . . 26
(a) Representations and Warranties . . . . . . . . . . . . . 27
(b) Performance of Obligations of the Sellers . . . . . . . 27
(c) No Material Adverse Change . . . . . . . . . . . . . . . 27
(d) Consents and Actions . . . . . . . . . . . . . . . . . . 27
(e) Closing Deliveries . . . . . . . . . . . . . . . . . . . 27
(f) Release of Security Interests . . . . . . . . . . . . . 28
SECTION 5.03 Conditions of Obligation of the Sellers . . . . . . 28
(a) Representations and Warranties . . . . . . . . . . . . . 28
(b) Performance of Obligations of Buyer . . . . . . . . . . 29
(c) Consents and Actions . . . . . . . . . . . . . . . . . . 29
ARTICLE VI
Indemnification . . . . . . . . . . . . . 29
SECTION 6.01 Buyer Claims . . . . . . . . . . . . . . . . . . . 29
SECTION 6.02 Seller Claims . . . . . . . . . . . . . . . . . . . 30
SECTION 6.03 Notice of Claim . . . . . . . . . . . . . . . . . . 30
SECTION 6.04 Defense of Third Party Claims . . . . . . . . . . . 31
ARTICLE VII
Termination, Amendment and Waiver . . . . . . . . 31
SECTION 7.01 Termination . . . . . . . . . . . . . . . . . . . . 31
SECTION 7.02 Amendment . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII
Labor and Employment Matters . . . . . . . . . 32
SECTION 8.01 Buyer's Employment Decisions . . . . . . . . . . . 32
ARTICLE IX
General Provisions . . . . . . . . . . . . 33
SECTION 9.01 Survival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . 33
SECTION 9.02 Sales Taxes . . . . . . . . . . . . . . . . . . . . 33
SECTION 9.03 Counterparts . . . . . . . . . . . . . . . . . . . 33
SECTION 9.04 Governing Law . . . . . . . . . . . . . . . . . . . 33
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered int
as of November 1, 1999, by and among REFAC INTERNATIONAL, LTD. ("Buyer"),
and DAVID MORRIS CREATIVE, INC., DAVID MORRIS ASSOCIATES, INC., DAVID
MORRIS CREATIVE ASSOCIATES LTD. (each, a "Seller", and collectively, the
"Sellers") and DAVID M. ANNUNZIATO (the "Executive").
ARTICLE I
Sales of Assets and Assumption of Liabilities
SECTION 1.01 Sales of Assets.
(a) Purchased Assets. At the Closing (as defined below), each
of the Sellers shall sell, assign, transfer, convey and deliver to Buyer
and Buyer shall accept and purchase all of the Sellers' right, title and
interest in and to all of the assets, properties and rights of each of the
Sellers existing at the close of business on the day of the Closing (the
"Purchased Assets"), including, without limitation, (i) all fixtures,
furniture, equipment of the Sellers; (ii) the customer lists of the
businesses of the Sellers (each, a "Business", and collectively, the
"Businesses"); (iii) all inventory, including raw materials, work-in-
process, finished product, spare parts and supplies used in connection with
each Seller's Business; (iv) all petty cash used in the day to day
operation of each Seller's Business and the bank accounts of each Seller's
Business; (v) the prepaid expenses and other current assets of each
Seller's Business; and (vi) all Intellectual Property (as defined in
Section 2.01(o)), of each Seller's Business, (vii) all permits,
authorizations and rights of each Seller's Business listed in Schedule
1.01(a), (viii) the Executive Loan (as defined in below), if any, and (ix)
all of the other assets of each Seller's Business listed in Schedule
1.01(a), in each case together with all assets, properties and rights
acquired by each of the Sellers of a similar nature to the foregoing since
the date hereof, less such assets, properties and rights as may have been
disposed of since said date in the ordinary course of business consistent
with past practice.
In connection with the foregoing, any amounts paid by the Sellers
to the Executive from the Balance Sheet date to the Closing Date in excess
of the Permitted Executive Payments (as defined below) shall be deemed to
be loans payable by the Executive to Buyer (if any, the "Executive Loan")
and shall constitute Purchased Assets. Executive agrees to repay to Buyer
on the Closing Date the amount of any such Executive Loan. The term
"Permitted Executive Payments" shall mean the amount equal to $150,000
divided by 365 and multiplied by the number of days elapsed during the
period from the date of the Balance Sheet until the Closing Date.
(b) Excluded Assets. The foregoing notwithstanding, Buyer shall
not purchase, and the Sellers shall not be deemed to sell, those assets
which are listed in the Schedule of Excluded Assets attached hereto and
labeled Schedule 1.01(b), including, without limitation, the artwork
currently contained in Sellers' premises; provided, that such art is not
included as an asset on the Balance Sheet (as defined in Section 2.01(m)).
The Excluded Assets shall include (i) an amount in cash not more than (x)
$49,670, plus (y) the amount of the profits of the Sellers for the month of
October, 1999 multiplied by 45%, to be retained by Sellers and distributed
to the Executive at or after the Closing; provided, that if the Sellers
shall operate at a loss for the month of October, 1999, Sellers or
Executive shall deliver to Buyer an amount equal to such loss multiplied by
45%, and (ii) the loan receivable from the Executive to Davis Morris
Creative, Inc. in the amount of $218,664, as reflected on the September 30,
1999 balance sheet previously delivered to Buyer. Buyer, Executive and
Sellers agree to deliver any adjustment amounts pursuant to clause (i) of
the preceding sentence within ten (10) days of the determination of any
such adjustment amount.
SECTION 1.02 Assumption of Liabilities.
(a) Assumed Liabilities. As of the Closing Date (as defined
below), Buyer shall undertake, assume, and agree to perform, and otherwise
pay, satisfy and discharge as of the Closing the liabilities for only (i)
those contracts or agreements listed in Schedule 1.02(a), (ii) the
liabilities of the Business set forth on the Balance Sheet, (iii) the lease
for the Leased Real Property (as defined in Section 2.01(e) hereof), and
(iv) the liabilities of the Business incurred in the ordinary course of
business since the date of the Balance Sheet, including open purchase
orders (collectively, the "Assumed Liabilities").
(b) Excluded Liabilities. Buyer shall not assume, nor does
Buyer agree to pay, any debts, liabilities or obligations not specifically
described in Section 1.02(a) hereof, including any federal, state or local
taxes of the Sellers on or measured by income, gross receipts or payroll,
whether for the period ending as of the Closing Date or any other period or
penalties or interest relating thereto, or any other taxes of the Sellers
of any kind or nature or penalties or interest relating thereto. All such
liabilities shall be the responsibility of the Sellers and/or Executive,
and the Sellers and Executive agree to jointly and severally indemnify and
hold Buyer harmless against any such liabilities, debts, obligations,
claims or damages therefrom (including incidental and consequential
damages), costs and expenses.
SECTION 1.03 Closing. The closing of the purchase and sale of
Purchased Assets (the "Closing") shall take place at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York at 10 a.m. on (a) November 1, 1999 subject to the satisfaction (or, if
permissible, waiver) of the conditions set forth in Article V hereof, or
(b) such other date, time and place which is agreed to by Buyer and the
Sellers. The date on which the Closing is to occur is herein referred to
as the "Closing Date" and the Closing shall be deemed to be effective as of
the opening of business on the Closing Date.
SECTION 1.04 The Purchase Price.
(a) Purchase Price. For purposes hereof the Purchase Price
shall be equal to $1,500,000 plus the Contingent Payment (as defined
hereinafter), if any.
(b) Payment of Purchase Price. The Purchase Price shall be paid
as follows:
(i) $1,500,000 by certified check, bank
cashiers check or wire transfer at the Closing; and
(ii) an additional $250,000 (the "Contingent
Payment") if the net earnings before interest, taxes,
depreciation and amortization ("EBITDA") of the Businesses
operated as a separate division of Buyer after the Closing,
calculated on the basis of preparation of the Income Statement,
shall exceed $375,000 in any two (2) of the three (3) calendar
years during the three-year period ending on December 31, 2002
(the "Contingent Payment Period"), to be paid promptly after a
determination that the Contingent Payment is payable in
accordance with this Section 1.04(b), but in no event later than
July 1, 2003.
In calculating the EBITDA of the Businesses operated as a separate division
of Buyer after the Closing (such division, "DMA-NEW"), the annual
management and overhead charge from Buyer to DMA-NEW for
accounting/bookkeeping, office rent, telephones, insurance, payroll
processing, employee benefits and benefit administration, and receptionist
services rendered by Buyer to DMA-NEW (including payroll taxes associated
with the personnel providing the foregoing services) shall be equal to
$183,314; provided, that the costs of relocation of the Businesses and the
existing tenant improvements for the space to be occupied by DMA-NEW
pursuant to Section 3.01(d) hereof shall be excluded from the foregoing
calculation of EBITDA for DMA-NEW. In addition, in calculating the EBITDA
of DMA-NEW during the Contingent Payment Period, Buyer shall credit DMA-NEW
at a rate of (x) 85% of DMA-NEW's usual and customary billing rates for
creative services actually performed for Buyer or any of its affiliates,
and (y) 100% of DMA-NEW's usual and customary billing rates for creative
services actually performed for customers referred to DMA-NEW by Buyer or
any of its affiliates. For purposes of this Agreement all determinations
with respect to the calculation of EBITDA of DMA-NEW for any calendar year
shall be made in accordance with generally accepted accounting principles,
consistently applied, by Buyer's regular independent public accountants.
To the extent that such books and records relate to DMA-NEW, Executive
shall have the right during normal business hours to inspect the books and
records of Buyer annually for the purposes of verifying the calculation of
EBITDA as set forth in this Section 1.04(b).
SECTION 1.05 Allocation of Purchase Price. The Purchase Price
shall be allocated pursuant to a schedule to be furnished to the Sellers by
Buyer prior to Closing, or as soon as practicable after Closing; provided,
that the Purchased Assets shall be valued at their aggregate book value;
provided, further, that the balance of the purchase price for the
Businesses shall be allocated to goodwill.
SECTION 1.06 Further Cooperation. From time to time after the
Closing, each of the Sellers at Buyer's request and without further
consideration, agrees to execute and deliver or to cause to be executed and
delivered such other instruments of transfer as Buyer may reasonably
request to transfer to Buyer more effectively the right, title and interest
in or to the Purchased Assets and to take or cause to be taken such further
or other action as may reasonably be necessary or appropriate in order to
effectuate the transactions contemplated by this Agreement.
ARTICLE II
Representations and Warranties
SECTION 2.01 Representations and Warranties of the Sellers.
Each of the Sellers represents and warrants to, and agrees with, Buyer as
follows:
(a) Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation.
(b) Binding Obligation. Seller has all requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and to carry out the transactions contemplated hereby. The Board
of Directors of Seller has duly authorized the execution and delivery of
this Agreement and the other transactions contemplated hereby and, no other
corporate proceedings on the part of Seller are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Seller and constitutes a valid and
binding obligation of Seller enforceable in accordance with its terms.
This execution, delivery and performance by Seller of this Agreement does
not and will not conflict with, or result in any violation of or default
under, any provision of the Articles of Incorporation or Bylaws (or other
organizational documents) of Seller, as amended, or any ordinance, rule,
regulation, judgment, order, decree, agreement, instrument or license
applicable to Seller or to any of its respective properties or assets. No
consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
governmental agency, authority or instrumentality, domestic or foreign, is
required by or with respect to Seller in connection with its execution,
delivery or performance of this Agreement.
(c) Purchased Assets; Assumed Liabilities. Except for assets
disposed of in the ordinary course of business, assets subject to the
leases described in Schedule 1.02(a) and Excluded Assets, the Purchased
Assets (x) consist of all assets reflected in Section 1.01(a) and (y)
include all of the assets which have been used by Seller in the operation
of its Business since January 1, 1999. Executive and the Sellers are aware
of no outstanding jobs which, individually or in the aggregate, will result
in a material loss.
(d) Title to Personal Property. Except as set forth in Schedule
2.01(d) and except for equipment leased by the Sellers pursuant to the
Equipment Leases described in Schedule 1.02(a), Sellers have good and
marketable title to all of the personal property included in the Purchased
Assets, in each case free and clear of all mortgages, liens, security
interests, pledges, charges or encumbrances of any nature whatsoever.
(e) Real Property. Sellers own no real property. Schedule
2.01(e) includes a complete list of the real property leased by Sellers
("Leased Real Property"). Sellers have previously delivered to Buyer
complete copies of all of the leases for the Leased Real Property.
(f) Contracts. Except as described in Schedule 2.01(f), no
Seller is a party to or bound by any lease, agreement, contract or other
commitment which involves the payment or receipt of more than $5,000 per
year or is not cancellable by Seller on less than 60 days notice without
penalty or payment of any cancellation or termination fee or other amount
(collectively, the "Contracts"). Each Contract is a valid and binding
obligation of a Seller and is in full force and effect. Each Seller has
performed all material obligations required to be performed by it to date
under the Contracts. All Contracts are in the name of one of the Sellers,
and all Contracts included in the Assumed Liabilities will be effectively
transferred to Buyer at the time of the Closing. No Seller and no employee
of any Seller is a party to any Contract that limits in any material manner
the ability of any Seller or such employee to compete in or to conduct any
line of business or compete with any person or entity in any geographic
area or during any period of time exceeding three months from the date
hereof.
(g) Litigation. There are no lawsuits, claims, proceedings or
investigations pending or, to the best knowledge of Seller, threatened by
or against or affecting Seller or any of its properties, assets, operations
or business which could in any way adversely affect Seller's business, the
transactions contemplated by this Agreement or Buyer's right to own or
utilize the Purchased Assets.
(h) Absence of Changes or Events. Since May 31, 1999, the
Business of Seller has been operated in the ordinary course and there has
not been any actual or, to the knowledge of Executive, threatened material
adverse change in the Business of Seller, the financial condition, results
of operations, assets or prospects of Seller or the value or condition of
the Purchased Assets.
(i) Compliance with Laws. Seller is not in violation with
respect to its operation of the Business or the Purchased Assets of any
law, order, ordinance, rule or regulation of any governmental agency,
authority or instrumentality.
(j) No Broker's or Finder's Fees. No agent, broker, investment
banker, person or firm acting on behalf of Seller is or will be entitled to
any broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated herein.
(k) Employee Benefit Plans. There are no plans of Seller in
effect for pension, profit sharing, deferred compensation, severance pay,
bonuses, stock options, stock purchases, or any other form of retirement or
deferred benefit, or for any health, accident or other welfare plan, as to
which Buyer will become liable as a result of the transactions contemplated
hereby.
(l) Environmental Matters. There have been no private or
governmental claims, citations, complaints, notices of violation or other
letters made, issued to or threatened against Seller by any governmental
agency, authority or instrumentality or private or other party with respect
to any alleged impairment or diminution of, or damage, injury or other
adverse effects to, the environment or public health resulting, in whole or
in part, from the ownership, use or operation of the Business or any of
Seller's facilities ("Property").
Seller has duly complied with, and, to the best of Seller's
knowledge, the Property is in compliance with, the provisions of all
federal, state and local environmental, health and safety laws, permits,
codes and ordinances and all rules and regulations promulgated thereunder.
Seller has provided Buyer with true, accurate and complete copies
of any written information in the possession of Seller which pertains to
the environmental history of the Property. Seller shall also promptly
furnish to Buyer true, accurate and complete copies of any sampling and
test results which may be obtained by Seller prior to the Closing from all
environmental and/or health samples and tests taken at and around the
Property.
(m) Financial Statements. The Sellers have delivered to Buyer
the preliminary balance sheet of the Sellers at May 31, 1999 (the "Balance
Sheet"), and the related preliminary consolidated statements of income for
the five-month period then ended (the "Income Statement"), each of which is
attached hereto as Schedule 2.01(m). Also attached hereto as Schedule
2.01(m) are Buyer financial statements, including a balance sheet and
income statement, prepared by Seller's independent public accounting firm
for the period ending September 30, 1999. Such financial statements,
including the notes thereto, are in accordance with the books and records
of the Sellers, have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby and present fairly the financial position and the results
of operations of the Sellers as of the dates and for the periods indicated.
(n) Taxes. There are no taxes on or measured by income or gross
receipts or franchise, real or personal property, employment, excise, sales
and use or other taxes of any kind ("Taxes") attributable to periods up to
and including the Closing for which Buyer could be held liable which have
not been or will not be paid by the Sellers. All Taxes which are due and
payable or required to be withheld, collected and/or paid over by Sellers
for all periods ending on or before the Closing Date have been paid in
full, and adequate reserves for all other Taxes, whether or not due and
payable, and whether or not disputed, have been set up on the books of
Sellers. Each of the Sellers has duly and timely filed (or there has been
filed on its behalf) with the appropriate governmental entities, agencies,
authorities or instrumentalities all tax returns required to be filed by it
with respect to the Purchased Assets, and all such tax returns are true,
correct and complete in all material respects. No audit is pending or, to
the knowledge of Sellers, threatened with respect to any Taxes due from any
of the Sellers. There are no outstanding waivers extending the statutory
period of limitations relating to the payment of Taxes due from any of the
Sellers for any taxable period ending on or prior to the Closing Date which
are expected to be outstanding as of the Closing Date. No deficiency or
adjustment for any Taxes has been threatened, proposed, asserted or
assessed, in writing, against any of the Sellers. None of the Assumed
Liabilities is an obligation to make a payment that will not be deductible
by reason of Section 280G of the Internal Revenue Code of 1986, as amended.
None of the Sellers is a party to any Tax allocation or sharing agreement,
or similar arrangement.
(o) Intellectual Property. (1) Schedule 2.01(o) identifies each
material agreement pertaining to the licensed use of Intellectual Property
(as hereinafter defined) in the Businesses and listing, in each case,
whether Seller is the licensor or licensee thereunder, the subject matter
of the license, and whether the rights granted are exclusive or non-
exclusive (the "License Agreements").
As used herein, "Intellectual Property" shall mean all U.S. and
foreign patents, copyrights, trademarks, service marks, trade dress, logos,
designs, trade names and similar business identifiers, including, in each
case, all registrations and applications therefor and unregistered rights
therein, and the goodwill of the Businesses symbolized by any of the
foregoing, confidential or proprietary technical and business information,
know-how and trade secrets, formulae, processes, inventions (whether
patentable or unpatentable) and other technical information. As used
herein, "Intellectual Property Rights" shall mean all rights to, and
interests in, Intellectual Property that each Seller has the right to sell,
transfer, assign or convey to Buyer without infringing upon, violating or
conflicting with the rights of any other person or entity.
(2) Except as set forth in Schedule 2.01(o), each Seller owns
all material Intellectual Property or possesses adequate licenses or other
valid right to the material Intellectual Property used in or necessary to
conduct its Business as currently conducted, in each case without the
payment of any royalties.
(3) To the knowledge of Seller, the services, activities and
products of Seller do not infringe upon, violate or conflict with the
Intellectual Property rights of any other person or entity. There are no
claims or suits pending for which notice has been provided or, to the
knowledge of Seller, threatened (i) alleging that Seller's services,
activities or products infringe upon or constitute the unauthorized use of
a third party's Intellectual Property rights or (ii) challenging Seller's
ownership of, right to use, or the validity or enforceability of any
Intellectual Property owned or used by Seller. To the knowledge of Seller,
there are no infringements by third parties of any Intellectual Property
owned by Seller. Seller has not entered into any consent, indemnification,
forbearance to sue, or settlement agreement with any third party relating
to Intellectual Property.
(4) Seller is not in breach of or default under the License
Agreements nor has an event or condition occurred (or is alleged by any
other party to have occurred) which, with or without due notice or lapse of
time or both, would constitute a breach or event of default on the part of
Seller or would provide a basis for a valid claim, acceleration or
termination by any other party under the License Agreements. To the
knowledge of Seller, no other party is in breach of or default under the
License Agreements nor has any event or condition occurred (or is alleged
by any other party to have occurred) which, with or without due notice or
lapse of time or both, would constitute a breach or event of default on the
part of such other party under the License Agreements. Seller is not a
party to any technology license agreement or sales agency or
distributorship agreement that limits in any material manner the ability of
Seller to compete or to conduct any line of business or compete with any
person or entity in any geographic area or during any period of time
exceeding three months from the date hereof.
(p) Computer Software. Seller has such title to or the right to
use, by license or other agreement, all material computer software programs
used by Seller as are necessary to permit Seller to conduct its Business as
currently conducted, without any known conflict with the rights of others
or any known use by others which conflicts, in any material respect, with
the rights of Seller. Except as set forth on Schedule 2.01(p) hereto, all
of the computer software (other than off the shelf "shrinkwrap" software)
of Sellers may be transferred to Buyer without the consent of or payment to
any third party.
SECTION 2.02 Representations and Warranties of Buyer. Buyer
represents and warrants to, and agrees with, the Sellers as follows:
(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada.
(b) Binding Obligation. Buyer has all requisite corporate power
and authority to enter into and perform its obligations under this
Agreement. All corporate acts and other proceedings required to be taken
by Buyer to authorize the execution, delivery and performance by Buyer of
this Agreement and the transactions contemplated hereby have been duly and
properly taken. This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms. The execution,
delivery and performance by Buyer of this Agreement does not and will not
conflict with, or result in any violation of, any provisions of the
Certificate of Incorporation or Bylaws of Buyer, as amended, or any
provision of any law, ordinance, rule, regulation, judgment, order, decree,
agreement, instrument or license applicable to Buyer or to its property or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission
or other governmental agency, authority or instrumentality, domestic or
foreign, is required by or with respect to Buyer in connection with its
execution, delivery or performance of this Agreement.
ARTICLE III
Covenants
SECTION 3.01 Covenants of Executive and the Sellers.
(a) Ordinary Course. If the date hereof is not also the Closing
Date, during the period from the date of this Agreement and continuing
until the Closing, each of the Sellers agrees (except as expressly
contemplated by this Agreement or to the extent that Buyer shall otherwise
consent in writing) that it shall carry on its Business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent with such Business, use all
reasonable efforts consistent with past practice and policies to preserve
intact its present business organization, keep available the services of
its present officers and key employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end
that its goodwill and ongoing business shall be unimpaired as a result of
the transactions contemplated hereby.
(b) No Other Bids. If the date hereof is not also the Closing
Date, during the period from the date of this Agreement and continuing
until the Closing, Executive and each of the Sellers agrees (except as
expressly contemplated by this Agreement or to the extent that Buyer shall
otherwise consent in writing) that none of Executive or the Sellers nor any
of their affiliates shall, nor shall they authorize any officer, director
or employee of or any investment banker, attorney, accountant or other
representative retained by any of them to, solicit or encourage (including
by way of furnishing information or entering into discussions or
negotiations of any kind) any inquiries or the making of any proposal which
may reasonably be expected to lead to any takeover proposal. As used in
this paragraph, "takeover proposal" shall mean any proposal for a merger or
other business combination involving any Seller or for the acquisition of a
substantial equity interest in any Seller or all or a portion of the
Purchased Assets other than the transactions contemplated by this
Agreement.
(c) Confidentiality, Non-Competition, etc. (1) As used herein,
"Confidential Information" means any confidential or proprietary
information relating to the identity of Buyer's or each Seller's and their
respective affiliates' customers, the identity of representatives of
customers with whom Buyer or any Seller or their respective affiliates has
dealt, the kinds of services provided by Buyer or any Seller or their
respective affiliates to customers, the manner in which such services are
performed or offered to be performed, the service needs of actual or
prospective customers, pricing information, information concerning the
creation, acquisition or disposition of products and services, customer
listings, computer software applications, research and development data,
know-how, personnel information and other trade secrets. Notwithstanding
the above, Confidential Information shall not include any information that:
(i) is generally known to industrial
designers, graphic design firms and/or to entities in Buyer's or
Seller's trade or business;
(ii) is generally available to the public
without conducting a substantial search of published literature;
or
(iii) is subject to disclosure pursuant
to any order or regulation of any governmental, regulatory or
administrative agency, authority or instrumentality or court of
competent judicial authority.
If a particular portion or aspect of Confidential Information
becomes subject to any of the foregoing exceptions, all other portions or
aspects of such information shall remain subject to all of the provisions
of this Agreement.
(2) Executive acknowledges that: (i) the Executive's employment
by Buyer, DMA-NEW or any of their affiliates has and will require that the
Executive have access to and knowledge of Confidential Information; (ii)
the disclosure of any such Confidential Information to existing or
potential competitors of Buyer or any Seller or any of their affiliates
would place Buyer or the Sellers at a competitive disadvantage and would do
damage, monetary or otherwise, to Buyer, the Sellers or the Businesses; and
(iii) the engaging by the Executive in any of the activities prohibited by
this Section 3.01(c) will constitute improper appropriation and/or use of
Confidential Information. Executive expressly acknowledges the trade
secret status of the Confidential Information and that the Confidential
Information constitutes a protectable business interest of Buyer.
Accordingly, Buyer and Executive agree as follows:
(i) During the Employment Period (as defined
hereinafter) and for a period of five (5) years thereafter,
Executive shall not, directly or indirectly, whether
individually, as a director, stockholder, owner, partner,
employee, principal or agent of any business, or in any other
capacity, make known, disclose, furnish, make available or
utilize any of the Confidential Information, other than in the
proper performance of the duties as an employee of Buyer, DMA-NEW
or their affiliates. Notwithstanding the foregoing, any
information which meets the definition of trade secret under the
Uniform Trade Secret Act and does not fall within subparagraphs
(c)(1)(i) to (c)(1)(iii) above, will be maintained in confidence
so long as it continues to be treated as a trade secret.
(ii) Executive agrees to return all
Confidential Information, including all photocopies, extracts and
summaries thereof, and any such information stored electronically
on tapes, computer disks or in any other manner to Buyer at any
time during employment upon Buyer's request and upon the
termination of his employment for any reason.
(3) Executive shall promptly and fully disclose to Buyer in
writing all inventions, improvements, discoveries, developments, know-how,
concepts, writings, formulae, processes, methods, designs and ideas
(whether copyrightable, patentable or otherwise) made, received, generated,
conceived, acquired, written or reduced to practice by the Executive alone
or in conjunction with others, during or before or after working hours
(whether or not at the request or upon the suggestion of Buyer), during the
period of his employment with Buyer, in or relating to the products or
services of Buyer or its customers which are known to the Executive as a
consequence of his employment with Buyer, DMA-NEW or their affiliates (the
"Inventions").
Executive agrees that any and all such Inventions shall be "work
for hire" and shall be the exclusive property of Buyer and agrees to assign
and transfer to Buyer all of his right, title and interest in and to all
Inventions. Executive will, at Buyer's expense, assist Buyer in executing,
acknowledging and delivering all papers and documents, doing all things and
supplying all information that Buyer may deem necessary or desirable to
transfer or record the transfer of the Executive's entire right, title and
interest in Inventions to Buyer and to enable Buyer to obtain patent,
copyright or trademark protection for Inventions anywhere in the world
during the terms of his employment by Buyer. The obligations of the
Executive hereunder shall continue beyond the termination of his employment
with Buyer with respect to Inventions conceived or made by the Executive
during the period of his employment and shall be binding upon assigns,
executors, administrators and other legal representatives of the Executive.
(4) Executive shall not, so long as he is employed by Buyer,
engage in "Competition" with Buyer DMA-New or their affiliates. For
purposes of this Agreement, Competition by the Executive shall mean the
Executive's engaging in, or otherwise directly or indirectly being employed
by or acting as a consultant or lender to, or being a director, officer,
employee, principal, agent, stockholder, member, owner or partner of, or
permitting his name to be used in connection with the activities of any
other business or organization anywhere in the United States which
competes, directly or indirectly, with the business of Buyer, DMA-NEW or
their affiliates as the same shall be constituted at any time during his
employment by Buyer, DMA-NEW or their affiliates. Notwithstanding the
foregoing, the Executive may during such period be the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of up to two percent (2%) of a publicly held company, the
beneficial ownership of which would otherwise cause the Executive to be in
breach of this Section 3.01(c)(4).
(5) For a period of thirty-six (36) months following the
termination of Executive's employment with Buyer, DMA-NEW or their
affiliates, whether upon expiration of the Term (as defined hereinafter) or
otherwise, Executives agrees that he will not, directly or indirectly, for
his benefit or for the benefit of any other person, firm or entity, do any
of the following:
(i) solicit from any customer doing business
with Buyer, DMA-NEW or their affiliates as of such Executive's
termination business of the same or of a similar nature to the
business of Buyer, DMA-NEW or their affiliates with such
customer;
(ii) solicit from any known potential
customer of Buyer, DMA-NEW or their affiliates business of the
same or of a similar nature to that which has been the subject of
a known written or oral bid, offer or proposal by Buyer, DMA-NEW
or their affiliates, or of substantial preparation with a view to
making such a bid, proposal or offer, within six (6) months prior
to such Executive's termination;
(iii) solicit the employment or services
of, or hire, any person who was known to be employed by or was a
known consultant to Buyer, DMA-NEW or their affiliates upon the
termination of the Executive's employment, or within six (6)
months prior thereto;
(iv) otherwise interfere with the business or
accounts of Buyer, DMA-NEW or their affiliates; or
(v) solicit from any licensee of Buyer, DMA-
NEW or their affiliates business from such licensee or a joint
venture with such licensee, in either case, which involves
business that is of the same or of a similar nature to the
businesses of Buyer, DMA-NEW or their affiliates.
Notwithstanding the foregoing, upon the termination of Executive's
employment for any reason and provided that the Executive does not engage
in any of the conduct prohibited by the foregoing paragraphs (5)(i) through
(5)(v), Executive shall be free to engage in the graphic design business
even if such business competes with the then existing businesses of Buyer;
provided, that such new business (A) does not employ the name "Refac",
"David Morris", "DMC", "DM Creative", "Human Factors", or any portion or
variation thereof, (B) any other trade name or logo then used by Buyer,
DMA-NEW or their affiliates, or (C) any other confusingly similar name or
logo.
(6) Executive acknowledges that the services to be rendered by
him to Buyer, DMA-NEW and their affiliates are of a special and unique
character, which gives this Agreement a peculiar value to Buyer, DMA-NEW
and their affiliates, the loss of which may not be reasonably or adequately
compensated for by damages in an action at law, and that a material breach
or threatened breach by him of any of the provisions contained in this
Section 3.01(c) will cause Buyer, DMA-NEW and their affiliates irreparable
injury. Executive therefore agrees that Buyer shall be entitled, in
addition to any other right or remedy, to a temporary, preliminary and
permanent injunction, without the necessity of proving the inadequacy of
monetary damages or the posting of any bond or security, enjoining or
restraining the Executive from any such violation or threatened violations.
(7) Executive further acknowledges and agrees that due to the
uniqueness of his services and confidential nature of the information he
will possess, the covenants set forth herein are reasonable and necessary
for the protection of the business and goodwill of Buyer, DMA-NEW and their
affiliates.
(8) For purposes of this Section 3.01(c), the terms "Employment
Period" and "Term" shall have the meaning set forth in the Employment
Agreement (as defined in Section 5.02(e)). The covenants in this Section
3.01(c) shall survive, with respect to Executive, for the Employment Period
and for such additional periods of time for which the covenants set forth
herein are made.
(d) Office Location. Sellers and DMA-NEW will use their
commercially reasonable efforts to relocate the operations of the
Businesses to the rear portion of the second floor of Buyer's premises
located at 115 River Road in Edgewater, New Jersey, as set forth on the
floor plan attached as Exhibit C hereto, as soon as practicable after the
Closing. DMA-NEW's rent expense for such offices shall not exceed the
amount currently payable under the Seller's current lease and the imputed
cost of any additional space it may require, and such amounts shall be used
in determining the EBITDA of DMA-NEW for the purposes of Section 1.04(b).
(e) Transfers Not Effected as of Closing. Nothing herein shall
be deemed to require the conveyance, assignment or transfer of any
contract, license (including, without limitation, any software license),
permit, right or instrument (collectively, "Contracts and Permits"), that
by its terms or by operation of law cannot be freely conveyed, assigned,
transferred or assumed. Except as set forth on Schedule 3.01(e) hereto,
all of the Contracts and Permits may be transferred or assigned to Buyer
without the consent of or payment to any third party or governmental or
regulatory agency or entity. To the extent the parties hereto have been
unable to obtain any governmental entity or third party consents, novations
or approvals required for the transfer of any Contracts or Permits and to
the extent not otherwise prohibited by the terms of any Contract or Permit,
for a period of one (1) year from and after the Closing Date the Sellers
shall remain bound by the terms of such Contract or Permit, as applicable,
and Buyer shall pay, perform and discharge fully all of the obligations of
the Sellers thereunder from and after the Closing. The Sellers shall,
without consideration therefor, pay, assign and remit to DMA-NEW or Buyer
promptly all monies, rights and other consideration received in respect of
such performance. The Sellers shall exercise or exploit their rights in
respect of such Contracts and Permits only as reasonably directed by Buyer
and at Buyer's expense. Subject to and in accordance with Section 3.01(e),
the parties hereto shall continue to use their commercially reasonable
efforts to obtain all such unobtained consents or approvals at the earliest
practicable date. If and when any such consents, novations or approvals
shall be obtained, then the Sellers shall promptly assign its rights and
obligations thereunder to Buyer without payment of consideration therefor
and Buyer shall, without the payment of any consideration therefor, assume
such rights and obligations. The parties shall execute such good and
sufficient instruments as may be necessary to evidence any such assignment
and assumption.
SECTION 3.02 Covenants of Buyer.
(a) Professional Fees. Upon the Closing, Buyer shall pay up to
$25,000 of the reasonably documented professional fees and expenses of the
Sellers incurred in connection with the negotiation of this Agreement and
the transactions contemplated hereby; provided, that Buyer shall have no
liability for any professional fees or expenses in excess of $25,000.
(b) Financing. Buyer shall make available to DMA-NEW a $500,000
line of credit. Interest shall be payable on the amounts borrowed
thereunder from time-to-time at the published prime rate of The Chase
Manhattan Bank (the "Prime Rate") plus two percent (2%) on the date of each
such borrowing under the credit line through the date of repayment. Such
credit line shall expire on December 31, 2004 and shall be used solely for
the purposes of financing the operations of DMA-NEW. The forms of Loan
Agreement and Note with respect to the foregoing are attached hereto as
Exhibits D and E.
(c) Board of Directors. Buyer agrees to use its reasonable best
efforts to cause Executive to be nominated for and elected to the Board of
Directors of Buyer during the Employment Period; provided, that Executive
agrees to immediately resign his position as a director of Buyer upon the
expiration of the Employment Period.
(d) Stock Options. Buyer agrees to set aside a pool of 45,000
options ("Options") to purchase shares of Refac common stock ("Common
Stock") under the Refac 1998 Stock Option and Incentive Plan (the "Option
Plan") for grants to employees of DMA-NEW ("Employees"), including
Executive. Executive shall determine the allocation of such Options to be
granted to the Employees; provided, that Executive shall be granted not
more than 30,000 of such Options. The exercise price of the Options shall
be the fair market value of the Common Stock on the date of grant, which
shall be equal to the closing market price of the Common Stock on the date
of grant; provided, that the exercise price of any Options being granted to
Executive on the date hereof shall be equal to the closing market price of
the Common Stock on the last trading day prior to the date hereof. The
Options will vest and become exercisable at the rate of 25% per annum
commencing on the first anniversary date of the grant of such Options.
ARTICLE IV
Additional Agreements
SECTION 4.01 Access to Information. If the date hereof is not
also the Closing Date, each of the Sellers shall afford to Buyer and to
Buyer's accountants, counsel and other representatives reasonable access
during normal business hours during the period prior to the Closing to all
its books and records, and, during such period, each of the Sellers shall
furnish promptly to Buyer all information concerning its business,
properties and personnel as Buyer may reasonably request. Buyer will hold
such information in confidence until such time as such information
otherwise becomes publicly available and in the event of termination of
this Agreement for any reason Buyer shall promptly return, or cause to be
returned, to the Sellers all nonpublic documents obtained from the Sellers
which it would not otherwise have been entitled to obtain; and shall not,
in any manner, utilize any such information for Buyer's benefit or in any
manner harmful to the Sellers.
SECTION 4.02 Expenses. Except as set forth in Section 3.02(a),
whether or not the transactions contemplated hereby are consummated, all
costs and expenses incurred by Buyer or the Sellers in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs.
SECTION 4.03 Press Releases. None of the parties hereto shall
issue a press release or other publicity announcing the sale of the
Purchased Assets or any other aspects of the transactions contemplated
hereby without the prior written approval of the other party, unless such
disclosure is advised by Buyer's counsel or is required by applicable law.
ARTICLE V
Conditions Precedent
SECTION 5.01 Conditions to Each Party's Obligation. The
respective obligation of each party hereunder shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, any governmental agency, authority or instrumentality
necessary for the consummation of the transactions contemplated by this
Agreement shall have been filed, occurred or been obtained.
(b) Legal Action. No action, suit or proceeding shall have been
instituted or threatened before any court or governmental agency, authority
or instrumentality seeking to challenge or restrain the transactions
contemplated hereby.
SECTION 5.02 Conditions of Obligations of Buyer. The
obligations of Buyer to effect the transactions contemplated hereby are
subject to the satisfaction of the following conditions unless waived by
Buyer:
(a) Representations and Warranties. The representations and
warranties of the Sellers set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, and Buyer
shall have received a certificate signed by the Executive to such effect.
(b) Performance of Obligations of the Sellers. Each of the
Sellers and Executive shall have performed all obligations required to be
performed by them under this Agreement prior to the Closing Date, and Buyer
shall have received a certificate signed by the Executive to such effect.
(c) No Material Adverse Change. Since the date of the Balance
Sheet, there shall have been no material adverse change in the financial
condition, results of operations, business or assets of the Sellers or
their respective Business or Purchased Assets.
(d) Consents and Actions. All requisite consents of any third
parties to the transactions contemplated by this Agreement shall have been
obtained.
(e) Closing Deliveries. The Sellers shall deliver, or cause to
be delivered, to Buyer at or prior to the Closing the following documents:
(i) Such certificates, executed by officers
of the Sellers, as Buyer may reasonably request.
(ii) Consents executed by all necessary
parties to permit Buyer to assume the Seller's interest in any
Contracts acquired among the Purchased Assets.
(iii) Such documents as may be required
to convey all of the Sellers' right, title and interest in all
personal property included in the Purchased Assets, including the
Bill of Sale, Assignment and Assumption Agreement, a copy of
which is attached hereto as Exhibit A.
(iv) The Employment Agreement to be entered
into by Buyer and Executive, a copy of which is attached hereto
as Exhibit B.
(v) Such other documents, instruments or
certificates as shall be reasonably requested by Buyer or its
counsel.
(f) Release of Security Interests. Provision satisfactory to
Buyer shall have been made for the release of any security interests which
encumber any of the Purchased Assets.
SECTION 5.03 Conditions of Obligation of the Sellers. The
obligations of the Sellers to effect the transactions contemplated hereby
are subject to the satisfaction of the following conditions unless waived
by the Sellers:
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, and the Sellers
shall have received a certificate signed by an appropriate officer of Buyer
to such effect.
(b) Performance of Obligations of Buyer. Buyer shall have
performed all obligations required to be performed by it under this
Agreement prior to the Closing Date, and the Sellers shall have received a
certificate signed by an appropriate officer of Buyer to such effect.
ARTICLE VI
Indemnification
SECTION 6.01 Buyer Claims. Except as hereinafter set forth,
the Executive and the Sellers shall, jointly and severally, indemnify and
hold harmless Buyer and its successors and assigns and its and their
respective officers, directors, shareholders, employees and agents,
against, and in respect of, any all damages, claims, losses, liabilities
and expenses, including, without limitation, reasonable legal, accounting
and other expenses, which may arise out of any misrepresentation or other
breach or violation of this Agreement by the Sellers; provided, however,
that the aggregate of all claims subject to indemnification hereunder by
the Sellers shall not exceed the amount of the Purchase Consideration, and;
provided, further, that Buyer shall be entitled to indemnification
hereunder only when the aggregate of all such claims (excluding for this
purpose legal, accounting and other expenses) exceeds $10,000, and only
with respect to amounts by which the aggregate of all such claims exceeds
$10,000. Buyer shall be entitled to set-off any amounts indemnifiable
pursuant to this Section 6.01 from the Contingent Payment, if any.
SECTION 6.02 Seller Claims. Except as hereinafter set forth,
Buyer shall indemnify and hold harmless Executive, the Sellers and their
successors and assigns and their respective officers, directors,
shareholders, employees and agents, against, and in respect of, any and all
damages, claims, losses, liabilities and expenses, including, without
limitation, reasonable legal, accounting and other expenses, which may
arise out of any misrepresentation or other breach or violation of this
Agreement by Buyer; provided, however, that the aggregate of all claims
subject to indemnification hereunder by Buyer shall not exceed $1,000,000;
provided, further, that the Sellers shall be entitled to indemnification
hereunder only when, and only with respect to amounts by which, the
aggregate of all such claims (excluding for this purpose legal, accounting
and other expenses) exceeds $10,000 and only with respect to amounts by
which the aggregate of all such claims exceeds $10,000.
SECTION 6.03 Notice of Claim. Upon obtaining knowledge
thereof, the party to be indemnified (the "Indemnified Party") shall
promptly notify the party which is required to provide indemnification (the
"Indemnifying Party") in writing of any damage, claim, loss, liability or
expense which the Indemnified Party has determined has given rise or could
give rise to a claim under this Article VI (such written notice being
hereinafter referred to as a "Notice of Claim"). A Notice of Claim shall
contain a brief description of the nature and estimated amount of any claim
giving rise to a right of indemnification.
SECTION 6.04 Defense of Third Party Claims. With respect to
any claim or demand set forth in a Notice of Claim relating to a third
party claim, the Indemnifying Party may defend, in good faith and at its
expense, any such claim or demand, and the Indemnified Party, at its
expense, shall have the right to participate in the defense or any such
third party claim. So long as the Indemnifying Party is defending in good
faith any such third party claim, the Indemnified Party shall not settle or
compromise such third party claim. If the Indemnifying Party does not so
elect to defend any such third party claim, the Indemnified Party shall
have no obligation to do so.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01 Termination. If the date hereof is not also the
Closing Date, this Agreement may be terminated at any time prior to the
Closing:
(a) by mutual consent of Buyer and the Sellers;
(b) by either Buyer or the Sellers if there has been a material
misrepresentation or breach of covenant or agreement contained in this
Agreement on the part of the other and such breach of a covenant or
agreement has not been promptly cured;
(c) by Buyer if any of the conditions set forth in Sections 5.01
and 5.02 shall not have been satisfied before November 30, 1999 or such
later date as Buyer and the Sellers shall mutually agree in writing;
(d) by the Sellers if any of the conditions set forth in Section
5.03 or shall not have been satisfied before November 30, 1999 or such
later date as Buyer and the Sellers shall mutually agree in writing.
In the event of the termination of this Agreement by any party
hereto pursuant to this Section 7.01, written notice thereof shall promptly
be given to the other party specifying the provision hereof pursuant to
which such termination is made, and, upon such termination in accordance
with Section 7.01, there shall be no liability or obligation thereafter on
the part of Buyer, Executive or Seller except for fraud or for willful
breach of this Agreement prior to such termination.
SECTION 7.02 Amendment. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
ARTICLE VIII
Labor and Employment Matters
SECTION 8.01 Buyer's Employment Decisions. Buyer agrees to
offer employment to all persons who are employed by the Sellers immediately
prior to Closing.
ARTICLE IX
General Provisions
SECTION 9.01 Survival of Representations, Warranties and
Agreements. All representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing until the expiration of two years from the Closing
Date, and, thereafter, to the extent a claim is made prior to such
expiration with respect to any breach of such representation, warranty or
agreement, until such claim is finally determined or settled; provided,
that the provisions of Section 3.01(c) shall survive for the periods set
forth in paragraph (8) of Section 3.01(c).
SECTION 9.02 Sales Taxes. All sales and use taxes, if any, due
under the laws of any state, any local government authority, or the federal
government of the United States, in connection with the purchase and sale
of the Purchased Assets shall be paid by the Sellers.
SECTION 9.03 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party, it
being understood that all parties need not sign the same counterpart.
SECTION 9.04 Governing Law. This Agreement shall be governed
in all respects, including validity, interpretation and effect, by the
internal laws of the State of New Jersey. Each of Buyer and the Sellers
irrevocably consents to the exclusive jurisdiction of the courts of the
State of New Jersey, or of any federal court located in such State, with
respect to any claim, action, or proceeding between the parties arising out
of or in connection with this Agreement.
IN WITNESS WHEREOF, Buyer, Executive and the Sellers have
executed this Agreement as of the date first written above.
DAVID MORRIS CREATIVE, INC.
By: /s/ David M. Annunziato
___________________________
Name: David M. Annunziato
Title: President
DAVID MORRIS ASSOCIATES, INC.
By: /s/ David M. Annunziato
___________________________
Name: David M. Annunziato
Title: President
DAVID MORRIS CREATIVE ASSOCIATES LTD.
By: /s/ David M. Annunziato
___________________________
Name: David M. Annunziato
Title: President
EXECUTIVE
By: /s/ David M. Annunziato
___________________________
Name: David M. Annunziato
REFAC INTERNATIONAL, LTD.
By: /s/ David M. Annunziato
___________________________
Name: David M. Annunziato
Title: President
N E W S CONTACT: Barbara Spier
Spier & Associates
212-572-6263
E-MAIL: [email protected]
about REFAC
WEB SITE: www.refac.com
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REFAC ACQUIRES DAVID MORRIS CREATIVE, INC.
GRAPHIC DESIGN FIRM BROADENS REFAC'S
PRODUCT DEVELOPMENT AND BRAND LICENSING CAPABILITIES
Edgewater, New Jersey - November 2, 1999 - Refac (AMEX: REF), a full
service intellectual property marketing organization and a leading
developer of consumer products, medical devices and business equipment
announced today that it has acquired David Morris Creative, Inc. ("DMC"), a
privately owned graphic design and communications firm based in Jersey
City, New Jersey for $1.5 million cash and $250,000 contingent upon future
earnings.
One of the region's top graphic design firms, DMC has designed
powerful graphic communications and marketing solutions for a wide variety
of clients since 1990. The firm offers an array of graphic services
including brand and communications strategy, corporate identity, packaging
and multimedia design. DMC's roster of blue chip clients includes Sharp
Electronics, Canon USA, Chubb Group of Insurance Companies, IBM, Siemen's
Medical Systems and Sony Electronics, Inc. DMC will relocate its operations
to Refac's new corporate headquarters and creative center located on The
Hudson River Pier in Edgewater, New Jersey by the end of the year.
Robert L. Tuchman, Refac President and CEO, stated, "Both our product
development and licensing clients have a growing interest in working with
consultants that can offer an integrated approach to product and brand
development and licensing and recognize that great design reinforces
and builds the strength, recognition and equity of their valuable brands.
DMC offers a wide range of graphic and new media design services - - - from
brand and communications strategy, corporate identity and packaging to
implementation. By adding the talents, energy and expertise of DMC to our
core product development and brand and technology licensing teams, we now
offer the industry's most unique and comprehensive array of professional
design and licensing services under one roof."
David M. Annunziato, DMC's CEO and Creative Director, stated, "This
acquisition benefits both DMC as a unit and Refac as a whole, but the
ultimate beneficiaries are our clients. We will now have access to more
resources with which to serve them, while Refac gains the unique ability to
offer them a complete branding solution."
For almost 50 years, Refac has been the recognized international
leader in intellectual property management. Today, it is a dynamic
organization specializing in integrated creative and business consulting.
Refac's expertise includes: new product development; graphic design &
communications; brand & trademark licensing; technology & patent licensing
and intellectual venture capital.
STATEMENTS ABOUT THE COMPANY'S FUTURE EXPECTATIONS AND ALL OTHER
STATEMENTS IN THIS DOCUMENT OTHER THAN HISTORICAL FACTS ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AND AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THE COMPANY INTENDS THAT THE "FORWARD-LOOKING STATEMENTS"
CONTAINED HEREIN BE SUBJECT TO THE ABOVE-MENTIONED STATUTORY SAFE HARBORS.
SINCE THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND ARE SUBJECT TO
CHANGE AT ANY TIME, THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM EXPECTED OR INFERRED RESULTS. THERE IS NO ASSURANCE AS TO THE FUTURE
OPERATING RESULTS OF REFAC OR DMC OR THE IMPACT THAT IT WILL HAVE ON THEIR
OVERALL OPERATIONS.
# # #
Refac Public Relations Contact:
Spier & Associates
300 Park Avenue
New York, New York 10017
(212) 572-6263
Barbara Spier
