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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 ACT OF 1934
Date of Report (Date of earliest event reported) JUNE 27, 1996
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JUST TOYS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-20612 13-3677074
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification Number)
Incorporation or Organization)
</TABLE>
50 WEST 23RD STREET
NEW YORK, NEW YORK 10010
(Address of Principal Executive Offices) (Zip Code)
Telephone Number, Including Area Code 212-645-6335
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Item 2. Acquisition or Disposition of Assets
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On June 27, 1996, Just Toys, Inc., a Delaware corporation (the "Company"),
acquired certain of the assets of Table Toys, Inc., a Texas Corporation ("Table
Toys") including the inventory, trademarks and other intellectual property and
molds, tools and dies of Table Toys. The purchase price for the assets acquired
is i) a cash payment of $597,033 (the "Cash"); ii) 538,243 shares of the
Company's Series B Convertible Redeemable Preferred Stock, $1.00 par value per
share (the "Preferred Stock"); and iii) warrants to purchase in the aggregate
60,000 shares of the Company's common stock, par value $.01 per share (the
"Warrants").
Table Toys was engaged in the business of designing, manufacturing, marketing
and distributing (i) play tables with interlocking surfaces compatible with most
brands of toy construction blocks and (ii) a line of toy construction blocks.
The asset purchase agreement (the "Asset Purchase Agreement") between the
Company and Table Toys was executed on January 22, 1996. The Asset Purchase
Agreement contemplated the filing by Table Toys of a petition under Chapter 11
of the Federal Bankruptcy Code (the "Petition"). Contemporaneously with the
execution of the Asset Purchase Agreement, the Company and Table Toys executed a
Marketing and Distribution Agreement (the "Distribution Agreement") which
enabled the Company to manufacture and market and sell Table Toys products
pending approval by the Bankruptcy Court of the Asset Purchase Agreement and the
closing of the transaction contemplated thereby. Table Toys filed the Petition
on January 26, 1996. The sale of the specified assets to the Company was
approved by the Bankruptcy Court on May 9, 1996. The Distribution Agreement
automatically terminated on June 27, 1996, the closing of the transactions
contemplated by the Asset Purchase Agreement.
At the closing, the Company issued and delivered 13,799 of the Warrants and
206 shares of the Preferred Stock jointly to Scott Buske and Donna Buske. Scott
Buske and Donna Buske were formerly officers, directors and shareholders of
Table Toys. Following the execution of the Distribution Agreement and Asset
Purchase Agreement, Scott Buske and Donna Buske resigned as officers and
directors of Table Toys and were employed by the Company. Scott Buske is
currently the Vice President of Manufacturing Operations of the Company.
The cash portion of the purchase price is being paid from the Company's own
funds and from borrowing under the Company's factoring agreement with Milberg
Factors, Inc.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Financial Statements of Businesses Acquired. It is impracticable to
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provide the required financial statements at the time this report is filed. The
Company will file such statements as soon as practicable, but in no event more
than sixty days from the date this report is required to be filed.
(b) Pro Forma Financial Information. It is impracticable to provide the
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required pro forma financial information at the time this report is filed. The
Company will file such information as soon as practicable, but in no event more
than sixty days from the date this report is required to be filed.
(c) EXHIBITS
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2.1 Asset Purchase Agreement dated January 22, 1996 between the
Company and Table Toys.
2.2 Amendment to the Asset Purchase Agreement dated April 12, 1996
between the Company and Table Toys.
2.3 Second Amendment to the Asset Purchase Agreement dated April
15, 1996 between the Company and Table Toys.
3.2 Certificate of Designations, Preferences and Rights of the
Series B Convertible Redeemable Preferred Stock (included in Exhibit
4.1 hereof).
4.1 Certificate of Designations, Preferences and Rights of the
Series B Convertible Redeemable Preferred Stock.
4.2 Form of Warrant, dated June 26, 1995, issued to various
parties in respect of in the aggregate 60,000 shares of Common Stock.
10 Marketing and Distribution Agreement dated January 22, 1996
between the Company and Table Toys.
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SIGNATURES
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.
JUST TOYS, INC.
(Registrant)
July 10, 1996 By: /s/ Morton J. Levy
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Morton J. Levy, Chairman of the Board
and Chief Executive Officer
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INDEX TO EXHIBITS
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EXHIBIT DESCRIPTION PAGE
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2.1 Asset Purchase Agreement dated January 22, 1996 between the
Company and Table Toys.
2.2 Amendment to the Asset Purchase Agreement dated April 12, 1996
between the Company and Table Toys.
2.3 Second Amendment to the Asset Purchase Agreement dated April
15, 1996 between the Company and Table Toys.
3.2 Certificate of Designations, Preferences and Rights of the
Series B Convertible Redeemable Preferred Stock (included in
Exhibit 4.1 hereof).
4.1 Certificate of Designations, Preferences and Rights of the
Series B Convertible Redeemable Preferred Stock.
4.2 Form of Warrant, dated June 26, 1995, issued to various
parties in respect of in the aggregate 60,000 shares of
Common Stock.
10 Marketing and Distribution Agreement dated January 22, 1996
between the Company and Table Toys.
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EXHIBIT 2.1
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TABLE TOYS, INC.
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ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") entered into as of the
22nd day of January, 1996 by and between Table Toys, Inc., a Texas corporation,
("Seller"), and Just Toys, Inc., a Delaware corporation ("Purchaser"). Seller
and Purchaser are jointly referred to as the "Parties."
R E C I T A L S:
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A. Seller is primarily engaged in the business of designing,
manufacturing, marketing and distributing (i) play tables with interlocking
surfaces compatible with most brands of toy construction blocks and (ii) a line
of toy construction blocks sold under the name Flexitoy(R). (hereinafter
referred to as the "Purchased Business"). Purchaser is also in the business of
designing, manufacturing, marketing and distributing toys. Seller desires to
sell to Purchaser, and Purchaser desires to purchase substantially all of
Seller's assets from Seller in accordance with the terms and conditions
hereinafter set forth.
B. The Parties contemplate that within two (2) weeks after
entering into this Agreement, Seller will file a petition for itself in a case
(the "Case") under Title 11, Section 101 et seq. of the United States Code (the
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"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of Texas, Houston Division (the "Bankruptcy Court"), that this
Agreement will be assumed in the Case, and that the sale of Seller's assets on
the terms and conditions stated herein shall be concluded pursuant to a plan of
reorganization to be filed by Seller in the Case. Upon consummation of the plan
of reorganization, Seller will have no further operating assets or operations
except for the consideration paid hereunder and its books and records and such
operations which are necessary to fulfill Seller's obligations under its plan of
reorganization and to wind down its business.
C. Simultaneously with the execution of this Agreement, Seller and
Purchaser are entering into a marketing and distribution agreement (the
"Distribution Agreement") providing for Purchaser to market and distribute
products heretofore sold by Seller. The parties contemplate that the
Distribution Agreement will be approved by the Bankruptcy Court no later than
February 7, 1996.
A G R E E M E N T :
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NOW THEREFORE, in consideration of the premises and the mutual
obligations of the parties hereto, Seller and Purchaser agree as follows:
1. Sale and Transfer of Assets.
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1.1 At the Closing (hereinafter defined), subject to the terms and
conditions
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of this Agreement, Seller will sell, convey, assign and transfer (by appropriate
transfer document for such asset) to Purchaser, and Purchaser will purchase and
accept, at the Purchase Price as hereinafter defined, the following assets and
properties of Seller (collectively the "Assets"):
1.1.1 All right, title and interest of Seller in and to the
Purchased Business as a going concern, Seller's goodwill, its corporate name,
"Table Toys," and any derivatives or combinations thereof and all other
intangible assets;
1.1.2 All machinery, tools, molds, equipment, inventories, work-
in-process, raw materials, supplies and other items of personal property,
including, without limitation, the tools and molds identified on Schedule 5.2.13
annexed hereto and made a part hereof;
1.1.3 All rights of Seller in and to trade names, service marks,
trademarks, trademark registrations and trademark applications, copyrights,
copyright registrations and copyright applications, patents and patent
applications, inventions, trade secrets, logos, slogans, proprietary processes,
computer software and all other information, know-how and intellectual property
rights owned by Seller or used in the Purchased Business, the right to recovery
for past infringements, all goodwill associated with the foregoing and all
licenses and other agreements relating to any of the foregoing;
1.1.4 All intellectual property (the "Fantasy Toys Intellectual
Property") currently the subject of that certain License Agreement (the "Fantasy
Toy License") dated January 31, 1995, among Seller, Fantasy Toys, Inc., and Reid
D. Bennett;
1.1.5 License Agreement dated July 1, 1995, among Hasbro Toy
Group, a division of Hasbro, Inc. ("Hasbro"), Hasbro Canada, Inc. ("Hasbro
Canada"), and Seller (the "Hasbro License"), but limited to a term expiring
December 31, 1996 (to be transferred by assignment);
1.1.6 All accounts receivable, including, but not limited to, all
accounts receivable arising from goods shipped prior to the date of the Closing
notwithstanding that invoices relating thereto have not then been issued and
including the accounts receivable listed on Schedule 5.2.12 annexed hereto and
made a part hereof to the extent they remain outstanding as of the Closing Date;
1.1.7 All rights of Seller relating to or arising out of or under
express or implied warranties from suppliers or manufacturers with respect to
the Assets;
1.1.8 All books and records relating to the Assets, including but
not limited to, correspondence, production records, accounting records, mailing
lists, customer and vendor lists, bills or material and other records and files
of or relating to the Assets; and
1.1.9 Those other assets, properties and rights described on
Schedule
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1.1.9 annexed hereto and made a part hereof.
1.2. Excluded Items Anything contained in Section 1.1 above to the
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contrary notwithstanding, Seller shall not sell, transfer, convey or assign to
Purchaser and the Assets shall not include the following (the "Excluded
Assets"):
1.2.1 The consideration delivered by Purchaser to Seller
pursuant to this Agreement;
1.2.2 Any cash or cash equivalents of Seller;
1.2.3 All insurance and insurance policies;
1.2.4 The leased equipment described on Schedule 1.2.4 annexed
hereto and made a part hereof; and
1.2.5 Those other assets, properties and rights listed on
Schedule 1.2.5 annexed hereto and made a part hereof.
1.3 Encumbrances. The Assets shall be sold and conveyed to
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Purchaser, pursuant to a plan of reorganization confirmed by the Order, as
hereafter defined, of the Bankruptcy Court, free and clear of all liabilities,
claims and encumbrances of any kind, nature and description.
2. Bankruptcy Court Approval. Within two (2) weeks after execution and
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delivery of this Agreement, Seller will file a voluntary petition for a
proceeding under Chapter 11 of the Bankruptcy Code and will also file a plan of
reorganization in such proceeding that incorporates and adopts this Agreement,
which includes Purchaser's distribution of the Purchase Price pursuant to
Schedule 2 annexed hereto and made a part hereof, authorizes the transfer of the
Hasbro License and confirms Purchaser's status as a "successor" to Seller within
the meaning of Section 1145 of the Bankruptcy Code. Seller agrees to use its
best efforts to obtain confirmation of such plan of reorganization as promptly
as practicable. Purchaser agrees to use its best efforts in assisting Seller to
obtain approval of this Agreement in Seller's plan of reorganization, and
Purchaser shall provide such information as may be required by the Bankruptcy
Court or as reasonably requested by Seller to enable Seller to comply with
Section 1125 of the Bankruptcy Code with respect to the Purchase Price.
Notwithstanding the foregoing sentence, Purchaser shall not be obligated to
incur any costs or expenses in connection with its assistance to Seller or in
supplying any information to Seller.
3. Closing and Closing Date. The closing of the transactions
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contemplated herein (herein called the "Closing") shall take place at the
offices of Seller's attorneys, Sheinfeld, Maley & Kay, P.C., 1001 Fannin, Suite
3700, Houston, Texas 77002, or at such other place as may be mutually agreed to
by Purchaser and Seller, on the date (the "Closing Date") which shall be 30 days
(or earlier, if agreed to by the Parties) after entry of the order confirming a
<PAGE>
plan of reorganization containing the approval of this Agreement (the "Order"),
unless the Order is stayed pending appeal, in which case the Closing Date shall
be the seventh (7th) day following the lifting of such stay.
4. Purchase Price. The purchase price (the "Purchase Price") hereunder for
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the Assets shall be computed and allocated as follows:
4.1 Purchase Price. The Purchase Price for the Assets shall consist
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of cash, stock, warrants and other consideration in the following amounts and
description:
4.1.1 Cash. Purchaser shall pay cash to Seller at the Closing in
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the amount of the total of the following:
4.1.1(a) $350,000.00; and
4.1.1(b) The net book value of Seller's accounts receivable
set forth on Schedule 5.2.12 hereto, with no adjustments made thereto after the
date hereof, other than to reflect (i) payments, (ii) returns (iii) and credits
not in the ordinary course of business and made without Purchaser's approval,
less $175,000.00.
4.1.2 Stock. Purchaser shall issue stock at the Closing to the
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parties and in the number of shares listed on Schedule 4.1.2 annexed hereto and
made a part hereof. The stock to be issued shall be such number of shares of
Series B Convertible Redeemable Preferred Stock (having the rights and
preferences set forth on Schedule 4.1.2), with a liquidation value of $3.625
(the "Liquidation Value") per share, of Purchaser (the "Preferred Shares")
having an aggregate Liquidation Value equal to $2,175,000.00 less the aggregate
price paid by Purchaser to Seller for inventory under the Distribution
Agreement.
4.1.3 Warrants. At the Closing Purchaser shall issue 60,000
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warrants (the "Warrants") to purchase, in the aggregate, 60,000 shares of
common stock of Purchaser at a price of $3.625 per share for a period of five
years, to the parties and in the number of shares listed on Schedule 4.1.3(1)
annexed hereto and made a part hereof, in the form of warrant attached hereto as
Schedule 4.1.3(2).
4.1.4 Other Consideration. Purchaser shall assume liability for
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and pay the following:
4.1.4(a) All ad valorem taxes on the Assets for 1996, up to a
maximum of $5,000.00; and
4.1.4(b) Liabilities and obligations arising under the Hasbro
License only with respect to sale of products thereunder (the "Hasbro Products")
after the Closing. Purchaser shall also pay, pursuant to the Hasbro License,
the $75,000.00 in minimum royalties due on December 31, 1996 (the "1996 Minimum
Royalty"), provided that royalties paid by
<PAGE>
Purchaser on sales of the Hasbro Products made by Distributor under the
Distribution Agreement or after the Closing shall be credited against the 1996
Minimum Royalty.
5. Representations and Warranties.
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5.1 Representations and Warranties of Purchaser. Purchaser hereby
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represents and warrants to Seller:
5.1.1 Organization. Purchaser is a corporation duly organized,
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validly existing and in good standing under the laws of the state of Delaware
and has all requisite power and authority, corporate or otherwise, to execute
and deliver this Agreement and the Closing Documents (hereinafter defined) and
to perform its obligations hereunder and thereunder.
5.1.2 Authority. The execution and delivery of this Agreement and
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consummation of the transactions contemplated herein have been duly authorized
by all necessary corporate action on the part of Purchaser, and no further
corporate authorization will be necessary on the part of Purchaser for the
execution, delivery, performance or consummation of this Agreement. This
Agreement is a valid and binding agreement of Purchaser enforceable in
accordance with its terms.
5.1.3 Compliance with Corporation Documents. Neither the execution
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and delivery of this Agreement nor the compliance with the terms and provisions
of this Agreement on the part of Purchaser will conflict with or result in a
breach of the Articles of Incorporation or By-Laws of Purchaser.
5.1.4 No Breach or Prohibition. Neither the execution and delivery
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of this Agreement nor the consummation of the transactions contemplated hereby
will: (i) conflict with or result in the breach or violation of any law,
regulation, writ, inspection or decree of any court or governmental
instrumentality applicable to Purchaser; or (ii) constitute a breach of any
agreement to which Purchaser is a party or by which Purchaser is bound.
5.1.5 Validity. This Agreement constitutes and the other documents
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and instruments contemplated hereby will, on the due execution and delivery
thereof, constitute the legal, valid and binding obligations of Purchaser,
enforceable in accordance with their respective terms except as the same may be
subject to bankruptcy, moratorium, fraudulent conveyance and similar laws
affecting creditors rights generally and to the application of general equitable
principles.
5.1.6 Valid Issuance. Upon issuance and delivery of the
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certificates representing the Preferred Shares and upon issuance and delivery of
the Warrants in accordance with this Agreement, such Preferred Shares shall be
duly authorized, validly issued, fully paid and nonassessable and the Warrants
shall be duly authorized and validly issued.
5.1.7 Asset Value and Sales. On the date of this Agreement and on
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the
<PAGE>
Closing Date, all of Purchaser's Assets have a value less than $75,000,000.00
and the annual sales of Purchaser have never exceeded $75,000,000.00.
5.1.8 Government Approval. No approval, consent, authorization or
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other action including, but not limited to, any action, approval, consent or
authorization by or filing with any governmental or quasi-governmental agency,
commission, board, bureau or instrumentality is necessary or required as to
Purchaser for the due execution, delivery or performance by Purchaser of this
Agreement or any document or instrument contemplated hereby.
5.1.9 Purchaser's Acknowledgment. Purchaser acknowledges that
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Seller is in default with respect to its monetary obligations under all
contracts and Agreements between Seller and all third parties.
5.2 Representations and Warranties of Seller. Seller represents and
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warrants to Purchaser:
________ 5.2.1 Organization. Seller is a corporation duly organized, validly
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existing and in good standing under the laws of the state of Texas, and has all
requisite power and authority, corporate or otherwise, to execute and deliver
this Agreement. Subject to Bankruptcy Court Approval, Seller has all requisite
power and authority, corporate or otherwise, to execute and deliver the Closing
Documents and to perform its obligations hereunder and thereunder and to
transact its business where and as now conducted. Seller has not taken any
corporate action and has not failed to take any corporate action, which action
or failure would, preclude or, prevent Purchaser from conducting the Purchased
Business after the Closing, in the manner substantially as heretofore conducted.
Notwithstanding the foregoing, Seller intends on filing for bankruptcy
protection promptly after entering into this Agreement.
5.2.2 Authority. Subject to approval by the Bankruptcy Court of
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this Agreement and of the consummation of the transactions contemplated herein,
the execution and delivery of this Agreement and consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate action on the part of Seller, and no further corporate authorization
will be necessary on the part of Seller, including the proper authorization of
Seller's board of directors and shareholders, for the execution, delivery,
performance or consummation of this Agreement.
5.2.3 Compliance With Corporation Documents. Neither the execution
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or delivery of this Agreement nor the compliance with the terms and provisions
of this Agreement on the part of Seller will conflict with or result in a breach
of the Certificate of Incorporation or By-Laws of Seller.
5.2.4 No Breach or Prohibition. Subject to Bankruptcy Court
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approval, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) conflict with or
result in the breach or violation of any law,
<PAGE>
regulation, writ, inspection or decree of any court or governmental
instrumentality applicable to Seller; or (ii) constitute a breach of any
agreement to which Seller is a party or by which Seller is bound.
5.2.5 Title to and Condition of Assets. At the Closing, Seller
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will transfer the Assets, pursuant to the Order, free and clear of all liens and
encumbrances of any nature. All Assets shall be SOLD AS IS WHERE IS, without
any representations or warranties, except as set forth in this Agreement.
EXCEPT AS SET FORTH HEREIN, SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
THE CONDITION OR STATE OF REPAIR OF THE ASSETS, OR ANY PORTION THEREOF, OR OF
VISIBLE OR HIDDEN DEFECTS IN THE MATERIAL, WORKMANSHIP OR CAPACITY OF THE
ASSETS, OR ANY PORTION THEREOF, AND THERE ARE NO IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO THE ASSETS OR ANY
PORTION THEREOF. PURCHASER ACKNOWLEDGES THAT SELLER IS UNDER NO OBLIGATION TO
ALTER, REPAIR OR IMPROVE THE ASSETS OR ANY PORTION THEREOF. PURCHASER FURTHER
ACKNOWLEDGES THAT AS OF THE CLOSING IT HAS HAD AN OPPORTUNITY TO INSPECT THE
ASSETS, AND THAT DELIVERY OF THE ASSETS AT THE CLOSING WILL BE, EXCEPT AS
SPECIFICALLY SET FORTH HEREIN, "AS IS" AND WITH ALL FAULTS, AND THAT SELLER HAS
DISCLAIMED ANY IMPLIED WARRANTIES WITH RESPECT TO THE ASSETS. THE DISCLAIMERS
AND AGREEMENTS MADE IN THIS PARAGRAPH SHALL BE SET FORTH IN THE CONVEYANCE
DOCUMENTS TO BE DELIVERED TO PURCHASER AT CLOSING.
5.2.6 Asset Value and Sales. On the date of this Agreement and on
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the Closing Date, all of Seller's Assets have a value less than $75,000,000.00
and the annual sales of Seller have never exceeded $75,000,000.00.
5.2.7 Government Approval. Except for approval by the Bankruptcy
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Court, to the actual knowledge of Seller, no approval, consent, authorization
or other action including, but not limited to, any action, approval, consent or
authorization by or filing with any governmental or quasi-governmental agency,
commission, board, bureau or instrumentality is necessary or required as to
Seller for the due execution, delivery or performance by Seller of this
Agreement or any document or instrument contemplated hereby.
5.2.8 Validity. Subject to Bankruptcy Court approval, this
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Agreement constitutes and the Closing Documents will, on the due execution and
delivery thereof, constitute the legal, valid and binding obligations of Seller,
enforceable in accordance with their respective terms.
5.2.9 Financial Statements. Annexed hereto as Schedule 5.2.9 are
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(i) the audited balance sheets of Seller at December 31, 1994, 1993, 1992 and
1991 and the related statements of operations, cash flows and stockholders'
equity for the years then ended and notes
<PAGE>
related thereto (collectively, "the Audited Financial Statements"), all of which
have been certified by Deloitte & Touche L.L.P. or Jain and Jain, P.C.,
independent certified public accountants, as having been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the period indicated. To the actual knowledge of Seller, without independent
investigation of third parties, the Audited Financial Statements and the
December 31, 1995 Financial Statements (as hereafter defined) when issued and
delivered will be substantially (a) true, correct and complete, (b) in
accordance with the books and records of Seller and (c) fairly, completely and
accurately present the financial position of Seller at the dates specified and
the results of its operations for the period covered.
5.2.10 Contracts. The Hasbro Products included in Seller's product
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line have received all necessary prior approvals as required pursuant to the
Hasbro License, including without limitation, those required under paragraph 7
thereof. Except only those contracts, agreements or commitments listed and
described on Schedule 5.2.10 annexed hereto and made a part hereof (complete
and correct copies of which have been heretofore delivered to Purchaser), Seller
is not a party to and has no contract, agreement or commitment of any kind or
nature whatsoever, written or oral, formal or informal, including, without
limitation, any:
(i) sales, advertising, license, franchise, distribution, dealer, agency,
manufacturer's representative, or similar agreement, or any other
contract relating to the payment of a commission,
(ii) pension, profit-sharing, bonus, stock purchase, stock option,
retirement, severance, hospitalization, accident, insurance or other
similar plan, arrangement or agreement involving benefits to current or
former employees,
(iii) contract or commitment for the employment of any employee or
consultant,
(iv) collective bargaining agreement or other contract with any labor union,
(v) contract or commitment for services, materials, supplies, merchandise,
inventory or equipment,
(vi) contract or commitment for the sale or purchase of any services
products, raw materials or assets,
(vii) mortgage, indenture, promissory note, loan agreement, guaranty or
other contract or commitment for the borrowing of money or for a line
or letter of credit,
(viii) contract of commitment with any stockholder or any current or
former director, officer or employee of Seller which is in effect on
the date hereof,
<PAGE>
(ix) contract or commitment with any government or agency thereof,
(x) contract pursuant to which its right to compete with any entity or
person in the conduct of its business anywhere in the world is
restrained or restricted for any reason or in any way,
(xi) contract or commitment guaranteeing the performance, liabilities or
obligations of any entity or person,
(xii) contract or commitment relating to the return of products previously
sold or any price support arrangement of similar arrangements with
customers,
(xiii) contract or commitment for capital improvements or expenditures or
with any contractor or subcontractor for in excess of $5,000,
(xiv) contract or commitment for charitable contributions aggregating in
excess of $1,000,
(xv) lease or other agreement or commitment pursuant to which it is a
lessee of or holds or operates any real property, machinery, equipment,
motor vehicles, office furniture, fixtures or similar personal property
owned by any third party,
(xvi) contract or commitment to register any Securities of Seller, or
(xvii) contract or commitment otherwise involving in excess of $5,000 in
cash over its term (including any periods covered by any options to
renew by any party), whether or not in the ordinary course of business.
To the actual knowledge of Seller, without independent investigation of
third parties, the Hasbro Licenses and the Fantasy Toys License are valid and
existing, in full force and effect and enforceable in accordance with their
terms.
Except with respect to Seller's failure to pay certain of its monetary
obligations under the contracts identified on Schedule 5.2.10, and except as set
forth on Schedule 5.2.10, to the actual knowledge of Seller without independent
investigation of third parties, no party thereto is in default and no claim of
default by any party has been made or is now pending, and no event exists which,
with or without the lapse of time or the giving of notice or both would
constitute a material breach or default, cause acceleration of any obligations,
would permit the terminations or excuse the performance by any party thereto and
would materially adversely affect the Purchased Business and the Assets.
5.2.11 Inventory. Set forth on Schedule 5.2.11 annexed hereto and
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made a part hereof, is a description by type, location, amount and book value of
all inventory (the
<PAGE>
"Inventory") existing on the date hereof, with the valuation thereof determined
in accordance with generally accepted accounting principles consistently
applied, stated at the lower of cost (based on the first-in, first-out method)
or market value and consists solely of merchandise usable or salable in the
ordinary course of business. None of such Inventory bears any trade right not
included in the Assets. To the actual knowledge of Seller, without independent
investigation of third parties or a physical inventory, proper recognition has
been given to damaged, obsolete, prior season, slow-moving, irregular or
defective stock, excess quantities and to appropriate markdowns and close-outs.
5.2.12 Accounts Receivable. Annexed hereto as 5.2.12 is a true and
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complete list of all accounts receivable of Seller on the date hereof (the
"Accounts Receivable") identified by account, debtor, amount and due date. To
the actual knowledge of Seller without independent investigation of third
parties, except as set forth on Schedule 5.2.12 annexed hereto and made a part
hereof:
(i) each Account Receivable constitutes and each Account Receivable
reflected on the 1995 Financial Statement and a closing statement of
accounts receivable, will constitute a bona fide receivable resulting
from a bona fide sale or other transaction with a customer or licensee
in the ordinary course of business, the amount of which was actually
due on the date of such balance sheet or such closing statement;
(ii) the books and records of Seller state correctly the facts with respect
to each Account Receivable of Seller and the balance due thereon;
(iii) each payment reflected on such books and records as having been made
on each such Account Receivable was made by the respective account
debtor and not directly or indirectly by any director, officer,
employee or agent of Seller unless such person is shown on said books
and records as such account debtor;
(iv) each document and instrument evidencing, securing or relating to each
Account Receivable, including, without limitation, each insurance
policy, certificate, bill or statement, is correct and complete in all
respects, is genuine and valid and is enforceable in accordance with
its terms; and
(v) there are no defenses, claims of disability, counterclaims, offsets,
refusals to pay or other rights of set-off against any Accounts
Receivable and there is no threatened, intended or proposed defense,
claim of disability, counterclaim, offset, refusal to pay or other
right of set-off with respect thereto.
5.2.13 Personal Property. Schedule 5.2.13 annexed hereto and made a
-----------------
part hereof is a true and complete list of (i) all of the Assets including
tangible personal property
<PAGE>
owned by Seller having a book value, determined in accordance with generally
accepted accounting principles, at the date hereof in excess of $2,000.00 per
item and the location thereof and (ii) all tools and molds owned or used by
Seller in its business and the location thereof. As of the date of this
Agreement, to the actual knowledge of Seller, without independent investigation
of third parties, the tools and molds listed on Schedules 5.2.13 are in good
condition and state of repair and constitute all the tools and molds necessary
to manufacture the products included in Seller's product lines within the last
six (6) months (except for Box-4-Blox) as of the date hereof. The Assets
constitute all tangible and intangible property necessary for Purchaser to
manufacture and sell the products heretofore sold by Seller.
5.2.14 Intellectual Property. Schedule 5.2.14 annexed hereto and
---------------------
made a part hereof is a complete and correct list, and a brief description
(including, if applicable, date of application, filing or registration, as the
case may be, and the registration or application number) of each patent,
invention, trade secret, copyright, proprietary software or hardware, trade
name, trademark, brand name, service mark, or design, or representation or
expression of any thereof or registration or application therefor ("Trade
Rights"), whether or not registered in the name of or applied for by Seller, in
which Seller has any rights or interest, whether through any contract or
otherwise, and in each case a brief description of the nature of such rights and
interests. Except as otherwise listed on Schedule 5.2.14, Seller is not a
licensor or a licensee in respect of any Trade Right nor does it pay or receive
royalty payments to or from any third party in respect of any Trade Rights.
Seller owns or has the exclusive right to use each Trade Right necessary to
conduct, or be used in, its business as now operated and there are no conflicts
with or infringements of the rights of others in respect thereof or any
unauthorized use or misappropriation of any thereof. To the actual knowledge of
Seller without independent investigation of third parties, with respect to each
Trade Right, such Trade Right is subsisting, has not been adjudged invalid or
unenforceable, in whole or in part and is valid and enforceable; and all
necessary filings and recordation have been made to protect its interest in such
Trade Rights, including, without limitation, recordation of all its interests in
patents, trademarks and service marks in the United States Patent and Trademark
Office and its claims to copyrights in the United States Copyright Office.
Seller is the owner of the Trade Rights purported to be owned by it as set forth
on Schedule 5.2.14, including, without limitation, the Fantasy Toys Intellectual
Property, is the exclusive owner of the entire and unencumbered right, title and
interest in and to such Trade Right and, to the actual knowledge of Seller
without independent investigation of third parties, no claim is currently being
asserted that the use of such Trade Right does or may violate the asserted
rights of any third party. The Trade Rights listed on Schedule 5.2.14 constitute
all of the Trade Rights necessary to conduct the Purchased Business as
heretofore conducted by Seller and are included in the Assets.
5.2.15 Insurance. Schedule 5.2.15 annexed hereto and made a part
---------
hereof is a complete and correct list, and brief description (including name of
insurer, agent, type of coverage, policy number, annual premium, amount of
coverage, expiration date and any claims thereunder), of all current insurance
policies, including, without limitation, liability, burglary, theft, fidelity,
life, fire, product liability, worker's compensation, health and other forms of
insurance of any kind held by Seller. No notice of cancellation or non-renewal
with respect to,
<PAGE>
or disallowance of any material claim under, any insurance policies or binders
of insurance which relate to the assets or business of Seller has been received
by Seller.
5.2.16 Litigation. Except as related to the collection by third
----------
parties of payables owed by Seller to its suppliers, trade creditors, etc., and
as otherwise set forth in Schedule 5.2.16 annexed hereto and made a part hereof,
no action, suit, claim, investigation, proceeding or controversy, whether legal
or administrative or in mediation or arbitrating, is pending or threatened, at
law or in equity or admiralty, before or by any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, against or affecting the Assets, business, operations,
financial condition or prospects of Seller in which an unfavorable judgment,
decree or order would restrain, prohibit, invalidate, set aside, rescind,
prevent or make unlawful this Agreement or the carrying out of this Agreement or
the transactions contemplated hereby, nor is there any basis for any such
action, suit, claim, investigation or proceeding. Seller is not in default in
respect of any judgment, order, writ, injunction or decree of any court or any
federal, state, municipal or other governmental department commission, board,
bureau, agency or instrumentality. For purposes of Section 7.1.1 hereof, this
representation shall be deemed true and correct as of the Closing Date so long
as between the date hereof and the Closing Date, there is no new action, suit,
claim, investigation, proceeding or controversy which will materially impair
the transaction contemplated hereby.
5.2.17 Compliance with Law. To the actual knowledge of Seller
-------------------
without independent investigation of third parties, Seller has all permits,
licenses, orders and approvals of all Federal, state or local governmental
regulatory bodies required for it to conduct its business as presently
conducted; all such permits, licenses, orders and approvals are in full force
and effect and no suspension or cancellation of any of them is pending or
threatened; and none of such permits, licenses, orders or approvals will be
adversely affected by the consummation of the transactions contemplated by this
Agreement. To the actual knowledge of Seller without independent investigation
of third parties, Seller is in compliance with each law, rule, regulation, order
and decree applicable to its business including, without limitation, laws, rules
and regulations respecting occupational safety, environmental protection,
employment practices and consumer products safety. To the actual knowledge of
Seller without independent investigation of third parties, the conduct of the
business of Seller and all assets and properties utilized by Seller therein is
in conformance with the requirements and regulations of the Occupational Safety
and Health Administration.
5.2.18 Customers and Suppliers. Schedule 5.2.18 annexed hereto and
-----------------------
made a part hereof is a complete and correct list of the names and addresses of
the ten largest customers and ten largest suppliers of Seller during each of
1994 and 1995, and the total sales to or purchases from such customers or
suppliers made by Seller during such periods. No supplier, customer,
manufacturer, licensor or licensee of Seller representing in excess of 5% of
Seller's purchases, sales or royalties during either of such periods has advised
Seller formally or informally, that it intends to terminate, discontinue or
substantially reduce its business with Seller by reason of the transactions
contemplated by this Agreement or otherwise.
<PAGE>
5.2.19 Environmental Warranties.
------------------------
a. "Environmental Laws" means all applicable federal, state or local
statues, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
b. "Hazardous Material" means
(1) any "hazardous substance", as defined by the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
("CERCLA");
(2) any "hazardous waste", as defined by the Resource Conservation
an Recovery Act, as amended;
(3) any petroleum product; or
(4) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other applicable
federal, state or local law, regulations, ordinance or requirement (including
consent decrees and administrative orders) relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or material, all as amended or hereafter amended.
c. To the actual knowledge of Seller without independent
investigation of third parties, all facilities and property (including underling
groundwater) owned, leased or operated bb Seller have been, and continue to be,
owned, leased or operated by Seller in material compliance with all
Environmental Laws.
d. To the actual knowledge of Seller without independent
investigation of third parties, there have been no past, and there are no
pending or threatened (i) claims, complaints, notices or requests for
information received by Seller with respect to any alleged violation of any
Environmental Law, or (ii) complaints, notices or inquiries to Seller regarding
potential liability under any Environmental Law.
e. To the actual knowledge of Seller without independent
investigation of third parties, there have been no releases of Hazardous
Materials at, on or under any property now or previously owed, leased or
operated by Seller that, singly or in the aggregate, have, or may reasonably be
expected to have, a material adverse effect on the financial condition,
operations, assets, business, properties or prospects of Seller or the Purchased
Business.
f. To the actual knowledge of Seller without independent
investigation of third parties, Seller has been issued and is in material
compliance with all permits, certificates, approvals, licenses and other
authorizations relating to environmental matters and necessary or desirable for
its business.
<PAGE>
g. To the actual knowledge of Seller without independent
investigation of third parties, no property now or previously owned, leased or
operated by Seller is listed or proposed for listing (with respect to owned
property only) on the National Priorities List pursuant to CERCLA, on the
Comprehensive Environmental Response Compensation Liability Information System
List ("CERCLIS") or on any similar state list of sites requiring investigation
or clean-up.
h. To the actual knowledge of Seller without independent
investigation of third parties, there are no underground storage tanks, active
or abandoned, including petroleum storage tanks, on or under any property now or
previously owed, leased or operated by Seller that, singly or in the aggregate,
have, or may reasonably be expected to have, a material adverse effect on the
financial condition, operations, assets, business, properties or prospects of
Seller.
i. To the actual knowledge of Seller without independent
investigation of third parties, Seller has not directly transported or directly
arranged for the transportation of any Hazardous Material to any location which
is listed or proposed for listing on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations which may
lead to material claims against Seller for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA.
j. To the actual knowledge of Seller without independent
investigation of third parties, there are no polychlorinated biphenyls or
friable asbestos preset at any property ow or previously owed, leased or
operated by Seller that, singly or in the aggregate, have, or may reasonably be
expected to have, a material adverse effect on the financial condition,
operations, assets, business, properties or prospects of Seller.
k. To the actual knowledge of Seller without independent
investigation of third parties, no conditions exist at, on or under any property
now or previously owned, leased or operated by Seller which, with the passage of
time, or the giving of notice or both, would give rise to liability under any
Environmental Law.
5.2.20 Product Information. To the actual knowledge of Seller
-------------------
without independent investigation of third parties: there are no recalls,
threatened or pending, of, and no report has been filed or is required to have
been filed with respect to any products sold by Seller or any predecessor
business under the Consumer Products Safety Act, as amended, or under any other
applicable act or statute of a similar nature; during the past twenty-four (24)
months, Seller has not received (a) any request for information from or (b)
received notice that any request for information about products sold by Seller
or any predecessor business has been made to the Consumer Products Safety
Commission or any similar state agency or commission; all products of Seller
which are eligible for such approval have been approved by Underwriters
Laboratory and all products sold by Seller which are required to comply with the
Federal Small Parts Regulations, 16 C.F.R. 1500, et seq., so comply; all
approvals previously obtained by Seller with respect to any products currently
being offered by Seller remain in full force and effect, and there are no
notices of withdrawal of any such approval or compliance or
<PAGE>
amendments thereto requiring any modification of a product which will materially
increase the cost to produce the same in order to preserve any such approval or
compliance.
5.2.21 Warranties. No products sold by Seller within the past four
----------
years have been the subject of abnormal warranty claims measured by normal
experience. Schedule 5.2.21 annexed hereto contains an accurate and complete
statement of the standard warranties and warranty policies of Seller. Except as
disclosed in Schedule 5.2.21, no products heretofore sold by Seller are now
subject to any claim for liability under a warranty different from such standard
warranties. To the actual knowledge of Seller without independent investigation
of third parties, all such warranties are in conformity with the labeling and
other requirements of applicable laws.
5.2.22 Accuracy of Information. To the actual knowledge of Seller
-----------------------
without independent investigation of third parties, neither this Agreement or
the representations and warranties by the Seller contained herein or in any
documents, instruments, certificates or schedules furnished pursuant hereto or
in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements or facts contained herein and therein not misleading.
5.2.23 Securities Representation. Seller's creditors and
-------------------------
shareholders will acquire the Preferred Shares and Warrants pursuant to the
Seller's plan of reorganization and the Order. In entering into this Agreement
and agreeing to sell the Assets based upon the Purchase Price set forth herein,
neither the Seller nor any of its shareholders has relied on any representations
of Purchaser, except as set forth in this Agreement, and has specifically not
relied on any projections, budgets, operating plans or other forward looking
information of Purchaser or its business, whether or not the same was furnished
by Purchaser. In entering into this Agreement and agreeing to sell the Assets
based upon the Purchase Price set forth herein, neither the Purchaser nor any of
its shareholders has relied on any representations of Seller, except as set
forth in this Agreement, and has specifically not relied on any projections,
budgets, operating plans or other forward looking information of Seller or its
business, whether or not the same was furnished by Seller.
5.2.24 No Adverse Change. Except as set forth on Schedule 5.2.24
-----------------
annexed hereto, as of the date of this Agreement, other than in the ordinary
course of business, Seller has not, since July 1, 1995:
a. authorized, issued, sold or converted any Securities, or
entered into any agreement with respect thereto;
b. other than inventory sold in the ordinary course of business,
sold, assigned, transferred or otherwise disposed of any tangible or intangible
assets or intellectual properties, including without limitation, any patent,
trademark, trade name, copyright, license, franchise, design or other tangible
asset or intellectual property right; or
<PAGE>
c. entered into any other transaction other than in the ordinary
course of business and consistent with past practices.
6. Other Covenants.
---------------
6.1 Assets and Indebtedness. Between the date of this Agreement and
-----------------------
the Closing Date, Seller will not sell, dispose of or abandon any of the Assets
or agree to do so except in accordance with this Agreement and the Distribution
Agreement.
6.2 Securities Laws. Assuming Section 1145 of the Code applies, in
---------------
connection with Purchaser's issuance of any securities pursuant to this
Agreement, including without limitation Purchaser's issuance of the Preferred
Shares and Warrants, Purchaser will comply with all applicable federal and state
securities laws.
6.3 Confidentiality. During the course of negotiations and in
---------------
preparation for the Closing, Seller has or will reveal to Purchaser and its
agents substantial information regarding the business, financial condition and
affairs of Seller. All information revealed prior to the Closing Date,
including the negotiations of sale contemplated hereunder, shall be treated by
Purchaser and its agents as confidential and (except to the extent it is
otherwise made public by Seller in connection with the Bankruptcy Case or
required to be disclosed by Purchaser by law in connection with its SEC
reporting obligations) shall not be disclosed to third parties. If the
transactions contemplated by this Agreement are not consummated, Purchaser shall
forthwith return to Seller all copies of documents, records and information in
its possession or in the possession of any of its agents with respect to the
Assets and the business of Seller.
6.4 Non-Competition. For a period of two (2) years after the Closing
---------------
Date, Seller shall not directly or indirectly, own, manage, operate, join,
control, participate in, invest in, or otherwise be connected in any manner
with, whether a partner, investor or otherwise, any business entity in North
America, other than Purchaser and its affiliates, which is engaged in any
business similar to the Purchased Business; or for itself, or on behalf of any
other person or entity, call on any contractor or supplier of Purchaser or be in
contact in any way with any customer, supplier, contractor or licensor of
Purchaser and any of its affiliates for the purpose of soliciting, diverting or
taking away any supplier, customer, contractor or licensor of Purchaser or any
of its affiliates. For a period of two (2) years after the Closing Date, Seller
shall not directly or indirectly, hire or solicit the employment of any employee
of the Purchased Business (or any person who was on the date hereof an employee
of the Purchased Business) or encourage any such employee to leave his
employment with the Purchased Business or knowingly participate in any
discussions with any employee of the Purchased Business regarding the
possibility of his or her employment by any person other than Purchaser or its
subsidiaries.
6.4.1 Rights and Remedies Upon Breach. If Seller breaches, or
-------------------------------
threatens to commit a breach of, any of the provisions of Section 6.4, Purchaser
shall have the right and remedy to have such covenants specifically enforced by
any court of competent jurisdiction, it being agreed that any breach or
threatened breach of such covenants would cause irreparable injury to Purchaser
and that money damages would not provide an adequate remedy to
<PAGE>
Purchaser. This right of specific performance is in addition to, and not in
lieu of, any other rights and remedies available to Purchaser under law, in
equity or under this Agreement.
6.4.2 Severability of Covenant. Seller acknowledges that the
------------------------
foregoing covenants in Section 6.4 are reasonable and valid in geographical and
temporal scope and in all other respect and that Seller has received full and
adequate consideration therefor. If any court determines that any of such
covenants, or any part thereof, is invalid or unenforceable, the remainder of
such covenants shall not thereby be affected and shall be given full force and
effect, without regard to the invalid portions. If any court determines that
any of the foregoing covenants or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, and should such court reduce
the duration or scope of such provision as the case may be, such provision, in
its reduced form, shall then be enforceable.
6.5 Bankruptcy. Seller shall provide Purchaser with periodic reports
----------
on the status of Seller's bankruptcy proceedings and, at Purchaser's request,
with copies of all material bankruptcy filings made by Seller, including without
limitation the plan of reorganization.
6.6 Books and Records. After the Closing, Seller shall make available
-----------------
during normal business hours to Purchaser, Seller's books and records and such
other information as may be required to be disclosed by Purchaser by law in
connection with its SEC reporting obligations. Purchaser shall pay for all costs
and expenses associated with providing such information to Purchaser.
6.7 Power of Attorney. Effective on the Closing Date, Seller shall
-----------------
irrevocably constitute and appoint Purchaser, its successors and assigns, the
true and lawful attorney of Seller with full power of substitution, in the name
of Purchaser, or the name of Seller, on behalf of and for the benefit of
Purchaser, to collect or cause to be collected all accounts receivable and other
items being transferred, conveyed and assigned to Purchaser as provided herein,
to endorse, without recourse, checks, notes and other instruments in the name of
Seller, to institute and prosecute, in the name of Seller or otherwise, all
proceedings which Purchaser may deem proper in order to collect, assert or
enforce any claim, right or title of any kind in or to the Assets, to defend and
compromise any and all actions, suits or proceedings in respect of any of the
Assets, and to do all such acts and things in relation thereto as Purchaser may
deem advisable. Seller agrees that the foregoing powers are coupled with an
interest and shall be irrevocable by Seller directly or indirectly by the
dissolution of Seller or in any manner or for any reason. Seller further agrees
that Purchaser shall retain for its own account any amounts collected pursuant
to the foregoing powers, and Seller shall promptly transfer and deliver to
Purchaser any cash or other property received by Seller on or after the Closing
Date hereof in respect of any accounts receivable or otherwise relating to the
Assets or the Purchased Business.
6.8 Best Efforts. Seller shall use it best efforts (but shall not be
------------
obligated to incur any monetary costs) to fulfill the conditions to Closing,
including, without limitation, the transfer of ownership of the Fantasy Toy
Intellectual Property to Purchaser.
<PAGE>
6.9 Annual Reports. Purchaser shall deliver to the holders of the
--------------
Preferred Shares, as reflected on Purchaser's stock record books from time to
time, Purchaser's Annual Report to Shareholders (the "Annual Report") in the
same manner and at the same time as the Annual Report is delivered to holders of
Purchaser's common stock.
7. Conditions Precedent to Closing.
-------------------------------
7.1 Purchaser's Obligation to Close. The obligations of Purchaser
-------------------------------
hereunder shall be subject to the satisfaction of the following conditions
precedent:
7.1.1 Representations and Warranties. The representations and
------------------------------
warranties of Seller contained herein shall be correct in all material respects
on the date hereof and the Closing Date, except as otherwise contemplated by
this Agreement.
7.1.2 Performance of Covenants and Agreements. Seller shall have
---------------------------------------
performed and complied with all covenants, agreements and conditions required to
be performed or complied with pursuant to this Agreement prior to or as of the
Closing.
7.1.3 Litigation. No suit, action, or other proceeding shall be
----------
threatened or pending before any court or governmental agency seeking to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the transactions contemplated hereby.
7.1.4 Closing Certificate and Certificate of Corporate Resolutions.
------------------------------------------------------------
Purchaser shall have been furnished with a certificate of corporate resolutions,
in form satisfactory to Purchaser, stating that this Agreement and the
transactions contemplated herein have been approved and authorized by all proper
corporate action of Seller. Further, Purchaser shall have been furnished with a
closing certificate, in form satisfactory to Purchaser, executed by Seller, to
the effect that the representations of Seller contained herein are true and
correct in all material respects on the Closing Date, except as otherwise
contemplated by this Agreement, and that Seller has performed and complied with
all covenants, agreements and conditions required to be performed or complied
with prior to the Closing.
7.1.5 Documents. Purchaser shall have received the documents
---------
referred to in Section 8 herein.
7.1.6 Bankruptcy Court Approval. The execution of this Agreement
-------------------------
and the consummation of the transactions contemplated herein shall have been
approved by the Bankruptcy Court by the entry of the Order, in form and
substance satisfactory to Purchaser and Seller, and the Order shall not have
been stayed pending appeal. The Bankruptcy Court must also enter an order
stating that Purchaser is the "successor" of Seller within the meaning of
Section 1145 of the Bankruptcy Code and that the Preferred Shares and Warrants
are being issued in exchange for a claim against, an interest in, or a claim for
an administrative expense in the case concerning, the debtor.
<PAGE>
7.2 Seller's Obligation to Close. The obligations of Seller hereunder
----------------------------
shall be subject to the satisfaction of the following conditions precedent:
7.2.1 Representations and Warranties. The representations and
------------------------------
warranties of Purchaser contained herein shall be correct when made in all
material respects and shall be deemed to have been made again at the Closing
Date, except as contemplated by this Agreement.
7.2.3 Performance of Covenants and Agreements. Purchaser shall
---------------------------------------
have performed and complied with all covenants, agreements and conditions
required to be performed or complied with pursuant to this Agreement prior to or
as of the Closing.
7.2.4 Closing Certificate and Certificate of Corporate Resolutions.
------------------------------------------------------------
Seller shall have been furnished with a certificate of corporate resolutions, in
form satisfactory to Seller, stating that this Agreement and the transactions
contemplated herein have been approved and authorized by all proper corporate
action of Purchaser. Further, Seller shall have been furnished with a closing
certificate, in form satisfactory to Seller, executed by Purchaser, to the
effect that the representations of Purchaser contained herein are true and
correct in all material respects as of the Closing Date.
7.2.5 Documents. Seller shall have received the payments and
---------
documents referred to in Section 8 herein.
7.2.6 Bankruptcy Court Approval. The execution of this Agreement
-------------------------
and the consummation of the transactions contemplated herein shall have been
approved by the Bankruptcy Court by the entry of the Order, and the Order shall
not have been stayed pending appeal.
8. Items and Documents to be Delivered at Closing (the "Closing
------------------------------------------------------------
Documents").
- -----------
8.1 At the Closing, Seller shall deliver at closing:
8.1.1 Documents of Conveyance. Appropriate title documents,
-----------------------
including a bill of sale and assignment, in order to vest in Purchaser title to
the Assets free and clear of all claims, liens and encumbrances of any kind.
8.1.2 Lien Releases. Appropriate documents, including UCC-3
-------------
termination statements evidencing releases by each person or entity holding any
liens or contractual security interests in the Assets; in lieu of UCC-3's, the
Seller may provide an order from the Bankruptcy Courts ordering the release of
such liens.
8.1.3 Officer's Certificate. A certificate from an officer of
---------------------
Seller pursuant to Paragraph 7.1.4 as well as appropriate certified copies of
resolutions of Seller authorizing the undertakings hereunder and official
certificates of Seller's good standing and due existence.
<PAGE>
8.1.4 Hasbro License. Seller shall deliver to Purchaser a written
--------------
consent from Hasbro and Hasbro Canada in the form attached as Schedule 8.1.4 and
made a part hereof.
8.1.5 Change in Name. As of midnight of the Closing Date, Seller
--------------
will cease and desist from using its corporate name (or name substantially
similar to or likely to be confused with its present corporate name) in the
conduct of any business. At the Closing, Seller shall deliver to Purchaser a
Notice of Change of Name to be filed with the Bankruptcy Court.
8.1.6 1995 Financial Statement. On or before the Closing Date,
------------------------
Seller shall deliver to Purchaser a balance sheet of Seller dated as of
December 31, 1995 and the related statements of operations, cash flows and
stockholders' equity for the year then ended (the "1995 Financial Statements")
and notes related thereto, all of which have been certified by Jain and Jain,
P.C., independent certified public accountants, as having been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the period indicated. The cost associated with such financial
statements and certification to be paid solely by Purchaser. Notwithstanding the
foregoing, if Seller is unable to deliver the 1995 Financial Statement due to
the conduct of Purchaser (whether it be by Purchaser's refusal to pay for the
associated cost or otherwise), this condition shall be deemed waived by
Purchaser.
8.2 Purchaser's Deliveries. Purchaser shall deliver at Closing:
----------------------
8.2.1 Purchase Price. Payment of the Purchase Price, including, (i)
--------------
as to the cash consideration, by cashier's check or, at Seller's election, by
funds wire transferred to bank accounts in Houston, Texas, provided such payment
is consistent with the Order and (ii) as to the Preferred Shares and Warrants,
the issuance thereof.
8.2.2 Officer's Certificate. A certificate from an officer of
---------------------
Purchaser pursuant to Paragraph 7.2.4, as well as appropriate certified copies
of resolutions authorizing the Purchaser's undertakings hereunder including its
execution of the Lease.
9. Indemnification.
---------------
9.1 Indemnification of Seller. Purchaser shall defend and promptly
-------------------------
indemnify Seller and save and hold it harmless from, against, for and in respect
of and shall pay any and all damages, losses, obligations, liabilities, claims,
encumbrances, deficiencies, costs and expenses, including, without limitation,
reasonable attorneys' fees and other costs and expenses incident to any action,
investigation, claim or proceeding (all hereinafter collectively referred to as
"Losses") suffered, sustained, incurred or required to be paid by Seller by
reason of (i) any breach or failure of observance or performance of any covenant
made by Purchaser hereunder or under any document or instrument executed or
delivered pursuant hereto, or (ii) any representation or warranty of Purchaser
herein or in any document or instrument executed or delivered pursuant hereto
being materially untrue or materially incorrect in any respect or (iii) any of
the liabilities assumed by Purchaser pursuant hereto.
<PAGE>
9.2 Indemnification of Purchaser. Seller shall defend and promptly
----------------------------
indemnify Purchaser and its affiliates and save and hold them harmless from,
against, for and in respect of and shall pay any and all Losses suffered,
sustained, incurred or required to be paid by Purchaser or any of its affiliates
by reason of (i) any breach or failure of observance or performance of any
covenant, agreement or commitment made by Seller hereunder or under any document
or instrument executed or delivered pursuant hereto or (ii) as a result of any
representation or warranty contained herein or in any document or instrument
executed pursuant hereto being materially untrue or materially incorrect in any
respect or (iii) any of the liabilities not assumed by Purchaser pursuant
hereto.
9.3 Procedures. For purposes of this Paragraph, the party entitled to
----------
indemnification shall be known as the "Injured Party" and the party required to
indemnify shall be known as the "Other Party". In the event that the Other Party
shall be obligated to the Injured Party pursuant to this Section or in the event
that a suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Other Party may become obligated to the
Injured party hereunder, the Injured Party shall give prompt written notice to
the Other Party of the occurrence of such event. The Other Party agrees to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding at the Other Party's own cost and expense.
The Injured Party shall have the right but not the obligation to participate at
its own expense in the defense thereof by counsel of its own choice. In the
event that the Other Party fails timely to defend, contest or otherwise protect
against any such suit, action, investigation, claim or proceeding, the Injured
Party shall have the right to defend, contest or otherwise protect against the
same and may make any compromise or settlement thereof and recover the entire
cost thereof from the Other Party including without limitation, reasonable
attorneys' fees, disbursements and all amounts paid as a result of such suit,
action, investigation, claim or proceeding or compromise or settlement thereof.
10. Other Agreements.
----------------
10.1 Asset Costs to be Assumed by Purchaser. Purchaser shall be
--------------------------------------
responsible for all costs relating to the Assets incurred on or after the
Closing Date, including without limitations costs of storing and holding Assets.
10.2 Announcements. Notwithstanding the provisions of Section 6.3
-------------
hereof, Seller may notify its employees and the public of the transactions
contemplated hereby at such time and in such manner as Purchaser shall approve,
which approval shall not be unreasonably withheld, or as may be required by law
or by contract.
10.3 Arm's Length Negotiations. This Agreement and the transactions
-------------------------
contemplated hereby including the determination of the Purchase Price are the
result of arm's length negotiations between unrelated parties and represent fair
and adequate consideration for the transfer of the Assets in accordance with
this Agreement. Except as set forth in this Agreement, there is no
consideration being paid by Purchaser for the Assets.
<PAGE>
10.4 Fire and Casualty. Seller assumes all risk of destruction, loss
-----------------
or damage due to fire or other casualty to the Assets from the date hereof up to
the Closing Date, provided however, upon any such destruction, loss or damage
due to fire or other casualty of substantially all of the Assets or any material
tool or mold. Purchaser shall have the option to either (i) terminate this
Agreement by notifying Seller within seven (7) days after it learns of any such
destruction, loss or damage, or (ii) proceed with the Closing contemplated
herein but excluding such Assets so destroyed with a reduction in the Purchase
Price based on the value of the Assets destroyed or, alternatively, in
Purchaser's discretion, accepting the insurance proceeds paid or payable in
respect of such Assets destroyed.
10.5 Expenses. Purchaser and Seller, respectively, will pay all costs
--------
and expenses of their performance of and compliance with all agreements and
conditions contained in this Agreement on their respective parts to be performed
or complied with. Purchaser agrees to pay all sales or transfer taxes, if any,
attributable to the sale of the Assets to Purchaser.
10.6 Nature and Survival of Representations and Warranties. The
-----------------------------------------------------
representations, warranties and agreements contained in or made pursuant to this
Agreement and the exhibits hereto shall survive the execution and delivery of
this Agreement and the Closing, all of which representations, warranties and
agreements shall continue for a period prescribed by applicable statutes of
limitations.
10.7 Miscellaneous.
-------------
10.7.1 Notices. All notices, requests and communications hereunder
-------
shall be in writing and any such notice, request, demand or other communication
shall be deemed to have been duly given or made (i) when delivered by hand; or
(ii) on the date of transmission if sent by telecopy simultaneous with mailing
by first class, postage prepaid mail; or (iii) in the case of delivery solely by
mail, four days after deposited in the mail, certified mail, return receipt
requested, postage prepaid, addressed for purposes of delivery by mail as
follows:
If to Seller: Table Toys, Inc.
Attention: President
2500 Central Parkway, Suite P
Houston, Texas 77092
Facsimile: (713) 956-9905
Telephone: (713) 956-9900
with a copy to: Sheinfeld, Maley & Kay, P.C.
Attention: Henry J. Kaim, Esq.
1001 Fannin, Suite 3700
Houston, Texas 77002
Facsimile: (713) 658-9756
Telephone: (713) 658-8881
<PAGE>
If to Purchaser: Just Toys, Inc.
Attention: Morton J. Levy, Chief
Executive Officer
50 West 23rd Street
7th Floor
New York, New York 10010
Facsimile: (212) 741-8793
Telephone: (212) 645-6335
with a copy to: Shack & Siegel, P.C.
Attention: Donald D. Shack, Esq.
530 Fifth Avenue
New York, New York 10036
Facsimile: (212) 730-1964
Telephone: (212) 782-0700
10.7.2 Parties in Interest. All covenants and agreements herein
-------------------
contained by or on behalf of the parties hereto shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors,
assigns and legal representatives.
10.7.3 Amendments or Modifications. This Agreement or any provision
---------------------------
hereof may not be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
10.7.4 Paragraphs and Sections. This Agreement, for convenience
-----------------------
only, has been divided into numbered paragraphs and sections and it is
understood that the rights and other legal relations of the parties hereto shall
be determined from this instrument as an entirety and without regard to the
aforesaid division into paragraphs and sections and without regard to headings
prefixed to said paragraphs or sections.
10.7.5 Agreement Superseding. This Agreement constitutes the entire
---------------------
agreement of the parties hereto with respect to the subject hereof and shall
supersede any prior agreement between the parties hereto, whether written or
oral, relating to the subject matter hereof.
10.7.6 Number and Gender. Whenever the context requires, reference
-----------------
herein made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative. Definitions of terms
defined in the singular or plural shall be equally applicable to the plural or
singular, as the case may be, unless otherwise indicated.
<PAGE>
10.7.7 Governing Law. This Agreement and the transactions
-------------
contemplated herein shall be governed by and construed in accordance with the
laws of the State of Texas.
10.7.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one (1)
agreement.
10.9 Attorneys' Fees. Each party shall pay its own attorneys' fees for
---------------
preparing, reviewing, negotiating and/or closing this Agreement. In the event
of any dispute hereunder (after the execution hereof) the losing party shall
reimburse the prevailing party for all court costs and reasonable attorneys'
fees.
10.10 Termination. Unless extended by the agreement of the Parties,
-----------
the rights and obligations described herein shall terminate forthwith on the
earlier of (a) a petition for a proceeding under Chapter 11 of the Bankruptcy
Code has not been filed in accordance with Paragraph 2, (b) an Order is entered
in the Case denying confirmation of a plan of reorganization for Seller, or (c)
the Distribution Agreement is terminated.
10.11 Maintenance of Records. Purchaser shall keep and maintain for a
----------------------
period of two (2) years from the Closing Date all documents and records relating
to the Purchased Business acquired pursuant to this Agreement. Upon request,
Purchaser shall make such documents and records available to Seller for
inspection and copying, at Seller's expense, during regular business hours;
provided, however, that any such inspection pursuant to this Section shall be
conducted in such a manner so as not to unreasonably interfere with the normal
conduct of the Purchased Business by Purchaser.
<PAGE>
IN WITNESS HEREOF, this Agreement is executed effective as of the date first
written above.
PURCHASER:
---------
JUST TOYS, INC.
By:
--------------------------------
Morton J. Levy, Chief Executive Officer
SELLER:
------
TABLE TOYS, INC.
By:
-------------------------
Scott Buske, President
<PAGE>
EXHIBIT 2.2
<PAGE>
AMENDMENT TO TABLE TOYS, INC.
ASSET PURCHASE AGREEMENT
This AMENDMENT TO TABLE TOYS, INC. ASSET PURCHASE AGREEMENT (this
"Amendment") entered into as of the 12th day of April, 1996, by and between
TABLE TOYS, INC., a Texas corporation ("Seller"), and JUST TOYS, INC., a
Delaware corporation ("Purchaser"). Seller and Purchaser are jointly referred
to as the "Parties."
R E C I T A L S
- - - - - - - -
A. The Parties entered into that certain Table Toys, Inc. Asset Purchase
Agreement (the "Asset Purchase Agreement") dated January 22, 1996.
B. The Parties desire to decrease the estimated paid stock to preferred
stockholders by 10,000 shares and increase the estimated paid stock to accounts
payable above $2,000.00 by 10,000 shares.
A G R E E M E N T
- - - - - - - - -
NOW THEREFORE, in consideration of the premises and the mutual obligations
of the parties hereto, Seller and Purchaser agree as follows:
1. Schedule 2 to the Asset Purchase Agreement shall be replaced in its
entirety with Schedule 2 attached hereto.
2. Except as modified by the terms and provisions of this Amendment, each
and every one of the terms and provisions of the Asset Purchase Agreement, to
the extent the same are not inconsistent with the terms and provisions of this
Amendment, are hereby confirmed and ratified as in full force and effect.
3. The terms and provisions hereof shall be governed by and construed in
accordance with the laws of the State of Texas.
4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original for all purposes, but all of which together
shall constitute one and the same instrument.
<PAGE>
IN WITNESS HEREOF, this Amendment is executed effective as of the date
first written above.
PURCHASER:
----------
JUST TOYS, INC.
By: _____________________________________
Morton J. Levy, Chief Executive Officer
SELLER:
------
TABLE TOYS, INC.
By: __________________________________
Kevin Gates, President
<PAGE>
EXHIBIT 2.3
<PAGE>
SECOND AMENDMENT TO TABLE TOYS, INC.
ASSET PURCHASE AGREEMENT
This SECOND AMENDMENT TO TABLE TOYS, INC. ASSET PURCHASE AGREEMENT (the
"Second Amendment") entered into as of the 15th day of April 1996, by and
between TABLE TOYS, INC., a Texas corporation ("Seller") and JUST TOYS, INC., a
Delaware Corporation ("Purchaser"). Seller and Purchaser are jointly referred
to as the "Parties."
R E C I T A L S
- - - - - - - -
A. The Parties entered into that certain Table Toys, Inc. Asset Purchase
Agreement dated January 22, 1996, as amended on April 12, 1996 (the "Asset
Purchase Agreement").
B. Pursuant to Section 4.1.4(b) of the Asset Purchaser Agreement,
Purchaser agreed to assume certain liabilities of Seller pursuant to the Hasbro
License, as defined in the Asset Purchase Agreement.
C. The Parties have agreed that the Purchaser shall not assume the
liabilities of Seller arising out of the Hasbro License and that the Hasbro
License will not be included in the transaction.
A G R E E M E N T
- - - - - - - - -
5. Sections 1.1.5 and 4.1.4(b) of the Asset Purchase Agreement are
hereby deleted in their entirety.
6. All other references in the Asset Purchase Agreement to the Hasbro
License are hereby deleted in their entirety.
7. Except as modified by the terms and provisions of this Amendment, each
and every one of the terms and provisions of the Asset Purchase Agreement, to
the extent the same are not inconsistent with the terms and provisions of this
Amendment, are hereby confirmed and ratified as in full force and effect.
8. The terms and provisions hereof shall be governed by and construed in
accordance with the laws of the State of Texas.
9. This Second Amendment may be executed in two or more counterparts,
each of which shall be deemed an original for all purposes, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS HEREOF, this Second Amendment is executed effective as of the
date first written above.
PURCHASER:
---------
JUST TOYS, INC.
By:________________________________________
Morton J. Levy, Chief Executive Officer
SELLER:
------
TABLE TOYS, INC.
By:___________________________________
Kevin Gates, President
<PAGE>
EXHIBIT 4.1
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF THE
SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK
OF
JUST TOYS, INC.
_____________
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
______________
Just Toys, Inc. (hereinafter the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, and pursuant to the provisions
of Section 151 of the General Corporation Law of the State of Delaware, the
Board of Directors of the Corporation, by a unanimous written consent executed
on January 20, 1996, adopted a resolution providing for the authorization of
650,000 shares of Series B Convertible Redeemable Preferred Stock, par value
$1.00 per share, which resolution is as follows:
RESOLVED, that there is hereby created a class of Series B Convertible
Redeemable Preferred Stock (the "Series B Preferred Stock") consisting of
650,000 shares and pursuant to the authority vested in the Board of Directors of
this Corporation in accordance with the provisions of its Certificate of
Incorporation, the voting rights, preferences, qualifications, restrictions,
dividend
<PAGE>
rate, dividend rights, conversion rights, the per share amount payable upon
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Corporation and the redemption price of Series B Preferred Stock be, and
the same hereby are, fixed as follows:
1. Voting Rights.
-------------
The holders of Series B Preferred Stock (the "Series B Preferred Holders")
shall not be entitled to vote on any matters except as otherwise provided
in Section 242 of the Delaware General Corporation Law. This provision
shall prevail in all elections and at all proceedings over the provisions
of any statute which authorizes any action by a vote or written consent of
the holders of all of the shares or a specific proportion of the shares of
the Corporation. It is expressly provided that the Series B Preferred
Holders shall have no right to vote upon the authorization and/or issuance
of any additional shares of Series B Preferred Stock for the purpose of
paying any dividend on the Series B Preferred Stock or of any other class
or series of preferred stock on a parity with the Series B Preferred Stock.
Notwithstanding the foregoing, the Series B Preferred Holders shall have
all voting rights provided under Section 242 of the Delaware General
Corporation Law with respect to the authorization and/or issuance of any
class or series of stock ranking senior to the Series B Preferred Stock,
with respect to dividend rights or rights on liquidation, winding-up and
dissolution.
2. Ranking.
-------
The Series B Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding-up and dissolution, rank (i) senior to all
classes of common stock and to each other class of capital stock or series
of preferred stock heretofore or hereafter issued by the Corporation (other
than the Series A Preferred Stock ) which does not expressly provide that
it ranks senior to or on a parity with the Series B Preferred Stock as to
dividend rights or rights on liquidation, winding-up and dissolution
(collectively referred to as "Junior Securities"); (ii) on a parity with
each other class of capital stock or series of preferred stock issued by
the Corporation (other than the Series A Preferred Stock) which expressly
provides that such class or series will rank on a parity with the Series B
Preferred Stock as to dividend rights or rights on liquidation, winding-up
and dissolution (collectively referred to as "Parity Securities") and (iii)
junior to the Series A Preferred Stock and each other class of capital
stock or series of preferred stock issued by the Corporation which
expressly provides that such class or series will rank senior to the Series
B Preferred Stock as to dividend rights or rights on liquidation, winding-
up and dissolution (collectively referred to as the "Senior Securities").
Notwithstanding the foregoing, unless it is expressly provided otherwise,
the Series B Preferred Stock will rank on a parity with all other series of
preferred stock authorized or issued by the Corporation (other than the
Series A Preferred Stock). Notwithstanding the foregoing, pursuant to
Section 242 of the Delaware General Corporation Law, the Corporation shall
not without the affirmative vote of at least a majority of the outstanding
shares of the Series B Preferred Stock increase or decrease the par value
of the shares of such class
<PAGE>
or alter or change the powers, preferences, or special rights of the shares
of such class so as to adversely affect the Series B Preferred Stock.
Additionally, so long as any shares of Series B Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote of the
holders of at least a majority of the outstanding shares of Series B
Preferred Stock issue any series of Preferred or Common Stock ranking with
respect to dividends or distribution of assets senior to the Series B
Preferred Stock.
3. Dividends.
---------
The Series B Preferred Holders shall be entitled to receive, but only when,
as and if declared by the Board of Directors, out of the funds of this
Corporation legally available therefor, cumulative quarterly dividends,
payable on the last day of each December, March, June and September, at a
rate per annum equal to seven percent (7%) on the Liquidation Value (as
hereinafter defined) of each share of Series B Preferred Stock then
outstanding commencing on its date of issuance, provided that if the
Corporation elects to pay such dividends by issuing additional shares of
Series B Preferred Stock, as permitted pursuant to this paragraph,
dividends shall not accrue on such additional shares of Series B Preferred
Stock until such shares have been issued. No interest shall accrue on any
accrued and unpaid dividends. The amount of any and all dividends on the
Series B Preferred Stock may, in the sole discretion of the Corporation, be
paid in cash or, at the option of the Corporation, by issuing additional
shares of Series B Preferred Stock valued at the Liquidation Value, or a
combination of both.
Dividends on the Series B Preferred Stock shall be cumulative, whether or
not in any quarter or quarters there shall be assets of the Corporation
legally available for the payment of such dividends. The Corporation shall
declare and pay all or a portion of such dividends to the extent that there
are sufficient assets of the Corporation legally available for payment
thereof. In determining whether sufficient assets are legally available,
the Corporation shall not be required to restate any of its financial
statements, obtain an appraisal or do any revaluation of its assets. Such
dividend may be paid in cash or in shares of Series B Preferred Stock, at
the option of the Corporation, as herein provided.
So long as any shares of the Series B Preferred Stock remain outstanding,
no dividend shall be paid or declared on any Junior Security other than a
dividend payable on the Corporation's common stock in shares of the
Corporation's common stock, nor shall any shares of Junior Securities be
acquired for consideration by this Corporation or any subsidiary unless all
accrued and unpaid dividends have been declared and paid on the Series B
Preferred Stock.
No dividend shall be paid on or declared and set apart for any Parity
Security for any dividend period unless at the same time the dividend on
the Series B Preferred Stock for such period and all prior periods shall be
paid on or declared and set apart; provided that no dividends shall be paid
on or declared and set apart for the shares of the Series B
<PAGE>
Preferred Stock until all accumulated and unpaid dividends from all prior
years with respect to shares of all Senior Securities shall have been paid
or declared and set aside.
4. Conversion.
----------
4.1 Conversion Rights. Subject to and upon compliance with the provisions
-----------------
of this paragraph, at the option of the Series B Preferred Holder, the
Series B Preferred Stock held by such Series B Preferred Holder may be
converted into fully paid and nonassessable shares of the Corporation's
common stock, at the rate of one share of common stock for each share of
Series B Preferred Stock (the "Conversion Rate"). In case the Corporation
shall exercise its redemption rights in accordance with paragraph six
hereof, such conversion right shall terminate at the close of business on
the fifth business day prior to the date of such redemption by the
Corporation, unless the Corporation defaults in making the payment due upon
redemption.
The Conversion Rate shall be adjusted in certain instances as provided
in paragraph 44 hereof. No payment or adjustment shall be made upon any
conversion on account of any dividends accrued and unpaid on the Series B
Preferred Stock surrendered for conversion or on account of any dividends
on the common stock issued upon such conversion.
4.2 Conversion Mechanics. In order to exercise the conversion privilege,
--------------------
the Series B Preferred Holders desiring to exercise such conversion
privilege shall surrender the certificates representing the Series B
Preferred Stock desired to be converted, duly endorsed or assigned to the
Corporation or in blank with signature guaranteed, at the main office of
the Corporation, accompanied by written notice to the Corporation at such
office, that the Series B Preferred Holder elects to convert such Series B
Preferred Stock or, if less than the entire number of shares represented by
such certificate is to be converted, the portion thereof to be converted.
Fractional shares of Series B Preferred Stock aggregating less than a whole
share may not be converted except as set forth in paragraph 43 below.
Series B Preferred Stock shall be deemed to have been converted
immediately as of the close of business on the day of surrender of such
shares for conversion in accordance with the foregoing provisions (the
"Conversion Date"), and at such time the rights of such Series B Preferred
Holders as holders of the Series B Preferred Stock converted shall cease,
and the recipient of the common stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such common
stock at such time. As promptly as practicable on or after the Conversion
Date, the Corporation shall issue and shall deliver to such recipients a
certificate or certificates for the number of full shares of common stock
issuable upon conversion, together with payment in lieu of any fraction of
a share, as provided below.
In the case of any certificates representing Series B Preferred Stock
which are
<PAGE>
converted in part only, upon such conversion the Corporation shall execute
and deliver to the Series B Preferred Holder thereof, at the expense of the
Corporation, a new certificate representing the number of shares or
fraction thereof of Series B Preferred Stock represented by the surrendered
certificate which were not converted.
4.3 Fractional Shares. No fractional shares of common stock shall be
-----------------
issued upon conversion of the Series B Preferred Stock. Fractional shares
of Series B Preferred Stock owned by a Series B Preferred Holder may only
be submitted after or concurrently with conversion of all other shares of
Series B Preferred Stock then owned by such Series B Preferred Holder. In
lieu of any fractional shares of common stock (or specified portion
thereof), the Corporation shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction of the market price per
share of common stock (as determined by the Board of Directors or in any
manner prescribed by the Board of Directors) at the close of business on
the Conversion Date.
4.4 Adjustment of Conversion Rate. The Conversion Rate for the Series B
-----------------------------
Preferred Stock shall be subject to adjustment from time to time as
follows:
4.4.1 If the Corporation shall declare a dividend or make a
distribution on its common stock in shares of its common stock,
subdivide or reclassify the outstanding shares of common stock into a
greater number of shares of common stock or combine or reclassify the
outstanding shares of common stock into a smaller number of shares of
common stock, the Conversion Rate in effect for the Series B Preferred
Stock at the time of the record date for such dividend or distribution
or the effective date of such subdivision, combination or
reclassification shall be adjusted so that the Series B Preferred
Holder shall be entitled to receive for each share of Series B
Preferred Stock owned by such holder, the number of shares of common
stock or other securities which such Series B Preferred Holder would
have owned or would have been entitled to receive immediately after
such dividend, distribution, subdivision, combination or
reclassification had such Series B Preferred Stock been converted
prior to the occurrence of (or applicable record date for) such event.
Successive adjustments in the Conversion Rate shall be made whenever
any event specified above shall occur. All calculations under this
Paragraph 4 shall be made to the nearest one hundredth (1/100th) of a
share.
4.4.2 In any case in which the provisions of paragraph 441 shall
require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the
occurrence of such event issuing to the holder of any share of Series
B Preferred Stock converted after such record date and before the
occurrence of such event the additional shares of common stock
issuable upon such conversion by reason of the adjustment required by
such event over and above the shares of common stock issuable upon
such conversion before giving effect to such adjustment and paying to
such holder any amount of cash in
<PAGE>
lieu of fractional shares of common stock pursuant to paragraph 43.
4.4.3 Whenever the Conversion Rate for the Series B Preferred Stock
shall be adjusted as provided in paragraph 441, the Corporation shall
forthwith prepare and maintain at the principal office of the
Corporation, a statement showing in detail the method of calculation
of such adjustment, the facts requiring such adjustment and the
Conversion Rate that shall be in effect after such adjustment, and the
Corporation shall also cause a copy of such statement to be sent by
mail, first class postage prepaid, to each Series B Preferred Holder
at the address appearing on the Corporation's records. Each such
statement shall be signed by the Corporation's chief financial
officer.
4.5 Reservation of Shares. The Corporation shall, at all times during
---------------------
which shares of Series B Preferred Stock may be converted into Common Stock
as provided in this Section 4, reserve and keep available, out of any
Common Stock held as treasury stock or out of its authorized and unissued
Common Stock, or both, solely for the purpose of delivery upon conversion
of the shares of Series B Preferred Stock as herein provided, such number
of shares of Common Stock as shall then be sufficient to effect the
conversion of all shares of Series B Preferred Stock from time to time
outstanding, and shall take such action as may from time to time be
necessary to ensure that such shares of Common Stock will, when issued upon
conversion of Series B Preferred Stock, be fully paid and nonassessable.
5. Liquidation, Dissolution, Winding Up.
------------------------------------
In the event of any liquidation, dissolution or winding up of the affairs
of the Corporation, whether voluntary or involuntary (the "Liquidation"),
before any payments to the holders of Junior Securities and after payment
of all dividends and other amounts due the holders of any Senior
Securities, the Series B Preferred Holders shall be entitled to receive,
out of the net assets of the Corporation, after payment or provision for
payment of the debts and the liabilities of the Corporation an amount in
cash equal to $3.625 per share of the Series B Preferred Stock (the
"Liquidation Value"), together with an amount equal to dividends at the
rate of seven percent (7%) per annum on the Liquidation Value thereof from
the date on which dividends thereon became cumulative to the date of
payment thereof, less the amount of dividends theretofore paid thereon.
After payment to the Series B Preferred Holders of the amounts to which
they are respectively entitled, the balance, if any, of the net assets of
the Corporation may be paid to the holders of the Junior Securities,
according to their respective rights. In case the net assets of the
Corporation after payment in full to the holders of the Senior Securities
are insufficient to pay the Series B Preferred Holders and the holders of
all Parity Securities the full amount to which they are respectively
entitled, the entire net assets of the Corporation remaining shall be
distributed ratably to the Series B Preferred Holders and the holders of
other Parity Securities. Neither the consolidation or merger of the
Corporation into or with any other corporation or corporations, nor the
sale or transfer
<PAGE>
by the Corporation of all or any part of its assets shall be deemed a
Liquidation of the Corporation within the meaning of any of the provisions
of this Section 5.
6. Redemption and Sinking Fund.
---------------------------
6.1 Optional Redemption. On or after December 30, 1996 the Series B
-------------------
Preferred Stock shall be redeemable, in whole or in part, at the option of
the Corporation by resolution of its Board of Directors, at any time and
from time to time at the Liquidation Value of such shares, plus all
dividends accrued and unpaid, whether or not earned or declared, payable on
such shares up to the date fixed for redemption, upon notice as provided in
Section 63.
6.2 Mandatory Redemption (Sinking Fund). Shares of the Series B Preferred
-----------------------------------
Stock shall be subject to redemption through the operation of a sinking
fund (herein called the "Sinking Fund") at the Liquidation Value plus an
amount equal to the dividends accrued and unpaid thereon to the redemption
date, whether or not earned or declared. For the purposes of the Sinking
Fund, out of any funds of the Corporation legally available therefor
remaining after full cumulative dividends upon the Senior Securities, the
Series B Preferred Stock and Parity Securities then outstanding to the end
of the dividend period next preceding the date fixed for such redemption
(and for the current dividend period if the date fixed for such redemption
is a dividend payment date) shall have been declared and shall have been
paid or set apart for payment, as and when directed by the Board of
Directors, the Corporation shall set aside in cash, annually on each
December 31 commencing December 31, 2001, and ending December 31, 2004, an
amount sufficient to redeem annually, at the Liquidation Value plus all
accrued and unpaid dividends, ten percent (10%) of the shares of the Series
B Preferred Stock issued as purchase price for the acquisition of the
assets of Table Toys, Inc. and any additional shares of the Series B
Preferred Stock theretofore issued as a dividend on such portion of the
Series B Preferred Stock. The Corporation shall, prior to each such
Sinking Fund redemption, give notice of redemption as provided in Section
63.
The Sinking Fund shall be cumulative so that if on any such December 31 the
funds of the Corporation legally available therefor shall be insufficient
to permit any such amount to be set aside in full, or if for any other
reason such amount shall not have been set aside in full, the amount of the
deficiency shall be set aside, but without interest, before any cash
dividend shall be paid or declared, or any distribution made, on any Junior
Security or before any Junior Security or any shares of Parity Securities
shall be purchased, redeemed or otherwise acquired by the Corporation, or
any moneys shall be paid to or set aside or made available for a sinking
fund for the purchase or redemption of any Junior Securities or any Parity
Securities (except with respect to Parity Securities on a pro rata basis);
provided, however, that, notwithstanding the existence of any such
deficiency, the Corporation may make any required redemption on any Parity
Securities if the aggregate amount to be paid upon redemption of such
Parity Securities being so redeemed bears (as nearly as practicable) the
same ratio to the aggregate amount to be
<PAGE>
paid upon redemption (excluding interest to the date of redemption) of all
shares of such Parity Securities then due to be redeemed (excluding
interest to the date of redemption) as the amount to be paid upon
redemption of the Series B Preferred Stock being redeemed (excluding
interest to the date of redemption) bears to the aggregate amount to be
paid upon redemption of all shares of the Series B Preferred Stock then due
to be redeemed (excluding interest to the date of redemption).
The Corporation may apply as a credit, shares of Series B Preferred Stock
which have been converted pursuant to Paragraph 4 or which have been
redeemed at the election of the Corporation pursuant to Paragraph 61, in
each case in satisfaction of all or any part of the foregoing mandatory
sinking fund and redemption obligations, provided that such shares of
Series B Preferred Stock have not been previously so credited. The number
of shares of Series B Preferred Stock required to be redeemed shall be
reduced accordingly.
The Corporation shall redeem all remaining outstanding shares of the Series
B Preferred Stock on December 31, 2005.
6.3 Redemption Notice. Not less than 30 nor more than 90 days prior to
-----------------
any redemption date, a notice specifying the time and place thereof shall
be given by mail to the holders of the Series B Preferred Stock to be
redeemed at their respective addresses as the same shall appear on the
stock books of this Corporation. Any notice which was mailed in the manner
herein provided shall be conclusively presumed to have been duly given
whether or not the holder receives the notice. In the event that less than
all of the outstanding shares of Series B Preferred Stock are to be
redeemed, the shares to be redeemed shall be selected by lot or in such
other equitable manner as the Board of Directors may determine. Upon
payment of the applicable redemption price the holders of the shares to be
redeemed and to whom notice has been duly given shall cease to be
stockholders with respect to such shares and shall have no interest in or
claim against this Corporation by virtue thereof and shall have no voting
or other rights with respect to such shares except the right to receive the
monies payable upon such redemption from this Corporation or otherwise,
without interest thereon, upon surrender (and endorsement, if required by
this Corporation) of the certificates, and the shares represented thereby
shall no longer be deemed to be outstanding.
IN WITNESS WHEREOF, I, Morton J. Levy, the Chairman of the Board of Just
Toys,
Inc., has signed this Certificate this 3rd day of June, 1996.
JUST TOYS, INC.
By: ___________________________________
Morton J. Levy, Chairman of the Board
<PAGE>
EXHIBIT 4.2
<PAGE>
JUST TOYS, INC.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, JUNE 26, 2001
No. WT
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____________, is the
registered holder of ____ Warrants to purchase initially, at any time from June
27, 1996 until 5:00 p.m. New York time on June 26, 2001 ("Expiration Date"), one
share of fully-paid and non-assessable share of common stock, $.01 par value per
share ("Common Stock") of JUST TOYS, INC., a Delaware corporation (the
"Company"), per Warrant at the initial exercise price, subject to adjustment in
certain events (the "Exercise Price"), of $3.625 per share of Common Stock upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, but subject to the conditions set forth herein.
Payment of the Exercise Price shall be made by certified or official bank check
in New York Clearing House funds payable to the order of the Company. The
Exercise Price and the number and type of securities issuable upon exercise of
each Warrant is subject to adjustment as herein provided.
No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to that certain asset purchase
agreement dated as of January 22, 1996, as amended, (the "Asset Purchase
Agreement") between the Company and Table Toys, Inc. and certain of its
stockholders.
Upon the occurrence of the events specified herein requiring the
Exercise Price and the type and/or number of the Company's securities issuable
upon exercise of a Warrant to adjusted, the Company will, at the request of the
holder hereof, issue a new Warrant Certificate
<PAGE>
evidencing the adjustment in the Exercise Price and/or the number and/or type of
securities issuable upon the exercise of the Warrants; provided, however, that
the failure of the Company to issue such new Warrant Certificates shall not in
any way change, alter, or otherwise impair, the rights of the holder as set
forth herein.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
1. Exercise of Warrant. Each Warrant is exercisable at an initial
-------------------
exercise price (subject to adjustment as provided in Section 5 hereof) per
share of Common Stock payable by certified or official bank check in New York
Clearing House funds payable to the order of the Company. Upon surrender of a
Warrant Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price for the shares of Common Stock
purchased, at the Company's principle offices in New York (presently located at
50 West 23rd Street, Seventh Floor, New York, New York 10010) the registered
holder of a Warrant Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock underlying the Warrants). In the case
of the exercise of less than all the Warrants represented by this Warrant
Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Warrants not yet exercised
2. Issuance of Certificates. Upon the exercise of a Warrant, the
------------------------
issuance of certificate(s) for shares of Common Stock (and/or other securities,
properties or rights issuable upon the exercise of such Warrant), shall be made
forthwith (and in any event within five (5) business days thereafter) without
charge to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates shall be executed on behalf of the Company by
the manual or facsimile signature of the then Chairman or Vice Chairman of the
Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary, Assistant Secretary of the Company.
Warrant Certificates shall be dated the date of execution by the Company upon
<PAGE>
initial issuance, division, exchange, substitution or transfer.
3. Restriction On Transfer of Warrants. The Holder of a Warrant
-----------------------------------
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof; that the Warrants may not be sold, transferred, assigned, hypothecated
or otherwise disposed of, in whole or in part, except (i) pursuant to an
effective registration statement under the Securities Act of 1933, (ii) to the
extent applicable, Rule 144 under such Act (or any similar rule under such Act)
relating to the disposition of securities or (iii) an opinion of counsel, if
such opinion shall be reasonably satisfactory to counsel for the company, that
an exemption from registration under such Act is available.
4. Exercise Price. The term "Exercise Price" herein shall mean the
--------------
initial exercise price as adjusted from time to time as set forth herein.
Except as otherwise provided in Section 5 hereof, the initial Exercise Price of
each Warrant shall be $3.625 per share of Common Stock. The Exercise Price
shall be adjusted as a result from time to time in accordance with the
provisions of Section 5 hereof; provided, however, that the Adjusted Exercise
price shall never be reduced below the par value of the Common Stock.
5. Adjustments to Exercise Price and Number of Shares.
--------------------------------------------------
5.1. Dividends and Reclassifications. In case the Company shall at
-------------------------------
any time declare a dividend or make a distribution on its Common Stock,
subdivide, combine or reclassify the outstanding shares of Common Stock into a
greater or lesser number of shares of Common Stock, the Exercise Price shall
forthwith be proportionately increased or decreased as of the record date for
such dividend or distribution or the effective date of such subdivision,
combination or reclassification as the case may be.
5.2. Adjustment in Number of Shares. Upon each adjustment of the
------------------------------
Exercise Price pursuant to the provisions of this Section 5, the total number
of shares of Common Stock issuable to each Holder upon the exercise of all
Warrants held by such Holder shall be adjusted to the nearest full share of
Common Stock by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of securities issuable upon exercise of the
Warrants held by such Holder immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
5.3. Definition of Common Stock. For the purpose of this agreement,
--------------------------
the term "Common Stock" shall mean (i) the class of stock designated as common
stock in the Certificate of Incorporation of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value.
5.4. Merger or Consolidation. In case of any consolidation of the
-----------------------
Company
<PAGE>
with, or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the corporation
formed by such consolidation or surviving such merger shall execute and deliver
to the Holder a new or supplemental warrant certificate, as the case may be
providing that the Holder of each Warrant then outstanding or to be outstanding
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of such Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger,
by a holder of the number of shares of Common Stock of the Company for which
such Warrant might have been exercised immediately prior to such consolidation,
merger, sale or transfer. Such supplemental warrant certificate shall provide
for adjustments which shall be substantially identical to the adjustments
provided in Section 5. The above provision of this subsection shall similarly
apply to successive consolidations or mergers.
5.5. Notice of Adjustment in Exercise Price. Upon any adjustment of
--------------------------------------
the Exercise Price or the securities to be issued upon Exercise of the Warrants
pursuant to Section 5, the Company shall promptly thereafter cause to be given
to each Holder by first-class mail, postage prepaid, written notice setting
forth the Exercise Price after such adjustment and setting forth in reasonable
detail the method of calculation and the facts upon which such calculations are
based and setting forth the number and type of securities subject to the
Warrants upon payment of the adjusted Exercise Price.
6. Exchange and Replacement of Warrant Certificates. Each Warrant
------------------------------------------------
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of shares of Common Stock and/or other
securities in such denominations as shall be designated by the Holder thereof at
the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
7. Elimination of Fractional Interests. The Company shall not be
-----------------------------------
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
8. Reservation and Listing of Securities. The Company shall at all times
-------------------------------------
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of
<PAGE>
issuance upon the exercise of the Warrants, such number of shares of Common
Stock or other securities, properties or rights as shall be issuable upon the
exercise thereof. The Company covenants and agrees that, upon exercise of the
Warrants and payment of the Exercise Price therefor, all shares of Common Stock
issuable upon such exercise shall be duly and validly issued, fully paid, non-
assessable and not subject to the preemptive rights of any stockholder.
9. Notice to Warrant Holders. Nothing contained in this agreement shall
-------------------------
be construed as conferring upon the Holders the right to vote or to consent or
to receive notice as a stockholder in respect of any meetings of stockholders
for the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to
receive a dividend or distribution payable thereon; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to
subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and
business as a entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, option or warrants, or any proposed
dissolution, liquidation, winding up or sale.
10. Notices.
-------
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt requested:
<PAGE>
(a) If to the registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section
1 hereof or to such other address as the Company may designate
by notice to the Holders.
11. Successors. All the covenants and provisions of this agreement shall
----------
be binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
12. Governing Law. The Warrant Certificate and the rights of the Holder
-------------
hereunder shall be construed in accordance with the laws of the State of
Delaware without giving effect to the rules of said State governing the
conflicts of laws.
13. Captions. The caption headings of the Sections of this Certificate are
--------
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Certificate and shall be given no substantive
effect.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of June 27, 1996
JUST TOYS, INC.
[SEAL] By:_______________________________________
Morton J. Levy, Chief Executive Officer
Attest:
______________________
Secretary
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3]
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate(s) No. _____, to purchase __________ shares
of Common Stock and herewith tenders in payment for such securities a certified
or official bank check payable in New York Clearing House Funds to the order of
Just Toys, Inc. in the amount of $__________, all in accordance with the terms
hereof. The undersigned requests that a certificate for such securities be
registered as follows:
Registered Holder Certificate and No. of Shares
----------------- -----------------------------
Name:________________________
Address:______________________
______________________
______________________
Fed. I.D. No.__________________
and that such Certificate(s) be delivered to __________ whose address is
__________.
Dated:________________
Signature_________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
Signature Guaranteed
(if certificate(s) being issued
to someone other than
the Holder)
____________________________
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _____________________ hereby sells, assigns and transfers
unto
(Please print name, address and Federal Identification Number of transferee)
___________________ Warrants of Just Toys, Inc. represented by Warrant
Certificate No. _______, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated:___________
Signature:________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
____________________________________________
(Insert Social Security or Other Identifying
Number of Assignee)
Signature Guaranteed
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10
<PAGE>
TABLE TOYS, INC.
----------------
MARKETING AND DISTRIBUTION AGREEMENT
------------------------------------
THIS MARKETING AND DISTRIBUTION AGREEMENT (this "Agreement") is entered
into as of January 22, 1996 (the "Effective Date"), by and between JUST TOYS,
INC., a Delaware corporation, located at 50 West 23rd Street, New York, New York
10010 ("Distributor"), and TABLE TOYS, INC., a Texas corporation, located at
2500 Central Parkway, Suite P, Houston, Texas 77092 ("Company").
R E C I T A L S :
- - - - - - - -
A. Company is primarily engaged in the business of designing,
manufacturing, marketing and distributing (i) play tables with interlocking
surfaces compatible with most brands of toy construction blocks and (ii) a line
of toy construction blocks sold under the name Flexitoy(R).
B. On even date herewith, Company and Distributor have entered into
that certain Asset Purchase Agreement (the "Asset Purchase Agreement") whereby
Distributor, subject to the conditions set forth therein, has agreed to purchase
and Company has agreed to sell substantially all of Companys assets.
C. Company and Distributor contemplate that within two (2) weeks
after entering into this Agreement and the Asset Purchase Agreement, Company
will file a petition for itself in a case (the Case") under Title 11, Section
101 et seq. of the United States Code (the Bankruptcy Code") in the United
-------
States Bankruptcy Court for the Southern District of Texas, Houston Division
(the Bankruptcy Court"), that this Agreement and the Asset Purchase Agreement
will be assumed in the Case, and that the sale of Companys assets on the terms
and conditions stated in the Asset Purchase Agreement shall be concluded
pursuant to a plan of reorganization to be filed by Company in the Case. Upon
consummation of such plan of reorganization, Company will have no further
operating assets or operations except for its books and records and such
operations which are necessary to fulfill Companys obligations under its plan
of reorganization and to wind down its business.
D. Company and Distributor have determined it is in their best
interests, pending approval by the Bankruptcy Court of the Asset Purchase
Agreement to enter into this Agreement whereby Company will retain Distributor
as its exclusive marketing agent and distributor of all products heretofore
manufactured or sold by Company.
E. As further described herein, this Agreement will govern the
relationship between Company and Distributor until the transactions under the
Asset Purchase Agreement are consummated, confirmation of Companys plan of
reorganization is denied or this Agreement is otherwise terminated.
<PAGE>
A G R E E M E N T :
- - - - - - - - -
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. General.
-------
1.1 Terms Defined Above. The capitalized terms defined and used
-------------------
above shall have the respective meanings indicated above.
1.2 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the respective meanings as indicated, unless the context
otherwise requires:
"Cost" means Companys cost for each item of finished goods or raw
parts as set forth on Schedule 1.2 annexed hereto.
"Products" mean the play tables, construction blocks and other toys
manufactured, sold or distributed by Company.
"TPM" means third party manufacturers who mold, manufacture, assemble,
fabricate, package or ship the Products.
1.3 Headings. The headings in this Agreement are for convenience
--------
only and shall not affect its interpretation.
2. Marketing and Production.
------------------------
2.1 Distributor as Marketing Agent. Company and Distributor hereby
------------------------------
agree that Distributor shall act as the exclusive marketing agent and
distributor for the Products. As a marketing agent and distributor, Distributor
shall be responsible for soliciting, filling and shipping all orders for the
Products and for billing and collecting all sums due thereunder. Company and
Distributor acknowledge that Distributor may, at Distributors discretion, use
manufacturer representatives or distributors. Distributor shall be responsible
for all costs and expenses listed on Schedule 2.1 attached hereto, incurred by
Distributor during the term of this Agreement. Company and Distributor hereby
agree that subject to the terms of this Agreement, Distributor may use the names
"Table Toys" and Flexitoy(R)" alone, or in combination with its own name, in
connection with Distributors marketing of the Products during the term hereof.
2.2 Manufacturing and Production. Company shall make available to
----------------------------
Distributor and hereby grants to Distributor the right to use all of Companys
tools, molds, dies, equipment, patents, designs, trademarks and other
intellectual property, whether owned or licensed by Company, in connection with
the manufacturing, marketing, sale and distribution of Products during the term
of this Agreement. Distributor will be responsible for the
<PAGE>
manufacturing and assembling of the Products during the term of this Agreement.
Distributor will be responsible for maintaining Companys customary product
quality and filling of orders in a manner consistent with Distributors
customary business practices. Company and Distributor acknowledge that
Distributor will use TPMs to mold, manufacture, assemble, fabricate, package and
ship the Products.
2.3 Inventory and Materials. As of the Effective Date, Company has
-----------------------
inventory consisting of finished goods and raw parts (unassembled finished
goods) located in Kansas, Texas and Iowa as set forth on Schedule 2.3 annexed
hereto. When filling an order, Distributor shall use Companys inventory as
follows to the extent such inventory is suitable to fill such order:
2.3.1 Distributor shall first use packaged finished goods owned by
Company prior to having any TPM assemble or package new finished goods or mold
new raw parts. Distributor will pay Company for such finished goods at
Companys Cost for such goods.
2.3.2 Distributor shall use raw parts (unassembled or unpackaged
finished goods) owned by Company, prior to having any TPM mold new raw parts or
package finished goods. Distributor will pay Company for such raw parts at
Companys Cost. Distributor will pay the TPM directly for the assembly or
packaging of such raw parts.
2.3.3 If Company does not own the necessary raw parts or finished
goods, Distributor shall be responsible for contracting (on its own behalf)
directly with the appropriate TPMs to mold the raw parts and assemble and
package the finished product as Distributor may require. Distributor will pay
the TPMs directly for the molding of the raw parts and the assembling and
packaging of the finished goods. Distributor will pay Company for any raw parts
used that were owned by the Company, at Companys Cost.
2.3.4 Distributor shall provide Company with a written purchase
order issued by Distributor with respect to all of Companys inventory used by
Distributor within ten (10) days of Distributors use of such inventory.
Distributor shall pay Company within thirty-five (35) days of any such purchase
order. So long as the terms are satisfactory to Distributor, includng price
charged by TPM, Distributor will continue to use Companys TPMs in Kansas, Texas
and Iowa to mold, manufacture, assemble, fabricate, package and ship the
Products. In the event any such TPM is unavailable or unwilling to perform
services on acceptable terms, Distributor will use its best effort to locate and
use a comparable substitute TPM. Distributor shall be responsible for paying
all TPMs for materials, parts and services contracted by Distributor and shall
pay all TPMs for such materials, parts and services on terms agreed to between
Distributor and TPM. All raw parts and/or new goods produced by TPMs at
Distributors request shall belong to Distributor.
2.4 Access to Books and Records. Distributor shall have access to
---------------------------
all books and records of Company during normal business hours. Company shall
continue to maintain the
<PAGE>
books and records of Company, and hereby agrees to grant to Distributor and its
designated agents access during normal business hours to review any such
financial records for any reason.
3. Employees and Facility.
----------------------
3.1 Employees. Upon the Effective Date, all employees, except for
---------
Companys officers and certain accounting and other office personnel, will be
terminated except that Scott Buske and Donna Buske shall resign from any
positions with Company and it is Distributors intention that Scott Buske and
Donna Buske will be employed directly by Distributor under the terms set forth
on Schedule 3.1 annexed hereto.
3.2 Occupancy of Facility. Throughout the term of this Agreement,
---------------------
Companys officers, accounting and other office personnel continued to be
employed by Company shall continue to use Companys premises at 2500 Central
Parkway, Suite P, Houston, Texas. Distributor shall also have access to such
facility.
3.3 Cost of Facility. Throughout the term of this Agreement, Company
----------------
will pay all real and personal property lease and utility costs incurred in
connection with the Houston facility.
4. Pricing of Products Sold by Distributor and Terms of Business.
-------------------------------------------------------------
4.1 Price. The price of Products sold by Distributor on behalf of
-----
Company on or after the Effective Date shall be as determined by Distributor, in
its sole discretion. All products sold by Distributor after the Effective Date
shall be for Distributors own account. Company hereby assigns to Distributor
all outstanding customer orders as set forth on Schedule 4.1 annexed hereto.
4.2 Terms and Conditions.
--------------------
4.2.1 Shipping/Risk of Loss. The risk of loss of any of
---------------------
Companys inventory shall pass to Distributor upon shipment.
4.2.2 Warranty. Distributor will provide warranties concerning
--------
defects in design, workmanship and materials as Company has given to its
customers historically on all Products sold pursuant to this Agreement.
Distributor shall be responsible for any warranty claims made with respect to
products sold by Distributor.
4.2.3 Insurance on Products. Distributor shall maintain general
---------------------
liability and product liability insurance coverage in an amount not less than
$1,000,000.00 per occurrence and will name Company as an additional insured
under such policy. Distributor agrees to provide Company with an original
certificate evidencing that such coverage is in effect and names Company as an
additional insured and agrees not to modify or cancel any such
<PAGE>
insurance without prior written notice to Company.
4.2.4 Intellectual Property. Distributor acknowledges that Company
---------------------
has not sold Companys intellectual property rights to Distributor and
Distributor will make no claim under this Agreement to ownership of Companys
intellectual property rights. At Distributors election, Distributor may
continue the processing of outstanding intellectual property filings and
applications; Distributor will pay for all costs related thereto which are
incurred during the term of this Agreement. Company will provide Distributor
access to its attorneys and other parties in charge of maintaining such
properties for the purpose of permitting Distributor to continue maintaining
such properties; provided, however, Company shall not be obligated to incur any
cost or expenses in connection therewith.
5. Marketing of Products.
---------------------
5.1 Expenses and Good Faith Effort to Promote Sales of the Products.
---------------------------------------------------------------
Distributor shall use its good faith efforts to promote the sale of Products.
Distributor hereby agrees to pay all sales expenses of Products, including all
expenses incurred by its salespersons hereunder, and for the maintenance of all
field personnel used for sales purposes.
5.2 Continuation of Goodwill. Distributor shall continue the
------------------------
Products integrity, goodwill and reputation.
5.3 Appointment of Agents. Distributor shall appoint such sales and
---------------------
marketing agents and/or representatives as it thinks advisable for the marketing
of the Products.
5.4 Representations to Purchaser. In connection with the promotion
----------------------------
and marketing of Products, Distributor shall make clear, in all dealings with
customers and prospective customers, that during the term of this Agreement it
is acting as the exclusive marketer and distributor of Products and not as an
owner, shareholder or controlling person of Company.
5.5 Support. Company shall provide Distributor with all samples,
-------
catalogues, brochures and information concerning Products in Companys
possession on the Effective Date.
6. Duration and Termination.
------------------------
6.1 Duration. This Agreement shall commence on the Effective Date
--------
and shall continue until the earlier of (i) denial of Companys plan of
reorganization, (ii) the Closing as defined in the Asset Purchase Agreement, or
(iii) a termination for cause or without cause as provided below.
Notwithstanding the foregoing, Distributor or Seller may terminate this
Agreement at any time after the expiration of one (1) year from the Effective
Date upon written notice of termination to the other party. This Agreement
shall terminate if the Asset Purchase Agreement is terminated. The parties may
mutually agree to extend this Agreement after
<PAGE>
termination in order to continue to provide for an orderly transition under the
Asset Purchase Agreement.
6.2 Bankruptcy Court Approval. Company and Distributor (at no cost
-------------------------
to Distributor) shall use their best efforts after the execution and delivery
hereof to obtain an order of the Bankruptcy Court approving the terms and
conditions of this Agreement. Distributor shall have no obligation to sell or
promote the Products until this Agreement has been approved by the Bankruptcy
Court, but may do so at its own discretion. If such approval is not obtained by
February 7, 1996, Distributor may terminate this Agreement on February 7, 1996,
or any time thereafter until such time as this Agreement has been approved by
the Bankrupcy Court.
6.3 Termination with Cause. Company or Distributor shall be entitled
----------------------
forthwith to terminate this Agreement by written notice to the other if:
6.3.1 the other party commits any material breach of any of the
provisions of this Agreement and, in the case of a breach capable of remedy,
fails to remedy the same within ten (10) days after receipt of a written notice
from the non-breaching party giving full particulars of the breach and requiring
it to be remedied, or in the case of non-payment by Distributor of invoices for
Products, failure to remedy the same within five (5) days after receipt of
written notice thereof; or
6.3.2 a lien holder takes possession or a receiver is appointed
over any of the property or assets of Distributor; or
6.3.3. Distributor is unable to obtain Products to fill orders in
accordance with this Agreement for any reason including a failure by any TPM or
other party having possession of Companys tools, molds, dies or inventory to
release inventory, perform services or otherwise take such action as makes it
substantially impractical or materially more expensive for Distributor to sell
Products or have Products produced.
6.4 Capable of Remedy. For the purpose of clause 6.3.1, a breach
-----------------
shall be considered capable of remedy if the party in breach can comply with the
provision in question in all respects other than as to the original time of
performance (provided that time of performance is not of the essence).
6.5 Termination by Either Party without Cause. Either Company or
-----------------------------------------
Distributor may terminate this Agreement without cause in the event (i) the
Bankruptcy Court refuses to enter an order approving the terms and conditions of
this transaction or the Asset Purchase Agreement, or (ii) the Asset Purchase
Agreement is terminated, or (iii) this Agreement is terminated pursuant to
Sections 6.1 or 6.2. Any such terminations shall be without payment of damages.
6.6 No Waiver of Subsequent Breaches. Any waiver by either party of a
--------------------------------
breach of any provision of this Agreement shall not be considered as a waiver of
any subsequent
<PAGE>
breach of the same or any other provision hereof.
6.7 No Prejudice. The rights to terminate this Agreement pursuant to
------------
Sections 6.1-6.5 shall be without prejudice to any other right or remedy of any
party in respect of the breach concerned (if any) or any other breach.
6.8 Consequences of Termination.
---------------------------
6.8.1 Distributor shall, at its own expense, within ninety (90)
days send to Company or otherwise dispose of all of Distributors inventory of
(i) Products and raw materials and (ii) advertising, promotional or sales
material, then in the possession of Distributor. Distribuor shall have the right
during such ninety (90) day period to finish manufacturing or assembling of
products or raw parts owned by Company, as may be otherwise required to fill any
outstanding orders, provided Distributor provides Company with written notice of
all such outstanding orders within ten (10) days after termination.
6.8.2 Distributor shall cease to (i) use the name "Table Toys",
(ii) use any of Companys intellectual property rights, and (iii) to promote,
market or advertise Product, except for the purpose of disposing of any
inventory in accordance with Section 6.8.1. The parties hereby expressly agree
that this provision is not a noncompetition agreement, and that Distributor has
and shall continue to sell toys similar to and in competition with the Products.
6.8.3 Except as otherwise provided herein and subject to any
rights or obligations which have accrued prior to termination, neither party
shall have any further obligation to the other under this Agreement.
7. Nature of Agreement.
-------------------
7.1 Relationship. Nothing in this Agreement shall create, or be
------------
deemed to create, a partnership or the relationship of principal and agent or
employer and employee between the parties.
7.2 Entire Agreement. Except for the Asset Purchase Agreement, and
----------------
attachments thereto, this Agreement contains the entire agreement between the
parties with respect to the subject matter hereof, supersedes all previous
agreements and understandings between the parties with respect hereto, and may
not be modified except by an instrument in writing signed by the duly authorized
representatives of the parties. Each party acknowledges that, in entering into
this Agreement, it does not do so on the basis of, and does not rely on, any
representation, warranty or other provision except as expressly provided herein,
and all conditions, warranties or other terms implied by statute and common law
are hereby excluded to the fullest extent permitted by law.
8. Miscellaneous.
-------------
<PAGE>
8.1 Proper Law. This Agreement shall be governed by and construed in
----------
all respects in accordance with the laws of the State of Texas, the principal
place of business of Company.
8.2 Notices and Service. All notices, requests and communications
-------------------
hereunder shall be in writing and any such notice, request, demand or other
communication shall be deemed to have been duly given or made (i) when delivered
by hand; or (ii) on the date of transmission if sent by telecopy simultaneous
with mailing by first class, postage prepaid mail; or (iii) in the case of
delivery solely by mail, four days after deposited in the mail, certified mail,
return receipt requested, postage prepaid, addressed for purposes of delivery by
mail as follows:
If to Company: Table Toys, Inc. Attention:
President 2500 Central Parkway,
Suite P Houston, Texas 77092
Facsimile: (713) 956-9905
Telephone: (713) 956-9900
with a copy to: Sheinfeld, Maley & Kay, P.C.
Attention: Henry J. Kaim, Esq.
1001 Fannin, Suite 3700 Houston,
Texas 77002
Facsimile: (713) 658-9756
Telephone: (713) 658-8881
If to Distributor: Just Toys, Inc. Attention:
Morton J. Levy, Chief Executive
Officer 50 West 23rd Street 7th
Floor New York, New York 10010
Facsimile: (212) 741-8793
Telephone: (212) 645-6335
with a copy to: Shack & Siegel, P.C. Attention:
Donald D. Shack, Esq. 530 Fifth
Avenue New York, New York 10036
Facsimile: (212) 730-1964
Telephone: (212) 782-0700
8.3 Amendments. Any amendments or modifications to this Agreement
----------
must
<PAGE>
be in writing and executed by authorized representatives of the parties hereto.
8.4 Assignment. The rights and obligations of either party hereunder
----------
may be assigned only with the express written consent of the other party hereto.
8.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one (1)
agreement.
8.6 Attorneys Fees. Each party shall pay its own attorneys fees
---------------
for preparing, reviewing, negotiating and/or closing this Agreement. In the
event of any dispute hereunder (after the execution hereof) the losing party
shall reimburse the prevailing party for all court costs and reasonable
attorneys fees.
8.7 Representation and Warranty. Each of the parties hereto
---------------------------
represents and warrants that it is duly authorized to enter into this Agreement
and to perform its obligations hereunder.
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement as of the day
and year first above written.
TABLE TOYS, INC.
By:_________________________
Scott Buske, President
JUST TOYS, INC.
By:_______________________________________
Morton J. Levy, Chief Executive Officer
