<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 24, 1998
EQUITY MARKETING, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23346 13-3534145
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
131 S. Rodeo Drive
Beverly Hills, California 90212
(Address of Principal Executive Offices)
(310) 887-4300
(Registrant's Telephone Number)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On April 24, 1998, Equity Marketing, Inc. (the "Company") entered into a
Stock Purchase Agreement to acquire Corinthian Marketing, Inc., a Delaware
corporation ("Corinthian") and a Trademark Purchase Agreement with Corinthian
Marketing P.L.C., a United Kingdom company, pursuant to which the Company
acquired certain trademarks related to the business of Corinthian, including the
"Headliners" trademark, for cash consideration of approximately $8 million at
the closing and cash consideration of approximately $700,000 payable within one
year after the closing upon satisfaction of certain conditions. Corinthian
produces and distributes the Headliners brand of collectible sports figurines.
Pursuant to the Stock Purchase Agreement the Company acquired all of the issued
and outstanding shares of common stock of Corinthian from Corinthian Marketing
P.L.C., a United Kingdom company, Corinthian International Holdings, L.L.C., a
Texas limited liability company, Morrison Entertainment Group, Inc, a California
corporation, and Rowan Nominees, Ltd., a United Kingdom company (collectively,
the "Stockholders"). The acquisition was financed through the Company's existing
cash reserves. A copy of the April 27, 1998 press release announcing the
acquisition is attached as Exhibit 99.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Acquired Business. Financial statements for
Corinthian are not included with this filing on Form 8-K. Pursuant to the
requirements of this item, such financial statements will be filed by amendment
no later than July 8, 1998.
(b) Pro Forma Financial Information. Pro forma financial information
reflecting the acquisition of Corinthian is not included with this filing on
Form 8-K. Pursuant to the requirements of this item, such pro forma financial
information will be filed by amendment no later than July 8, 1998.
(c) Exhibits.
Exhibit 2.1 Stock Purchase Agreement, dated April 24, 1998, by and
among the Company and the Stockholders of Corinthian.
Pursuant to Item 601(b)(2), the Company hereby agrees to
furnish supplementally to the Commission a copy of any
exhibits or schedules omitted from this filing upon
request.
Exhibit 2.2 Trademark Purchase Agreement, dated April 24, 1998, by
and between the Company and Corinthian Marketing P.L.C., a
United Kingdom company. Pursuant to Item 601(b)(2), the
Company hereby agrees to furnish supplementally to the
Commission a copy of any exhibits or schedules omitted
from this filing upon request.
Exhibit 99 Press Release dated April 27, 1998.
<PAGE> 3
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.
May 8, 1998 EQUITY MARKETING, INC.
By: /s/ MICHAEL J. WELCH
---------------------------------------
Michael J. Welch
Executive Vice President, Secretary,
Chief Financial Officer and Treasurer
<PAGE> 1
Exhibit 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is made and entered
into as of the 24th day of April 1998, by and among Equity Marketing, Inc., a
Delaware corporation ("PURCHASER"), Corinthian Marketing P.L.C., a United
Kingdom company ("PLC"), Corinthian International Holdings, L.L.C., a Texas
limited liability company ("INTERNATIONAL"), Corinthian Marketing, Inc., a
Delaware corporation ("CORINTHIAN"), Morrison Entertainment Group, Inc., a
California corporation ("MEG"), and Rowan Nominees, Ltd., a United Kingdom
registered company ("ROWAN"). International, MEG, PLC and Rowan are sometimes
each referred to as a "SELLER" and collectively referred to as the "SELLERS."
A. The Sellers own all of the issued and outstanding capital stock of
Corinthian.
B. PLC controls International.
C. On the terms and subject to the conditions of this Agreement,
Purchaser desires to purchase from the Sellers, and the Sellers desire to sell
to Purchaser, all of the issued and outstanding capital stock of Corinthian.
NOW, THEREFORE, with reference to the foregoing facts, and consideration
of the mutual covenants and agreements hereinafter set forth, Purchaser, the
Sellers and Corinthian agree as follows:
1. DEFINITIONS.
As used in this Agreement and the exhibits and schedules attached
hereto, the following terms shall have the following meanings:
"ACQUISITION" shall mean the purchase and sale of the Shares pursuant
to this Agreement.
"ACTION" means any lawsuit, litigation, action, demand, suit,
proceeding, inquiry, arbitration or claim before any court or Governmental
Authority, whether formal or informal, or civil, criminal, administrative, or
investigative, and includes mediation, arbitration, appellate, bankruptcy and
judgment-execution proceedings.
"AFFILIATE" shall mean, with respect to any specified Person, (a) any
other Person who, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(b) any other Person who is a director, officer, partner or trustee of the
specified Person or a Person described in clause (a) of this definition or any
spouse of the specified Person or any such other Person, (c) any relative of the
specified Person or any other Person described in clause (b) of this definition,
or (d) any Person of which the specified Person and/or any one or more of the
Persons specified in clause (a),(b) or (c) of this
<PAGE> 2
definition, individually or in the aggregate, beneficially own 10% or more of
any class of voting securities or otherwise have a substantial beneficial
interest.
"AGREEMENT" shall mean this Agreement, as amended, supplemented
or modified from time to time in accordance with its terms.
"ASSET AGREEMENT" shall mean that certain Asset Purchase
Agreement entered into concurrently herewith by and between Purchaser and TPHK.
"BEST KNOWLEDGE" with respect to any Person shall mean and
include (i) actual knowledge of the Person, including, the actual knowledge of
any of the officers or directors of such Person and (ii) that knowledge which a
prudent businessperson could have obtained in the management of his business
after making due inquiry, and after exercising due diligence, with respect
thereto.
"BUSINESS CONDITION" of any Person shall mean the condition
(financial or other), earnings, results of operations, business or properties of
such Person.
"BUSINESS DAY" shall mean any day except a Saturday, Sunday or
other day on which commercial banks in the cities of Los Angeles, California, or
New York, New York, are authorized by Law to close.
"CAPITAL SECURITIES" of any Person shall mean the capital stock
of such Person and/or any Stock Equivalents of such Person.
"CLOSING" shall mean the closing of the purchase and sale of
the Shares, which has taken place simultaneously with the execution and delivery
of this Agreement among the parties hereto.
"CLOSING DATE" shall mean the date of the Closing.
"COMPROMISE AGREEMENT" shall mean the Compromise Agreement
dated the date hereof among Corinthian, International, PLC, MEG, Rowan, Morrison
and Weems.
"CONTRACT" shall mean any written or oral note, bond,
debenture, mortgage, license, agreement, commitment, document, instrument or
contract.
"CORINTHIAN COMMON STOCK" shall mean the common stock, $1.00
par value per share, of Corinthian, as designated on the date hereof.
"CORINTHIAN CONTRACT" shall mean any Contract to which
Corinthian is a party or otherwise bound, or to which any asset or property of
Corinthian is subject.
"CORINTHIAN DISCLOSURE SCHEDULE" shall mean the schedule of
exceptions to representations and warranties of the Seller Group made pursuant
to Section 3 hereof.
2
<PAGE> 3
"CORINTHIAN IP" shall mean all IP which Corinthian owns,
licenses and/or uses.
"EMPLOYEE PLAN" with respect to any Person shall mean any plan,
arrangement or Contract providing compensation or benefits to, for or on behalf
of employees and/or directors of such Person, including employment, deferred
compensation, retirement or severance Contracts; plans pursuant to which Capital
Securities are issued, including stock purchase, stock option and stock
appreciation rights plans; bonus, thrift, pension, savings, insurance, profit
sharing, severance, loan guaranty, employee loan or incentive compensation plans
or arrangements; supplemental unemployment benefit, hospitalization or other
medical, life, dental, vision, health care or other insurance; and ERISA Plans.
"EMPLOYMENT AGREEMENTS" shall mean the Employment Agreements
entered into concurrently herewith between Purchaser and each of Morrison and
Weems.
"ENVIRONMENTAL LAW" shall mean any order, writ, injunction,
decree, judgment, ruling or Law of any Governmental Authority, or any binding
agreement with any such Governmental Authority, relating to pollution or
protection of the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
the Resource Conservation and Recovery Act of 1976, as amended; the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended; the Superfund Amendments and Reauthorization Act of 1986, as amended;
the Toxic Substances Control Act of 1976, as amended; the Occupational Safety
and Health Act of 1970, as amended; the Emergency Planning and Community
Right-To-Know Act of 1986; the Federal Water Pollution Control Act Amendments of
1972, as amended by the Clean Water Act of 1977 and the Water Quality Act of
1987; and the Clean Air Act, as amended, and other Laws relating to (i)
emissions, discharges or releases of Polluting Substances or (ii) the handling,
storage, disposal, reclamation, recycling or transportation of Polluting
Substances.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and includes all rules and regulations promulgated under
that Act.
"ERISA PLANS" of any Person shall mean all "employee benefit
plans," within the meaning of Section 3(3) of ERISA maintained by, contributed
to (or required to be contributed to), or sponsored by such Person.
"EUROPEAN CONTRACTS" shall mean the Retail Product License
Agreement between Corinthian and NBA Properties, Inc., dated February 21, 1997,
as amended by two addenda (undated) and two addenda, dated August 1, 1997.
"EXPLOIT" shall mean manufacture, advertise, license, market,
merchandise, promote, publicize, sell, use, market, supply or distribute, and
"EXPLOITATION" shall have a correlative meaning.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof, a public body or authority,
and any entity exercising executive,
3
<PAGE> 4
legislative, judicial, regulatory or administrative functions of or pertaining
to government, whether domestic or foreign or local, state, regional or
national.
"INCOME TAX" means any federal, state, local, or foreign income
or franchise tax, including any interest, penalties, and additions imposed with
respect to such taxes.
"INCOME TAX RETURN" means all returns, declarations, reports,
claims for refunds, information returns, statements, and other forms required to
be filed with respect to any Income Taxes, including any schedule or attachment
thereto, and including any amendments thereof.
"INDEBTEDNESS" of a Person shall mean (a) indebtedness of such
Person for money borrowed, whether short-term or long-term and whether secured
or unsecured, (b) the undrawn face amount of, and unpaid reimbursement
obligations in respect of, all letters of credit issued for the account of such
Person, (c) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (d) all obligations of such Person upon which
interest charges are customarily paid, (e) obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any capital
stock or other equity interests of such Person or any warrants, rights or
options to acquire such capital stock or other equity interests, (f) all
indebtedness of the types referred to in clauses (a) through (e) above of
another Person which is guaranteed directly or indirectly by such Person or
secured by the assets of such Person and (g) renewals, extensions, refundings,
deferrals, restructurings, amendments and modifications of any such
indebtedness, obligation or guarantee.
"IP" shall mean patents, trademarks, service marks, trade
names, copyrights (which have been filed with the federal copyright
authorities), trade secrets, trade dress and other rights and property commonly
referred to as intellectual property, and rights or licenses to use the same,
and any and all applications therefor.
"IRC" shall mean United States Internal Revenue Code of 1986,
as amended and in effect from time to time (or any successor statute in effect
from time to time), and the rules and regulations promulgated thereunder.
"IRS" shall mean the United States Internal Revenue Service.
"LAW" shall mean any foreign, federal, state or local statute,
law, rule, regulation, ordinance, order, code, policy or rule of common law
arising from final nonappealable decisions of Governmental Authorities and state
and federal courts in the United States, now or hereafter in effect, and in each
case as amended, and any judicial or administrative interpretation thereof by a
Governmental Authority or otherwise, including any judicial or administrative
order, consent, decree or judgment arising from final nonappealable decisions of
Governmental Authorities and state and federal courts in the United States.
"LICENSE AGREEMENT" shall mean that certain Trademark License
Agreement entered into concurrently herewith by and between Purchaser and PLC.
4
<PAGE> 5
"LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable Law of any jurisdiction to evidence
any of the foregoing).
"LOSSES" shall mean losses, liabilities, damages, claims,
fines, penalties, judgements, demands, assessments, levies, costs and expenses,
sustained or incurred by the party incurring such Losses, including without
limitation, reasonable attorneys', accountants', investigators' and experts'
fees and expenses, sustained or incurred in connection with the defense or
investigation of any Action, net of any insurance proceeds actually collected in
respect thereof (net of related expenses, including premium adjustments).
"MARCH BALANCE SHEET" shall mean the balance sheet of
Corinthian as of March 31, 1998, as included in the Corinthian Disclosure
Schedule.
"MATERIAL CONTRACTS" shall mean (i) the Material Licenses, and
(ii) that certain lease agreement, dated June 17, 1996, as amended on May 22,
1997, by and between Corinthian and Stan Lucas.
"MATERIAL LICENSES" shall mean the following licenses: (i)
License Agreement between Corinthian and Major League Baseball Properties, Inc.,
dated June 9, 1997; (ii) License Agreement between Corinthian and Major League
Baseball Players Association (MLBPA), dated August 12, 1996, as amended on June
12, 1997, June 24, 1997, August 29, 1997 and October 22, 1997; (iii) License
Agreement between Corinthian and NHL Enterprises, L.P. and NHL Enterprises
Canada, L.P., dated July 1, 1997; (iv) License Agreement between Corinthian and
The National Hockey League Players' Association (NHLPA), dated June 3, 1996; (v)
Retail Product License Agreement between Corinthian and NBA Properties, Inc.,
dated August 1, 1996, as amended on January 8, 1998; (vi) Joint Licensing
Agreement between Corinthian and The Collegiate Licensing Co., dated June 23,
1997, as amended on March 24, 1998; (vii) Agreement between Corinthian
Incorporated and National Football League Players Incorporated, dated October
15, 1996, as amended on October 15, 1996, October 21, 1996, March 27, 1997 and
April 8, 1998; (viii) Retail Licensing Agreement between Corinthian and National
Football League Properties, Inc., (player figurine with pocket replay video
card), dated April 24, 1996; (ix) Retail Licensing Agreement between Corinthian
and National Football League Properties, Inc., (NFL Quarterback Club player
figurine with pocket replay video card), dated April 24, 1996; and (x) Retail
Product License Agreement between Corinthian and NBA Properties, Inc., dated
February 21, 1997, as amended by two addenda (undated) and two addenda, dated
August 1, 1997.
"MORRISON" shall mean Joe Morrison.
"NBA LICENSE" shall mean the Retail Product License Agreement
between Corinthian and NBA Properties, Inc., dated August 1, 1996, as amended
January 8, 1998.
5
<PAGE> 6
"PERSON" shall mean an individual or a group, syndicate,
cooperative, joint venture, unincorporated organization, partnership,
corporation, trust, association, limited liability company, Governmental
Authority or other entity.
"POLLUTING SUBSTANCES" shall mean pollutants, contaminants,
chemicals, or industrial toxic or hazardous substances or wastes.
"RELATED PARTY INDEBTEDNESS" shall mean any indebtedness or
obligation of Corinthian to any member of the Seller Group or any Affiliate
thereof, including TPHK, and shall include without limitation obligations for
goods and inventory purchased by Corinthian. The outstanding Related Party
Indebtedness is described in Schedule 1(a) to the Corinthian Disclosure
Schedule.
"SECURITIES" shall mean Capital Securities and any other
"security" as that term is defined under the Securities Act.
"SECURITIES ACT" shall mean the United States Securities Act of
1933, as amended, or any successor federal statute, and the rules and
regulations of the SEC thereunder.
"SELLER GROUP" means the Sellers other than Rowan.
"SHARES" shall mean all of the outstanding shares of Corinthian
Common Stock.
"STOCK EQUIVALENTS" of any Person shall mean options, warrants,
calls, rights, commitments, convertible securities and other securities pursuant
to which the holder, directly or indirectly, has the right to acquire (with or
without additional consideration) capital stock of such Person.
"SUBJECT CLAIMS" shall mean those certain potential claims
against Corinthian identified in Schedule 1(b) to the Corinthian Disclosure
Schedule.
"SUBJECT CONTRACT" shall mean any Contract required to be
described in the Corinthian Disclosure Schedule pursuant to Sections 3(j) and/or
3(k) of this Agreement.
"SUBSIDIARY" when used in reference to any particular party,
means a corporation with respect to which the party either (i) is required to
consolidate the reporting of its financial information in accordance with
generally accepted accounting principles, or (ii) is a beneficial owner of
either at least 20% of any class of the corporation's securities or securities
of the corporation representing at least 20% of the voting power of all the
corporation's outstanding securities that are entitled to vote in the election
of its directors.
"TAX LIABILITIES" shall mean all liabilities related to Taxes.
"TAX RETURNS" shall mean all returns, declarations, reports,
claims for refunds or information returns or statements relating to Taxes,
including any schedule or attachment thereto, and including any amendments
thereof.
6
<PAGE> 7
"TAXES" shall mean all taxes, charges, fees, levies or other
governmental assessments, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, unemployment, social security
(including any social security charge or premium) excise, estimated, alternative
minimum, severance, stamp, occupation, property or other taxes, customs, dues,
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority (federal, state, local or foreign).
"TPHK" shall mean Toy Projex Ltd., a Hong Kong corporation.
"TRANSFER" shall mean sell, assign, transfer, pledge, grant a
security interest in, license, sublicense or otherwise dispose of, with or
without consideration.
"WEEMS" shall mean John Weems.
The masculine form of words includes the feminine and the neuter and
vice versa, and, unless the context otherwise requires, the singular form of
words includes the plural and vice versa. As used in this Agreement, the word
"including" is always without limitation. The words "herein," "hereof,"
"hereunder," and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular section or subsection.
Except as otherwise expressly provided in this Agreement, accounting terms used,
but not otherwise defined, in this Agreement are to be construed and interpreted
in accordance with "generally accepted accounting principles" in effect on the
date hereof, as described in Accounting Standards Board SAS No. 69 and
established by various pronouncements of the Accounting Principles Board, the
Financial Accounting Standards Board, and the American Institute of Certified
Public Accountants.
2. PURCHASE AND SALE; CLOSING.
(a) PURCHASE AND SALE. On the terms and subject to the
conditions set forth in this Agreement, Purchaser hereby purchases the Shares
from the Sellers, and the Sellers hereby sell the Shares to Purchaser at the
Closing.
(b) PURCHASE PRICE. The purchase price for the Shares (the
"PURCHASE PRICE") is $100,000. The Purchase Price was paid by wire transfer of
funds to the accounts designated by the Sellers. The Purchase Price has been
allocated among the Sellers ratably based upon the number of shares held by each
Seller.
(c) THE CLOSING. The Closing has taken place at the offices of
Troop Meisinger Steuber & Pasich, LLP, 10940 Wilshire Boulevard, Los Angeles,
California 90024. At the Closing, (i) the Sellers delivered to Purchaser the
certificates evidencing the Shares, duly endorsed in blank for transfer, against
delivery by Purchaser of the Purchase Price, which is being paid by certified or
bank cashiers check or by wire transfer of funds, (ii) the parties delivered the
other agreements entered into in connection with this Agreement, including the
Asset Agreement, the License Agreement and the Employment Agreements, and (iii)
the parties delivered such other
7
<PAGE> 8
documents as have been reasonably requested.
(d) NBA LICENSE EXTENSION. If, prior to June 1, 1998, the NBA
License is extended through at least July 31, 2000, on terms and conditions
acceptable to Purchaser and PLC, then, within five days of the execution of such
extension, Purchaser shall pay to the Sellers, ratably based upon the number of
shares held by each Seller, an amount equal to: (i) $1,500,000; less (ii) the
fees and costs which are charged by the licensor in connection with the
extension of the term of the NBA Licenses (excluding the fees and costs to be
incurred under the NBA Licenses which are consistent with its terms and
conditions as in effect on the date hereof, such as a royalty rate and minimum
guaranteed royalty level for the extended term at the same royalty rate and
minimum guaranteed royalty level as in effect on the date hereof). The
additional sum shall be deemed to be part of the Purchase Price.
(e) CAPITAL CONTRIBUTION; RELATED PARTY INDEBTEDNESS.
Concurrently with the Closing, Purchaser has made a capital contribution in the
amount of $4,884,637 to Corinthian, and Corinthian has used the funds from such
capital contribution as follows: (i) $550,000 has been used to satisfy in full
its obligation to MEG under the Compromise Agreement; and (ii) the balance has
been used to pay all outstanding Related Party Indebtedness, as follows:
$837,968 to International and $3,496,669 to TPHK.
(f) SUBJECT CLAIMS. If a Subject Claim is resolved prior to one
year from the date of this Agreement for a Claim Cost less than the amount set
forth on Schedule 1 as the Potential Claim Cost with respect to such Subject
Claim, Purchaser shall pay to the Sellers the amount by which the Potential
Claim Cost exceeded the Claim Cost plus interest at a rate of 6% per annum;
provided, however, that the maximum amount payable under this Section 2(f) by
Purchaser, other than interest, shall be $750,000. A Subject Claim shall be
deemed to be resolved when the potential claimant and Corinthian settle such
Claim, which settlement is in writing or is otherwise evidenced by a writing, or
the potential claimant acknowledges or agrees in writing as to the amount of the
Subject Claim. The "CLAIM COST" with respect to any Subject Claim shall mean all
Losses suffered or incurred by Corinthian and/or Purchaser in connection with
such Claim. Purchaser shall use commercially reasonable efforts to resolve the
Subject Claims within one year from the date hereof. Purchaser agrees upon
request to consult with PLC with respect to Subject Claims and to notify PLC of
any settlement or resolution. PLC and MEG agree to assist in the resolution of
Subject Claims. Any payment pursuant to this Section 2(f) shall be deemed to be
part of the Purchase Price. The amount payable under this Section 2(f) shall be
paid to Fried, Frank, Harris, Shriver & Jacobson for the benefit of the Sellers.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER GROUP.
Subject to the exceptions set forth in the Corinthian
Disclosure Schedule dated the date hereof and delivered by the Seller Group to
Purchaser concurrently with this Agreement, each member of the Seller Group
represents and warrants to Purchaser as follows:
(a) ORGANIZATION AND CAPITALIZATION OF CORINTHIAN.
(i) Corinthian is a corporation duly organized, validly
existing in
8
<PAGE> 9
good standing under the Laws of the State of Delaware and has all requisite
corporate power and corporate authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted. Complete and
correct copies of Corinthian's current Articles of Incorporation and Bylaws have
been delivered to Purchaser or its attorneys.
(ii) Corinthian is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction where it owns
or leases any property or its business activities require it to so qualify.
(iii) The authorized capital stock of Corinthian
consists solely of 10,000 shares of Corinthian Common Stock, of which only
1,353.941 shares are issued and outstanding, and no other class of Capital
Security. The Sellers own of record and beneficially all of the Shares. The
Corinthian Disclosure Schedule sets forth the number of shares of Shares owned
of record by each Seller. The Shares are not subject to any Lien and no Person
has any right or option to purchase or acquire, with or without consideration,
any of the Shares. The Shares have been duly authorized and validly issued and
are fully paid and nonassessable. The holders of the Shares possess exclusive
voting rights with respect to the affairs of Corinthian.
(iv) There are no outstanding Stock Equivalents of
Corinthian. Corinthian is not obligated to purchase or redeem any Capital
Securities.
(v) Corinthian has not, either directly or through any
agent, offered any Securities to or solicited any offers to acquire any
Securities from, or otherwise approached, negotiated or communicated in respect
of any Securities with, any Person in such a manner as to require that the offer
or sale of such Securities be registered pursuant to the provisions of Section 5
of the Securities Act and the rules and regulations of the SEC thereunder or the
securities Laws of any state. Corinthian has complied with all federal and state
securities and blue sky Laws in all offers, sales and purchases of its
Securities prior to the date hereof and has not violated any applicable Law in
making such issuances and purchases of its Securities prior to the date hereof.
Any notices required to be filed under federal and state securities and blue sky
Laws prior to the date hereof have been filed on a timely basis prior to or as
so required.
(b) AUTHORITY; ENFORCEABILITY.
(i) This Agreement has been duly executed and delivered
by Corinthian and constitutes a valid and legally binding obligation of
Corinthian enforceable against Corinthian in accordance with its terms, subject
to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar Laws relating to or affecting creditors' rights
generally, or the availability of equitable remedies.
(ii) The execution and delivery by Corinthian of this
Agreement do not, and compliance by Corinthian with the provisions hereof will
not: (A) conflict with or result in a breach or default under any of the terms,
conditions or provisions of any Corinthian Contract; or (B) violate any Law
applicable to Corinthian; or (C) result in the creation or imposition of any
Lien on any asset of Corinthian.
9
<PAGE> 10
(iii) The Asset Agreement has been duly executed and
delivered by TPHK and constitutes a valid and legally binding obligation of TPHK
enforceable against TPHK in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar Laws relating to or affecting creditors' rights generally, or the
availability of equitable remedies.
(iv) The execution and delivery by TPHK of the Asset
Agreement do not, and compliance by TPHK with the provisions thereof will not:
(A) conflict with or result in a breach or default under any of the terms,
conditions or provisions of any Contract to which TPHK is a party or to which
any of its assets are subject; or (B) violate any Law applicable to TPHK; or (C)
result in the creation or imposition of any Lien on any asset of TPHK.
(c) SUBSIDIARIES AND AFFILIATED CORPORATIONS.
(i) Corinthian does not have and has never had any
Subsidiaries.
(ii) TPHK is wholly owned by International and MEG.
(d) FINANCIAL STATEMENTS. The March Balance Sheet has been
prepared from the books and records of Corinthian in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except for changes specified therein and except that it is not
accompanied by notes, and presents fairly the financial condition of Corinthian
as of March 31, 1998.
(e) TAXES.
(i) Corinthian has filed all Tax Returns that it was
required to file for tax periods ending before the Closing, taking into account
all extensions of time allowed by applicable Law. All such Tax Returns were
correct and complete in all material respects. In particular, the foregoing Tax
Returns were not subject to penalties under IRC Section 6662, relating to
accuracy-related penalties (or any corresponding provision of the state, local
or foreign Tax Law) or any predecessor provision of Law, and Corinthian has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of IRC Section 6662 (or any corresponding provision of the state, local
or foreign Tax Law) or any predecessor provision of Law. All Taxes due and owing
by Corinthian (whether or not shown on any Tax Return) have been paid.
Corinthian has not requested, nor currently is the beneficiary of, any extension
of time within which to file any Tax Return that has not been filed. No claim
has ever been made by an authority in a jurisdiction where Corinthian does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no Liens on any of the assets of Corinthian that arose in connection
with any failure (or alleged failure) to pay any Tax other than Liens for
current Taxes not yet delinquent.
(ii) Corinthian has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party
(including, without limitation, as required
10
<PAGE> 11
under IRC Sections 1441-1464, IRC Sections 3401-3406, IRC Section 6041 and IRC
Section 6049).
(iii) No member of the Seller Group expects any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. To the Best Knowledge of each member of the Seller Group there
is no dispute or claim concerning any Tax Liability of Corinthian either claimed
or raised by any Governmental Authority in writing or upon personal contact with
any agent of such authority. The Corinthian Disclosure Schedule lists (A) all
Income Tax Returns filed with respect to Corinthian; (B) indicates those Tax
Returns listed in (A) that have been audited; and (C) indicates those Tax
Returns listed in (A) that currently are the subject of audit. Corinthian has
delivered to Purchaser complete copies of all federal or state Income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by Corinthian.
(iv) Corinthian has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Corinthian has never filed a consent under IRC
Section 341(f) (or any corresponding provision of state, local or foreign income
tax Law) concerning collapsible corporations or agreed to have IRC Section
341(f)(2) (or any corresponding provision of state, local or foreign income tax
Law) apply to any disposition of any asset owned by it. Corinthian has not made
any payments, is not obligated to make any payments, and is not a party to any
Contract that under certain circumstances could obligate it to make any payments
that will not be deductible under IRC Section 280G. Corinthian has not been a
United States real property holding corporation within the meaning of IRC
Section 897(c)(2) during the applicable period specified in IRC Section
897(c)(1)(A)(ii).
(vi) Corinthian is not a party to any Tax indemnity, Tax
sharing or Tax allocation agreement. Corinthian (A) has not been a member of an
affiliated group of corporations within the meaning of IRC Section 1504 within
the four years preceding the date hereof, or (B) has no Tax Liability for the
Taxes of any Person under IRC Section 1.1502-6 (or any similar provision of
state, local, or foreign Law), as a transferee or successor, by Contract, or
otherwise.
(vii) The unpaid Taxes of Corinthian as of the date of
this Agreement do not exceed $600,000.
(f) CUSTOMS MATTERS. Corinthian has all licenses, permits,
consents, orders, approvals and other authorizations necessary under the customs
and trade Laws of the United States of America, including without limitation
bilateral trade agreements, to carry on its business as currently being
conducted. Corinthian has properly reported all goods imported into the United
States, accurately stated all dutiable costs thereof and paid all tariffs due
thereon at the time of entry.
(g) REAL PROPERTY AND ASSETS.
11
<PAGE> 12
(i) Corinthian has good and transferable title to all of
its assets of material value to it whether real, personal, tangible or
intangible set forth or included in the March Balance Sheet, free and clear of
all Liens except for: (A) Liens that are reflected in the March Balance Sheet;
(B) Liens for current taxes not yet delinquent; (C) assets sold or transferred
in the ordinary course of business and consistent with prudent business practice
since the date of the March Balance Sheet; and (D) restrictions imposed by Law
and easements and restrictions which are neither individually nor in the
aggregate material to Corinthian or its Business Condition.
(ii) The Corinthian Disclosure Schedule identifies each
real property that Corinthian owns or leases. Corinthian enjoys peaceful and
undisturbed possession under all material leases for the use of real property
under which it operates.
(iii) The Corinthian Disclosure Schedule identifies all
of the tooling, dies and other equipment utilized by Corinthian in manufacturing
its products, the specific products to which each such tooling, die or equipment
relates, and the amortization schedule for and location of such assets.
Corinthian either owns all such assets or such assets are being transferred by
TPHK to Purchaser pursuant to the Asset Agreement. Material assets currently
used by Corinthian are in good operating condition and repair, normal wear and
tear excepted.
(iv) All inventories have been purchased by Corinthian
in the normal and ordinary course of business. The Corinthian Disclosure
Schedule lists the physical inventory at March 31, 1998, all orders for and
purchases of inventories from and after January 1, 1998, a description of the
inventories purchased, the identity of the seller(s) of the inventories, the
purchase price of the inventories and, if such inventories were purchased from
TPHK, TPHK's cost for such inventories.
(v) The Corinthian Disclosure Schedule lists the
accounts receivable of Corinthian as of April 5, 1998. These accounts receivable
are stated in accordance with generally accepted accounting principles and (A)
constitute and will constitute bona fide and valid rights of Corinthian to
collect payments from other Persons; (B) represent and will represent credit
extended in a manner consistent with Corinthian's trade practices; and (C)
except as reserved against in the March Balance Sheet, are not and will not be
subject to any defense, counterclaim or offset. Corinthian does not have any
obligation to repurchase any accounts receivable sold to NationsBanc Commercial
Corporation ("NCC") pursuant to that certain Factoring Agreement dated July 17,
1996, and since October 31, 1997 Corinthian has not paid any amounts to NCC to
satisfy any obligations to NCC relating to accounts receivable purchased by NCC
from Corinthian.
(vi) Neither the Sellers nor any Affiliates thereof
(other than Corinthian), own or have any interest in any assets or property
which have been used within the past two years, are presently being used, or are
anticipated or necessary to be used in the business of Corinthian as presently
or proposed to be conducted.
(h) ENVIRONMENTAL LIABILITIES.
(i) Subject to subsections (ii) and (iii) of this
Section, Corinthian has conducted and is conducting its business, and has used
and is using its properties, whether
12
<PAGE> 13
currently owned, operated or leased or owned, operated or leased it any time in
the past, in material compliance with all applicable Environmental Laws.
(ii) Neither Corinthian nor any property currently
owned, operated or leased or which has been owned, operated or leased by
Corinthian, is subject to any pending or threatened investigation of which any
member of the Seller Group has either actual knowledge or written notice, or any
pending or threatened action or proceeding, including any notice of violation,
of which any member of the Seller Group has knowledge, by any Governmental
Authority regarding contamination of any part of the property or infractions of
any Environmental Law or any license or permit issued by any Governmental
Authority pursuant to any such Law.
(iii) No Polluting Substance is presently located on or
under any property which is currently owned, operated or leased by Corinthian,
except for office supplies, cleaning supplies, photocopying materials and other
materials of similar nature, kept by Corinthian in the ordinary course of its
business, or as indicated in any environmental reports, studies, assessments or
data listed on the Corinthian Disclosure Schedule and delivered to Buyer.
(i) LITIGATION AND PROCEEDINGS. There is no pending or, to the
Best Knowledge of any member of the Seller Group, threatened Action (or basis
therefor) to which Corinthian is a party or otherwise involving Corinthian, and
Corinthian is not subject to any judgment, order, writ, injunction, decree or
regulatory directive or agreement. The foregoing includes, without limiting its
generality, Actions (or any basis therefor known to any member of the Seller
Group) involving the prior employment of any employees or currently contemplated
prospective employees of Corinthian or their use, in connection with the
business of Corinthian, of any information or techniques which might be alleged
to be proprietary to their former employer(s).
(j) EMPLOYEE CONTRACTS AND ERISA PLANS.
(i) All Employee Plans which are now maintained by
Corinthian or have been maintained by Corinthian are identified in the
Corinthian Disclosure Schedule. True and complete copies of all written
documents relating to Employee Plans listed on the Corinthian Disclosure
Schedule have been furnished to Purchaser or its agents. The Corinthian
Disclosure Schedule summarizes all significant oral agreements listed therein.
(ii) Neither Corinthian nor any entity that is a member
of a "controlled group of corporations" or that is under "common control" with
Corinthian, within the meaning of IRC Section 414(b) or (c) (an "ERISA
AFFILIATE"), has ever maintained, contributed to (or been required to contribute
to), or sponsored a "multiemployer plan," within the meaning of ERISA Section
3(37)(a). Corinthian has never maintained, contributed to (or been required to
contribute to), or sponsored a "defined benefit plan," within the meaning of
ERISA Section 3(35).
(iii) Any ERISA Plan maintained by Corinthian has been
administered in substantial compliance with ERISA, the IRC and the terms of such
ERISA Plan, and there is no pending or threatened litigation relating to any
ERISA Plan.
13
<PAGE> 14
(iv) Any ERISA Plan maintained by Corinthian that is a
"pension plan" within the meaning of ERISA Section 3(2) (collectively, the
"PENSION PLANS") has received a favorable determination letter from the IRS
under IRC Section 401(a).
(v) Neither Corinthian nor any fiduciary of any Pension
Plan maintained by Corinthian has engaged in any transaction that is prohibited
by ERISA Section 406 or the regulations thereunder for which an exemption does
not exist.
(vi) No Pension Plan maintained by Corinthian is
currently in effect, and no current or former employee or officer of Corinthian
is entitled to any present or future payment with respect to any Pension Plan
maintained by Corinthian.
(vii) Any payments required to be made pursuant to the
terms of any Employee Plan maintained by Corinthian that relate to any period
prior to the Closing will have either been timely made or accrued on the books
of Corinthian in accordance with generally accepted accounting principles.
(viii) Corinthian does not offer and has never in the
past offered health benefits for retired employees except to the extent required
by applicable Law.
(ix) Corinthian does not maintain any Employee Plans
outside of the United States for non-U.S. citizen employees of Corinthian.
(x) The Corinthian Disclosure Schedule lists separately
all Contracts pursuant to which the consummation of the transactions as
contemplated hereunder will (a) entitle any current or former employee or
officer of Corinthian to severance pay, unemployment compen sation or any other
payment, or (b) accelerate the time of payment or vesting or increase the amount
of compensation due any such employee or officer. The consummation of the
transactions as contemplated hereunder will not result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the IRC for
which an exemption is not available or the cost of which is not borne by the
former employee or his beneficiary.
(xi) No liability under Title IV of ERISA has been
incurred by Corinthian or any of its ERISA Affiliates since the effective date
of ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to Corinthian or any of its ERISA Affiliates of
incurring directly or indirectly a liability under such Title, other than
liability for premiums due the Pension Benefit Guaranty Corporation.
(xii) Each Employee Plan maintained by Corinthian is in
full force and effect, and Corinthian is not in default under any Employee Plan
maintained by Corinthian. There have been no claims of default and, there are no
facts or conditions which if continued, or on notice, will result in a default
under any Employee Plan.
(k) CONTRACTS. The Corinthian Disclosure Schedule lists all of
the following types of Corinthian Contracts:
14
<PAGE> 15
(i) Each Contract (or group of related Contracts) which
is to be performed in whole or in part at or after the date of this Agreement
and which (A) cannot be canceled upon 30 days' notice without payment or penalty
of less than $10,000; (B) involves aggregate future payments by or to Corinthian
of more than $10,000; (C) involves material nonmonetary obligations to be
performed later than one year from the date hereof; (D) otherwise materially
affects Corinthian or its Business Condition; or (E) was not entered into in the
ordinary course of business;
(ii) Each Contract pursuant to which Corinthian (A) has
borrowed or is committed or entitled to borrow money in an amount in excess of
$10,000; (B) has lent or committed to lend money; (C) has given or is committed
to give a guarantee of, or otherwise to incur primary or secondary liability for
(including any letter of credit), any obligation of any other party in any
amount;
(iii) Each Contract regarding advertising, brokerage,
licensing, management, representative or agency relationships;
(iv) Each Contract with or concerning any labor or
employee organization;
(v) Each Contract for the Transfer of any properties,
assets or rights of Corinthian for consideration in excess of $10,000 or for the
grant of any preferential right to purchase any of such assets, properties or
rights, or which requires the consent of any third party to the Transfer of such
assets, properties or rights;
(vi) Each Contract with any Seller or any Affiliate of
Corinthian;
(vii) Each Contract (A) under which the benefits cannot
be retained upon the consummation of the transactions contemplated by this
Agreement without the written consent or approval of other parties, (B) under
which there will be a default as a result of the consummation of the
transactions contemplated by this Agreement unless such other parties provide
written consent or approval or (C) which would require the making of any
payment, other than payments as contemplated by this Agreement, to any employee
of Corinthian or to any other Person as a result of the consummation of the
transactions contemplated herein;
(viii) Each Contract involving a guarantee by the
Sellers of any Corinthian Indebtedness or imposing a Lien on personal assets of
the Sellers which serve as collateral for Corinthian Indebtedness;
(ix) Each Contract pursuant to which Corinthian has
granted or agreed to any discount in connection with future product sales,
rebates, inventory balancing or product returns or exchanges;
(x) Each Contract providing Corinthian the right or
license to use or exploit the IP of any other Person; and/or
15
<PAGE> 16
(xi) Each Contract requiring Corinthian to make capital
expenditures in excess of $5,000.
(l) ABSENCE OF LIABILITIES. Corinthian has no Indebtedness,
obligation or liability, absolute, accrued, contingent or otherwise, except for
(i) those disclosed in the Corinthian Disclosure Schedule or the March Balance
Sheet, or (ii) trade payables and obligations incurred in the ordinary course of
business on or after January 1, 1998. At the Closing, the Related Party
Indebtedness was as set forth specifically in the Corinthian Disclosure
Schedule.
(m) CONFLICTS OF INTEREST. Neither Corinthian nor any officer,
employee, agent or any other person acting on behalf of Corinthian has, directly
or indirectly, given or agreed to give or received or agreed to receive any
money, gift or similar benefit (other than legal price concessions to customers
in the ordinary course of business) to or from any customer, supplier, licensor,
employee or agent of a customer or supplier, or official or employee of any
Governmental Authority or other Person who was, is, or may be in of a position
to help or hinder the business of Corinthian (or assist in connection with any
actual or proposed transaction therewith) which (i) might subject Corinthian to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had a material adverse
effect on the Business Condition of Corinthian or (iii) if not continued in the
future, might have a material adverse effect on the Business Condition of
Corinthian.
(n) OTHER RELATIONSHIPS. No member of the Seller Group has any
interest (other than as a noncontrolling holder of securities of a publicly
traded company), either directly or indirectly, in any Person, including without
limitation, any Person (whether as an employee, officer, director, shareholder,
agent, independent contractor, security holder, creditor, consultant, or
otherwise) that presently (i) provides any services or designs, produces and/or
sells any products or product lines, or engages in any activity which is the
same, similar to or competitive with any activity or business in which
Corinthian is now engaged; (ii) is a supplier of, customer of, creditor of, or
has an existing contractual relationship with Corinthian; or (iii) has any
direct or indirect interest in any asset or property used by Corinthian or any
property, real or personal, tangible or intangible, that is necessary or
desirable for the conduct of the business of Corinthian. No current or former
stockholder, director, officer or employee of Corinthian nor any Affiliate of
any such person, is, or since January 1, 1995, has been, directly or indirectly
through his affiliation with any other person or entity, a party to any
transaction (other than as an employee) with Corinthian providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring cash payments to any such person.
(o) LICENSES; COMPLIANCE WITH LAWS AND CONTRACTS.
(i) Corinthian:
(A) has all material franchises, permits,
licenses (other than product licenses), and other rights which are necessary for
the conduct of its business and to the Best Knowledge of any member of the
Seller Group, there is not any basis for the denial of such rights in the
future;
16
<PAGE> 17
(B) is in compliance with, and is not in
violation of, any Law;
(C) has performed all of the obligations
required to be performed by it to date under all Subject Contracts and is not in
breach of or default under any such Subject Contract (including any breach or
default arising from any misrepresentation), and no event has occurred or
circumstances exist which, with notice or lapse of time or both, would
constitute a breach of any Subject Contract.
(ii) The Corinthian Disclosure Schedule lists all
federal, state, local and foreign licenses, permits and other authorizations
issued by any Governmental Authority to Corinthian.
(iii) To the Best Knowledge of each member of the Seller
Group: (A) each other party to a Subject Contract has performed all of the
material obligations required to be performed by it to date under such Contract
and is not in material default thereunder; and (B) no event has occurred or
circumstances exist which, with notice or lapse of time or both, would
constitute a breach of any Subject Contract; provided that MEG's representation
with respect to the European Contracts is limited to its actual knowledge.
(p) IP RIGHTS.
(i) The Corinthian Disclosure Schedule contains a true
and complete list of all Corinthian IP which consists of patents (issued and
pending), registered trademarks and recorded copyrights and the basis of the
right of Corinthian to use such Corinthian IP. The Corinthian IP constitutes all
IP that is required to enable Corinthian to conduct its business as now
conducted. Corinthian has provided commercially reasonable safeguards and
security for the protection and confidentiality of the Corinthian IP and all
other of its confidential and/or proprietary information. Corinthian has not
received any written notice of infringement or other written complaint to the
effect that Corinthian has violated or infringed the IP or any other proprietary
rights of others. Neither Corinthian nor any Person employed by or affiliated
with Corinthian has wrongfully Exploited any IP owned or licensed by any Person
for which Corinthian could suffer any Losses, and neither Corinthian nor any
Person employed by or affiliated with Corinthian has violated any confidential
relationship which such Person may have had with any third party for which
Corinthian could suffer any Losses. Corinthian has full right and authority to
utilize the Corinthian IP, including, without limitation, the processes, systems
and techniques presently used by it in the design, development, manufacture,
marketing, sale and distribution of its present products and all rights to any
such IP developed by any employee or consultant of Corinthian have been duly and
validly assigned to Corinthian. No royalties, honoraria, damages
or fees are payable by Corinthian to other Persons by reason of the ownership or
use by Corinthian of any Corinthian IP or any IP hereafter developed by
Corinthian or any employee thereof. Except for PLC's interest in the Marks (as
defined below), no Affiliate of Corinthian owns or holds, directly or
indirectly, any interests in any Corinthian IP. To the actual knowledge of each
member of the Seller Group, no Person has interfered with, infringed upon,
misappropriated, or otherwise violated any IP right of Corinthian. Corinthian
has not Transferred to any Person right to Exploit any Corinthian IP.
17
<PAGE> 18
(ii) PLC is the sole and exclusive owner (legal and
beneficial) of the trademarks identified on Attachment 11 to the Corinthian
Disclosure Schedule to this Agreement (the "MARKS") in any and all forms and
embodiments thereof in each Jurisdiction (as defined below), and to the goodwill
attached to the Mark in each Jurisdiction, in the class or classes identified in
Schedule 3(p) to this Agreement with respect to such Jurisdiction. The
Corinthian Disclosure Schedule sets forth a list of all countries, states or
other jurisdictions in which each Mark is registered or in which registration
applications are pending (the "JURISDICTIONS"), the date(s) of registration (or
application), the class(es) of registration and the name of the Person in which
each Mark is registered. Except as permitted by those distribution arrangements
identified in Attachment 12 to the Corinthian Disclosure Schedule (the
"LICENSES"), to the actual knowledge of any member of the Seller Group, no
Person other than Corinthian is using any Mark anywhere else in the world in
connection with the Exploitation of sports-figurines, oversize-headed figurines
and toys or games marketed under licenses by sports teams, leagues, players'
associations or other governing or representative bodies. Except for the
Licenses, no Seller has Transferred to any Person the right to use any Mark in
connection with the Exploitation of products anywhere in the world. PLC has
performed all of the obligations required to be performed by it under the
Licenses and is not in breach of or default under any Licenses (including any
breach or default arising from any misrepresentation), and no event has occurred
or circumstances exist which, with notice or lapse of time or both, would
constitute a breach of any License. To the actual knowledge of PLC: (i) each
other party to a License has performed all of the material obligations required
to be performed by it to date under such License and is not in material default
thereunder; and (ii) no event has occurred or circumstances exist which, with
notice or lapse of time or both, would constitute a breach of any License.
(iii) Corinthian's and/or Purchaser's use of each Mark
for Exploitation in the registered classes will not infringe any IP right of any
Person in any Jurisdiction in which such Mark is registered or, to the actual
knowledge of any member of the Seller Group, anywhere else in the world.
(q) INSURANCE.
(i) The Corinthian Disclosure Schedule lists: (A) all
policies of insurance that are in force on the date hereof and/or which have
been in force at any time within the prior three years and insure Corinthian or
any of its assets or employees (the "INSURANCE POLICIES"); (B) all outstanding
claims under the Insurance Policies; (C) all claims made by or on behalf of
Corinthian under any Insurance Policy; and (D) any Contract under which
Corinthian is obligated to maintain insurance on behalf of any other Person.
Corinthian will continue to maintain following the date hereof substantially the
same insurance coverages that are in force on the date hereof, and Corinthian
has delivered to Purchaser true and complete copies of each Insurance Policy,
including all amendments, supplements, modifications, or side letters relating
thereto.
(ii) The Insurance Policies are: (A) all in full force
and effect; (B) sufficient for compliance with all requirements of Law and all
Corinthian Contracts, and (C) will not terminate or lapse by reason of
consummation of the transactions contemplated by this Agreement. The premiums
with respect to all Insurance Policies covering all periods up to and
18
<PAGE> 19
including the Closing Date have been paid or will have been paid prior to the
Closing, and no notice of cancellation or termination has been received with
respect to any such Policy.
(r) LICENSES.
(i) No licensor of Corinthian has canceled or
terminated, or made any threat to cancel or terminate, for any reason, any
Material License or any other license to which Corinthian is a party. The
Corinthian Disclosure Schedule lists all demand letters, notices of default or
non-compliance, and requests or threats to amend, terminate or modify any
Material License or any other license agreement to which Corinthian is a party.
(ii) The Corinthian Disclosure Schedule sets forth the
amount of royalties payable (by Material License) as of March 31, 1998; and
there have been no audits of the royalties paid or payable by Corinthian
pursuant to any Material License. Subject to the reserves therefor set forth in
the March Balance Sheet, Corinthian has properly recorded, reported and paid all
royalties due, and has complied with all marketing, advertising and other
obligations (financial and other), under each Material License and each other
license to which it is a party.
(s) CUSTOMERS. No Large Customer of Corinthian has canceled or
otherwise terminated, or made any threat to cancel or terminate, its
relationship with Corinthian, or its purchase of products from Corinthian, and
to the actual knowledge of each member of the Seller Group, no Large Customer
intends to cancel or otherwise terminate its relationship with Corinthian or
decrease materially the amount of products it purchases compared to products it
has purchased in recent periods. A "LARGE CUSTOMER" of Corinthian shall mean
Toys "R" Us, Inc., K-Mart Corporation, Walmart Stores, Inc., KB Toys and Target
Stores, Inc.
(t) LABOR RELATIONS. There is no pending or, to the Best
Knowledge of any member of the Seller Group, threatened labor dispute, strike or
work stoppage affecting the Business Condition of Corinthian. Corinthian has
conducted and conducts its business in all material respects in accordance with
all Laws regarding employment, unfair labor practices and nondiscrimination.
(u) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997
there has not been:
(i) Any damage, destruction or loss (whether or not
covered by insurance) to tangible assets of Corinthian which has had a
materially adverse effect on the Business Condition of Corinthian;
(ii) Any declaration, setting aside or payment of any
dividend or other distribution with respect to any Capital Securities of
Corinthian or any direct or indirect redemption, purchase or other acquisition
by Corinthian of Securities of Corinthian;
(iii) Any issuance or Transfer by Corinthian or any
Seller of any Securities of Corinthian, or any agreement of any character to
which Corinthian has been a party or by which it has been bound obligating
Corinthian to issue, sell or deliver any Securities.
19
<PAGE> 20
(iv) Any Lien created affecting any assets of Corinthian
or assumed by Corinthian with respect to any such assets except for purchase
money security interests in supplies and inventory acquired by Corinthian in the
ordinary course of business, consistent with past practices, except for Liens
for Taxes not yet delinquent;
(v) Any Indebtedness or other material liability,
guarantee or obligation (whether absolute, accrued, contingent, or otherwise)
incurred, or other transaction engaged in by Corinthian, other than in the
ordinary course of business, consistent with past practices;
(vi) Any Transfer of any asset of Corinthian with a book
value in excess of $5,000, other than inventory in the ordinary course of
business consistent with past practices;
(vii) Any cancellation, without full payment, of any
note, loan or other obligation owing to Corinthian;
(viii) Any waiver or release of any right or claim of
Corinthian;
(ix) Except pursuant to the Compromise Agreement and
except for a bonus in the aggregate amount of $70,000 paid or to be paid
resulting from the transactions contemplated by this Agreement, any increase in
the compensation payable or to become payable by Corinthian to any of its
officers, employees, agents or consultants, or any payment or commitment or
obligation of any kind for the payment by Corinthian of a bonus or other
additional salary or compensation to any such person, except in the ordinary
course of business consistent with past practice of Corinthian;
(x) Any change in the method of accounting including,
without limitation, any change in depreciation or amortization policies or
rates, by Corinthian from the methods consistently applied since July 1, 1996;
(xi) Any amendment or termination of any Contract which
would be a Subject Contract if such Contract were in effect as of the date of
this Agreement;
(xii) Any Contract, other than this Agreement, by which
Corinthian will or could be obligated to undertake or engage in any action
described in the preceding clauses (i) through (xi).
(v) BROKERS. Except for Barrington Associates, no member of the
Seller Group has retained or otherwise engaged or employed any broker, finder or
any other person, or paid or agreed to pay any fee or commission to any agent,
broker, finder or other person, for or on account of acting as a finder or
broker in connection with this Agreement or the transactions contemplated
hereby. Neither Corinthian nor Purchaser has any obligation to Barrington
Associates.
20
<PAGE> 21
(w) BANKS, AGENTS, ETC. The Corinthian Disclosure Schedule
contains a complete and correct list setting forth the name of (i) each
financial institution in which Corinthian has an account, safe deposit box or
borrowing privilege and the names of all persons authorized to draw thereon, to
have access thereto or to borrow thereupon, as the case may be, and (ii) each
agent to whom Corinthian has granted a power of attorney or similar authority to
act on its behalf.
(x) BOARD APPROVAL. The Board of Directors or managers of each
of Corinthian, PLC, International and MEG has duly approved this Agreement.
(y) CONSENTS. Corinthian has obtained all consents and
approvals which are necessary so that the execution, delivery and performance of
this Agreement, and the consummation of the Acquisition, will not result in a
breach or default under, or give rise to the right to terminate, any Material
Contract. All orders, permits, consents, licenses, approvals, franchises,
certificates, registrations and other authorizations from Governmental
Authorities that are necessary for the Seller Group to consummate the
Acquisition (including Blue Sky and state securities permits, approvals,
registrations and qualifications) have been obtained.
(z) MINUTE BOOKS. The minute books of Corinthian contain a
summary of all meetings of directors, committees of directors, executive
committees and stockholders approving any material action on their part and
reflect all material transactions referred to in such minutes accurately in all
material respects.
(aa) ACCURACY OF INFORMATION. Except for the statements and
omissions corrected in the March Balance Sheet, all documents and written
information supplied by the Seller Group were complete and correct in all
material respects as of the date at which the information was furnished and, as
of such date, contained no untrue statement of a material fact nor omitted to
state a material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that no representation is made with respect to the accuracy or
completeness of any projections.
Except for the specific representations and warranties set
forth in this Article 3 and in Article 4 hereof, none of Corinthian or the
Sellers makes any representation or warranty, express or implied, regarding the
business, financial condition, results or operations, assets, liabilities or
future prospects of Corinthian. Purchaser acknowledges and agrees that none of
Corinthian or the Sellers is making any representation or warranty in this
Agreement with respect to financial projections, financial forecasts or future
financial performance of Corinthian.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Each Seller severally represents and warrants to Purchaser as
to itself as follows:
(a) ORGANIZATION OF THE SELLER. Such Person is a corporation or
limited liability company, as the case may be, duly organized, validly existing
in good standing under the Laws of its jurisdiction of organization as set forth
in the preamble to this Agreement and has all requisite corporate or limited
liability company power and authority to own, lease and operate its properties
and assets, to carry on its business as now being conducted and to enter into
this
21
<PAGE> 22
Agreement and perform its obligations under this Agreement.
(b) AUTHORITY; ENFORCEABILITY.
(i) This Agreement has been duly executed and delivered
by such Person and constitutes a valid and legally binding obligation of such
Person enforceable against such Person in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar Laws relating to or affecting creditors' rights
generally, or the availability of equitable remedies.
(ii) The execution and delivery by such Person of this
Agreement does not, and compliance by such Person with the provisions hereof
will not: (A) conflict with or result in a breach or default under any of the
terms, conditions or provisions of any Contract to which such Person is a party
or by which any of its assets is subject; or (B) violate any Law applicable to
such Person; or (C) result in the creation or imposition of any Lien on any
asset of such Person.
PLC represents that the Compromise Agreement was approved by
the holders of at least 75% of its voting power.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Seller Group as follows:
(a) ORGANIZATION OF PURCHASER. Purchaser is a corporation duly
organized, validly existing and in good standing (or validly existing in active
status) under the Laws of the state of Delaware and has all requisite corporate
power and corporate authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted.
(b) AUTHORITY; ENFORCEABILITY.
(i) This Agreement has been duly executed and delivered
by Purchaser and constitutes a valid and legally binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar Laws relating to or affecting creditors' rights
generally, or the availability of equitable remedies.
(ii) The execution and delivery by Purchaser of this
Agreement do not, and compliance by Purchaser with the provisions hereof will
not, (A) conflict with or result in a breach or default under any of the terms,
conditions or provisions of any Contract to which Purchaser is a party or
otherwise bound, or to which any asset or property of Purchaser is subject; (B)
violate any Law applicable to Purchaser, or (C) result in the creation or
imposition of any Lien on any asset of Purchaser.
(c) BROKERS. Purchaser has not retained or otherwise engaged or
employed any broker, finder or any other person, or paid or agreed to pay any
fee or commission to any
22
<PAGE> 23
agent, broker, finder or other person, for or on account of acting as a finder
or broker in connection with this Agreement or the transactions contemplated
hereby.
(d) BOARD APPROVAL. The Board of Directors of Purchaser has
duly approved this Agreement.
6. ADDITIONAL COVENANTS.
(a) CERTAIN TAX MATTERS.
(i) Purchaser shall prepare or cause to be prepared,
consistent with past practice, and file or cause to be filed all Tax Returns for
Corinthian for all periods ending on or prior to the Closing which are filed
after the Closing. Purchaser shall permit PLC to review and comment on each such
Tax Return described in the preceding sentence prior to filing and shall make
such revisions to such Tax Returns as are reasonably requested by PLC. The
Seller Group shall pay all such Taxes or shall reimburse Purchaser for any Taxes
of Corinthian with respect to such periods within 15 days after payment by
Purchaser or Corinthian of such Taxes; provided, however, that the Sellers shall
not be obligated to reimburse Corinthian for the payment of $600,000 by
Corinthian following the Closing for Income Taxes with respect to the tax year
ended June 30, 1997. Purchaser agrees to cause Corinthian to pay no later than
May 20, 1998, the Income Taxes with respect to the tax year ended June 30, 1997
to the extent shown on the federal and State of California Income Tax Returns
filed by Corinthian for such year prior to the date hereof, plus any interest
payable with respect thereto, provided that the aggregate of such payments shall
not exceed $600,000.
(ii) Purchaser shall prepare or cause to be prepared and
file or cause to be filed any Tax Returns of Corinthian for Tax periods which
begin before the Closing Date and end after the Closing Date. Purchaser shall
permit PLC to review and comment on each such Tax Return described in the
preceding sentence prior to filing and shall make such revisions to such Tax
Returns as are reasonably requested by PLC. The Seller Group shall pay to
Purchaser within 15 days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such Taxable period ending on the Closing Date. For purposes of this
Section 6(a)(ii), in the case of any Taxes that are imposed on a periodic basis
and are payable for a Taxable period that includes (but does not end on) the
Closing Date, the portion of such Tax which relates to the portion of such
Taxable period ending on the Closing Date shall (A) in the case of any Taxes
other than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (B) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. Any credits relating to a Taxable
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of Corinthian.
23
<PAGE> 24
(iii) The parties agree that any and all tax benefits
derived from net operating loss carryforwards and carrybacks resulting from any
losses incurred by Corinthian for any taxable period beginning on or after July
1, 1997 ("1998 NOLS") shall inure to the benefit of Purchaser and not to the
benefit of the Seller Group. Thus, in determining the Income Taxes of Corinthian
for taxable periods ending on or prior to the Closing for which the Seller Group
is obligated under this Agreement to pay, such Income Taxes shall not be reduced
by any 1998 NOLs. Without limiting the generality of the foregoing, Seller Group
acknowledges and agrees that if Corinthian submits a claim for a refund for
Income Taxes for any period ending on or prior to June 30, 1997 based upon 1998
NOLs, such refund: (A) shall inure solely to the benefit of Purchaser and not to
the Seller Group; and (B) shall not reduce any obligation of the Seller Group
pursuant to Section 7(b)(iii) below, including, without limitation, the
obligations of the Seller Group where, upon audit or otherwise, additional
Income Taxes become payable for periods ending on or prior to June 30, 1997.
(iv) Purchaser, Corinthian and the Seller Group shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section 6(a) and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. To the extent not delivered to Purchaser, the
Seller Group agrees (A) to retain all books and records with respect to Tax
matters pertinent to Corinthian relating to any taxable period beginning before
the Closing until the expiration of the statute of limitations (and, to the
extent notified by Purchaser, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records and,
if the other party so requests, the Seller Group shall allow Purchaser to take
possession of such books and records. Purchaser and the Seller Group further
agree, upon request, to use their commercially reasonable efforts to obtain any
certificate or other document from any Governmental Authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby), including, where appropriate, the execution and filing of
any and all consents, waivers, extensions of any applicable statutes of
limitations, powers of attorney and other documents as shall be reasonably
requested by any party hereto in connection with such Tax audit, assessment or
other controversy.
(v) Purchaser shall promptly notify the Seller Group in
writing within 10 days of receipt by Purchaser or any of its Affiliates of
notice of (A) any pending or threatened federal, state, local or foreign Tax
audits or assessments of Corinthian and (B) any pending or threatened federal,
state, local or foreign Tax audits or assessments of Purchaser or any of its
Affiliates which may affect the Liabilities for Taxes of Corinthian with respect
to any period ending on or before the Closing. The Seller Group shall promptly
notify Purchaser in writing within 10 days of receipt by any member of the
Seller Group of notice of any pending or threatened federal, state, local or
foreign Tax audits or assessments relating to the income, properties or
operations of Corinthian. Purchaser will have the sole right to represent
Corinthian's
24
<PAGE> 25
interest with respect to any such Tax audit or assessment, including in any
administrative or court proceeding relating thereto, and each such audit or
assessment with respect to any Tax Period shall be treated as a separate Third
Party Claim under Section 7(f) of this Agreement. The Seller Group will
cooperate with Purchaser and its counsel in the defense against or compromise of
any claim in any such audit, assessment, or proceeding and Purchaser shall keep
Sellers apprised of any material developments in such audit, assessment, or
proceeding.
(vi) All transfer, documentary, sales, use, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be paid by the Seller Group when due, and
the Seller Group will, at its own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
Law, Purchaser will, and will cause its Affiliates to, join in the execution of
any such Tax Returns and other documentation.
(vii) Purchaser and the Seller Group each agrees upon
request to provide the other party with all information that either party may be
required to report pursuant to IRC Section 6043 and all Treasury Regulations
promulgated thereunder.
(viii) All tax sharing agreements or similar agreements
with respect to or involving Corinthian, on one hand, and any other member of
the Seller Group, on the other hand, shall be terminated as of the Closing and,
after the Closing, Corinthian shall not be bound thereby or have any liability
thereunder.
(b) RELEASE. Each member of the Seller Group and Rowan each
hereby forever relieves, releases and discharges Corinthian from any and all
claims, debts, liens, liabilities, losses, demands, obligations, promises, acts,
agreements, costs and expenses, damages, actions and causes of action, of
whatever kind or nature, whether known or unknown, suspected or unsuspected,
existing now, existing as of the Closing or accruing after the Closing based on,
arising out of, or in connection with any action or omission of Corinthian prior
to the Closing but including the management agreement described in Section 8(m)
of this Agreement ) (collectively, "RELEASED CLAIMS") and agrees that neither
Purchaser nor Corinthian shall have any liability or obligation whatsoever to
such member of the Seller Group and Rowan (or any Person claiming by or through
it) arising out of or in connection with the Released Claims. Each member of the
Seller Group and Rowan each represents that it is has not Transferred any
Released Claims.
Corinthian hereby forever relieves, releases and discharges Rowan and
each member of the Seller Group from any and all claims, debts, liens,
liabilities, losses, demands, obligations, promises, acts, agreements, costs and
expenses, damages, actions and causes of action, of whatever kind or nature,
whether known or unknown, suspected or unsuspected, existing now, existing as of
the Closing or accruing after the Closing based on, arising out of, or in
connection with any action or omission of Rowan or any member of the Seller
Group prior to the Closing (collectively, "SELLER RELEASED CLAIMS") and agrees
that neither Rowan nor any member of the Seller Group shall have any liability
or obligation whatsoever to Corinthian (or any Person claiming by or through it)
arising out of or in connection with Seller Released Claims; provided, however,
that Seller Released Claims shall not include any representation, warranty,
obligation
25
<PAGE> 26
or agreement under this Agreement, or any right or claim which Corinthian may
have which is included in the March 31 Balance Sheet. Corinthian represents that
it is has not Transferred any Seller Released Claims.
In furtherance thereof, each member of the Seller Group, Corinthian and
Rowan each acknowledges that it is familiar with Section 1542 of the Civil Code
of the State of California, which provides as follows:
A general release does not extend to claims which the
creditor did not know or suspect to exist in his favor at the
time of executing the release, which if known by him, must have
materially affected his settlement with the debtor.
Each member of the Seller Group, Corinthian and Rowan each waives any and all
rights it has or may have under California Civil Code Section 1542 and/or any
successor section to it with respect to the claims released hereby.
(c) MUTUAL COOPERATION. Each of the parties to this Agreement
shall cooperate with the other parties and use its commercially reasonable
efforts to take all actions and do all things that are proper, advisable or
necessary to consummate the transactions contemplated by this Agreement.
(d) EXPENSES OF CORINTHIAN; BROKER'S FEE. PLC shall pay: (i)
all fees and other charges of Barrington Associates in connection with the
transactions contemplated by this Agreement; and (ii) all costs and expenses
incurred by Corinthian in connection with the negotiation, execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement, including fees and expenses of counsel and accountants.
(e) EXPLOITATION OF TRADEMARKS. Each Seller agrees: (i) on
behalf of itself and its Affiliates, not to Exploit the name "Headliners" or any
other name listed as a trademark on Attachment 11 to the Corinthian Disclosure
Schedule (the "MARKS") as a trademark or otherwise anywhere in the world for any
purpose whatsoever, except pursuant to and in accordance with a written license
from Purchaser or a successor to Purchaser; and (ii) to be responsible and
liable for any action of any of its Affiliates which Exploit the Marks as a
trademark or otherwise anywhere in the world for any purpose whatsoever, except
pursuant to and in accordance with a written license from Purchaser or a
successor to Purchaser.
(f) INTERNATIONAL AND PLC COVENANT NOT TO COMPETE.
(i) In consideration of the benefits of this Agreement
to each of PLC and International, and in order to induce Purchaser to enter into
this Agreement, each of International and PLC hereby covenants and agrees that
during the period commencing on the date of this Agreement and ending five years
after the date of this Agreement, it shall not, and each will cause its
Affiliates not to, directly or indirectly, in any capacity, in any county
identified in Schedule 6(f) to this Agreement, or any part of the world, Exploit
(A) figurines, toys, games, collectibles and other products under licenses
granted by NA Sports Persons; or (B) oversize-
26
<PAGE> 27
headed figurines (related to sports, entertainment or any business).
Notwithstanding the foregoing sentence, International and PLC may Exploit
outside of North America oversize-headed figurines of (I) Non-North American
Participants in the Designated Sports and the Designated Entertainment
Properties; and (II) UK Personalities (collectively, "SELLER COVERED
FIGURINES"). PLC and International jointly and severally agree to take
commercially reasonable efforts to prevent the commercial resale in North
America of the Seller Covered Figurines, and shall not sell any Seller Covered
Figurines to any Person which, to the actual knowledge of PLC or International,
markets, sells and distributes, or intends to market, sell or distribute, any
Seller Covered Figurines in North America.
(ii) In consideration of the benefits of this Agreement
to Purchaser and in order to induce PLC and International to enter into this
Agreement, Purchaser hereby covenants and agrees that during the period
commencing on the date of this Agreement and ending five years after the date of
this Agreement, it shall not, and will cause its Affiliates not to, directly or
indirectly, in any capacity, Exploit outside of North America (other than Japan
on or after January 1, 1999), oversize-headed figurines of (A) Non-North
American Participants in the Designated Sports and the Designated Entertainment
Properties, and (B) UK Personalities (collectively, "PURCHASER COVERED
FIGURINES"). Purchaser agrees to take commercially reasonable efforts to prevent
the commercial resale outside of North America of the Purchaser Covered
Figurines, and shall not sell any Purchaser Covered Figurines to any Person
which, to the actual knowledge of Purchaser, markets, sells and distributes, or
intends to market, sell or distribute, any Purchaser Covered Figurines outside
of North America.
(iii) For purposes of this Agreement: (A) "DESIGNATED
SPORTS" shall mean soccer, rugby, cricket, Formula One racing, Australian rules
football and the Olympics; (B) "DESIGNATED ENTERTAINMENT PROPERTY" shall mean a
television show or theatrical film produced by a United Kingdom-based Person
which is originally commercially broadcast or released in the United Kingdom;
(C) "NON-NORTH AMERICAN PARTICIPANT" shall mean an individual who is not a
citizen of a country in North America and who is not an NA Sports Person; (D)
"UK PERSONALITY" shall mean an athlete, musician, vocalist or entertainer who is
a citizen of a country in the United Kingdom and who maintains a principal
permanent residence in the United Kingdom; and (E) "NA SPORTS PERSON" shall
mean: (I) a sports team, franchise, league, players' association or other
governing or representative body located in North America, including without
limitation, the sports covered by the Material Licenses, the National Basketball
Association, the Woman's Basketball Association and the Woman's National
Basketball Association, and minor and development leagues associated with such
sports; and (II) a player, coach and/or competitor on a professional or
non-recreational amateur level on a team based in North America or in
competitions taking place in North America.
(iv) The covenant under this Section 6(f) shall not
prohibit any Person which acquires International, PLC or Purchaser in an arm's
length transaction from continuing to engage in any business in which such
Person was engaged as of the date of such acquisition.
(g) MEG COVENANT NOT TO COMPETE. In consideration of the
benefits of this Agreement to MEG and in order to induce Purchaser to enter into
this Agreement, MEG hereby
27
<PAGE> 28
covenants and agrees that from the period commencing on the date of this
Agreement and ending on the fifth anniversary of the date of this Agreement, MEG
shall not, and MEG shall cause its Affiliates not to, directly or indirectly,
either as an employee, employer, consultant, agent, investor, joint venturer,
proprietor, principal, partner, stockholder (except as the holder of less than
1% of the issued and outstanding stock of a publicly held corporation),
corporate officer or director, or in any other individual or representative
capacity, engage or participate in any business, in any county identified in
Schedule 6(f) to this Agreement, or any other jurisdiction, domestic or foreign,
in which Purchaser or its Affiliates (including Corinthian) has conducted
business, related to the manufacture, distribution and/or sale of (i) figurines,
toys, games or collectibles marketed under licenses by athletes, coaches, sports
teams, franchises, leagues, players' associations or other governing or
representative bodies, (ii) oversize-headed figurines (related to sports or any
other business or entertainment) but not including figurines of characters
created and owned by MEG which as originally created and used have large heads,
or (iii) any other product which is directly competitive with any other toy,
game or collectible manufactured, distributed, sold or licensed by Purchaser or
its Affiliates (including Corinthian); provided, however, that nothing in this
Section 6(g)(iii) shall prohibit MEG from engaging in any manner in the
manufacture, distribution, sale or licensing of items set forth on Schedule 6(g)
to this Agreement or any other product as to which Purchaser did not exercise
its licensing rights under Section 6(h) of this Agreement unless Purchaser did
not exercise its licensing rights because such offered product is directly
competitive with a pre-existing Purchaser product.
(h) LICENSE OF MATERIAL
(i) Subject to Sections 6(g) and 6(h)(ii) of this
Agreement, MEG agrees that it will not Exploit any product, trade secret,
invention, improvement, patent, patent application, copyright or writing, and
any program, method, process, system or novel technique (whether or not capable
of being trademarked, copyrighted or patented), conceived, developed or
otherwise obtained by MEG during the period commencing on August 1, 1996 and
ending three years after the date of this Agreement (the "MATERIAL") (as used in
this Section 6(h), Material shall not include any items listed on Schedule 6(g),
other than Jockheads), unless the MEG complies with the following terms:
(A) MEG shall give a written notice (the "NOTICE")
to Purchaser of its intention to Exploit such
Material; and
(B) Purchaser shall have the first option to
negotiate an exclusive worldwide license for
the Material, which license shall have a term
of not less than two years (with at least four
successive two-year renewal options), provide
for a royalty not in excess of 6% of gross
sales, and such other terms as are customary
for such a license, including a reasonable
marketing date, royalty audit provisions and
customary and reasonable financial terms, such
as royalty advances and/or guarantees to
ensure Purchaser's good faith intention to
Exploit the Material. For the purposes of this
Agreement, "gross sales" means gross sales to
third parties not Affiliated with the
Purchaser and its
28
<PAGE> 29
Affiliates at the Purchaser's regular
wholesale price, less returns actually
credited, quantity discounts actually given
and allowance for bad debts.
If Purchaser does not give notice of its intent to exercise its rights
under this Section 6(h) within 15 business days of receipt of the Notice, MEG
may Exploit the Material. If Purchaser does give such notice, Purchaser and MEG
shall negotiate such license. The provisions of this Section 6(h) shall not be
applied to any Material set forth on Schedule 6(h).
(ii) Notwithstanding Section 6(h)(i) of this Agreement,
MEG agrees that any product, trade secret, invention, improvement, patent,
patent application, copyright or writing, and any program, method, process,
system or novel technique (whether or not capable of being trademarked,
copyrighted or patented), conceived, devised, developed, or otherwise obtained
by MEG, during the period commencing on August 1, 1996 and ending five years
after the date of this Agreement, relating to oversize-headed figurines
(excluding figurines of characters created and owned by MEG which as originally
created and used have large heads) sports-related figurines, sports-related
toys, sports-related collectibles or sports-related games shall be and become
the property of Purchaser and MEG agrees to give Purchaser notice within 10
business days following the end of each calendar quarter during the period this
Section 6(h)(ii) is in effect of its conception, invention, authorship,
development or acquisition of any such product, trade secret, invention,
improvement, patent application, copyright, writing, program, method, process,
system or novel technique and to execute such instruments of transfer,
assignment, conveyance or confirmation and such other documents, and to do all
appropriate lawful acts, as may be requested by Purchaser to transfer, assign,
confirm and perfect in Purchaser all legally protectable rights in any such
product, trade secret, invention, improvement, patent, patent application,
copyright, writing, program, method, process, system or novel technique.
(i) PUBLICITY. Except as required by law, neither the Seller
Group nor Rowan shall disclose to any Person or make any public announcement, by
press release or otherwise, of this Agreement or the transactions contemplated
by this Agreement without the prior written consent of Purchaser, which consent
will not be unreasonably withheld or delayed once this Agreement is publicly
announced by Purchaser. Purchaser will consult with PLC regarding any proposed
written public announcement or press release concerning this Agreement or the
transactions contemplated hereby, and will in good faith consider any comments
and suggestions PLC may have; provided, however, that Purchaser shall have the
right to determine the actual text of any such announcement or release.
(j) BANK GUARANTY. Purchaser shall use its best efforts to
cause, as promptly as practicable following the Closing, each of International,
PLC, MEG, Weems and Morrison to be released from its obligations as guarantors
of the obligations of Corinthian under the Factoring Agreement between
NationsBanc Commercial Corporation and Corinthian dated as of July 17, 1996.
Purchaser will indemnify and hold International, PLC, MEG, Weems and Morrison
harmless from any liability which they may incur as guarantors of the
obligations of Corinthian under such Factoring Agreement.
7. INDEMNIFICATION.
29
<PAGE> 30
(a) GENERAL. From and after the Closing, the parties shall
indemnify each other as provided in this Section 7. For the purposes of this
Section 7, each party shall be deemed to have remade all of its representations
and warranties contained in this Agreement at the Closing with the same effect
as if originally made at the Closing. As used in this Agreement, (a) the term
"INDEMNIFIED PARTY" shall mean a party who is entitled to indemnification from a
party hereto pursuant to this Section 7; (b) the term "INDEMNIFYING PARTY" shall
mean a party hereto who is required to provide indemnification under this
Section 7 to another party; and (c) the term "THIRD PARTY CLAIM" shall mean any
Action which is asserted or threatened by a party other than the parties hereto,
their successors and permitted assigns, against any Indemnified Party or to
which any Indemnified Party is subject.
(b) THE SELLER GROUP'S INDEMNIFICATION OBLIGATIONS.
The Seller Group shall indemnify, save and keep Purchaser
and its officers, directors, employees and stockholders, Corinthian and its
officers, directors and employees (other than Morrison and Weems), and their
respective heirs, successors and assigns (each a "PURCHASER INDEMNITEE" and
collectively, the "PURCHASER INDEMNITEES") harmless against and from all Losses
sustained or incurred by any Purchaser Indemnitee, as a result of or arising out
of or by virtue of:
(i) any inaccuracy in or breach of any representation
and warranty made to Purchaser in this Agreement;
(ii) the breach by any member of the Seller Group of, or
failure of any member of the Seller Group to comply with, any of their
respective covenants or obligations under this Agreement;
(iii) any liability of Corinthian or the Sellers with
respect to Tax Returns filed or Taxes owing for periods ending on or prior to
the Closing, and for the pre-closing portion of any straddle period, excluding
liability for the payment to be made by Corinthian following the Closing in the
amount of up to $600,000 for Taxes with respect to the tax year ended June 30,
1997. For purposes of this Section 7(b)(iii), Taxes shall not include any Income
Taxes which would have been paid but for the application of any credit or net
operating or capital loss deductions attributable to any period ending (or
portion thereof) on or before June 30, 1997, but shall include any Income Taxes
which would have been paid but for the application of any credit or net
operating or capital loss deductions attributable to any period beginning on or
after July 1, 1997;
(iv) the Lost Tax Benefit of the amount (if any) by
which the net operating loss of Corinthian, as reported on any Income Tax Return
filed with the IRS or any state taxing authority for the taxable period
beginning on July 1, 1997 and ending on the Closing, is reduced upon final
determination of such applicable taxing authority (for this purpose, the "LOST
TAX BENEFIT" of any such reduction of reported net operating loss shall mean the
product of (A) the amount of the reduction and (B) the highest applicable Income
Tax rate imposed on corporate income by the applicable taxing authority for such
taxable year); provided, however, that the Seller Group shall have no obligation
to indemnify for any Lost Tax Benefit to the extent such
30
<PAGE> 31
Lost Tax Benefit results from the Purchaser adopting a Tax accounting practice
more favorable to Corinthian than the corresponding Tax accounting practice used
by Corinthian in the preparation of its Income Tax Return filed with the IRS for
the period ending June 30, 1997 or from an arithmetic error;
(v) any Loss suffered or incurred by Corinthian resulting
from the alleged violations of copyrights held by Roger Boggs, Lyle Lambur
and/or Roger Boggs Studios or any claims by or through such Persons (or their
successors) related thereto, as disclosed in the Corinthian Disclosure Schedule;
(vi) any Loss with respect to a Subject Claim in excess of
the Potential Claim Cost for such Claim as set forth in Schedule 1(b) to the
Corinthian Disclosure Schedule; and
(vii) fraud by any member of the Seller Group in connection
with this Agreement and the transactions contemplated hereby.
(c) PURCHASER INDEMNIFICATION OBLIGATIONS.
Purchaser shall indemnify, save and keep the Seller Group
and its successors and permitted assigns (individually a "SELLER INDEMNITEE" and
collectively, the "SELLER INDEMNITEES") harmless against and from all Losses
sustained or incurred by any Seller Indemnitee as a result of or arising out of
or by virtue of:
(i) any inaccuracy in or breach of any representation and
warranty made by Purchaser to the Seller Group in this Agreement;
(ii) any breach by Purchaser of, or failure by Purchaser to
comply with, any of its covenants or obligations under this Agreement; and
(iii) fraud by Purchaser in connection with this Agreement
and the transactions contemplated hereby.
(d) LIMITATION ON INDEMNIFICATION OBLIGATIONS.
(i) Neither Purchaser Indemnitees nor the Seller
Indemnitees shall be entitled to recover under Sections 7(b) (other than
Sections 7(b)(iii), 7(b)(iv) or 7(b)(v)) or 7(c) unless (A) a claim has been
asserted by written notice, setting forth the basis for such claim, delivered to
the Indemnifying Party on or prior to June 30, 1999; and (B) the aggregate
amount of indemnifiable Losses incurred by Purchaser Indemnities on the one hand
or the Seller Indemnitees on the other hand exceeds $100,000 (the "BASKET"), at
which time such claim for indemnification may be made only for the excess.
(ii) Except as provided in Section 7(d)(iii), in no event
shall: (A) Purchaser Indemnities be entitled to recover an amount hereunder in
excess of $850,000 from PLC
31
<PAGE> 32
and International and $150,000 from MEG, and (B) Seller Indemnities be entitled
to recover from Purchaser an amount hereunder in excess of $1,000,000.
(iii) Notwithstanding anything to the contrary herein
contained, the limitations contained in Sections 7(d)(i) and (ii) shall not
apply to (A) indemnification obligations under Sections 7(b)(iii), 7(b)(iv) or
7(b)(v) or (B) indemnification obligations under Sections 7(b)(i), 7(b)(ii),
7(b)(vi) and 7(c) for: (I) breaches of any of the representations and warranties
relating to Sections 3(a)(iii) or (iv), 3(b), 3(e) or 3(h); (II) breach of any
covenants or agreement of any Indemnifying Party contained under Sections 2 or 6
of this Agreement; or (III) fraud by an Indemnifying Party in connection with
this Agreement and the transactions contemplated by this Agreement. Any recovery
under or in connection with the circumstances described in the immediately
preceding sentence shall not be taken into account in determining whether the
$1,000,000 limitation set forth in Section 7(d)(ii) has been reached.
(e) NO CLAIM BY THE SELLER GROUP INDEMNIFYING PARTIES OR
OTHERS. Although the Seller Group Indemnifying Parties may have relied on
information supplied by Corinthian in making certain representations and
warranties contained in this Agreement and the Corinthian Disclosure Schedule,
each Seller Group Indemnifying Party has no claim, and shall assert no claim,
for contribution, indemnification or otherwise, against Corinthian with respect
to any breach of any covenant or of any of the representations and warranties or
any inaccuracy in the Corinthian Disclosure Schedule irrespective of whether the
information supplied by Corinthian and relied upon by such Seller Group
Indemnifying Party was incomplete or inaccurate in any way or for whatsoever
reason; further, the Seller Group Indemnifying Parties acknowledge that
Corinthian has made no representation or warranty to the Seller Group
Indemnifying Parties with respect to the information supplied by it to the
Seller Group Indemnifying Parties whatsoever.
(f) THIRD PARTY CLAIMS. Forthwith following the receipt of
notice of a Third Party Claim, the party receiving the notice of the Third Party
Claim shall (i) notify the other party of its existence setting forth with
reasonable specificity the facts and circumstances of which such party has
received notice and (ii) if the party giving such notice is an Indemnified
Party, specifying the basis hereunder upon which the Indemnified Party's claim
for indemnification is asserted. The Indemnified Party shall have the right,
without prejudice to its right of indemnification hereunder, in its discretion
exercised in good faith and upon the advice of counsel, to contest, defend and
litigate such Third Party Claim, and may settle such Third Party Claim, either
before or after the initiation of litigation, at such time and upon such terms
as the Indemnified Party deems fair and reasonable; provided, however, that (x)
the Indemnified Party must give to the Indemnifying Party at least five days
prior notice of its intention to settle, and (y) without the prior consent of
the Indemnifying Party (which consent will not be unreasonably withheld), the
Indemnified Party may not settle the Third Party Claim (A) on terms which
involve a payment by the Indemnified Party which (I) is in excess of $25,000 and
(II) of which the Indemnifying Party will be obligated to pay more than 50%; or
(B) if such settlement would involve an admission of liability by the
Indemnifying Party, a loss or relinquishment of material rights by the
Indemnifying Party or equitable relief against the Indemnifying Party. The
Indemnified Party shall be reimbursed by the Indemnifying Party for the
reasonable attorneys' fees and other expenses of defending, contesting,
litigating and/or settling the Third Party Claim which are incurred from time to
time, forthwith
32
<PAGE> 33
following the presentation to the Indemnifying Party of itemized bills for said
attorneys' fees and other expenses.
(g) LIQUIDATION OF INDEMNIFICATION CLAIMS. When an Indemnified
Party shall give an Indemnifying Party notice of a Loss that has been fixed or
determined as to amount, the notice shall specify in reasonable detail the
nature and amount of the Losses and the sections of this Agreement upon which
the claim for indemnification for the Losses is based. If the Indemnifying Party
desires to dispute the claim, it shall, within 15 days after notice of the claim
is given pursuant to this Section 7(g), give counter notice to the Indemnified
Party, setting forth in reasonable detail the basis for disputing the claim. If
no such counter notice is given within that 15-day period, or if the
Indemnifying Party acknowledges liability for the indemnification, then the
indemnification obligation shall be promptly satisfied.
(h) DISPUTE RESOLUTION. If, within 15 days after the giving of
a counter notice by the Indemnifying Party, the Indemnifying Party and the
Indemnified Party have not reached agreement as to the indemnification claim in
question, then the claim for indemnification shall be submitted to and settled
by arbitration as hereinafter provided (it being expressly understood and agreed
that if such counter notice is duly given, it is the intention of the parties to
this Agreement that any such indemnification claim shall be resolved by
arbitration as provided in this Section 7(h)). The arbitration shall be by a
single arbitrator experienced in the matters at issue selected by, and mutually
acceptable to, the Indemnifying Party and the Indemnified Party and shall be
conducted in accordance with the arbitration rules of the American Arbitration
Association. The arbitrator must be independent (not an agent, officer,
director, attorney, employee, or shareholder of Purchaser or any member of the
Seller Group or a relative of Affiliate of any of those persons) without any
economic or financial interest of any kind in the outcome of the arbitration.
Each arbitrator's conduct will be governed by the Code of Ethics for Arbitrators
in Commercial Disputes (1986) that has been approved and recommended by the
American Bar Association and the American Arbitration Association. Within 60
days after the effective date of the counter notice of the Indemnifying Party,
the arbitrator shall convene a hearing for the dispute to be held on such date
and at such time and place in Los Angeles County, California, as the arbitrator
designates upon 30 days' advance notice to each Indemnified Party and each
Indemnifying Party. The parties shall request that the arbitrator render his
decision within 30 days after the conclusion of the hearing. The arbitrator
shall hear and decide the dispute based on the evidence produced,
notwithstanding the failure or refusal to appear by a party who has been duly
notified of the date, time, and place of the hearing. The decision of the
arbitrator shall be final and binding as to any matters submitted under this
Agreement, and to the extent that the arbitrator's decision is that Losses have
been incurred for which a party is to be indemnified under this Agreement, the
Losses shall be promptly satisfied; provided, however, that, if necessary, such
decision may be enforced by either the Indemnifying Party or the Indemnified
Party in any court of record having jurisdiction over the subject matter or over
any of the parties hereto. The prevailing party shall recover all of such
party's costs, and reasonable attorneys' fees incurred in connection with any
such arbitration.
(i) CHARACTERIZATION OF INDEMNIFICATION PAYMENTS. All amounts
paid by Purchaser or the Seller Group, as the case may be, under the terms of
this Section 7 shall be treated for all Tax purposes as an adjustment of the
Purchase Price, unless otherwise required by
33
<PAGE> 34
applicable law in which event such payments shall be made in an amount
sufficient to indemnify the party on a net after-Tax basis.
(j) LIMITATIONS. The sole and exclusive remedy of Purchaser and
the Seller Group for any claim for monetary relief arising under this Agreement
shall be the right of the parties to seek indemnification if and to the extent
permitted by, and subject to the limitations set forth in, this Agreement. No
claim for monetary relief shall be asserted by Purchaser under this Agreement
against Rowan, whether pursuant to this Article 10 or otherwise except for
breach of Rowan's obligations under Sections 4 of this Agreement and Rowan
agrees not to make any claim for monetary relief against any Purchaser
Indemnified Party. Except for any claims arising under Section 4 of this
Agreement and except for the obligations of any party hereto with respect to
covenants or agreements made separately by such party, in respect of which the
liabilities of each member of the Seller Group shall be several and not joint
and shall be limited to the specific representations, covenants and agreements
of such member and not the representations, covenants and agreements of any
other member of the Seller Group, any obligations of the Seller Group under this
Agreement shall be allocated 85%to International and PLC (for which liability
shall be joint and several), on the one hand, and 15% to MEG, on the other hand,
(each, a "Pro Rata Interest"), and no member of the Seller Group shall be liable
for any Losses in excess of the portion of such Losses or monetary obligations
equal to its Pro Rata Interest.
(k) ADDITIONAL INDEMNIFICATION LIMITATIONS. If the amount with
respect to which any indemnity claim is made under this Section 7 gives rise to
a currently realized Tax Benefit to the party making the claim, the indemnity
payment shall be reduced by the amount of the Tax Benefit currently realized to
the party making the claim. To the extent such indemnity payment does not give
rise to a currently realized Tax Benefit, if the amount with respect to which
any indemnity claim is made gives rise to a subsequently realizable Tax Benefit
to the party that made the claim, such party shall refund to the indemnifying
party the amount of such Tax Benefit when, as and if realized. For the purposes
of this Agreement, any subsequently realizable Tax Benefit shall be treated as
though it were a reduction in the amount of the initial indemnity claim, and the
liabilities of the parties shall be redetermined as though both occurred at or
prior to the time of the indemnity payment. For purposes of this Section 7(k), a
"TAX BENEFIT" means an amount by which the Tax liability of the party is reduced
(including, without limitation, by deduction, reduction of income by virtue of
increased tax basis or otherwise, entitlement to refund, credit or otherwise)
plus any related interest received from the relevant taxing authority. Where a
party has other losses, deduction, credits or items available to it, the Tax
Benefit from any losses, deductions, credits or items relating to the indemnity
claim shall be deemed to be realized only after the utilization of such other
losses, deductions, credits or items. For purposes of this Section 7(k), a Tax
Benefit is "currently realized" only to the extent it can be reasonably
anticipated that such Tax Benefit will be realized in the current taxable period
or year or in any tax return with respect thereto (including a carryback to a
prior year) or in any taxable period or year prior to the date of the indemnity
claim. In the event that there should be a determination disallowing the Tax
Benefit, the indemnifying party shall be liable to refund to the indemnified
party the amount of any related reduction previously allowed or payments
previously made to the indemnifying party pursuant to this Section 7(k). The
amount of the refunded reduction or payment shall be deemed a payment under this
Section 7 and thus shall be paid subject to any applicable reductions under this
Section 7(k).
34
<PAGE> 35
8. MISCELLANEOUS PROVISIONS.
(a) NOTICES. All notices, consents, demands, requests,
approvals or other communications hereunder shall be in writing and shall be
deemed to have been duly given if (i) delivered in person, on the date actually
given, (ii) by United States mail, certified or registered, with return receipt
requested, on the date which is two Business Days after the date of mailing, or
(iii) if sent by telex or facsimile transmission, with a copy mailed on the same
day in the manner provided in (i) above, on the date transmitted provided
receipt is confirmed by telephone:
(i) if to Purchaser to:
Equity Marketing, Inc.
131 South Rodeo Drive
Beverly Hills, CA 90212
Attention: Mark Lewis, Senior Vice President -
Business Affairs and Administration
Telecopy No.: (310) 887-4483
With a copy to:
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard, Suite 800
Los Angeles, California 90024
Attention: Alan B. Spatz, Esq.
Telecopy No.: (310) 443-8511
(ii) if to the Sellers, to:
Corinthian Marketing P.L.C.
Dralda House
24-28 Crendon Street
High Wycombe
Buckinghamshire HP13 6LS
England
Attention: Paul Speed
Telecopy No.: (011) 44 1494 523-847
35
<PAGE> 36
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004-1980
Attention: Warren S. de Wied, Esq.
Telecopy No.: (212) 859-4000
Morrison Entertainment Group, Inc.
c/o Bruce R. Bailey
1900 Avenue of the Stars, Suite 500
Los Angeles, CA 90067
Telecopy No.: (310) 286-9907
With a copy to:
Bruce R. Bailey
1900 Avenue of the Stars, Suite 500
Los Angeles, CA 90067
Telecopy No.: (310) 286-9907
or at such other address as may have been furnished by such Person in writing to
the other parties.
(b) SEVERABILITY. Should any Section or any part of a Section
within this Agreement be rendered void, invalid or unenforceable by any court of
Law for any reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other Section or part of a Section in this
Agreement.
(c) EXHIBITS AND SCHEDULES. Each Exhibit and Schedule delivered
pursuant to the terms of this Agreement, each document, instrument and
certificate delivered by the parties in connection with the transactions
contemplated hereby constitutes an integral part of this Agreement and is
incorporated by reference into this Agreement.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED BOTH AS TO VALIDITY AND PERFORMANCE AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PRINCIPLES THEREOF.
(e) SUBMISSION TO JURISDICTION AND WAIVER OF IMMUNITY AND
INCONVENIENT FORUM. Each member of the Seller Group agree that any and all
disputes arising in connection with this Agreement and the transactions
contemplated hereby may be brought in any state or federal court of record
located in the County of Los Angeles, State of California. Each member of the
Seller Group irrevocably submits to the jurisdiction of the state and federal
courts located in the County of Los Angeles, State of California in any legal
action or proceeding relating to this Agreement and the transactions
contemplated hereby. The members of the Seller Group irrevocably waive all
immunity from jurisdiction, attachment and execution, whether on the basis
36
<PAGE> 37
of sovereignty or otherwise, to which they might otherwise be entitled in any
legal action or proceeding in any state or federal court located in the County
of Los Angeles, State of California. Each member of the Seller Group irrevocably
waives, to the fullest extent permitted by Law, any objection which it may now
or hereafter have to any suit, action or proceeding relating to this Agreement
and the transactions contemplated hereby being brought in the federal or state
courts located in the County of Los Angeles, State of California, and hereby
further irrevocably waive any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
(f) HEADINGS. Section headings and subheadings used in this
Agreement are for convenience only and shall not affect the meaning or
construction of this Agreement.
(g) NO ADVERSE CONSTRUCTION. The rule that a contract is to be
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement, any other document delivered
at the Closing or any provisions hereof or thereof.
(h) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) COSTS AND ATTORNEYS' FEES. In the event that any action,
suit, or other proceeding is instituted concerning or arising out of this
Agreement the prevailing party shall recover all of such party's costs, and
reasonable attorneys' fees incurred in each and every such action, suit, or
other proceeding, including any and all appeals or petitions therefrom.
(j) SUCCESSORS AND ASSIGNS. All rights, covenants and
agreements of the parties contained in this Agreement shall, except as otherwise
provided herein, be binding upon and inure to the benefit of their respective
successors and assigns. No member of the Seller Group may assign its obligations
under this Agreement without the prior written consent of Purchaser, and
Purchaser may not assign any of its obligations under this Agreement without the
prior written consent of PLC.
(k) AMENDMENT. This Agreement may be amended at any time prior
to the Closing by the mutual written agreement of all parties hereto and at any
time after the Closing by the mutual written agreement of Purchaser and the
Sellers.
37
<PAGE> 38
(l) ENTIRE AGREEMENT. This Agreement, the attached Exhibits and
Schedules, the other agreements and schedules referred to in this Agreement,
contain the entire understanding of the parties and there are no further or
other agreements or understandings, written or oral, in effect between the
parties relating to the subject matter hereof unless expressly referred to
herein.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
EQUITY MARKETING, INC., MORRISON ENTERTAINMENT GROUP,
A DELAWARE CORPORATION A CALIFORNIA CORPORATION
By: /s/ STEPHEN P. ROBECK By: /s/ JOE MORRISON
-------------------------------------- ---------------------------------
Stephen P. Robeck, Co-Chief Joe Morrison
Executive Officer
CORINTHIAN MARKETING P.L.C., ROWAN NOMINEES, LTD.,
A UNITED KINGDOM CORPORATION A UNITED KINGDOM REGISTERED COMPANY
By: /s/ PAUL SPEED By: /s/ WARREN DE WIED
-------------------------------------- ---------------------------------
Paul Speed, Chief Executive Officer Warren de Wied, as Attorney of
Fact
CORINTHIAN INTERNATIONAL HOLDINGS L.L.C.,
A TEXAS LIMITED LIABILITY COMPANY
By: /s/ PAUL SPEED
--------------------------------------
Paul Speed, Manager
CORINTHIAN MARKETING, INC.,
A DELAWARE CORPORATION
By: /s/ JOHN WEEMS
--------------------------------------
John Weems, Executive Vice-President
38
<PAGE> 39
STOCK PURCHASE AGREEMENT
SCHEDULE 6(f)
CALIFORNIA COUNTIES COVERED BY COVENANT NOT TO COMPETE
Alameda County San Diego County
Apine County San Francisco County
Amador County San Joaquin County
Butte County San Luis Obispo County
Calaveras County San Mateo County
Colusa County Santa Barbara County
Contra Costa County Santa Clara County
Del Norte County Santa Cruz County
El Dorado County Shasta County
Fresno County Sierra County
Glenn County Siskiyou County
Humboldt County Solano County
Imperial County Sonoma County
Inyo County Stanislaus County
Kern County Sutter County
Kings County Tehama County
Lake County Trinity County
Lassen County Tulare County
Los Angeles County Tuolumne County
Marin County Ventura County
Mariposa County Yolo County
Mendocino County Yuba County
Merced County
Modoc County
Mono County
Monterey County
Napa County
Nevada County
Orange County
Placer County
Plumas County
Riverside County
Sacramento County
San Benito County
San Bernardino County
39
<PAGE> 40
STOCK PURCHASE AGREEMENT
SCHEDULE 6(g)
PRE EXISTING MEG PROPERTIES
I. ANIMAL HOSPITAL IN MY POCKET
PUPPY IN MY POCKET
KITTY IN MY POCKET
PONY IN MY POCKET
TEDDY IN MY POCKET
SURPRISE IN MY POCKET
TROLL IN MY POCKET
DOLLY IN MY POCKET
And all future GIRLS' IN MY POCKET properties
II. MONSTER IN MY POCKET
DINOSAUR IN MY POCKET
MONSTER WRESTLERS IN MY POCKET
SUMO WRESTLERS IN MY POCKET
NINJA WARRIORS IN MY POCKET
MONSTERMACHINES IN MY POCKET
And all future BOYS' IN MY POCKET properties
The IN MY POCKET brand is an on-going micro-collectible line of
realistic animal and other figures. Different collections have been
marketed as both girls and boys lines over the years. The Brand is
currently in its 8th year in the market and has generated over
$110,000,000 in wholesale sales to-date. Vivid Imaginations in the UK is
the lead Toy Licensee. Irwin markets the line in Canada.
III. SAMSON
A male-action toyline/animated television show concept originally sold
to Giochi Preziosi in Italy. Giochi Preziosi chose not to proceed and
the rights have reverted back to MEG.
IV. CAT RIDERS/BRUTE FORCE
A line of anthropomorphic cat/motorcycles and other vehicles and
animated television concept. MEG is partnered with Western Technologies
and The Imagination Factory on the property.
<PAGE> 41
V. JOCKHEADS
An animated television show concept of a sports-obsessed typical
American family. MEG is partnered with JJM Investments to develop an
animated television series. The reference to Jockheads shall be deemed
to include any toys, merchandise or licenses of the characters appearing
in such show.
VI. HERO HIGH
A male-action/television show concept based on the premise that Super
Heroes, like Marines, are "made not born." The "best and brightest" high
school students from all over the world are chosen to attend an elite
special high school in Malibu because they have highly-developed
particular skills. They are trained in the secret skills to become Super
Heroes by a group of retired Super Hero teachers.
VII. ONE-MAN ARMY
A radio-controlled vehicle concept of a half man, half machine who is an
unstoppable fighting force.
VIII. S-S-SECRET WEAPONS (SNAKES, SKUNKS & SCORPIONS)
A line of child size "play" weapons that look like different animals
(e.g., a spring-loaded snake "switchblade", etc.).
IX. CHUBBY PUPPIES (and FAT CATS)
A line of overstuffed plush animals with a feature of mouths that make
different expressions.
X. MAGIC HAT TEDDIES
A small-doll line of teddies with accessories that each have working
features. The features are air-powered by squeezing the teddies' hat
which contains bellows. MEG is partnered with Western Technologies on
the property.
XI. MILK'N HONEY TEDDIES
A micro-collectible line of teddies that live in houses that "transform"
from real kitchen items such as tea pots and cereal boxes.
XII. BAD HAIRY DAY PORCUPINES
A plush line with super soft "quills" that can be made to stand on end
using a hardening gel, that can then be combed/washed out.
41
<PAGE> 1
Exhibit 2.2
TRADEMARK PURCHASE AGREEMENT
This Trademark Purchase Agreement (the "AGREEMENT") is made as of the
24th day of April, 1998 (the "EFFECTIVE DATE"), by and between Equity Marketing,
Inc., a Delaware corporation ("PURCHASER"), and Corinthian Marketing P.L.C., a
United Kingdom company ("SELLER").
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"ASSETS" shall mean the Marks and the Licenses.
"CONTRACT" shall mean any written or oral note, bond, debenture,
mortgage, license, agreement, commitment, document, instrument or contract.
"LICENSES" shall mean the licenses of the Marks identified in Exhibit
"A" to this Agreement.
"MARKS" shall mean the trademarks "Headliners," "Pocket Replay" and
"Powerpops."
"PERSON" shall mean an individual or a group, syndicate, cooperative,
joint venture, unincorporated organization, partnership, corporation, trust,
association, limited liability company, governmental authority or other entity.
"TRANSFER" shall mean sell, assign, transfer, pledge, grant a security
interest in, license, sublicense or otherwise dispose of, with or without
consideration.
2. PURCHASE AND SALE OF ASSETS. Seller hereby sells, transfers, assigns and
conveys to Purchaser all of its right, title and interest in and to the Assets,
and Purchaser hereby purchases the Assets.
3. PURCHASE PRICE. The purchase price for the Assets is U.S. $2,730,000.00,
receipt of which is hereby acknowledged by Seller.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to
the Purchaser as follows:
(a) ORGANIZATION OF SELLER. Seller is duly organized, validly existing
in good standing under the laws of England and Wales.
<PAGE> 2
(b) AUTHORITY; ENFORCEABILITY.
(i) This Agreement has been duly executed and delivered by Seller
and constitutes a valid and legally binding obligation of Seller enforceable
against Seller in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other similar laws relating to or affecting creditors' rights generally, or the
availability of equitable remedies.
(ii) The execution and delivery by Seller of this Agreement do
not, and compliance by Seller with the provisions thereof will not: (A) conflict
with or result in a breach under any of the terms, conditions or provisions of
any Contract to which Seller is a party or to which any of the Assets are
subject; or (B) violate any law applicable to Seller; or (C) result in the
creation or imposition of any Lien on any of the Assets.
(c) TITLE TO ASSETS. Seller is the sole and exclusive owner (legal and
beneficial) of the Marks in each Jurisdiction (as defined below), and to the
goodwill attached to the Marks in each Jurisdiction, in the class or classes
identified in Exhibit "A" to this Agreement with respect to such Jurisdiction.
Exhibit "A" sets forth a list of all countries, states or other jurisdictions in
which the Mark and the Other Marks is registered or in which registration
applications are pending (the "JURISDICTIONS"), the date(s) of registration (or
application), the class(es) of registration and the name of the Person in which
the Marks is registered.
5. FURTHER ASSURANCES. Seller agrees to execute and deliver such further
documents and instruments as may be reasonably requested by Purchaser to carry
out the intent and purposes hereof. Seller will notify in writing promptly after
the date hereof any person or entity who or which has possession of any of the
Assets that Purchaser owns the Assets.
6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to conflict
of laws principles.
7. SUBMISSION TO JURISDICTION AND WAIVER OF IMMUNITY AND INCONVENIENT FORUM.
Each of Purchaser and Seller agrees that any and all disputes arising in
connection with this Agreement and the transactions contemplated hereby may be
brought in any state or federal court of record located in the County of Los
Angeles, State of California. Each of Purchaser and Seller irrevocably submits
to the jurisdiction of the state and federal courts located in the County of Los
Angeles, State of California in any legal action or proceeding relating to this
Agreement and the transactions contemplated hereby. Each of Purchaser and Seller
irrevocably waives all immunity from jurisdiction, attachment and execution,
whether on the basis of sovereignty or otherwise, to which it might otherwise be
entitled in any legal action or proceeding in any state or federal court located
in the County of Los Angeles, State of California. Each of Purchaser and Seller
irrevocably waives, to the fullest extent permitted by Law, any objection which
it may now or hereafter have to any suit, action or proceeding relating to this
Agreement and the transactions contemplated hereby being brought in the
<PAGE> 3
federal or state courts located in the County of Los Angeles, State of
California, and hereby further irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.
8. HEADINGS. Section headings used in this Agreement are for convenience only
and shall not affect the meaning or construction of this Agreement.
9. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
10. SUCCESSORS AND ASSIGNS. All rights, covenants and agreements of the parties
contained in this Agreement shall, except as otherwise provided herein, be
binding upon and inure to the benefit of their respective successors and
assigns.
11. ENTIRE AGREEMENT. This Agreement and the exhibits referred to therein,
contain the entire understanding of the parties and there are no further or
other agreements or understandings, written or oral, in effect between the
parties relating to the subject matter hereof unless expressly referred to
herein.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EQUITY MARKETING, INC.,
A DELAWARE CORPORATION
By: /s/ STEPHEN P. ROBECK
----------------------------------------
Stephen P. Robeck,
Co-Chief Executive Officer
CORINTHIAN MARKETING P.L.C.,
INCORPORATED UNDER THE LAWS OF ENGLAND AND
WALES
By: /s/ PAUL SPEED
----------------------------------------
Paul Speed,
Chief Executive Officer
<PAGE> 4
EXHIBIT A
THE MARKS
<TABLE>
<CAPTION>
COUNTRY MARK APP. NO. APP. REG. NO. REG. CLASS
- ------- ---- -------- ---- -------- ----- -----
DATE DATE
---- ----
<S> <C> <C> <C> <C> <C> <C>
Argentina HEADLINERS 2032483 5/8/96 28
Argentina POWERPOPS 2068759 2/11/97 28
Brazil HEADLINERS 819370215 8/22/96 28
Brazil POCKET REPLAY 819370177 8/22/96 28
Brazil POWERPOPS 820144231 7/28/97 28
Canada HEADLINERS 811,761 5/3/96
Canada POCKET REPLAY 811,762 5/3/96
Canada POWERPOPS 836,064 2/10/97
Colombia HEADLINERS 96/043,618 8/16/96 28
Colombia POCKET REPLAY 96/043,617 8/16/96 196,291 4/18/97 28
Colombia POWERPOPS 97/034100 6/19/97 28
EU HEADLINERS 466,805 2/18/97 16, 28,
41
Mexico HEADLINERS 261,901 5/8/96 28
Mexico POCKET REPLAY 261,902 5/8/96 28
Mexico POWERPOPS 289,269 3/10/97 28
Peru HEADLINERS 9681 5/3/96 039,360 10/22/97 28
Peru POCKET REPLAY 9682 9/25/96 029,551 9/25/96 28
USA HEADLINERS 75/090,443 4/16/96 2,109,882 10/28/97 28
USA HEADLINERS IN 75/411,405 12/29/97 28
THE CREASE
USA YOU'LL KNOW 75/184,603 10/21/96 28
THEM WHEN
YOU SEE THEM
USA POWERPOPS 75/233,174 1/29/97 28
USA HEADLINERS XL 75/439,652 2/20/98 28
Venezuela HEADLINERS 6613-96 5/14/96 28
Venezuela POCKET REPLAY 6612-96 5/14/96 28
</TABLE>
<PAGE> 1
Exhibit 99
CONTACT: MICHAEL J. WELCH
CHIEF FINANCIAL OFFICER
EQUITY MARKETING, INC.
(310) 887-4315
MOLLIE LEISER
(212) 614-5109
FOR IMMEDIATE RELEASE
EQUITY MARKETING ACQUIRES CORINTHIAN MARKETING, INC.
DEAL MARKS EQUITY MARKETING'S MAJOR MOVE
INTO THE U.S. PROFESSIONAL SPORTS LICENSING DOMAIN
LOS ANGELES, CA, APRIL 27,1998 --- Equity Marketing, Inc. (Nasdaq: EMAK)
today announced the acquisition of Corinthian Marketing, Inc. Corinthian
produces and distributes the popular Headliners(TM) brand of collectible sports
figurines. Headliners are uniquely designed with oversized heads to capture the
look and personality of popular professional athletes. The Headliners brand is
sold through mass market and hobby-related retailers and is based on licensing
relationships with Major League Baseball and the M.L.B. Player's Association,
the National Hockey League and the N.H.L. Player's Association, and the National
Football League, N.F.L. Players, Inc., N.F.L. Quarterback Club and the
Collegiate Licensing Corporation.
Commenting on the acquisition, Stephen P. Robeck and Donald A. Kurz, Co-CEOs of
Equity Marketing said, "The addition of the Headliners brand to our newly
established Equity Sports business is an important step in our continuing
growth. It is a springboard into the professional sports licensing arena and
adds the enormous power of sports-based intellectual property to our core
strength in entertainment. This has been a strategic priority for us."
Under the terms of the agreement, Equity Marketing purchased all of the stock in
Corinthian and its related trademarks for total cash consideration of
approximately $8.7 million. Based on year-to-date sales and current orders, the
Headliners business is expected to generate revenue, on a stand-alone basis, of
between $10-12 million in 1998. The acquisition will be accounted for as a
purchase and is being financed through the Company's existing cash reserves. The
transaction is expected to be
<PAGE> 2
slightly accretive to Equity Marketing's 1998 earnings per share.
Equity Sports' mission is to create retail consumer products, collectibles and
promotional products based on sports-related intellectual property. Said Messrs.
Robeck and Kurz, "This is an excellent strategic fit for us. Along with our
NASCAR business, Headliners gives us a solid platform to build our Equity Sports
business. It will enable us to address a wider range of retail product
categories and customers, deepen relationships with existing promotional clients
and provide access to an array of new clients as well. Headliners offers a
unique and powerful trademark, in addition to a more predictable, less seasonal
revenue flow."
Corinthian's CEO, Joe Morrison, and its COO, John Weems, will move over to
Equity Marketing to head up its Equity Sports business and pursue sports-related
licensing opportunities. Joe Morrison said, "Headliners is a personality-driven
sports collectible brand that will be a cornerstone of Equity Sports and an
ideal complement to Equity Marketing's existing business. We have considerable
synergies and similarities in our licensing-based businesses, Asian
manufacturing operations and mass market customer accounts structure. We also
have significant sports promotional opportunities that remain largely untapped
- -- they should flourish under Equity Marketing."
Equity Marketing designs, develops, produces and markets worldwide a broad range
of toys, gifts and other consumer products based on characters from popular
entertainment properties licensed primarily by major television and motion
pictures studios.
###
THIS NEWS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS. THE COMPANY WISHES TO
CAUTION READERS THAT ALL FORWARD-LOOKING STATEMENTS ARE NECESSARILY SPECULATIVE
AND NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS, WHICH
SPEAK ONLY AS OF THE DATE MADE. ACTUAL RESULTS COULD VARY MATERIALLY FROM THOSE
ANTICIPATED FOR A VARIETY OF REASONS, INCLUDING, WITHOUT LIMITATION, THE
POTENTIAL CANCELLATION AND/OR DELAY OF PROMOTIONS DUE TO DELAYS IN RELEASE OF
THE THEATRICAL MOTION PICTURES, THE FAILURE OF THE COMPANY TO OBTAIN PROMOTIONS
PROJECTS BASED ON THESE MOTION PICTURES AT ANTICIPATED LEVELS, THE SUCCESS OR
FAILURE OF A SPECIFIC MOTION PICTURE OR TELEVISION PROPERTY, THE LOSS OF
EXISTING LICENSES OR THE INABILITY TO RENEW OR EXTEND LICENSES UNDER FAVORABLE
TERMS, CONSUMER DEMAND FOR ITS PRODUCTS, THE COMPANY'S DEPENDENCE ON A SINGLE
CUSTOMER, QUARTERLY FLUCTUATIONS IN FINANCIALS RESULTS AND INCREASES IN
INTERNATIONAL TARIFF RATES, WHICH WOULD INCREASE THE COMPANY'S COST OF SALES.
THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS, WHICH MAY BE MADE TO REFLECT
EVENTS OR CIRCUMSTANCE AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
