ROYALTY AGREEMENT
This Royalty Agreement (the "Agreement") is made as of March 15, 2005, by
and among SPARKS EXHIBITS & ENVIRONMENTS CORP., a Pennsylvania corporation
located at 0000 Xxxxxxx Xxxx, Xxxxxxxxxxxx, XX 00000 ("Sparks"), ARGOSY
INVESTMENT PARTNERS II, L.P., a Pennsylvania limited partnership located at 000
Xxxx Xxxxxx Xxxx, Xxxxx 0000, Xxxxx, XX 00000 ("Argosy"), and ALLIANCE MEZZANINE
INVESTORS, L.P., a New Jersey limited partnership located at 00 Xxxxxxx Xxxxxx,
Xxxxxx, XX 00000 ("Alliance"). Argosy and Alliance are collectively referred to
herein as the "Creditors".
The parties to this Agreement are also parties to an Agreement dated the
date hereof (the "Sale Agreement") pursuant to which Argosy and Alliance sold
certain securities and the agreements and documents ancillary thereto to Sparks.
Section 2 of the Sale Agreement provides that as part of the consideration for
the sale under the Agreement, the Company will execute and deliver this Royalty
Agreement to the Creditors.
NOW, THEREFORE, in consideration of the matters recited above and the
mutual covenants contained herein, and intending to be legally bound, the
parties hereby agree as follows:
1. Royalty.
(a) Sparks will pay the Creditors a royalty of 1% of Company Sales (as
defined below) during the period beginning on April 1, 2005 and ending on March
31, 2009.
(b) "Company Sales" shall be defined as all sales originating from the
customers of Showtime Enterprises, Inc. and Showtime Enterprises West, Inc.
listed on Schedule A (the "Customers") and account executives listed on Schedule
B (the "Account Executives"), including without limitation, new customers
generated by the Account Executives or customers of Sparks transferred to or
covered by the Account Executives. Company Sales shall be determined in
accordance with generally accepted accounting principles and shall not include
sales, use or value added taxes.
(c) Sparks shall make payments of each Creditor's Pro Rata Share (as
defined below) of royalties due under this Agreement on the following dates:
(i) on or before June 30, 2006, the royalties due for the twelve
month period ending March 31, 2006;
(ii) on or before June 30, 2007, the royalties due for the twelve
month period ending March 31, 2007;
(iii) on or before June 30, 2008, the royalties due for the twelve
month period ending March 31, 2008; and
(iv) on or before June 30, 2009, the royalties due for the twelve
month period ending March 31, 2008.
Each payment shall be made to the Creditors by check or pursuant to the wire
instructions set forth in Section 4 hereof. On or before the date each such
payment is due, Sparks shall provide each of the Creditors with a detailed
accounting of the Company Sales for the period just ended.
(d) "Pro Rata Share" shall be defined as 64.286% for Argosy and 35.714%
for Alliance.
(e) Sparks covenants and agrees to maintain complete and accurate records
of the accounting information related to the Company Sales. For the sole purpose
of verifying compliance with the terms of this Agreement, each Creditor will
have the right upon reasonable notice and upon reason to inspect and audit all
relevant account and sales books and records of Sparks. In no event will the
Creditors collectively conduct more than one such audit per year. If such audit
should disclose an under-reporting of any royalties due Creditors, then Sparks
will promptly pay Creditors such amount. If the under-reporting exceeds 5% of
royalties actually due, shall be accompanied by interest thereon at the lower of
the rate of 9% per annum or the maximum rate allowed by applicable law for the
period from the date the amounts should have been paid to the date they are
paid, plus the cost of the audit. If such audit should disclose an overpayment
of royalties, each Creditor will promptly refund its Pro Rata Share of the
amount of overpayment.
2. Warranty and Covenant. Sparks represents and warrants to the Creditors
that it is not under any obligation to any third party that would prevent, limit
or interfere with this Agreement to pay royalties to the Creditors, and
covenants that it shall not incur any such obligation.
3. Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder: (a) default in any payment by Sparks
hereunder which continues for five (5) business days after receipt of written
notice of such default; or (b) breach by Sparks of any covenant or agreement
herein and expiration of any applicable notice and cure period (but in no event
less than five (5) business days after receipt of written notice of such
default).
4. Miscellaneous.
(a) Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (i) delivered
personally, (ii) mailed by first class certified mail, return receipt requested,
postage prepaid, or (iii) sent by a nationally recognized overnight courier
service, postage or delivery charges prepaid, to the parties at their respective
addresses set forth on the first page of this Agreement or to such other
addresses of which the parties may give notice in accordance with this Section
4(a).
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(b) Wire Transfer Instructions.
For Argosy:
Bank Name: National Penn Bank
Philadelphia & Xxxxxxx Xxxxxxx
Xxxxxxxxx, XX
ABA: 031 308 784
Account #: 959-3152
Account Name: Argosy Investment Partners II, L.P.
For Alliance:
Bank Name: Commerce Bank
00 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
ABA: 000000000
Account #: 000-00000-0
Acct Name: Alliance Mezzanine Investors, LP
(c) Entire Understanding; Modification. This Agreement sets forth the
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous, written, oral, expressed or implied,
communications, agreements and understandings with respect to the subject matter
hereof. This Agreement shall not be amended, modified, supplemented or
terminated except in writing signed by both parties.
(d) Parties in Interest. This Agreement shall inure to the benefit of,
bind and be enforceable by Sparks and the Creditors. This Agreement shall not be
assignable or delegable by any party without the prior written consent of the
other party, provided Sparks may assign its rights and duties hereunder without
the Creditors' consent to a successor in the event of a sale, merger,
consolidation or similar transaction of Sparks or its parent entities.
(e) Severability. If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
(f) Counterparts. This Agreement may be fully executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
(g) Section Headings; References. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect. All words used in this Agreement shall be construed to be of
such number and gender as the context requires or permits.
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(h) Waivers. Neither the failure nor delay on the part of either party to
exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall the single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or any other right, remedy, power or privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of such right, remedy, power or privilege with respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed
by the party asserted to have granted such waiver.
(i) Controlling Law. This agreement is made under, and shall be governed
by, construed and enforced in accordance with, the substantive laws of the
Commonwealth of Pennsylvania applicable to agreements made and to be performed
entirely therein without giving effect to principles of conflicts of laws.
(j) EXCLUSIVE JURISDICTION. IN ANY ACTION OR PROCEEDING BETWEEN THE
PARTIES HERETO, THE PARTIES IRREVOCABLY CONSENT AND AGREE TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN PENNSYLVANIA; AND
SERVICE OF PROCESS BY HAND DELIVERY OR BY CERTIFIED MAIL, TO THE ADDRESSES SET
FORTH ABOVE FOR EACH PARTY.
(k) Survival. The provisions of this Agreement shall survive and continue
in full force in accordance with their terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date above written.
Sparks Exhibits & Environments Corp.
By:
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Argosy Investment Partners II, L.P.
By: Argosy Associates II, L.P., its
general partner
By: Argosy Associates II, Inc., its
general partner
By:
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Name: Xxxx Xxxxxxxx
Title: Vice President
Alliance Mezzanine Investors, L.P.
By: AMI Advisors, LLC, its general partner
By:
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Name: Xxxxx X. Xxxxxx
Title: Director
