Exhibit 10.5
STOCK PURCHASE AGREEMENT
AMONG
FUN TYME CONCEPTS, INC.,
PLAY CO. CAPITAL CORP.,
BBS HOLDINGS, LLC,
THE MEMBERS OF BBS HOLDINGS, LLC,
CAT L.L.C. and RICH L.L.C.
May 28, 1998
TABLE OF CONTENTS
Page
1. Definitions ...................................................................................................3
2. Terms of Exchange .............................................................................................7
3. Representations and Warranties Concerning the
Transaction ....................................................................................................7
4. Representations and Warranties
Concerning the Target, its Subsidiary and Cortina ..............................................................9
5. Post-Closing Covenants .......................................................................................16
6. Remedies for Breaches of This Agreement ......................................................................17
7. Miscellaneous ................................................................................................20
Exhibit A=Appraisal of Cortina Mountain Ski Resort
Exhibit B=Operating Agreement for BBS Holdings, LLC
Exhibit C=Amended Operating Agreement for Prestige
Exhibit D=Contract to purchase Cortina Mountain Ski Resort
Exhibit E=Sales Agreement between J.K. Ltd., Inc. and Prestige and Exclusive
Marketing Agreement with Prestige Chain, Inc.
Exhibit F=Assignment of rights in Cortina Mountain Ski Resort to Playco and
Assumption of Promissory Note to Cortina Mtn. Partnership
STOCK PURCHASE AGREEMENT
AGREEMENT made as of the 28th day of May, 1998, by and among Fun Tyme
Concepts, Inc., a New York corporation with its principal executive offices
located at 000 Xxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000 ("Acquirer"), Play Co.
Capital Corp., a Delaware corporation, with offices located at 000X Xxxxxxx
Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000 (ATarget@), BBS Holdings, LLC, a limited
liability company organized under the laws of the state of Delaware ("BBS
Holdings"), the members of BBS Holdings, Xxxxxxx Xx Xxxxxx, an individual
residing at 000X Xxxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000 (ADiMatteo@) and
LD Trust, a trust formed under the laws of the state of Delaware, located at c/o
X.X. Xxxx LLP, 75 Eisenhower Parkway, Roseland, NJ 07068-1697 (the ATrust@)
(XxXxxxxx and Trust are collectively referred to as the "Sellers"), CAT L.L.C.,
a limited liability company, located at 000 Xxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx
00000 (ACAT L.L.C.@) and RICH L.L.C., a limited liability company, located at
000 Xxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000 (ARICH L.L.C.@).
W I T N E S S E T H:
WHEREAS, Target is corporation which is wholly owned by BBS Holdings, a
limited liability company with its only members being Sellers; and
WHERAS, Target owns (i) a 50% interest in Prestige Fine Jewelry, LLC, a
company which is the exclusive marketing arm for a gold manufacturing business
(APrestige@) and (ii) all rights, title and interest to a contract (the
"Contract") to purchase a lease and certain real and personal property
incorporated therein with respect to the Cortina Mountain Ski Resort (ACortina@)
as annexed hereto as Exhibit D; and
WHEREAS, Xxxxxx Xxxxxxxxx, sole member of CAT L.L.C. and Xxxxxxx Xxxxx sole
member of RICH L.L.C. are officers, directors and principal stockholders of
Acquirer; and
WHEREAS, in accordance with its overall plan of reorganization under
Section 368(a)(1)(B) of the Internal Revenue Service Code, the parties to this
Agreement, individually, by their respective boards of directors and members, as
appropriate, have agreed that it is in the best interests of all parties for
Target to be acquired by Acquirer upon the terms and conditions set forth
herein, in a tax free exchange, whereby, Target shall be a wholly owned
subsidiary of Acquirer.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions.
"Acquirer" has the meaning set forth in the preface above.
"Acquirer's Shares" means an aggregate of 8,302,000 shares of Common
Stock of Acquirer, of which (i) 7,230,000 shares are to be issued by Acquirer in
accordance with this Agreement and (ii) 982,000 shares of Acquirer=s Common
Stock are owned in the aggregate by CAT L.L.C. and RICH L.L.C..
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the rules and
regulations promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Closing" has the meaning set forth in '2(e) herein.
"Closing Date" has the meaning set forth in '2(e) herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Target that is not already generally available to
the public.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations- in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past customs and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security" has the meaning set forth in '2 of the Securities Act.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Sellers" means all the stockholders of Target as set forth in the
preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Target" has the meaning set forth in the preface above.
"Target's Shares" means all the issued and outstanding shares of the
Common Stock, no par value per share, of the Target.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Sec. 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. Terms of the Exchange.
(a) Basic Transaction. The Acquirer hereby exchanges with BBS Holdings
7,230,000 of the Acquirer's Shares for the Target's Shares. In addition, CAT
L.L.C. and RICH L.L.C. hereby contribute an aggregate of 922,000 of the
Acquirer=s Shares to BBS Holdings. Each of CAT L.L.C. and RICH L.L.C., are
transferring there rights in BBS Holdings to CAT Trust and RAR Trust,
respectively, which trusts shall become members of BBS Holdings, in accordance
with '2(d) below.
(b) Ownership of Prestige. In accordance with the operating agreement of
Prestige Sellers have obtained consents to the transfer=s herein described as
well as a fully executed operating agreement from the remaining member of
Prestige, as annexed hereto as Exhibits C, whereby, Target is a 50% owner in
Prestige.
(c) Contract to Purchase Cortina Properties; Appraisal. The Sellers have
obtained and perfected in the name of Target, including but not limited to
obtaining all necessary consents and performing all necessary filings, all
rights, title and interest to the Contract, which is annexed hereto as Exhibit D
and the assignment to the contract to Target is annexed hereto as Exhibit F. In
accordance with this Agreement Target has had an appraisal performed on Cortina,
a copy of which is annexed hereto as Exhibit A.
(d) Formation of Parent. Sellers have formed BBS Holdings LLC., a limited
liability company to be the parent company of the Acquirer, to own Acquirer=s
Shares. Simultaneously with the Closing all members of Parent shall execute an
operating agreement for the control and operation of the Parent, in the form
annexed hereto as Exhibit C.
(e) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") is taking place at the offices of Acquirer=s Counsel
on the date hereof (the "Closing Date"). The Closing shall be deemed to have
occurred at 11:59 p.m. on the Closing Date.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the Sellers
represents and warrants to the Acquirer that the statements contained in this
?3(a) are correct and complete as of the date of this Agreement with respect to
himself or itself.
(i) Authorization of Transaction. This Agreement constitutes the valid
and legally binding obligation of each Seller, enforceable against each
Seller in accordance with its terms and conditions. No Seller either
individually or collectively needs to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any other Seller
or Person, in order to consummate the transactions contemplated by this
Agreement, except that certain third party consents are required as
identified herein.
(ii) Noncontravention. Except for the consents referred to in the
Schedules herein, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Target or any
Seller is a party or by which he/she or it is bound or to which any of
his/her or its assets are subject.
(iii) Brokers' Fees. No Seller has any Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Acquirer could
become liable or obligated.
(iv) Investment. The Sellers understand that the Acquirer's Shares
have not been, and will not be, registered under the Securities Act, or
under any state securities laws, and are being offered and sold in reliance
upon exceptions from the federal and state securities laws, in accordance
with transactions not involving any public offering.
(v) Target's Shares. Each Seller holds of record and owns beneficially
the number of Target Shares as provided for in the Target=s corporate book
and stock ledger, which have been duly authorized, validly issued, fully
paid and non-assessable, free and clear of any liens and encumbrances,
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. The Sellers, individually or as a group are not a party to any
option, warrant, purchase right, or other contract or commitment that could
require any or all the Sellers to sell, transfer, or otherwise dispose of
any capital stock of the Target (other than this Agreement). No Seller is a
party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Target. The Target's
Shares, when exchanged for the Acquirer's Shares, will confer good title to
same upon the Acquirer.
(b) Representations and Warranties of the Acquirer. The Acquirer represents
and warrants to the Sellers that the statements contained in this '3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this '3(b)).
(i) Organization of the Acquirer. The Acquirer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of New York.
(ii) Authorization of Transaction. The Acquirer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Acquirer, enforceable against the Acquirer in accordance with its terms and
conditions. The Acquirer need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the
Acquirer is a party or by which it is bound or to which any of its assets
is subject.
(iv) Acquirer's Shares. The Acquirer's Shares, when issued and
delivered to the Sellers at the Closing, will be duly authorized, validly
issued, fully paid and non-assessable, free and clear of all liens and
encumbrances and will confer good title to same upon the Sellers.
4. Representations and Warranties Concerning the Target, its Subsidiary and
Cortina.
Each Seller represents and warrants to the Acquirer that the statements
contained in this '4 are correct and complete as of the date of this Agreement.
Nothing in the annexed schedules shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
schedule identifies the exception with particularity and describes the relevant
facts in detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). All representation and warranties made in this
Paragraph 4 referring to the ATarget@ shall include representations and
warranties on behalf of its subsidiary, Prestige and as to the rights to
Cortina, as these businesses are the sole operations of the Target.
(a) Organization, Qualification, and Corporate Power. The Target and
its subsidiary are corporations or limited liability companies duly organized,
validly existing, and in good standing under the laws of their states of
formation and duly authorized to conduct business and in good standing under the
laws of each jurisdiction where such qualification is required, except where the
failure to so qualify does not materially adversely affect the business or
financial condition of the Target. The Target and its subsidiary have full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which they are engaged, and to own and
use the properties, including but not limited to all real and personal property,
owned and used by it. Target and subsidiary own all of their properties,
inclusive of but not limited to all real and personal properties. The Sellers
have delivered to the Acquirer correct and complete copies of the charter and
bylaws of the Target (as amended to date). The minute books containing the
records of meetings of the shareholders, the board of directors, and any
committees of the board of directors, the stock certificate books, and the stock
record books of the Target is correct and complete. The Target is not in default
under or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Target
shall consist of as of the Closing Date, 200 shares of Common Stock, no par
value per share (the "Common Stock"), of which 100 shares will be issued and
outstanding, of which XxXxxxxx owns 20 shares and the Trust owns 80 shares. All
of the issued and outstanding shares have been duly authorized, and will be
validly issued, fully paid, and non-assessable, and are held of record and
beneficially by the respective Sellers. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the Target
to issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Target. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Target. With respect to Prestige the
Target is the 50% owner of such limited liability company, there being no
outstanding or authorized, by either Prestige or Target, options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Target or allow another
party the right to issue, sell, or otherwise cause to become outstanding any of
ownership in Prestige.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Target of its subsidiary are subject
or any provision of the charter or bylaws of either the Target or its
subsidiares or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Target or its subsidiary is a party or by which they are bound or to which
any of their assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Neither the Target nor any of its subsidiary
needs to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
(d) Title to Assets. The Target and its subsidiary have good and
marketable title to, or a valid leasehold interest in the properties and assets
used by it, free and clear of all Security Interests, except those set forth in
Schedule 4(d) and except for properties and assets disposed of in the Ordinary
Course of Business. The contract to purchase Cortina and the assignment to
Target, annexed hereto as Exhibits D and F, are valid and binding agreements,
enforceable in accordance with there terms.
(e) Subsidiary. The Target=s only subsidiary is Prestige and does not
own or have the right or option to acquire any Security of any Person, except
the rights to Cortina.
(f) Intentionally Left Blank.
(g) Events Subsequent to the Most Recent Fiscal Year End. Since
formation with respect to Prestige and Target, there has not been any material
adverse change in the business, financial condition, operations, results of
operations, or future prospects. Without limiting the generality of the
foregoing, since that date:
(i) neither Target nor its subsidiary has sold, leased, transferred,
or assigned any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(ii) neither Target nor its subsidiary has entered into any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $25,000 or outside the
Ordinary Course of Business;
(iii) no party has accelerated, terminated, modified, or canceled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) with Prestige, or by which Prestige is
bound;
(iv) neither Target nor its subsidiary has imposed any Security
Interest upon any of its assets, tangible or intangible;
(v) neither Target nor its subsidiary has made any capital expenditure
(or series of related capital expenditures) either involving more than
$25,000 or outside the Ordinary Course of Business;
(vi) neither Target nor its subsidiary has made any capital investment
in, any loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans, and
acquisitions);
(vii) neither Target nor its subsidiary has issued any note, bond, or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
(viii) neither Target nor its subsidiary has delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary
Course of Business whereby there are no liabilities in default and no
accounts payable older than 30 days;
(ix) neither Target nor its subsidiary has canceled, compromised,
waived, or released any right or claim (or series of related rights and
claims);
(x) neither Target nor its subsidiary has granted any license or
sublicense of any rights under or with respect to any real or personal
property or terminated a right it has acquired;
(xi) except for the amendment to the operating agreement of Prestige,
referred to in Exhibits C, there has been no change made or authorized in
Prestige or Target;
(xii) except for the shares of Common Stock owned by the Sellers,
Target has not issued, sold, or otherwise disposed of any of its capital
stock, or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(xiii) Target has declared, set aside, or paid any dividend or made
any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital
stock;
(xiv) neither Target nor its subsidiary experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xv) neither Target nor its subsidiary made any loan to, or entered
into any other transaction with, any of its directors, officers, and
employees;
(xvi) neither Target nor its subsidiary entered into any employment
contract or collective bargaining agreement, written or oral, and there are
no such agreements presently in effect;
(xvii) neither Target nor its subsidiary adopted, amended, modified,
or terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any other
Employee Benefit Plan);
(xviii) neither Target nor its subsidiary made or pledged to make any
charitable or other capital contribution;
(xix) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving Prestige or Target; and
(xx) neither Target nor its subsidiary committed to any of the
foregoing.
(h) Undisclosed Liabilities. Except as listed on Schedule 4(h) neither
nor any of its subsidiary have any Liability in excess of $10,000 and there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability, none of which results from, arises out of, relates to, is
in the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law.
(i) Legal Compliance. The Target and its subsidiary, and its and their
respective predecessors and Affiliates have complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply.
(j) Tax Matters.
The Target and its subsidiaries have filed all Tax Returns during the
past five years that it was required to file and all Taxes owed by the Target
(whether or not shown on any Tax Return) have been paid. The Target is not
currently the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where the
Target does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the assets of the
Target that arose in connection with any failure (or alleged failure) to pay any
Tax.
(k) Real Property. Except with respect to Cortina, the Target does not
own or lease any real property and has not entered into any agreement to acquire
any real property, except and annexed as Exhibit F, which contains an accurate
legal description by categories of all real estate and easements and other
rights in real property, owned or leased by or to Target. All such leases of
real property are valid, binding and enforceable in accordance with their terms
neither Target nor, to Target's knowledge, any other party thereto is in default
thereunder.
(b) Target has all of the property and property rights used or necessary in
the operation of the business as presently conducted. Target owns good and
marketable title to all of its real and personal property free and clear of all
security interests, mortgages, pledges, liens, conditional sales agreements,
leases, encumbrances, charges, or claims of third parties of any nature
whatsoever.
(c) All real estate leased to Target and all machinery, equipment,
leasehold improvements, furniture, furnishings, plant and office equipment and
other fixed assets of Target and Target=s use of the same, comply in all
material respects with all applicable ordinances and regulations and building,
zoning or other laws. All such assets are and will be, as of the Closing Date,
in good working order and condition and suitable for use in the operation of the
business of Target, subject to ordinary wear and tear.
(l) Intellectual Property.
Neither the Target nor Prestige own or have the right to use pursuant
to any license, sublicense, agreement, or permission any intellectual property
necessary for the operation of their businesses.
(m) Tangible Assets. The Target and its subsidiary owns or leases all
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of their businesses as presently conducted and as presently proposed to
be conducted. Each such tangible asset is free from defects (patent and latent),
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
(n) Inventory. The inventory of the Target and its subsidiary consists
of raw materials and supplies, manufactured and purchased parts, goods in
process, and finished goods, all of which are merchantable and fit for the
purpose for which they were procured or manufactured, and none of which are
slow-moving, obsolete, damaged, or defective.
(o) Contracts. The sole contracts of the Target are the contracts
referenced in '4(d) regarding Cortina and the Sales Agreement between J.K. Ltd.,
Inc. and Prestige and Exclusive Marketing Agreement between Prestige and
Prestige Chain, Inc. annexed hereto as Exhibit E, all of which are correct and
complete copies of each written agreement (as amended to date) With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) no party
is in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (D) no party has repudiated any
provision of the agreement.
(p) Notes and Accounts Receivable. All notes and accounts receivable of
the Target and its subsidiary are reflected properly on its books and records,
are valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts.
(q) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Target, its subsidiary or any of the Sellers.
(r) Insurance. Each of the Target and its subsidiares have appropriate
insurance coverage applicable to their businesses and with respect thereto each
such insurance policy: (A) the policy is legal, valid, binding, enforceable, and
in full force and effect; (B) the policy will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (C) neither the Target
nor any other party to any policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (D) no party to the policy has repudiated any provision thereof.
(s) Litigation. Neither the Target nor its subsidiary (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge nor (ii)
is it a party or to the best Knowledge of any of the Sellers and the directors
and officers of the Target threatened to be made a party to or has any reason to
believe that there may be the commencement of any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator.
(t) Product Warranty. Each product manufactured, sold or delivered by
the Target or its subsidiairies has been in conformity with all applicable
contractual commitments and all express and implied warranties, and the Target
does not have any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability) for replacement or
repair thereof or other damages in connection therewith. No product
manufactured, sold or delivered by the Target is subject to any guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale not in the ordinary course of business.
(u) Product Liability. Neither the Target nor any of its subsidiary has
any Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold or delivered by the Target.
(v) Employees. Except as annexed as Schedule 4(v) neither Target nor
any subsidiary is bound by any employment agreement or collective bargaining
agreement, nor has either experienced any strikes, grievances, claims of unfair
labor practices, or other collective bargaining disputes. Neither the Target or
any subsidiary, nor any of its or their officers or directors have committed any
unfair labor practice.
(w) Employee Benefits.
(i) Neither the Target nor any subsidiary contributes or
maintains and has never contributed or maintained any Employee Benefit Plan.
Neither the Target nor any subsidiary has contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.
(iii) Neither the Target nor any subsidiary has maintained or
contributed to or has ever been required to contribute to any Employee Welfare
Benefit Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their spouses,
or their dependents (other than in accordance with Code Sec. 4980B).
(x) Guaranties. Neither the Target nor any subsidiary is a guarantor or
otherwise liable for any Liability or obligation (including indebtedness) of any
other Person, except for a promissory note in the principal amount of $165,000
in accordance with its acquisition of the rights to the Contract.
(y) Disclosure. The representations and warranties contained in this '4
do not contain any material untrue statement of a fact or omit to state any
material fact necessary in order to make the statements and information
contained in this '4 not misleading.
5. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under '6 below). The
Sellers acknowledge and agree that from and after the Closing the Acquirer will
be entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the Target.
(b) Confidentiality. Each of the Sellers will treat and hold as such
all of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Acquirer or destroy, at the request and option of the Acquirer, all tangible
embodiments (and all copies) of the Confidential Information which are in
his/her possession. In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Seller will notify the
Acquirer promptly of the request or requirement so that the Acquirer may seek an
appropriate protective order or waive compliance with the provisions of this
'5(b). If, in the absence of a protective order or the receipt of a waiver
hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Seller shall use his/her best efforts to
obtain, at the request of the Acquirer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Acquirer shall designate. The
foregoing provisions shall not apply to any Confidential Information which is
generally available to the public immediately prior to the time of disclosure.
6. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. All of the representations
and warranties of the Parties contained in this Agreement shall survive the
Closing hereunder (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period subject to the applicable statutes of
limitations.
(b) Indemnification By Sellers. Subject to the limitations set forth in
'6(e) hereof as to the amount and manner of payment of indemnification
obligations hereunder, each of the Sellers does hereby indemnify and hold
Acquirer harmless from and against each Seller's pro rata share of any Adverse
Consequences sustained by the Acquirer as a result of any untrue
representations, breach of warranty or non-fulfillment of any covenant or
agreement by each such Seller contained herein or in any certificate, document
or instrument delivered to Acquirer hereunder, provided that Acquirer shall have
given written notice to each of the Sellers of any claim for indemnification
prior to the expiration of the applicable survival period set forth in '6(a)
hereof.
(c) Indemnification By Acquirer. The Acquirer does hereby indemnify and
hold each of the Sellers harmless from and against any Adverse Consequences
sustained by each Seller as a result of any untrue representation, breach of
warranty or non-fulfillment of any covenant or agreement by Acquirer contained
herein or in any certificate, document or instrument delivered to Sellers
hereunder, provided that Sellers shall have given written notice to Acquirer of
any claim for indemnification prior to the expiration of the applicable survival
period set forth in '6(a) hereof.
(d) Procedures for Indemnification. The procedures for Indemnification
shall be as follows:
(i) The party claiming indemnification ("Claimant") shall
promptly give notice to the party or parties from whom indemnification
is claimed ("Indemnitor") of any claim, whether between the parties or
brought by a third party, specifying the factual basis for such claim
and the amount of claim. If the claim relates to an action, suit or
proceeding filed by a third party against Claimant, such notice shall
be given by Claimant to Indemnitor within five (5) business days after
written notice of such action, suit or proceeding was given to
Claimant.
(ii) Following receipt of notice from the Claimant of any
claim, the Indemnitor shall have thirty (30) days, except where such
claim requires a sooner response, in which to make such investigation
of the claims as the Indemnitor deems necessary or desirable. For the
purpose of such investigation, the Claimant agrees to make available to
the Indemnitor and/or Indemnitor's authorized representatives, the
information relied upon by the Claimant to substantiate the claim. If
the Claimant and the Indemnitor agree at or prior to the expiration of
said period (or any mutually agreed upon extension thereof) as to the
validity and amount of such claim, the Indemnitor or Indemnitors shall
pay to the Claimant their pro rata portion of such claim in the manner
and subject to the limitations set forth hereinafter in '6(e). If the
Claimant and the Indemnitor fail to agree as aforesaid, then the
Claimant may seek appropriate legal remedy.
(iii) With respect to any claim by a third party as to which
the Claimant is entitled to indemnification hereunder (other than those
relating to liabilities for Taxes, which are subject to subparagraph
(iv) hereof), the Indemnitor shall have the right at any time at its
own expense to assume and thereafter conduct and control the defense of
the third party claim with counsel of Indemnitor's choice. The Claimant
shall cooperate fully with the Indemnitor, subject to reimbursement for
actual out-of-pocket expenses incurred by the Claimant as a result of
request by the Indemnitor. If the Indemnitor elects to assume control
of the defense of any third party claim, the Claimant shall have the
right to participate in such defense at its own expense. If the
Indemnitor does not elect to assume control or otherwise participate in
the defense of any third party claim, the Indemnitor shall be bound by
the results obtained by the Claimant with respect to such claim.
Indemnitor has three (3) business days to either consent to such action
or defend against the claim. In the event that the Indemnitor fails to
consent or commence defending the claim within the time specified, then
the Claimant may enter into such consent or judgement without the
Indemnitors consent. Notwithstanding anything to the contrary set forth
in this '8(d)(iii) the Claimant shall not settle or consent to the
entry of any judgment with respect to the third party claim without the
prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld. However, in the event that the consent requires
the payment of money damages only, and the payment is to be made by the
Indemnitor at the time of entering into the settlement, then Indemnitor
need not receive the consent of the Claimant.
(iv) In the case of any audit, examination or other proceeding
("Proceeding") with respect to Taxes for which Sellers have agreed to
indemnify Acquirer pursuant to this Agreement, Acquirer shall promptly
inform Sellers, and shall afford Sellers, at Seller's expense the
opportunity to control the conduct of such Proceeding. Acquirer shall
execute or cause to be executed powers of attorney or other documents
necessary to enable Sellers to take all actions desired by Sellers with
respect to such Proceeding to the extent such Proceeding may affect the
amount of Taxes for which Sellers are liable pursuant to this
Agreement. Sellers shall have the right to control any such Proceeding
and if necessary initiate any claim for refund, file any amended return
or take any other action which it deems appropriate with respect to
such Taxes. Sellers shall be entitled to retain any refund attributable
to any tax period prior to the Closing, except with respect to the Tax
Period. Notwithstanding anything to the contrary set forth in this
'6(d)(iv) the Claimant shall not settle or consent to the entry of any
judgment with respect to the third party claim without the prior
written consent of the Indemnitor, which consent shall not be
unreasonably withheld. However, in the event that the consent requires
the payment of money damages only, and the payment is to be made by the
Indemnitor at the time of entering into the settlement, then Indemnitor
need not receive the consent of the Claimant.
(e) Limitations On Amount and Manner of Payment of Sellers' Indemnification
Obligations.
(i) Acquirer shall have no right of recovery against Sellers
pursuant to the indemnification provisions under this '6 until the aggregate
amount of all Adverse Consequences exceeds $25,000 and then to the extent of all
such adverse consequences.
(ii) The aggregate amount of the liability of all Sellers
hereunder for indemnification of Acquirer's Adverse Consequences shall be
recoverable solely from the shares of Acquirer received pursuant to the terms of
this Agreement and any proceeds received by Sellers from the redemption or sale
of the aforesaid.
7. Miscellaneous.
(a) Nature of Certain Obligations. The covenants of each of the Sellers
in '2(a) above concerning the sale of his/her Target's Shares to the Acquirer
and the representations and warranties of each of the Sellers in '3(a) above
concerning the transaction are several obligations. This means that the
particular Seller making the representation, warranty, or covenant will be
solely responsible to the extent provided in '6 above for any Adverse
Consequences the Acquirer may suffer as a result of any breach thereof.
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Acquirer and the Sellers; provided, however, that the Acquirer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Acquirer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
herein. Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of New York.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Acquirer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties, the Target will bear his/her or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Sellers agree that the Target has not borne and will not bear any of the
Sellers' costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(n) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in the County of New York,
State of New York, in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to this Agreement in
any other court. Each of the Parties waives any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with respect
thereto. Any Party may make service on any other Party by sending or delivering
a copy of the process (i) to the Party to be served at the address and in the
manner provided for the giving of notices in '8(g) above. Nothing in this '8(n),
however, shall affect the right of any Party to bring any action or proceeding
arising out of or relating to this Agreement in any other court or to serve
legal process in any other manner permitted by law or at equity. Each Party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
FUN TYME CONCEPTS, INC. BBS HOLDINGS, LLC
By:/s/Xxxxxx Xxxxxxxxx By:/s/ Xxxxxx Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx Name: Xxxxxx Xxxxxxxxx
Title:President Title:
SELLERS:
/s/Xxxxxxx XxXxxxxx /s/ Xxxx Xxxxxxxxx
Xxxxxxx XxXxxxxx LD Trust, by its Trustee, Xxxx Xxxxxxxxx
/s/Xxxxxx Xxxxxxxxx /s/Xxxxxxx Xxxxx
CAT L.L.C. RICH L.L.C.
PLAY CO. CAPITAL CORP.
By: /s/ Xxxxxxx XxXxxxxx
Xxxxxxx XxXxxxxx
President
