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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") made and entered into
this 18th day of January 2000, by and between BIKERS DREAM, INC. ("Seller"), and
V-TWIN HOLDINGS, INC., a District of Columbia corporation ("Purchaser").
WHEREAS, Seller's retail stores division: (i) is engaged in the sale and
servicing of motorcycles to the general public at five Company-owned Bikers
Dream Superstores in Santa Xxx, Sacramento and San Diego, California, Dallas,
Texas, and Conover, North Carolina (collectively, the "Company Superstores");
(ii) licenses the Seller's Intellectual Property (as defined below) and use of
its business model and operating manuals to its independently owned Bikers Dream
Superstores pursuant to the license agreements described in Schedule 1.1.9
hereto (collectively, the "License Agreements"); and (iii) operates an
e-commerce site under the domain name "xxxxxx-xxxxx.xxx" (the "Domain Name") for
the sale to the public of motorcycle parts, accessories and apparel (the
businesses referred to in clauses (i), (ii) and (iii) above are hereafter
collectively referred to as the "Retail Business"); and
WHEREAS, pursuant to the terms and subject to the conditions set forth
herein, Seller desires to sell to Purchaser, and Purchaser hereby desires to
acquire from Seller, certain assets relating to the operation of the Retail
Business, and Purchaser desires to assume certain liabilities in connection
therewith (including, without limitation, the assignment by Seller to Purchaser
of Seller's rights under the License Agreements and Seller's leases for the
Company Superstores, and the assumption by Purchaser of Seller's obligations
under said agreements); and
WHEREAS, pursuant to the terms and conditions set forth herein, after the
Settlement Date, Purchaser desires to continue to operate the Company
Superstores at the five locations described above and in connection therewith,
to enter into a Master Dealer Agreement with Seller relating to the distribution
of Seller's Ultra Brand of motorcyles.
NOW, THEREFORE, in consideration of the terms, covenants and conditions
contained herein, the parties agree as follows:
1. GENERAL TERMS OF SALE
1.1 Contract to Sell. Subject to the terms and conditions
set forth herein, Seller hereby agrees to sell, assign, transfer and deliver to
Purchaser, and Purchaser hereby agrees to purchase from Seller, the following
assets and properties (collectively, the "Assets"):
1.1.1 All goods, supplies, equipment and fixtures
(including trade fixtures, office machinery and equipment), used primarily in
the operation of the Company Superstores
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which are present at the Company Superstores as of the close of business on the
day before the Settlement Date (the "Fixed Assets");
1.1.2 All inventory of the Company Superstores as of
the Settlement Date consisting of new and used motorcycles, motorcycle parts,
clothing and accessories, up to the Fixed Value (as defined in Section 2.2
hereof) thereof as of the Settlement Date (the "Inventory");
1.1.3 The motor vehicles used in the operation of the
Company Superstores as described in Schedule 1.1.3 hereof;
1.1.4 All of Seller's right, title and interest in
contracts held by Seller with any of its suppliers or vendors to the Company
Superstores, to the extent that such agreements may be assignable or assumable;
1.1.5 All the intellectual property assets of Seller
set forth in Schedule 1.1.5, including the trade name "Bikers Dream" together
with the current logo and/or service xxxx and other right as the licensor (the
"Intellectual Property");
1.1.6 The right to the use of the assumed name "Bikers
Dream" and the existing telephone numbers of the Company Superstores, to the
extent such telephone numbers can be assigned to Purchaser;
1.1.7 All of Seller's right, title and interest in and
to the Domain Name and related Intellectual Property;
1.1.8 All of Seller's right, title and interest in and
to the domain name "xxxxxxxxxxx.xxx" (the "Disputed Domain Name") and related
Intellectual Property as set forth in and pursuant to Section 5.17.1 of this
Agreement;
1.1.9 All of Seller's right, title and interest under
the License Agreements, with the exception of any License Agreements under
dispute of any kind as of the date of this Agreement and disclosed in Schedule
1.1.9 (the "Disputed License Agreements");
1.1.10 All of Seller's right, title and interest as
lessee in and to the real property leases for each of the Company Superstores,
including the leases identified on Schedule 1.1.10 hereto;
1.1.11 All of Seller's right, title and interest in and
to the equipment leases for all equipment located on the premised of the Company
Superstores as of the Settlement Date, including without limitation the
equipment leases identified on Schedule 1.1.11 hereto, to the extent that such
agreements may be assignable or assumable.
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1.1.12 All prepaid deposits as set forth in Schedule
1.1.12 hereto.
1.2 Assumption of Liabilities and Obligations. On the
Settlement Date, Purchaser shall assume and agree to pay, perform and discharge:
(i) all liabilities and obligations whatsoever arising out of or in any way
related to the operation of the Retail Business after the Settlement Date; (ii)
Seller's liabilities under the License Agreements, the real property leases
described in Section 1.1.10 hereto, the equipment leases described in Section
1.1.11 hereto (to the extent that such agreements are assignable), liabilities
of Seller under any other contract assumed by Purchaser hereunder, and all
obligations under Seller's credit line with Cycle Capital Corporation; and (iii)
such other obligations and liabilities of Seller listed on Schedule 1.2 hereof
(collectively, the "Assumed Liabilities").
1.3 Excluded Obligations. Except as set forth in Section
1.2 above, Purchaser shall not assume or be responsible for, any liability,
obligation, debt or commitment of Seller.
1.4 Further Assurances. From time to time after the
Settlement Date, Seller will execute and deliver to Purchaser, or assist
Purchaser in obtaining, such further instruments of sale, transfer, conveyance,
assignment and delivery, consents and assurances as may be reasonably requested
by Purchaser in order to convey to Purchaser all right, title and interest of
Seller in and to the Assets or as otherwise may be expressly required by this
Agreement.
2. CONSIDERATION AND METHOD OF PAYMENT
2.1 Purchase Price. On the Settlement Date, as
consideration for the transfer of the Assets, Purchaser shall assume the Assumed
Liabilities pursuant to Section 1.2 and deliver to Seller the securities and
promissory note described in Sections 2.1.1 and 2.1.2 below (collectively, the
"Purchase Price"). The Purchase Price may be subject to adjustment after the
Settlement Date as set forth in Section 2.2.
2.1.1 Securities. The delivery to the Seller
83,333 restricted common voting shares of the Purchaser (the "Purchaser
Shares").
2.1.1.1 The Purchaser Shares shall be subject to
call and repurchase by Purchaser after the Settlement Date pursuant to the terms
of Section 5.10 hereof.
2.1.1.2 Subject to Purchaser's right to call and
repurchase set forth in Section 5.11 and Purchaser's right of first refusal set
forth in Section 5.12, Seller shall be entitled at any time to sell any or all
of its Purchaser Shares in a private offering made in accordance with applicable
federal and state securities laws, or in the public market if permitted by
applicable federal and state securities laws.
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2.1.2 Promissory Note. The delivery by Purchaser
of a five (5) year promissory note in the amount of One Million Dollars
($1,000,000) to Seller in form and substance satisfactory to Purchaser and its
counsel.
2.1.2.1 The promissory note shall bear a simple
interest rate of 5%, and such interest shall not begin to accrue until after
twelve (12) months following the Settlement Date. Commencing on the date which
is fifteen (15) months after the Settlement Date, Purchaser shall make quarterly
payments of principal in the amount of $62,500 plus accrued interest, quarterly
in arrears, with the outstanding balance of all outstanding principal and
interest due on that date which is five (5) years from the Settlement Date.
2.1.2.2 In order to secure Purchaser's obligations
under the Note, Purchaser will grant to Seller effective as of the Settlement
Date a perfected security interest in all personal property of the Purchaser,
including without limitation the Assets and all after-acquired inventory
(including, without limitation, all new and used motorcycle inventory and all
parts inventory), subject only to the security interests, if any, granted by
Purchaser on new motorcycles to Cycle Capital Corporation and any other provider
of floor plan financing.
2.2 Adjustment of Purchase Price. The Purchase Price shall
be subject to adjustment as necessary after the Settlement Date, in the manner
prescribed by Section 2.2.3 hereof, in the event the Fixed Value of the Assets
as determined in accordance with Section 2.2.1 hereof does not equal $3,000,000.
2.2.1 Fixed Value of Assets. It is contemplated by the
parties that effective as of the Settlement Date, subject to the other terms and
conditions of this Agreement, Seller will sell, assign, transfer and deliver to
Purchaser, and Purchaser hereby agrees to purchase from Seller, Inventory having
a total value based on original purchase cost (as determined in accordance with
Section 2.2.2) as of the Settlement Date of $3,000,000. Said total of $3,000,000
is hereafter referred to as the "Fixed Value."
2.2.2 Determination of Original Purchase Cost.
The parties will determine the original purchase cost of the Inventory as
follows:
2.2.2.1 Original Purchase Cost of New and Used
Motorcycles. An itemized physical inventory of the new motorcycles and the used
motorcycles being transferred pursuant to this Agreement will be completed as of
the Settlement Date and on the Settlement Date Seller will deliver to Purchaser
an itemized listing of all such new and used motorcycles and the original
purchase cost thereof to the Company Superstores.
2.2.2.2 Original Purchase Cost of Motorcycle
Parts, Clothing and Accessories. An itemized physical inventory of the
motorcycle parts, clothing and accessories will be conducted as of December 31,
1999. This physical inventory will be updated as of the
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Settlement Date based solely on Seller's books and records through such date.
Based on the results of the itemized physical inventory and the books and
records maintained by the Company after the physical inventory, all as referred
to above, the Seller will furnish to Purchaser, within 30 days after the
Settlement Date, the original purchase cost to the Seller of the motorcycle
parts, clothing and accessories as of the Settlement Date. At Purchaser's option
and upon reasonable notice to Seller prior to the Settlement Date, Purchaser or
Purchaser's agent (any such third party appointed by Purchaser shall be at
Purchaser's sole cost and expense) may be present during the itemized physical
inventory referred to above to verify the accuracy thereof.
2.2.3 Procedure for Adjustment of Purchase Price. After
the Settlement Date, the Purchase Price shall be adjusted as follows, based on
the summaries of original purchase cost furnished by Seller to Purchaser
pursuant to Sections 2.2.2.1 and 0.0.0.0:
2.2.3.1 Total Original Purchase Cost Exceeds
Fixed Value. (a) If the summaries of original purchase cost furnished by Seller
to Purchaser pursuant to Sections 2.2.2.1 and 2.2.2.2 indicate that the total
original purchase cost of all new and used motorcycles, motorcycle parts and
clothing and accessories transferred to Purchaser on the Settlement Date exceeds
the Fixed Value, then Purchaser shall have the option either (i) to return new
motorcycles to Seller such that the original purchase cost of the remaining new
and used motorcycles, motorcycle parts and clothing and accessories equals the
Fixed Value or (ii) pay Seller in cash the difference between the total original
purchase cost of such new and used motorcycles, motorcycle parts and clothing
and accessories and the Fixed Value.
2.2.3.2 Total Original Purchase Cost is Less than
Fixed Value. If the summaries of original purchase cost furnished by Seller to
Purchaser pursuant to Sections 2.2.2.1 and 2.2.2.2 indicate that the total
original purchase cost of all new and used motorcycles, motorcycle parts and
clothing and accessories transferred to Purchaser on the Settlement Date is less
than the Fixed Value, then Purchaser shall have the right to a reduction in the
Purchase Price based on the difference between the two amounts. Such reduction
in the Purchase Price shall be accomplished by a reduction in the number of
Purchaser Shares (for purposes of this adjustment, at a valuation of $6.00 per
share). Purchaser shall issue and deliver to Seller a new stock certificate
evidencing the new number of Purchaser Shares, whereupon Seller will promptly
deliver to Purchaser for cancellation the original stock certificate evidencing
the Purchaser Shares delivered to it on the Settlement Date.
2.2.4 Adjustment Due to Credits for Customer Deposits.
Prior to the Settlement Date, the Company Superstores will have accepted from
customers, deposits for credit against motorcycles and parts on order and
deposits for credit against the cost of repair work to be performed by such
Company Superstores (collectively, the "Customer Credits"). It is understood
that certain orders for motorcycles and parts and certain repair work will have
begun prior to the Settlement Date and such transactions will not be completed
until after the Settlement Date. If the aggregate of the Customer Credits
claimed by customers within the first three months after the
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Settlement Date exceeds $25,000, then the Seller will make a cash payment to
Purchaser in the amount of such excess upon receipt of confirming documentation
from Purchaser reasonably satisfactory to Seller. If the aggregate of the
Customer Credit claimed by customers within the first three months after the
Settlement Date is less than $25,000, then Purchaser will make a cash payment to
Seller in the amount of such excess and, if requested by Seller, provide
confirming documentation reasonably satisfactory to Seller.
2.2.5 Adjustment Due to Proration of Rent, Utilities,
Etc. The rent for the Company Superstores under the real property leases
identified in Section 1.1.10 hereto, as well as any utilities and payments on
any service contracts, shall be prorated as of the Settlement Date. Any
difference owing by one party to the other in respect of such proration shall be
paid in cash within thirty (30) days after the Settlement Date.
2.3 Allocation of Purchase Price.
2.3.1 The allocation of the Purchase Price shall be as
follows:
Inventory $2,745,000
Leasehold improvements $200,000
Garage equipment $30,000
Deposits $25,000
Each of the parties must report this transaction for
federal tax purposes in accordance with this allocation of the Purchase Price.
If the Purchase Price is adjusted after the Settlement Date pursuant to Section
2.2.3, then the parties agree to adjust the inventory figure up or down
accordingly.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1 Authority. Seller has the full power and authority to
enter into this Agreement and to consummate the transactions described herein,
and no contract or agreement to which Seller is a party prevents it from
consummating the transaction described herein, nor is the consent of any third
party required, except as provided herein.
3.2 Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of California, and has the
corporate power to own or lease the Assets now owned or leased by it and conduct
the Retail Business in the manner in which the Retail Business is now being
conducted. Seller is qualified to do business and is in good standing in the
states of Texas and North Carolina. Proof of good standing as of a reasonably
recent date will be provided on the Settlement Date.
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3.3 Corporate Proceedings. All corporate proceedings
required by law or by the provisions of this Agreement to be taken by
Seller on or before the Settlement Date in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
thereby have been or will be duly and validly taken. Seller is not required to
obtain the consent of its shareholders in order to execute this Agreement and
consummate the transactions contemplated hereby.
3.4 Title. Seller represents and warrants to Purchaser that
the Seller has and on the Settlement Date will deliver to Purchaser, subject to
the conditions of this Agreement, title to the Assets free and clear of all
mortgages, pledges, liens, security interests, state taxes, federal taxes,
charges, conditional sales contracts and encumbrances whatsoever, with the
exception of security interests granted to Cana Capital Corporation, FINOVA
Mezzanine Capital (f/k/a Tandem Capital) and Cycle Capital Corporation, security
interests held by lessors of equipment, and with the exception of those items
listed in Schedule 3.4. Seller represents that it is not aware of any claims,
administrative actions, suits, litigation or anticipated claims, suits or
litigation which in the aggregate would have a material adverse effect on the
business or financial condition of the Retail Business.
3.5 Condition of Assets. In light of Purchaser's
opportunity to inspect and review the condition and status thereof, the Assets
are being purchased on an "as-is" basis AND SELLER HEREBY DISCLAIMS ALL
WARRANTIES WITH RESPECT TO THE ASSETS, INCLUDING WITHOUT LIMITATION WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE, other than new
motorcycles covered by Seller's standard warranty and those warranties made by
parts manufacturers for the benefit of Seller, which warranties shall be
assigned by Seller to Purchaser.
3.6 Property Insurance. Schedule 3.6 sets forth a list of
all insurance policies and binders held by Seller related to the Retail
Business. Seller has made available correct and true copies of all such policies
and binders to Purchaser. Seller (i) is not in default of any material provision
contained in any such policy or binder and (ii) has not received notice of
cancellation or non-renewal of any such policy or binder. All of such insurance
is and will be on the Settlement Date, in full force and effect and all premiums
due and payable thereon have been or will be paid.
3.7 Sale of Assets Creates No Conflict. The execution,
delivery and performance of this Agreement and the consummation of the
transactions herein contemplated do not and will not conflict with, or result in
a breach of any term or provisions of, or constitute a default under, or result
in the creation of any lien or encumbrance upon the Assets pursuant to the
articles of incorporation, or bylaws of the Seller, or other organizational and
governing documents, or any contract, indenture, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is bound or to
which the Assets are subject, or any law, rule, regulation, judgment, order or
decree, except Seller's agreements with Cana Capital Corporation,
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FINOVA Mezzanine Capital (f/k/a Tandem Capital), Cycle Capital Corporation, the
real property leases referred to in Section 1.1.10, the equipment leases
referred to in Section 1.1.11, the Disputed License Agreements, and as otherwise
disclosed in Schedule 3.7. All consents by third parties that are required to
prevent or eliminate every such conflict, breach, default, and encumbrance shall
have been validly obtained before the Settlement Date (other than the consent of
Cana Capital Corporation) and as of the Settlement Date shall be in full force
and effect and valid and sufficient for such purpose, or have otherwise been
provided for in Schedule 3.7.
3.8 License Compliance. To the best of the Seller's knowledge
and belief, the Company Superstores have all governmental licenses and permits
(federal, state and local) necessary to conduct their business as currently
conducted and have complied in all material respects with all laws, rules and
regulations and orders applicable to the conduct of their business as currently
conducted. Such licenses and permits are in full force and effect and there is
not pending or threatened any proceeding seeking to revoke or materially
limiting the scope of any such license or permit. Such licenses and permits are
described in Schedule 3.8.
3.9 Tax Warranty. To the best of Seller's knowledge and
belief, Seller has filed all federal, state (including sales and use taxes and
withholding, unemployment and payroll related taxes) and local tax returns
relating to the Retail Business as required by law and has paid, through the
applicable reporting period, all taxes, assessments, and penalties due and
payable.
3.10 Environmental Hazards. Sellers warrants that, to the best
of Seller's knowledge and belief, there is no violation by Seller at any Company
Superstore location of any hazardous waste law under federal, state or local
law. Except in compliance with the requisite laws, Seller has not generated,
stored or disposed of any hazardous waste at any such location. Seller has not
received any notice from any federal, state, county, municipal or other
governmental department, agency or authority concerning the existence at any
Company Superstore location of any petroleum product or other hazardous waste
discharge or seepage which have caused noncompliance with applicable laws and
regulation. The term "hazardous waste" shall mean any substance, material or
waste which is regulated by any federal, state or local governmental or
quasi-governmental authority, including, without being limited to, any
substance, material or waste defined, used or listed as a "hazardous waste,"
"extremely hazardous waste," "restricted hazardous waste," "hazardous
substance," "hazardous material," "toxic substances" or other similar or related
terms as defined, used or listed in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et.
seq.), the Clear Air Act, as amended (42 U.S.C. Sections 7401, et. seq.), the
Clean Water Act, as amended (42 U.S.C. Sections 1251, et. seq.) and the
regulations adopted and publications promulgated pursuant thereto or any other
similar applicable federal, state or local law, rule, regulations or ordinance.
3.11 Zoning. To the best of Seller's knowledge and belief,
the zoning of each parcel of real property where a Company Superstore is
located permits the operation of the Retail
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Business at each such location as such Retail Business is currently conducted by
Seller. Seller has not received notice of any proceeding which would affect the
present zoning classification of any of its Company Superstore locations.
3.12 Accuracy of Certain Records. Seller represents that, to
the best of Seller's knowledge and belief, the physical inventory reports of the
Company Superstores on the Xxxxxxxxxx system as of December 31, 1999 and the
year-to-date actual reports of the Company Superstore operations as of September
30, 1999 previously furnished to Purchaser are accurate in all material
respects.
3.13 Brokerage Fee. Seller has not retained the services of a
real estate or business broker and no brokerage fee is due on this sale.
3.14 Employee Benefit Plans. Schedule 3.14 is a list of all of
Seller's pension, bonus, profit sharing, stock option, or other agreements
providing for employee benefits. To the best of Seller's knowledge, Seller is
not in default under any of these agreements or arrangements. All such
agreements and arrangements have been established and administered in accordance
with the applicable provisions of ERISA and the Internal Revenue Code.
3.15 Untrue Statement. None of the warranties made by
Seller hereunder contains or will contain any untrue statement of a material
fact, or omits to state a material fact necessary to prevent such warranties
from being misleading.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND AFFILIATE
4.1 Authority. Purchaser has the full power and authority to
enter into this Agreement and to consummate the transactions described herein,
and no contract or agreement to which Purchaser is a party prevents it from
consummating the transaction described herein, nor is the consent of any third
party required, except as provided herein. Any such consent shall be obtained
prior to the Settlement Date.
4.2 Good Standing; Ownership of Affiliate. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the District of Columbia, and has the corporate power to enter into this
Agreement and the agreements and instruments contemplated thereby, acquire the
Assets pursuant to the terms of this Agreement, to own or lease the Assets and
to conduct the Retail Business in the manner in which the Retail Business is now
being conducted. Proof of good standing as of a reasonably recent date for each
corporation in all jurisdictions where Purchaser is incorporated and qualified
to do business will be provided on the Settlement Date. V-Twin Acquisitions,
Inc., a Virginia corporation ("Affiliate") is a privately held corporation owned
solely by Xxx Schwartzenbeck and Xxx Xxxxxxxxxx on behalf of Purchaser.
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4.3 Corporate Proceedings. All corporate proceedings required
by law or by the provisions of this Agreement to be taken by Purchaser on or
before the Settlement Date in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated thereby have
been or will be duly and validly taken. Purchaser is not required to obtain the
consent of its shareholders in order to execute this Agreement and consummate
the transactions contemplated hereby.
4.4 Reservation of Purchaser Shares. Purchaser has duly
authorized and reserved for issuance the Purchaser Shares issuable in accordance
with the terms of Section 2.1 hereof and such Purchaser Shares will be duly and
validly issued, fully paid and nonassessable. Such Purchaser Shares shall be
free from security interests, liens, claims, other encumbrances and preemptive
rights in favor of the holders of other shares of capital stock or other
securities of Purchaser.
4.5 Reservation of Additional Shares. Any Additional
Shares issued pursuant to Section 5.10 hereof will be duly authorized and
reserved for issuance. Such Additional Shares, when issued, will be duly and
validly issued, fully paid and nonassessable and shall be free from security
interests, liens, claims, other encumbrances and preemptive rights in favor of
the holders of other shares of capital stock or other securities of Purchaser.
4.6 Reporting Company. Purchaser is a publicly-held company
whose common stock is (and has been for the past 90 days) registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). Purchaser's common stock is listed for trading on the OTC Bulletin Board.
Purchaser has not received any notice that its common stock will be delisted
from the OTC Bulletin Board or that Purchaser does not meet all requirements for
the continuation of such listing. Pursuant to the provisions of the 1934 Act,
Purchaser has timely filed all reports and other materials required to be filed
thereunder with the Securities and Exchange Commission during the preceding
twelve months.
4.7 Sale of Assets Creates No Conflict. The execution,
delivery and performance of this Agreement by Purchaser and the consummation of
the transactions herein contemplated (including without limitation the issuance
of the Purchaser Shares and the issuance of the Additional Shares as defined in
Section 5.10.1 hereof) do not and will not conflict with, or result in a breach
of any term or provisions of, or constitute a default under, or result in the
creation of any lien or encumbrance upon the Assets, pursuant to the articles of
incorporation, or bylaws of the Purchaser, or other organizational or governing
documents of Purchaser, or any contract, indenture, mortgage, deed of trust or
other instrument to which Purchaser is a party or by which it is bound or to
which Purchaser or Purchaser's assets are subject, or any law, rule, regulation,
judgment, order or decree applicable to Purchaser, except for the security
interest created in favor of Seller pursuant to the terms of this Agreement and
except as otherwise disclosed in Schedule 4.7. All consents by third parties
that are required to prevent or eliminate every such conflict, breach, default,
and encumbrance shall have been validly obtained before the
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Settlement Date and as of the Settlement Date shall be in full force and effect
and valid and sufficient for such purpose, or have otherwise been provided for
in Schedule 4.7.
4.8 License Compliance. To the best of the Purchaser's
knowledge and belief, except as set forth in Schedule 4.8, the Purchaser has
acquired all governmental licenses, permits and approvals (federal, state and
local) necessary to conduct the Retail Business as currently conducted by Seller
and as proposed to be conducted by Purchaser (collectively, the "Licenses"; any
such Licenses which have not been obtained by Purchaser as disclosed in Schedule
4.8 are hereafter referred to as the "Pending Licenses") and has complied in all
material respects with all laws, rules and regulations and orders applicable to
the conduct of the Retail Business as proposed to be conducted by Purchaser
after the Settlement Date. The Licenses are in full force and effect and there
is not pending or threatened any proceeding seeking to revoke or materially
limiting the scope of any such Licenses. The Pending Licenses are described in
Schedule 4.8.
4.9 Consents and Approvals. Without limiting the generality
of the provisions of Section 4.8, no consent, approval, authorization or order
of any court, governmental agency or body or arbitrator having jurisdiction over
Purchaser or Affiliate, or any of its affiliates or NASDAQ or Purchaser's or
Affiliate's shareholders is required for execution of this Agreement, and all
other agreements entered into by Purchaser and Affiliate relating thereto,
including, without limitation issuance and sale of the promissory note referred
to in Section 2.1.2, the Purchaser Shares and the Additional Shares, and the
performance of Purchaser's and Affiliate's obligations hereunder.
4.10 Compliance with Securities Laws. The Purchaser Shares,
the Additional Shares and the promissory note issued pursuant to Section 2.1
hereof will either be registered under applicable federal and state securities
laws or such issuance will be exempt from registration pursuant to an
appropriate exemption under such laws. The issuance and exchange of Purchaser's
Common Stock contemplated by this Agreement, to the extent required, shall be
qualified with the California Commissioner of Corporations in accordance with
the California Corporate Securities Law and the Commissioner's rules and
regulations.
4.11 Brokerage Fee. Neither Purchaser nor Affiliate has
retained the services of any real estate or business broker and no brokerage fee
is due on the purchase of the Assets.
4.12 Untrue Statement. None of the warranties made by
Purchaser or Affiliate hereunder contains or will contain any untrue statement
of a material fact, or omits to state a material fact necessary to prevent such
warranties from being misleading.
5. COVENANTS AND FURTHER AGREEMENTS OF SELLER AND PURCHASER
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5.1 Reliance Upon and Survival of Representations and
Warranties. Each of the parties hereto shall be entitled to rely upon the
representations and warranties of the other parties set forth herein or in any
schedule, exhibit, or other document delivered pursuant hereto. The
representations, warranties, covenants, and agreements of the parties shall be
true and accurate as of the Settlement Date and shall survive the Settlement
Date, except that the representations and warranties of Seller in Section 3
hereof and the representations and warranties of Purchaser in Section 4 hereof
shall, in each case, survive for a period of twelve months from the Settlement
Date.
5.2 Further Assurances. The parties hereto agree to execute
and deliver or cause to be executed and delivered at the settlement or at other
reasonable times and places such additional instruments as the other party
hereto may reasonably request for the purpose of carrying out this Agreement.
5.3 Bulk Sales Law. Purchaser waives compliance with the
provisions of the Uniform Commercial Code of California, Texas and North
Carolina relating to bulk transfers in connection with the sale of the Assets.
Nothing in this paragraph will stop or prevent either Seller or Purchaser from
asserting as a bar or defense to any action or proceeding brought under that law
that it does not apply to the sale contemplated under this Agreement.
5.4 Indemnification.
5.41 For Purchaser. Seller covenants and agrees to
indemnify and hold harmless the Purchaser from and against any loss, claim,
liability, obligation or expense (including reasonable attorneys' fees): (i)
incurred or sustained by Purchaser on account of any misrepresentation or breach
of any warranty, covenant, or agreement of Seller contained in this Agreement,
or made in connection with this Agreement, or at Settlement; or (ii) incurred or
sustained by Purchaser arising from Seller's failure to pay any Excluded
Obligation. Purchaser shall promptly notify Seller in writing of any claim
indemnified under this section within 90 days of the time Purchaser discovers or
should have discovered the existence of such claim and thereafter shall permit
Seller at its expense to participate in the negotiation and settlement of any
such claim and to join in the defense of any legal action arising therefrom.
Notwithstanding any term herein to the contrary, the indemnities relating to the
representations and warranties of Seller set forth in Section 3 hereof shall
terminate twelve months from the Settlement Date.
Notwithstanding the foregoing (subject, however, to the
last sentence of the preceding paragraph), in the event a third party asserts a
claim against Purchaser which is indemnified under this section, Purchaser may
elect, at Purchaser's sole option, to pay the obligation provided Purchaser
gives Seller at least five (5) days written notice of its intention to do so. At
the expiration of such period, Seller shall have the option to: (i) pay the
claim; (ii) authorize Purchaser to pay the claim, in which case Seller shall
promptly repay Purchaser upon demand by Purchaser, together with interest
thereon at the rate of ten percent (10%) per annum
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from the date of Purchaser's payment until repaid by Seller, or (iii) notify
Purchaser that the claim is subject to a bona fide contest, in which case Seller
shall diligently pursue resolution of such claim and Purchaser shall make no
payment for 60 days from the date of Seller's notice to Purchaser, or such
additional reasonable time (not to exceed 30 days) as may be requested by Seller
to resolve the matter.
5.4.2 For Seller. Purchaser covenants and agrees to
indemnify and hold harmless Seller from and against any loss, claim, liability,
obligation or expense (including reasonable attorneys' fees) (i) incurred or
sustained on account of any misrepresentation or breach of any warranty,
covenant or agreement of Purchaser contained in this Agreement or made in
connection herewith, or (ii) any non-fulfillment, non-performance, failure to
timely or fully perform or breach of any agreement or other obligation to be
performed by Purchaser relating to the Assumed Liabilities. Without limiting the
generality of the foregoing, Purchaser hereby indemnifies Seller from and
against any loss, claim, liability, obligation or expense (including reasonable
attorneys' fees) arising out of Purchaser's failure to obtain any of
governmental approvals or licenses required to operate the Retail Business.
Seller shall promptly notify Purchaser in writing of any claim indemnified under
this Section within 90 days of the xxxx Xxxxxx discovers, or should have
discovered, the existence of such claim and thereafter shall permit Purchaser at
its expense to participate in the negotiation and settlement of any such claim
and to join in the defense of any legal action arising therefrom.
Notwithstanding any term herein to the contrary, the indemnities relating to the
representations and warranties of Purchaser set forth in Section 4 hereof shall
terminate twelve (12) months from the Settlement Date.
Notwithstanding the foregoing (subject, however, to the last
sentence of the preceding paragraph), in the event a third party asserts a claim
against Seller which is indemnified under this section, Seller may elect, at
Seller's sole option, to pay the obligation provided Seller gives Purchaser at
least five (5) days written notice of its intention to do so. At the expiration
of such period, Purchaser shall have the option to: (i) pay the claim; (ii)
authorize Seller to pay the claim, in which case Purchaser shall promptly repay
Seller upon demand by Seller, together with interest thereon at the rate of ten
percent (10%) per annum from the date of Seller's payment until repaid by
Purchaser, or (iii) notify Seller that the claim is subject to a bona fide
contest, in which case Purchaser shall diligently pursues resolution of such
claim and Seller shall make no payment for 60 days from the date of Purchaser's
notice to Seller, or such additional reasonable time (not to exceed 30 days) as
may be requested by Purchaser to resolve the matter.
5.5 Expenses. Each party shall pay its own expenses and
costs, including, without limitation, counsel fees and transfer taxes incurred
in connection with the consummation of this Agreement and the transactions
contemplated hereby, except as otherwise provided in this Agreement.
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5.6 Risk of Loss. In the event of any loss or damage to the
Assets at any time prior to Settlement, the risk of loss shall be borne by
Seller. Immediately after the Settlement Date, all risk of loss or damage shall
be borne by Purchaser.
5.7 Operation of Business Prior to Settlement. Seller hereby
agrees, from the date of execution of this Agreement until the Settlement Date,
that the Seller will use its best efforts (without making any commitments on
behalf of the Purchaser) to carry on the activities and operations of the
Company Superstores in substantially the same manner as has been customary in
the past and to preserve for the Purchaser the present relationships of each
Company Superstore with its employees, customers, and others having business
relations with such Company Superstores.
5.8 Insurance. To the extent possible without extra cost or
liability to Seller, Purchaser may elect to assume Seller's insurance as
described in Section 3.6. To that effect, Seller will use its best efforts to
make such assumption arrangements as are possible prior to the Settlement Date,
or use its best efforts to assist Purchaser in obtaining replacement coverage as
necessary, in order to protect the security interest of Seller pursuant to
Section 2.1.2.2 hereof and providers of floor plan financing to Purchaser.
5.9 Purchaser's Rights to Review Communications. After the
Settlement Date, the Purchaser shall have the right to open and read any letters
or mail addressed to the Seller if received at one of the Company Superstore
locations and to reply to any such letters that pertain to the conduct of the
business of the Company Superstores or the administration of the License
Agreements assigned pursuant to the terms of this Agreement in the same manner
that the Seller could have done had the sale not been made. Any such mail not
relating to the conduct of the business of the Company Superstores or the
administration of the License Agreements shall be promptly forwarded to the
Seller by the Purchaser. After the Settlement Date, Seller shall promptly
forward to Purchaser any mail received by it relating to the operation of the
Company Superstores.
5.10 Guarantee of Purchase Price.
5.10.1 If, on the Valuation Date, the Aggregate
Value of the Purchaser Shares is less than $1 million, then Purchaser shall at
its option, either: (i) duly authorize, issue and deliver to Seller that number
of additional shares of Purchaser's Common Stock ("Additional Shares") equal to
(a) the excess of $1 million over the Aggregate Value (the "Shortfall") (b)
divided by the Current Market Price, rounded down to the nearest whole number;
or (ii) deliver to Seller, by wire transfer, an amount up to the Shortfall in
immediately available funds ("Cash Payment") and duly authorize, issue and
deliver to Seller that number of Additional Shares which is calculated in the
manner described in Section 5.10.1(i) after subtracting the amount of the Cash
Payment from the $1 million amount appearing therein.
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Any Additional Shares to be issued pursuant to Section 5.10.1
shall be issued in the manner prescribed by Section 5.10.3. If, on the Valuation
Date, the Aggregate Value was calculated in accordance with Section
5.10.2.1(ii), then on the first business day after the Additional Shares are
issued, Purchaser shall file a pre-effective amendment adding the Additional
Shares to the registration statement filed by Purchaser pursuant to Section 5.13
hereof and request that the registration statement be made effective at the
earliest possible date.
If, on the Valuation Date, the Aggregate Value was calculated
in accordance with Section 5.10.2.1(i), and Seller's counsel determines that the
Additional Shares issued pursuant to the first paragraph of this Section 5.10.1
cannot be sold by Seller under Rule 144(k) immediately after issuance, then such
Additional Shares shall become subject to the registration rights provisions of
Section 5.13 hereof. In the event that, on the date that the Securities and
Exchange Commission notifies Purchaser that the Commission Staff will not review
any registration statement required to be filed by Purchaser pursuant to Section
5.13 hereof, or after having reviewed the registration statement, the Staff has
no further comments (the "Second Valuation Date"), the product of the Current
Market Price multiplied by the number of Additional Shares is less than the
original Shortfall, then Purchaser shall either make up the difference in a Cash
Payment or issue such extra number of Additional Shares such that the product of
the Current Market Price on the Second Valuation Date multiplied by all
Additional Shares being issued is equal to the original Shortfall. Any such
extra Additional Shares to be issued pursuant to this paragraph shall be issued
in the manner prescribed by Section 5.10.3. On the first business day after such
extra Additional Shares are issued, Purchaser shall file a pre-effective
amendment adding such extra Additional Shares to the registration statement
filed by Purchaser pursuant to Section 5.13 hereof and request that the
registration statement be made effective at the earliest possible date.
5.10.2 Definitions. For purposes of this Section
5.10, the following terms shall have the meanings set forth below:
5.10.2.1 "Valuation Date" shall be the first to
occur of the following of (i) if Rule 144 under the Act is available to Seller
for sales of the Purchaser Shares, the date on which Seller could sell the
Purchaser Shares under Rule 144(k); or (ii) the date that the Securities and
Exchange Commission notifies Purchaser that the Commission Staff will not review
any registration statement required to be filed by Purchaser pursuant to Section
5.13 hereof, or after having reviewed the registration statement, the Staff has
no further comments.
5.10.2.2 "Aggregate Value" shall mean (i) if the
Valuation Date is determined in accordance with Section 5.10.2.1(i), the sum of
(a) the gross proceeds from Seller's sales of the Purchaser Shares prior to the
date Rule 144(k) becomes available and (b) the number of Purchaser Shares held
by Seller on the date Rule 144(k) becomes available multiplied by the Current
Market Price and (ii) if the Valuation Date is determined in accordance with
Section
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5.10.2.1(ii), the product of the Current Market Price multiplied by the
number of Purchaser Shares.
5.10.2.3 "Current Market Price" shall mean, as of
any date of determination, the average of the daily market prices over a period
of 20 consecutive trading days before such date. The market price for each such
business day shall be the last sale price on such day on the principal
securities exchange on which the Common Stock is then listed or admitted to
trading, or, if no sale takes place on such day on any such exchange, the
average of the closing bid and asked prices on such day as officially quoted on
any such exchange, or if the Common Stock is not then listed or admitted on any
stock exchange, the market price for each such business day shall be the last
sale price on such day, or, if no sale takes place on such day, the average of
the closing bid and asked prices on such day in the over-the-counter market, in
either case as reported through NASDAQ, or, if such prices are not at the time
so reported, as furnished by any member of the National Association of
Securities Dealers, Inc. selected by Purchaser. If and so long as there shall be
no exchange or over-the-counter market for the Common Stock during the 20
business day period prior to the date on which Current Market Price is to be
determined, the Current Market Price shall be deemed to be the Fair Value of the
Common Stock.
5.10.2.4 For purposes of this Section, "Fair
Value" shall mean with respect to any security or other property, the fair value
thereof as of a date that is within fifteen (15) days of the date as of which
the determination is to be made, determined by an investment banking firm, firm
of certified public accountants or appraisal firm (which investment banking
firm, firm of certified public accountants or appraisal firm shall own no
securities of, and shall not be an affiliate, subsidiary or related person of,
either the Seller or Purchaser) of recognized national standing retained by
Purchaser and reasonably acceptable to Seller, and which determination is made
(a) under the assumption that all rights, warrants and options existing with
respect to any such securities have been exercised and (b) without regard to the
absence of a liquid or ready market for any such securities.
5.10.3 Issuance of Additional Shares. If
Purchaser shall be required by the terms of Section 5.10.1 hereof to deliver to
the Seller Additional Shares and/or available funds, as the case may be,
Purchaser shall deliver to Seller, within two (2) days after the Valuation Date,
written notice specifying the number of shares of Additional Shares and/or the
amount of available funds, as the case may be, to be delivered to Seller and the
calculations thereof made by Purchaser. The Additional Shares and/or available
funds, as the case may be, shall be delivered at a closing to be held not later
than five (5) business days after the Valuation Date or other date and time as
shall be agreed upon by the Seller and Purchaser (such date and time being
hereinafter called the "Additional Closing Date"). On the Additional Closing
Date, Purchaser will deliver to Seller one or more duly executed certificates
evidencing the aggregate number of Additional Shares specified by the
above-referenced written notice, dated the Additional Closing Date, registered
in the name of Seller or in the name of Seller's nominee and/or the amount of
immediately available funds specified by the above-referenced notice.
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5.10.4 Reservation of Shares. Purchaser shall
duly authorize and reserve for issuance the Additional Shares issuable in
accordance with the terms of Section 5.10.1 hereof and such Additional Shares
shall be free from preemptive rights in favor of the holders of other shares of
capital stock or other securities of Purchaser. Notwithstanding anything herein
to the contrary, if on the Valuation Date, Purchaser has not duly authorized and
reserved for issuance the Additional Shares pursuant to this Section 5.10.4,
Purchaser shall immediately take all further action necessary to duly authorize
and reserve for issuance such Additional Shares.
5.11 Right to Call and Repurchase Purchaser Shares. Subject
to the provisions of this Section 5.11, the Purchaser will have the right, at
any time and from time to time, to call and repurchase the Purchaser Shares in
whole or in part as follows, provided such Purchaser Shares have not previously
been sold by Seller in accordance with the provisions of this Agreement: (i) if
Purchaser gives written notice to Seller of its intent to repurchase said
shares within the first two (2) years after the Settlement Date, Purchaser
shall be entitled to purchase said shares at a price of $6.00 per share, (ii)
if Purchaser gives written notice to Seller of its intent to repurchase said
shares within the third year after the Settlement Date, Purchaser shall be
entitled to purchase said shares at a price of $7.00 per share, (iii) if
Purchaser gives written notice to Seller of its intent to repurchase said
shares within the fourth year after the Settlement Date, Purchaser shall be
entitled to purchase said shares at a price of $8.00 per share. Purchaser shall
not be entitled to call and repurchase any Purchaser Shares after the fourth
anniversary of the Settlement Date. Purchaser's notice shall state the number
of Purchaser Shares subject to the call, the applicable purchase price, and a
date and time (the "Call Closing Date") for consummation of the purchase no
more than thirty (30) days after Purchaser gives such notice. Upon the receipt
of such notice, the Seller shall thereupon have the obligation to sell the
Purchaser Shares subject to such notice, provided that the Call Closing Date
and payment for said shares occurs within thirty (30) days after such notice.
In the event the Call Closing does not occur within such thirty day period,
Seller shall have the option (i) to grant Purchaser such additional time as may
be requested by Purchaser to pay the purchase price or (ii) to cancel the sale,
in which case the Purchaser Shares which were the subject of Seller's notice
will not be subject to further call and repurchase under this Section.
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5.12 Right of First Refusal
5.12.1 Before any of the Purchaser Shares
may be sold or transferred by Seller, Seller shall first give written notice
thereof to Purchaser stating the proposed transferee, the number of Purchaser
Shares proposed to be transferred, the purchase price, if any (if such shares
are to be sold in the open market, the purchase price shall be deemed to be the
closing sale price of such Purchaser Shares on the date immediately preceding
the date of Purchaser's notice), and the terms of the proposed transaction. The
Purchaser shall thereupon have the option, but not the obligation, to acquire
any or all of the Purchaser Shares proposed to be transferred for the purchase
price stated in such notice. Within two (2) business days after the giving of
such notice by the Seller, the Purchaser shall give written notice to the Seller
stating whether or not it elects to exercise the option to purchase, the number
of Purchaser Shares, if any, it elects to purchase and a date and time (the
"Closing Date") for consummation of the purchase not more than ten (10) business
days after Purchaser gives its notice. Failure by the Purchaser to give such
notice within the two business day time period referred to above shall be deemed
an election by the Purchaser not to exercise its option to purchase with respect
to the Purchaser Shares described in the Seller's notice.
5.12.2 If the Purchaser elects not to exercise
its option to purchase the Purchaser Shares within the two business day time
period referred to above, or if Purchaser elects to purchase the Purchaser
Shares but such sale is not consummated by the Closing Date described in
Purchaser's notice, then the Seller may sell such Purchaser Shares on the same
terms and conditions as set forth in Seller's original notice (except that if
such notice provided that such shares were to be sold in the open market, Seller
shall not be bound to the purchase price set forth in Seller's original notice,
as long as such shares are sold in the open market), at any time after the
expiration of the two business day time period referred to above (in the case of
a non-exercise by Purchaser) or after the passing of the Closing Date described
in Purchaser's notice (in the case where Purchaser has notified Seller of its
intention to purchase the Shares but such sale is not consummated by said
Closing Date). If such shares are not sold by Seller within sixty (60) days,
then they shall become subject again to Purchaser's right of first refusal as
set forth in Section 5.12.1 above.
5.13 Registration Rights.
5.13.1 Piggyback Registration Rights. If at any
time during the Piggyback Registration Period (as defined in subsection 5.13.3
below), the Purchaser shall decide to register any of its Common Stock either
for its own account or the account of a shareholder or shareholders, under a
registration statement filed with the Securities and Exchange Commission under
the Securities Act of 1933 (the "Act") on a form which permits the inclusion of
the Registrable Securities (as hereafter defined), other than a registration on
Form S-8 in respect of shares of common stock of Purchaser issued pursuant to an
employee stock option plan and other
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than a registration in respect of shares of common stock issued by Purchaser in
connection with an acquisition (but then only to the extent the terms of such
acquisition prohibit inclusion of the Registrable Securities on any such
registration statement), the Purchaser shall: (i) give Seller twenty (20) days
prior written notice thereof (which shall include a list of the jurisdictions in
which the Purchaser intends to attempt to qualify such common shares under the
applicable blue sky or other state securities laws) (the "Registration Notice");
and (ii) include in such registration (and any related qualification under blue
sky laws or other compliance), all the Registrable Securities which the Seller
elects to have included therein and which are eligible to be included therein,
subject to the provisions herein. The Seller's election to have the Registrable
Securities included in any such registration shall be made in writing and
delivered to the Purchaser within twenty (20) days after receipt of the
Registration Notice (the "Registration Election").
5.13.2 Underwriting. If any registration under
Section 5.13.1 shall be underwritten in whole or in part, the Purchaser may
require that any Registrable Securities as to which the Seller exercises
registration rights be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters. The
registration rights granted to the Seller pursuant to this Section shall be
conditioned upon the Seller's participation in the underwriting and the
inclusion of the Registrable Securities in the underwritten offering to the
extent provided herein. All persons proposing to distribute their common shares
through such underwriting shall (together with the Purchaser) enter into an
underwriting agreement, which shall be in a customary form, with the underwriter
or underwriters which shall be selected by the Purchaser (the "Underwriter").
Notwithstanding any other provision of this Section to the contrary, if the
Underwriter determines that marketing factors require a limitation of the number
of common shares to be underwritten, the Underwriter may limit the number of
Registrable Securities to be included in the registration and underwriting;
provided that the Seller shall be entitled to include a pro rata portion of the
Registrable Securities in the registration and underwriting compared to the
total number of common shares to be included by other shareholders exercising
similar rights. The Purchaser shall advise the Seller as to the number of
Registrable Securities which shall be registered and underwritten pursuant
hereto as soon as reasonably possible after the Purchaser receives the
Registration Election. If the Seller disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by delivering a written notice
to the Purchaser and the Underwriter. Any Registrable Securities excluded
(whether voluntarily or involuntarily) or withdrawn from such registration and
underwriting shall be eligible to be included in any subsequent registration and
underwriting by the Purchaser as provided in Sections 5.13.1 and 5.13.2, and the
Seller shall have the same rights, duties and obligations in any subsequent
registration; provided that the registration statement to be filed in connection
therewith is to be filed during the Piggyback Registration Period.
5.13.3 Piggyback Registration Period. The
Piggyback Registration Period shall commence on the Settlement Date and shall
expire on that date which is four hundred fifty (450) days after the Settlement
Date.
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5.13.4 Demand Registration Rights. If, on the
date which is four hundred fifty (450) days after the Settlement Date, the
Seller has not sold all of the Registrable Securities and is not then able to
sell all of the Registrable Securities pursuant to an effective registration
statement or an exemption from registration under the Act (and any required
qualification or compliance or exemption therefrom under applicable blue sky
laws), the Seller shall have the right to require the Purchaser to file one
registration statement under the Act which registers all of the Registrable
Securities (the "Demand Right"). The Seller may exercise the Demand Right by
delivering written notice to the Purchaser not later than the date which is four
hundred eighty (480) days after the Settlement Date. After receiving such notice
from the Seller, the Purchaser shall file the required registration statement
with the Securities and Exchange Commission not later than the date which is six
hundred thirty (630) days after the Settlement Date and shall use its best
efforts to have the registration statement declared effective not later than the
date which is eight hundred ten (810) days after the Settlement Date. The
Purchaser shall keep the registration statement continuously effective and keep
the related prospectus continuously current and able to be used for sales of the
Registrable Securities for a period of two (2) years, or until such earlier time
that the Seller has sold all of the Registrable Securities.
5.13.5 Registration Information. In the case of
each registration, qualification, or compliance effected by the Purchaser
pursuant to the terms of this Agreement, the Purchaser shall keep the Seller
advised in writing as to the initiation, status and completion of each
registration, qualification and compliance.
5.13.6 Expenses of Registration. All costs,
expenses and fees incurred in connection with any registration, qualification or
compliance pursuant to this Agreement, including without limitation, all
registration, filing and qualification fees, printing costs and expenses, fees
and disbursements of counsel for the Purchaser, and expenses of any special
audits incidental to or required to be performed in connection with such
registration, shall be borne solely by the Purchaser; provided however, that the
Purchaser shall not be required to pay any of the Seller's legal fees,
underwriting fees, discounts, or commissions relating to the shares registered.
5.13.7 Definition of Registrable Securities. The
term "Registrable Securities" shall mean the Purchaser Shares, the Additional
Shares and/or any securities issued by Purchaser in exchange therefor, or as a
result of a stock dividend, stock split or reverse stock split in connection
therewith. Notwithstanding anything herein to the contrary, the Purchaser shall
not be required to have any Registrable Securities registered if (i) such
securities are already the subject of an effective registration statement or
(ii) in the opinion of either counsel for the Purchaser, knowledgeable and
experienced in Federal securities matters (said counsel to be acceptable to the
holder of the Registrable Securities in the reasonable judgement of the holder),
or counsel for the holder, knowledgeable and experienced in Federal securities
matters (said counsel to be acceptable to the Purchaser in the Purchaser's
reasonable judgement), the holder may lawfully sell publicly, at the time and in
the manner the holder proposes to sell the
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Registrable Securities, all of the Registrable Securities proposed to be sold
without registering the sale under the Act, whether pursuant to an exemption
from registration available under Section 4(1) of the Act, Rule 144 or Rule
144(k) under the Act, or otherwise.
5.13.8 Information by Seller. The Seller shall
furnish to the Purchaser, at the Seller's own expense and in writing, such
information regarding the Seller and the distribution proposed to be made by the
Seller as the Purchaser may request in connection with any registration,
qualification or compliance referred to in this Agreement. Furthermore, the
Seller agrees to cooperate fully with the Purchaser in the preparation and
filing of any registration statement which includes any Purchaser Shares or
Additional Shares owned by the Seller.
5.13.9 Cooperation and Idemnification. The
Seller agrees to indemnify and hold harmless the Purchaser, each of its
directors, and each of its officers who has signed any registration statement
filed by Purchaser pursuant to this Agreement (or any amendment thereof) and
each person, if any, who controls the Purchaser, within the meaning of the Act,
against any losses, damages or liabilities to which the Purchaser, or any such
director, officer or controlling person of the Purchaser may become subject
under such Act or otherwise, insofar as said losses, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in such registration
statement (or any amendment thereof) or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; that
such indemnity shall apply only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with information furnished by the Seller for use in the
preparation thereof. The Seller agrees to reimburse the Purchaser and any such
director, officer or controlling person for any legal or other expenses
reasonably incurred in connection with any such loss, damage or liability. The
Purchaser agrees to indemnify and hold harmless the Seller, each of its
directors, each of its officers, and each person, if any, who controls Seller,
within the meaning of the Act, against any losses, damages or liabilities to
which the Seller, or any such director, officer or controlling person of the
Seller may become subject under the Act or otherwise insofar as said losses,
damages or liabilities (or actions in respect thereof), arise out of or are
based upon any untrue statement or alleged untrue statement of material fact
contained in such registration statement (or any amendment thereof) or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; but such indemnity shall apply only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with information furnished
by any person or entity other than the Seller for use in the preparation
thereof.
5.13.10 Right of Seller to Put Shares. If, on
the date which is eight hundred ten (810) days after Settlement Date, the Seller
has not sold all of the Registrable Securities and is not then able to sell all
of the Registrable Securities pursuant to an effective
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registration statement or an exemption from registration under the Act (and any
required qualification or compliance or exemption therefrom under applicable
blue sky laws), then the Seller shall have the option, by written notice to
Purchaser to be given on or before the date which is eight hundred forty (840)
days after the Settlement Date, to require Purchaser to purchase from Seller any
remaining Registrable Securities held by Seller at a purchase price of $6 per
share. The closing date for such sale shall occur no later than 30 days after
Seller gives such notice to Purchaser. Without limiting the generality of the
foregoing, in the event Purchaser shall fail to maintain the listing of any
Purchaser Shares or Additional Shares upon the OTC Bulletin Board or the NASDAQ
Small Cap Market for so long as Seller shall continue to hold any Purchaser
Shares or Additional Shares, then Seller shall have the option, by written
notice to Purchaser to be given within sixty (60) days after the later of
Seller's receipt of Purchaser's notice of such delisting given pursuant to
Section 5.14 or Seller's acquiring actual knowledge of such delisting, to
require Purchaser to purchase from Seller any remaining Additional Shares or
Purchaser Shares held by Seller at a purchase price of $6 per share. The closing
date for such sale shall occur no later than thirty (30) days after Seller gives
such notice to Purchaser.
5.13.11 Prohibition on Short Sales; Manner of
Sale. Seller agrees that while Seller holds any Purchaser Shares, Seller will
not, directly or through an affiliate, establish or hold, in any manner or by
any means, a short position in Purchaser's Common Stock. Seller agrees that any
sales of the Purchaser Shares in the market will be done in consultation with
Purchaser and in an orderly fashion to minimize, to the extent practicable,
downward pressure on the price of Purchaser's Common Stock.
5.14 Maintenance of OTC Bulletin Board Listing. Purchaser
shall use its best efforts to continue to maintain, in the case of the Purchaser
Shares, and shall promptly secure, in the case of any Additional Shares issued
pursuant to this Agreement, the listing of such shares upon the OTC Bulletin
Board or the NASDAQ SmallCap market and shall maintain such listing so long as
Seller shall continue to hold any Purchaser Shares or any Additional Shares.
Purchaser will comply in all respects with the Purchaser's reporting, filing and
other obligations under the bylaws or rules of the OTC Bulletin Board and the
National Association of Securities Dealers ("NASD"), as applicable. Purchaser
will provide Seller copies of all notices it receives notifying Purchaser of the
delisting of its common stock from the OTC Bulleting Board or any exchange or
quotation system on which its common stock is listed.
5.15 Continuation of Registration Under Exchange Act. After
the Settlement Date, Purchaser will (i) cause its common stock to continue to be
registered under Sections 12(b) or 12(g) of the Exchange Act, (ii) comply in all
respects with its reporting and filing obligations under the Exchange Act, and
(iii) comply with all requirements related to any registration statement filed
pursuant to this Agreement.
5.16 License Agreement Under Dispute. Seller shall have no
obligation on the Settlement Date to transfer to Purchaser any of Seller's
rights under the Disputed License
22
23
Agreements. Nothing herein shall restrict Seller's ability to take any action it
deems appropriate in connection with the settlement of any dispute relating to
any of said Disputed License Agreements, including, without limitation,
terminating any such agreements. In the event that the dispute relating to any
such License Agreement is fully and finally resolved, Seller will transfer to
Purchaser all of Seller's right, title and interest under such Disputed License
Agreement to Purchaser, provided that:(i) in connection with such resolution,
the Disputed License Agreement has not otherwise been terminated and (ii) such
assignment is permitted by the terms of the Disputed License Agreement; and
(iii) such assignment would not violate or otherwise create a conflict under any
settlement agreement or arrangement entered into in connection with the
resolution of such dispute. Seller shall have no affirmative obligation to
obtain the consent of any dealer who is a party to such Disputed License
Agreement to the assignment of such agreement to Purchaser. Purchaser shall have
no right to any proceeds of any award or settlement received by Seller in
connection with the resolution or disposition of any dispute relating to a
Disputed License Agreement.
5.17 Disputed Domain Name; Use of E-Mail Address.
5.17.1 As of the date hereof, Seller does not
have, and as of the Settlement Date, will not have, any rights to the Disputed
Domain Name. On the Settlement Date, Seller will assign to Purchaser any claim
it may have to the Disputed Domain Name and Purchaser shall be entitled after
the Settlement Date to pursue any such claim.
5.17.2 Notwithstanding the transfer of the Domain
Name hereunder pursuant to the terms and conditions of this Agreement, Purchaser
hereby agrees that Seller shall be allowed for a period of ninety (90) days
after the Settlement Date, to use the email address "@xxxxxx-xxxxx.xxx" for
Seller's employees. Seller shall make arrangements after the Settlement Date to
change Seller's email address on or prior to the expiration of such ninety (90)
day period.
5.18 Master Dealership Agreement. Pursuant to a Master
Dealership Agreement ("Master Dealership Agreement") in form and substance
satisfactory to Seller and its counsel, Purchaser shall become a dealer of
Seller's brand of Ultra motorcycles and parts at the five Company Superstore
locations, and Affiliate shall become a dealer of Seller's brand of Ultra
motorcycles and parts locations at Affiliate's location in Xxxxxxx and
Springfield, Virginia. The execution of the Master Dealership Agreement is a
condition precedent to closing pursuant to Section 6 hereof. Additional stores
opened by Purchaser and Affiliate after the Settlement Date shall be subject to
the Master Dealer Agreement on such terms and conditions as shall be acceptable
to both parties.
5.19 Non-Interference with Existing Ultra Dealers. The parties
hereby acknowledge that the dealers who are parties to the License Agreements
may also be party to a separate Ultra Cycles dealer agreement between the Seller
and each such dealer. Purchaser
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agrees that after the Settlement Date, Purchaser will not, and shall not permit
Affiliate or any other affiliate or subsidiary of Purchaser to, directly or
indirectly, attempt to interfere in any manner with Seller's Ultra Cycle dealer
agreements in effect as of the Settlement Date, including, without limitation,
inducing or attempting to influence any party to such agreement to terminate
such Agreement or to violate the provisions of such agreement.
5.20 Notification of New Store Openings. After the Settlement
Date, Purchaser hereby agrees, and agrees to cause Affiliate or any other
affiliate or subsidiary of Purchaser, to give prompt written notice to Seller of
its intent to enter into license agreements with new dealers for the use of the
"Bikers Dream" name and/or related Intellectual Property, whereupon Seller shall
be afforded a reasonable opportunity to solicit any such new dealers for the
purpose of entering into an Ultra Cycles dealer agreement. In the event Seller
enters into an Ultra Cycles dealer agreement with any such dealer, Purchaser
agrees that it shall not, and shall not permit Affiliate or any affiliate or
subsidiary of Purchaser to, directly or indirectly, attempt to interfere in any
manner with such Ultra Cycle dealer agreement, including, without limitation,
inducing or attempting to influence any party to such agreement to terminate
such Agreement or to violate the provisions of such agreement.
5.21 Confidentiality. Purchaser shall not, nor shall
Purchaser permit Affiliate or any other affiliate or subsidiary of Purchaser to,
at any time use for Purchaser's, Affiliate's or any such other affiliate's or
subsidiary's benefit, or disclose, communicate or divulge to, or use for the
direct or indirect benefit of any person or entity, any confidential information
of Seller acquired by Purchaser, Affiliate or any such other affiliate or
subsidiary, including, without limitation, Seller's business methods, business
policies, procedures, techniques, research or development projects or results;
historical or projected financial information, budgets, trade secrets or other
knowledge or processes of or developed by Seller; any names and addresses of
customers or clients or any data on or relating to past, present or prospective
Seller customers or clients; or any other confidential information relating to
or dealing with the business, operations or activities of Seller, excepting in
each case information otherwise lawfully known generally by, or readily
accessible to, the trade or the general public.
5.22 Merchant Accounts. Purchaser shall apply for merchant
credit card accounts in its own name promptly after the Settlement Date. For a
period not to exceed ninety (90) days after the Settlement Date, Seller shall,
to the extent permitted under agreements governing its existing merchant
accounts, allow Purchaser to use such merchant accounts to process transactions
at the Company Superstores, and Seller shall promptly remit to Purchaser all
amounts received in respect of such transactions.
5.23 Governmental Approvals and Licenses. Purchaser shall
promptly and diligently apply for and obtain, not later than one hundred eighty
three (183) days after the Settlement Date, all Pending Licenses necessary for
the operation of the Retail Business. Seller shall give Purchaser such
assistance in obtaining the Pending Licenses as reasonably requested by
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Purchaser. Purchaser shall keep Seller informed of all material developments
during the application process and shall promptly notify Seller as each such
Pending License is obtained.
5.24 Publicity. All notices to third parties and all other
publicity concerning the transactions contemplated in this Agreement will be
jointly planned and coordinated by and between Seller and Purchaser. Neither
party will act unilaterally in this regard without the prior written approval of
the other; however, this approval will not be unreasonably withheld.
5.25 Financial Information. Seller agrees to provide to
Purchaser such financial and other information as Purchaser shall reasonably
request in connection with Purchaser's preparation of a report on Form 8-K with
respect to its acquisition of the Retail Business.
60 SETTLEMENT
6.1 Settlement Date. The transfer of possession of the Assets
by Seller to Purchaser (the "Settlement") will take place at the offices of
Seller's counsel, Xxxxxx & Xxxxxxx, at 0000 Xxxxxxx Xxxx Xxxx, Xxx Xxxxxxx,
Xxxxxxxxxx, at 10:00 a.m. local time, on January 29, 2000, or such other time
and place as Seller and Purchaser may agree to in writing. That date, or if the
Settlement is advanced or postponed under this paragraph, then the date to which
it is advanced or postponed, is called the Settlement Date. If on the Settlement
Date (1) any condition to Settlement set forth in this Section 6 is not
satisfied or (2) without limiting the generality of (1) above, Seller has been
unable to obtain all other waivers and consents of private parties and
governmental agencies required by this agreement, then either Purchaser or
Seller, on written notice, may postpone the Settlement to a time not later than
10:00 a.m. local time, on February 29, 2000 and the other party shall be
obligated to proceed with the Settlement on such date. If the Settlement does
not occur by February 29, 2000, this Agreement will automatically terminate
unless both parties agree in writing to an extension. Upon such termination of
this Agreement, each party shall return all records and documents received from
the other, and each party shall be released from all other duties, obligation
and liability to the other, with the exception of the confidentiality provisions
of Section 5.19 hereof.
6.2 Delivery. On the Settlement Date, Seller shall deliver
or cause to be delivered to such escrow agent as shall be reasonably acceptable
to Seller and Purchaser ("Escrow Agent") such assignments, third party consents,
instruments and documents required to be delivered by Seller under this
Agreement or which counsel for Purchaser or Escrow Agent may reasonably request
for the purpose of settling this Agreement. At Settlement, Purchaser shall
deliver to Escrow Agent the Purchaser Shares and the promissory note referred to
in Section 2.1.2 and shall deliver all other assignments, third party consents,
instruments and documents required to be delivered by Purchaser under this
Agreement or which counsel for Seller or Escrow Agent may reasonably request for
the purpose of settling this Agreement.
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6.3 Method of Payment. If a cash payment is made,
Purchaser shall make payment by certified check, cashier's check or wire
transfer.
6.4 Xxxx of Sale. Seller shall deliver to Escrow
Agent on the Settlement Date a Xxxx of Sale for the Assets in the form and
substance reasonably satisfactory to Purchaser and its counsel.
6.5 Recording Fees. The recording fees shall be paid
by Purchaser.
6.6 Conditions Precedent to Settlement by Purchaser. The
obligations of Purchaser contemplated herein are subject to the satisfaction, at
or before the Settlement Date, of all of the conditions set out herein below.
6.6.1 Accuracy of and Certificate as to
Representations and Warranties. The representations and warranties of Seller
contained herein and in all documents to be delivered pursuant hereto shall be
true and correct in all material respect as of the Settlement Date, as if made
at such time, and Purchaser shall have received from Seller a certificate, dated
as of the Settlement Date and signed by an executive officer of Seller,
certifying that all such representations and warranties of Seller remain true
and correct as of the Settlement Date.
6.6.2 Compliance with Convenants. Seller shall
have performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed by Seller.
6.6.3 Action/Proceeding. No court shall have
issued an order effective against a party to restrain or prohibit the
transactions herein contemplated.
6.6.4 Corporate Authorization. Seller shall
deliver to Escrow Agent certified copies of all appropriate resolutions of
Seller's Board of Directors authorizing the transaction contemplated by this
Agreement.
6.6.5 Consents. Seller shall have obtained from
all third parties all consents required to be obtained by it prior to the
Settlement Date pursuant to Section 3.7 and delivered such consents to Escrow
Agent.
6.6.6 Lease Assignment. Seller shall have
obtained and delivered to Escrow Agent assignments of all of its interest under
the leases for the Company Superstore locations which are described in Section
1.1.10 and Seller shall be released from liability thereunder. Seller is
negotiating a new lease for the existing Dallas location and a possible
alternative location. The terms of the new Dallas lease shall be reasonably
acceptable to Purchaser. The landlord shall consent to the assignment, and such
consent will be delivered to Escrow Agent on the Settlement Date.
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6.6.7 Assignment of License Agreements.
Seller shall execute and deliver to Escrow Agent an assignment to Purchaser of
all of its interest in the License Agreements, which are in force on the date of
this Agreement and identified in Schedule 1.1.9, with the exception of the
Disputed License Agreements.
6.6.8 Xxxx of Sale. Seller shall deliver to
Escrow Agent the Xxxx of Sale referred to in Section 6.4.
6.6.9 Master Dealer Agreement. Seller,
Purchaser and Affiliate shall enter into a dealer agreement for the sale of
Ultra motorcycles at the five Company Superstore locations and at Affiliate's
two Virginia dealerships, in form and substance satisfactory to Purchaser and
its counsel.
6.6.10 Additional Instruments of Transfer.
Seller shall execute and deliver to Escrow Agent such further instruments of
sale, transfer, conveyance, assignment and delivery, consents and assurances as
may be reasonably requested by Purchaser in order to convey to Purchaser all
right, title and interest of Seller in and to the Assets.
6.6.11 Operating Agreement and Escrow Agreement.
Seller and Purchaser shall execute an Operating Agreement and Escrow Agreement
in each case, in form and substance satisfactory to Purchaser and its counsel.
6.7 Conditions Precedent to Settlement by Seller. The
obligations of Seller contemplated herein are subject to the satisfaction, at
or before the Settlement, of all of the conditions set out herein below.
6.7.1 Accuracy of and Certificate as to
Representations and Warranties. The representations and warranties of Purchaser
contained herein and in all documents to be delivered pursuant hereto shall be
true and correct in all material respects as of the Settlement Date, as if made
at such time, and Seller shall have received from Purchaser a certificate, dated
as of the Settlement Date and signed by an executive officer of Purchaser,
certifying that all such representations and warranties of Purchaser remain true
and correct as of the Settlement Date. Without limiting the generality of the
foregoing, Seller hereby acknowledges that, as of the Settlement Date, Purchaser
will not have the Pending Licenses and, subject to the satisfaction of all other
conditions to Settlement set forth in this Section 6.7.1, Seller hereby waives
compliance by Purchaser with the provisions of Section 4.8 insofar as such
waiver relates solely to the failure of Purchaser to obtain the Pending
Licenses.
6.7.2 Compliance with Covenants. Purchaser
shall have performed and complied with all covenants, agreements and conditions
required by this Agreement to be performed by Purchaser.
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6.7.3 Action/Proceeding. No court shall have
issued an order effective against a party to restrain or prohibit the
transactions herein contemplated.
6.7.4. Corporate Authorization. Purchaser and
Affiliate shall deliver to Escrow Agent certified copies of all appropriate
resolutions of Purchaser's and Affiliate's Board of Directors authorizing the
transactions contemplated by this Agreement and the Master Dealership Agreement.
6.7.5 Consents. Purchaser and Affiliate
shall have obtained from all third parties all consents required to be obtained
by it prior to the Settlement Date pursuant to Section 4.7.
6.7.6 Note. Purchaser shall have executed
the Note in form and substance satisfactory to Seller and its counsel and
delivered the Note to Escrow Agent.
6.7.7 Security Agreement. Purchaser shall
have executed and delivered to Escrow Agent the Security Agreement in form and
substance satisfactory to Seller and its counsel.
6.7.8 Assumption of Liabilities. Purchaser
shall have executed and delivered to Seller an assumption of liabilities in
form and substance satisfactory to Seller and its counsel.
6.7.9 Floor Plan Financing. Without limiting
the generality of Section 6.7.8, Purchaser shall have assumed the existing floor
plan debt held by Cycle Capital Corp. pursuant to an assumption in form and
substance satisfactory to Seller and its counsel, and shall have delivered such
assumption to Escrow Agent.
6.7.10 Master Dealer Agreement. Seller,
Purchaser and Affiliate shall enter into a dealer agreement for the sale of
Ultra motorcycles at the five Company Superstore locations and at Affiliate's
two Virginia dealerships, in form and substance satisfactory to Seller and its
counsel.
6.7.11 Resale Certificate. Purchaser shall
deliver to Seller a Resale Certificate (relating to sales taxes) in form and
substance satisfactory to Seller and its counsel.
6.7.12 Operating Agreement; Escrow Agreement.
Seller and Purchaser shall execute an Operating Agreement and an Escrow
Agreement, in each case in form and substance satisfactory to Seller and its
counsel (including, without limitation, satisfactory indemnification
provisions). Without limiting the generality of the foregoing, Seller and its
counsel shall be satisfied that the execution and performance of such Operating
Agreement by
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Seller and Purchaser shall not cause Seller to be in violation of any rule or
regulation of any governmental agency or licensing authority with jurisdiction
over the operations of the Retail Business, including, without limitation, any
motor vehicle licensing authority.
6.8 Mutual Covenant to Restructure Transaction. In the
event Seller's counsel believes, pursuant to Section 6.7.12, that the
transactions contemplated by the Operating Agreement, may cause Seller to
violate a rule or regulation of any governmental agency or licensing authority,
Purchaser and Seller covenant to use best efforts to restructure the
transaction in such a way so as to bring it into compliance with applicable law
and to use best efforts to close the transaction by the Settlement Date.
6.9 Transfer of Title; Release of Settlement Documents
from Escrow. On the earlier of (i) the date on which Purchaser obtains the
Pending Licenses or (ii) one hundred eighty three (183) days from the
Settlement Date, the Operating Agreement shall terminate and the parties shall
jointly instruct Escrow Agent to release (A) to Seller, the Purchaser Shares
and the promissory note referred to in Section 2.1.2 and (B) to Purchaser, the
xxxx of sale, assignments, consents and releases of third parties, and any
other instruments of transfer delivered by Seller to Escrow Agent pursuant to
Section 6.6.
70 DEFAULT BY PURCHASER OR SELLER
7.1 Instances of Purchaser Default. Purchaser Default
shall occur in any of the following instances:
7.1.1 Failure to Perform. Purchaser fails to perform
any obligation imposed by this Agreement or any Ancillary Document, and does
not correct or commence and diligently pursue correction of such failure within
fifteen (15) days after written notice from Seller specifying the manner in
which Purchaser is in default.
7.1.2 Insolvency. Purchaser becomes insolvent, a
receiver is appointed to take possession of all or a substantial part of
Purchaser's properties, Purchaser makes an assignment for the benefit of
creditors or files a voluntary petition in bankruptcy, or Purchaser is the
subject of an involuntary petition in bankruptcy, which is not dismissed within
sixty (60) calendar days.
7.1.3 Default on Underlying Agreements and Assumed
Obligations. Any default by Purchaser under the Assumed Liabilities or any
other agreement made pursuant to this Agreement not cured within any grace
period provided herein.
7.2 Instances of Seller Default. Seller Default shall
occur in the following instances:
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7.2.1 Failure to Perform. Seller fails
to perform any obligation imposed by this Agreement, or any of the Ancillary
Documents, including, without limitation, the Master Dealership Agreement.
7.3 Seller's and Purchaser's Remedies Upon
Default. In the event of Seller's or Purchaser's default, Seller and Purchaser
shall have all the rights and remedies granted to them by agreement and by the
laws of the State of New York.
7.4 Remedies Cumulative. The remedies accorded
Seller hereunder are cumulative and concurrent and shall be in addition to any
other rights or remedies by law or equity. Seller shall have the right to
enforce one or more remedies hereunder, successively or concurrently, and such
action shall not operate or estop or prevent Seller from pursuing any further or
other remedy hereunder or which is permitted by law or equity.
80 MISCELLANEOUS
8.1 Binding Effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their
respective successors, heirs, assigns and devisees.
8.2 Integration. This Agreement and the other
agreements and instruments entered into by the parties in connection with the
transactions contemplated by this Agreement (collectively the "Ancillary
Documents") constitute the entire agreement between the parties relating to the
subject matter hereof. This Agreement and the Ancillary Documents supersede
prior memoranda and all other prior documents made by the parties in connection
with the transaction described herein. Oral agreements and understandings of the
parties, if any, regarding the subject matter of this Agreement have been
integrated herein. Neither this Agreement nor the Ancillary Documents may not be
modified or altered except by written agreement signed by all parties.
8.3 Notice. Any notice or other communication
required or permitted hereunder shall be sufficiently given if sent (i) by mail,
first-class postage prepaid, certified return receipt requested, (ii) overnight
courier or (iii) fax (with a copy first-class postage prepaid, certified return
receipt requested), in each case addressed as follows:
8.3.1 If to Purchaser, addressed to:
V-Twin Holdings, Inc.
c/o AIME
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
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8.3.2 If to Seller, addressed to:
Bikers Dream, Inc.
0000 Xxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
In the case of (i), notices shall be deemed received on the second business day
after deposit of the same in the United States mail, properly addressed and
postage prepaid, in the case of (ii), notices shall be deemed received on the
second business day after delivery to the courier, properly addressed and
shipping prepaid and in the case of (iii), notices shall be deemed given upon
receipt by the sending party of the fax "answer back" or confirmation sheet.
8.4 Time is of Essence. Time is of the essence
in this Agreement.
8.5 Choice of Law, Jurisdiction and Attorney's
Fee's. This Agreement shall be governed by and construed under the laws of the
State New York.
8.6 Severability. If any clause, provision or
section of this Agreement shall be held illegal or invalid by any court, the
illegality or invalidity of such clause, provision or section shall not affect
the remainder of this Agreement which shall be construed and enforced as if such
illegal or invalid clause, provision or section had not been contained in this
Agreement. If any agreement or obligation contained in this Agreement is held to
be in violation of law, then such agreement or obligation shall be deemed to be
the agreement or obligation of the respective party hereto only to the extent
permitted by law.
8.7 Assignment. Purchaser shall not sell,
assign or transfer an interest in this Agreement or in any instrument executed
in connection herewith, without prior consent of Seller. Seller shall not
unreasonably withhold consent.
8.8 Waiver. Failure of either party, at any
time, to require performance hereunder of any provision herein contained shall
in no way affect the right of a party to enforce the same, nor shall any waiver
by either party of any breach of any provision hereof be held to be a waiver of
a succeeding breach of any provision, or as a waiver of the provision itself.
8.9 Counterparts. This agreement may be
executed simultaneously in one or more counterparts, each of which will be
considered an original, but all of which together will constitute one and the
same instrument. Such counterparts may be signed by facsimile signatures.
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8.10 Number, Gender and Captions. As used
herein, the singular shall include the plural and the Plural the singular. The
masculine and the neuter shall include the masculine, feminine and neuter as the
context requires. All captions used herein are intended solely for convenience
of reference, and shall in no way limit any of the provisions of this Agreement.
8.11 Section Headings. The various Section
headings are inserted for convenience of reference only, and shall not affect
the meaning or interpretation of this Agreement or any section thereof.
8.12 Board Director. For so long as the
promissory note referred to in Section 2.1.2, or not less than a total of 20,000
Purchaser Shares and Additional Shares are held by Seller, Seller may appoint a
member to the Purchaser's board, and that person must be approved by the
Purchaser's existing board members, which consent shall not be unreasonably
withheld. It is hereby agreed that Xxxx Xxxxxxxx, President and Chief Executive
Officer of Seller, is acceptable to the board of directors of Purchaser.
8.13 Opportunity to Consult with Counsel. BY ITS
EXECUTION HEREOF, EACH PARTY REPRESENTS THAT IT HAS CONSULTED WITH ITS LEGAL
COUNSEL REGARDING THE TERMS OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND SUCH COUNSEL HAS HAD AN OPPORTUNITY TO MAKE SUCH COMMENTS OR
REVISIONS AS HE OR SHE DEEMS APPROPRIATE OR ADVISABLE.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their representative duly authorized officers.
SELLER
BIKERS DREAM, INC.,
a California Corporation
By: /s/ Xxxx Xxxxxxxx
--------------------------------------
Xxxx Xxxxxxxx, Chairman and CEO
PURCHASER
V-TWIN HOLDINGS, INC.,
a District of Columbia Corporation
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx, President
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TABLE OF CONTENTS
1. GENERAL TERMS OF SALE..........................................................................................1
---------------------
1.1 Contract to Sell...................................................................................1
----------------
1.2 Assumption of Liabilities and Obligations..........................................................3
-----------------------------------------
1.3 Excluded Obligations...............................................................................3
--------------------
1.4 Further Assurances.................................................................................3
------------------
2. CONSIDERATION AND METHOD OF PAYMENT............................................................................3
-----------------------------------
2.1 Purchase Price.....................................................................................3
--------------
2.1.1 Securities.............................................................................3
2.1.2 Promissory Note........................................................................4
2.2 Adjustment of Purchase Price.......................................................................4
----------------------------
2.2.1 Fixed Value of Assets..................................................................4
---------------------
2.2.2 Determination of Original Purchase Cost................................................4
---------------------------------------
2.2.2.1 Original Purchase Cost of New and Used Motorcycles.............................4
2.2.2.2 Original Purchase Cost of Motorcycle Parts, Clothing and Accessories...........5
2.2.3 Procedure for Adjustment of Purchase Price.............................................5
2.2.3.1 Total Original Purchase Cost Exceeds Fixed Value...............................5
2.2.3.2 Total Original Purchase Cost is Less than Fixed Value..........................5
2.2.4 Adjustment Due to Credits for Customer Deposits........................................5
2.2.5 Adjustment Due to Proration of Rent, Utilities, Etc....................................6
2.3 Allocation of Purchase Price.......................................................................6
----------------------------
3. REPRESENTATIONS AND WARRANTIES OF SELLER.......................................................................6
----------------------------------------
3.1 Authority..........................................................................................6
---------
3.2 Good Standing......................................................................................7
-------------
3.3 Corporate Proceedings..............................................................................7
---------------------
3.4 Title..............................................................................................7
-----
3.5 Condition of Assets................................................................................7
-------------------
3.6 Property Insurance.................................................................................7
------------------
3.7 Sale of Assets Creates No Conflict.................................................................8
----------------------------------
3.8 License Compliance.................................................................................8
------------------
3.9 Tax Warranty.......................................................................................8
------------
3.10 Environmental Hazards..............................................................................8
---------------------
3.11 Zoning.............................................................................................9
------
3.12 Accuracy of Certain Records........................................................................9
---------------------------
3.13 Brokerage Fee......................................................................................9
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xxxiv
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3.14 Employee Benefit Plans.............................................................................9
----------------------
3.15 Untrue Statement...................................................................................9
----------------
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND AFFILIATE......................................................9
---------------------------------------------------------
4.1 Authority..........................................................................................9
---------
4.2 Good Standing; Ownership of Affiliate.............................................................10
-------------------------------------
4.3 Corporate Proceedings.............................................................................10
---------------------
4.4 Reservation of Purchaser Shares...................................................................10
-------------------------------
4.5 Reservation of Additional Shares..................................................................10
--------------------------------
4.6 Reporting Company.................................................................................10
-----------------
4.7 Sale of Assets Creates No Conflict................................................................10
----------------------------------
4.8 License Compliance................................................................................11
------------------
4.9 Consents and Approvals............................................................................11
----------------------
4.10 Compliance with Securities Laws...................................................................11
-------------------------------
4.11 Brokerage Fee.....................................................................................12
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4.12 Untrue Statement..................................................................................12
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5. COVENANTS AND FURTHER AGREEMENTS OF SELLER AND PURCHASER......................................................12
--------------------------------------------------------
5.1 Reliance Upon and Survival of Representations and Warranties......................................12
------------------------------------------------------------
5.2 Further Assurances................................................................................12
------------------
5.3 Bulk Sales Law....................................................................................12
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5.4 Indemnification...................................................................................12
---------------
5.4.1 For Purchaser.........................................................................12
5.4.2 For Seller............................................................................13
5.5 Expenses..........................................................................................14
--------
5.6 Risk of Loss......................................................................................14
------------
5.7 Operation of Business Prior to Settlement.........................................................14
-----------------------------------------
5.8 Insurance.........................................................................................14
---------
5.9 Purchaser's Rights to Review Communications.......................................................14
-------------------------------------------
5.10 Guarantee of Purchase Price.......................................................................15
---------------------------
5.10.4 Reservation of Shares.....................................................................17
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5.11 Right to Call and Repurchase Purchaser Shares.....................................................17
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5.12 Right of First Refusal............................................................................18
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5.13 Registration Rights...............................................................................18
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5.13.1 Piggyback Registration Rights.............................................................18
5.13.2 Underwriting..............................................................................19
5.13.3 Piggyback Registration Period.............................................................20
5.13.4 Demand Registration Rights................................................................20
5.13.5 Registration Information..................................................................20
5.13.6 Expenses of Registration..................................................................20
5.13.7 Definition of Registrable Securities.......................................................20
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5.13.8 Information by Seller.....................................................................21
5.13.9 Cooperation and Indemnification...........................................................21
5.13.10 Right of Seller to Put Shares.............................................................22
5.13.11 Prohibition on Short Sales; Manner of Sale................................................22
5.14 Maintenance of OTC Bulletin Board Listing.................................................22
5.15 Continuation of Registration Under Exchange Act...................................................22
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5.16 License Agreements Under Dispute..................................................................23
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5.17 Disputed Domain Name; Use of E-Mail Address.......................................................23
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5.18 Master Dealership Agreement.......................................................................23
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5.19 Non-Interference with Existing Ultra Dealers......................................................24
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5.20 Notification of New Store Openings................................................................24
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5.21 Confidentiality...................................................................................24
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5.22 Merchant Accounts.................................................................................24
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5.23 Governmental Approvals and Licenses...............................................................25
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5.24 Publicity.........................................................................................25
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5.25 Financial Information.............................................................................25
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6. SETTLEMENT....................................................................................................25
6.1 Settlement Date...................................................................................25
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6.2 Delivery..........................................................................................25
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6.3 Method of Payment.................................................................................26
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6.4 Xxxx of Sale......................................................................................26
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6.5 Recording Fees....................................................................................26
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6.6 Conditions Precedent to Settlement by Purchaser...................................................26
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6.6.1 Accuracy of and Certificate as to Representations and Warranties......................26
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6.6.2 Compliance with Covenants.............................................................26
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6.6.3 Action/Proceeding.....................................................................26
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6.6.4 Corporate Authorization...............................................................26
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6.6.5 Consents..............................................................................27
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6.6.6 Lease Assignment......................................................................27
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6.6.7 Assignment of License Agreements......................................................27
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6.6.8 Xxxx of Sale..........................................................................27
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6.6.9 Master Dealer Agreement...............................................................27
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6.6.10 Additional Instruments of Transfer....................................................27
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6.6.11 Operating Agreement and Escrow Agreement..............................................27
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6.7 Conditions Precedent to Settlement by Seller......................................................27
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6.7.1 Accuracy of and Certificate as to Representations and Warranties......................27
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6.7.2 Compliance with Covenants.............................................................28
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6.7.3 Action/Proceeding.....................................................................28
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6.7.4 Corporate Authorization...............................................................28
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6.7.5 Consents..............................................................................28
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6.7.6 Note. ................................................................................28
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6.7.7 Security Agreement....................................................................28
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6.7.8 Assumption of Liabilities.............................................................28
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6.7.9 Floor Plan Financing..................................................................28
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6.7.10 Master Dealer Agreement...............................................................29
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6.7.11 Resale Certificate....................................................................29
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6.7.12 Operating Agreement; Escrow Agreement.................................................29
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6.8 Mutual Covenant to Restructure Transaction........................................................29
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6.9 Transfer of Title; Release of Settlement Documents from Escrow....................................29
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7. DEFAULT BY PURCHASER OR SELLER................................................................................29
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7.1 Instances of Purchaser Default....................................................................29
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7.1.1 Failure to Perform....................................................................29
7.1.2 Insolvency............................................................................30
7.1.3 Default on Underlying Agreements and Assumed Obligations..............................30
7.2 Instances of Seller Default.......................................................................30
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7.2.1 Failure to Perform....................................................................30
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7.3 Seller's and Purchaser's Remedies Upon Default....................................................30
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7.4 Remedies Cumulative...............................................................................30
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8. MISCELLANEOUS.................................................................................................30
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8.1 Binding Effect....................................................................................30
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8.2 Integration.......................................................................................30
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8.3 Notice............................................................................................31
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8.4 Time is of Essence................................................................................31
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8.5 Choice of Law, Jurisdiction and Attorneys' Fees...................................................31
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8.6 Severability......................................................................................31
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8.7 Assignment........................................................................................32
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8.8 Waiver............................................................................................32
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8.9 Counterparts......................................................................................32
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8.11 Section Headings..................................................................................32
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8.12 Board Director....................................................................................32
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8.13 Opportunity to Consult with Counsel...............................................................32
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