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ASSET PURCHASE AGREEMENT
By and Among
West Coast Entertainment Corporation
Wellesley Entertainment, Inc.,
Xxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx
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TABLE OF CONTENTS
Section Page
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1. Sale and Delivery of the Assets 1
1.1 Delivery of the Assets 1
1.2 Further Assurances 3
1.3 Purchase Price 3
1.4 Assumption of Liabilities; Etc. 4
1.5 Allocation of Purchase Price and Assumed Liabilities 4
1.6 The Closing 4
1.7 Restrictions on Transfer 4
1.8 Net Operating Cash Flow 5
1.9 Fee Dispute 5
2. Representations of the Seller 5
2.1 Organization 5
2.2 Capitalization of the Seller and the Subsidiaries 6
2.3 Authorization 6
2.4 Ownership of the Assets 7
2.5 Financial Statements 7
2.6 Absence of Undisclosed Liabilities 8
2.7 Litigation 8
2.8 Insurance 8
2.9 Inventory 9
2.10 Fixed Assets 9
2.11 Leases 9
2.12 Change in Financial Condition and Assets 10
2.13 Tax Matters 10
2.14 Accounts Receivable 11
2.15 Books and Records 11
2.16 Contracts and Commitments 12
2.17 Compliance with Agreements and Laws 14
2.18 Employee Relations 14
2.19 Absence of Certain Changes or Events 15
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Section Page
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2.20 Suppliers 16
2.21 Prepayments and Deposits 16
2.22 Trade Names and Other Intangible Property 16
2.23 Employee Benefit Plans 17
2.24 Regulatory Approvals 18
2.25 Indebtedness to and from Officers, Directors and
Shareholders 18
2.26 Powers of Attorney and Suretyships 18
2.27 Disclosure 18
2.28 Investment Representations 19
3. Representations of the Buyer 19
3.1 Organization and Authority 19
3.2 Capitalization of the Buyer 20
3.3 Authorization 20
3.4 Regulatory Approvals 20
3.5 Disclosure 20
3.6 Issuance of Shares 21
4. Access to Information; Public Announcements 21
4.1 Access to Management, Properties and Records 21
4.2 Confidentiality 22
4.3 Public Announcements 22
5. Pre-Closing Covenants of the Seller 22
5.1 Conduct of Business 22
5.2 Absence of Material Changes 23
5.3 Taxes 24
5.4 Delivery of Interim Financial Statements 24
5.5 Compliance with Laws 25
5.6 Continued Truth of Representations and Warranties
of the Seller 25
5.7 Continuing Obligation to Inform 25
5.8 Exclusive Dealing 25
5.9 No Publicity 25
6. Satisfaction of Conditions 25
7. Conditions to Obligations of the Buyer 26
7.1 Continued Truth of Representations and Warranties
of the Seller; Compliance with
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Section Page
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Covenants and Obligations 26
7.2 Corporate Proceedings 26
7.3 Governmental Approvals 26
7.4 Consents of Lenders, Lessors and Other Third Parties 26
7.5 Adverse Proceedings 26
7.6 Opinion of Counsel 27
7.7 Board of Directors and Shareholder Approval 27
7.8 The Assets 27
7.9 Update 27
7.10 Cash Available for Working Capital Purposes 27
7.11 Payables 27
7.12 Engineer's Report 27
7.13 Evidence of Tax Payment 27
7.14 Closing Deliveries 28
7.15 Payment of Taxes 29
8. Conditions to Obligations of the Seller 29
8.1 Continued Truth of Representations and Warranties of
the Buyer; Compliance with Covenants and Obligations 29
8.2 Corporate Proceedings 29
8.3 Governmental Approvals 29
8.4 Consents of Lenders, Lessors and Other Third Parties 29
8.5 Adverse Proceedings 29
8.6 Opinion of Counsel 30
8.7 Closing Deliveries 30
8.8 Stockholder Approval 30
9. Indemnification 31
9.1 By the Buyer and the Seller and the Principals 31
9.2 By the Seller and the Principals 31
9.3 Claims for Indemnification 32
9.4 Defense by Indemnifying Party 32
9.5 Payment of Indemnification Obligation 33
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Section Page
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9.6 Survival of Representations; Claims for Indemnification 33
10. Post-Closing Agreements 34
10.1 Proprietary Information 34
10.2 No Solicitation or Hiring of Former Employees 34
10.3 Non-Competition Agreement 34
10.4 Sharing of Data 35
10.5 Use of Name 36
10.6 Cooperation in Litigation 36
11. Termination of Agreement 36
11.1 Termination by Lapse of Time 36
11.2 Termination by Agreement of the Parties 36
11.3 Termination by Reason of Breach 36
12. Transfer and Sales Tax 37
13. Brokers 37
13.1 For the Seller 37
13.2 For the Buyer 37
14. Notices 37
15. Arbitration 38
16. Successors and Assigns 39
17. Entire Agreement; Amendments; Attachments 39
18. Expenses 39
19. Legal Fees 39
20. Governing Law 40
21. Section Headings 40
22. Severability 40
23. Counterparts 40
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Schedules to be provided by the Seller
1.1(i) - Subsidiaries
1.1(ii) - Excluded Assets
1.4 - Assumed Liabilities
1. - Allocation of the Purchase Price
2.2 - Capitalization
2.3 - Third Party Consents
2.4(i) - Encumbrances
2.4(ii) - Permitted Encumbrances
2.6 - Undisclosed Liabilities
2.7 - Litigation
2.8 - Insurance
2.9 - Inventory
2.10 - Fixed Assets
2.11 - Leases
2.1 - Changes in Financial Condition
2.13 - Tax Matters
2.14 - Accounts Receivable
2.16 - Contracts
2.17 - Permits
2.18 - Employee Relations
2.19 - Certain Changes or Events
2.20 - Suppliers
2.21 - Prepayments and Deposits
2.22 - Intangible Property
2.23 - Employee Plans
2.24 - Regulatory Approvals
2.25 - Affiliated Indebtedness
2.26 - Powers of Attorney and Suretyships
Schedules to be provided by the Buyer
3.3 - Third Party Consents
7.10 - Employment Contracts
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Exhibits
A - Instrument of Assumption of Liabilities
B - Opinion of Counsel to Seller
C - Xxxx of Sale
D - Opinion of Xxxx and Xxxx
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ASSET PURCHASE AGREEMENT
Agreement made as of October 18, 1996 between West Coast Entertainment
Corporation, a Delaware corporation with its principal office at 0000 Xxxxxx
Xxxx, Xxxxxxxxxxxx, XX 00000 (the "Buyer"), Wellesley Entertainment, Inc., a
Massachusetts corporation with its principal office at 00 Xxxxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Seller"), and Xxxxxx Xxxxxxx and Xxxxxxx
Xxxxxxx (individually, a "Principal" and collectively, the "Principals").
Preliminary Statement
The Buyer desires to purchase, and the Seller desires to sell,
substantially all of the assets and business of the Seller, for the
consideration set forth below and the assumption of certain of the Seller's
liabilities set forth below, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets
1.1 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of this Agreement, at the
closing of the transactions contemplated by this Agreement (the "Closing"), the
Seller shall sell, transfer, convey, assign and deliver to the Buyer, and the
Buyer shall purchase from the Seller, the following properties, assets and
other claims, rights and interests:
(i) all inventories, videotapes, video games, finished goods, office
supplies, maintenance supplies, packaging materials, spare parts and similar
items of the Seller (collectively, the "Inventory") which exist on the Closing
Date (as defined below);
(ii) all accounts, accounts receivable, notes and notes receivable
existing on the Closing Date which are payable to the Seller, including any
security held by the Seller for the payment thereof (the "Accounts
Receivable");
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(iii) all prepaid expenses, deposits and other similar assets of the
Seller existing on the Closing Date;
(iv) all rights of the Seller under the contracts, agreements, leases,
licenses and other instruments set forth on Schedule 2.16 attached hereto other
than such rights under contracts, agreements, leases, licenses and other
instruments included on Schedule 1.1(ii) (collectively, the "Contract Rights");
(v) copies of all books, records and accounts, correspondence, manuals,
customer lists, employment records, studies, reports or summaries relating to
or arising out of the business of the Seller;
(vi) all rights of the Seller under express or implied warranties from the
suppliers of the Seller;
(vii) the motor vehicles and other rolling stock owned by the Seller on
the Closing Date;
(viii) all of the machinery, equipment, furniture, leasehold improvements
and construction in progress owned by the Seller on the Closing Date whether or
not reflected as capital assets in the accounting records of the Seller
(collectively, the "Fixed Assets");
(ix) all of the Seller's right, title and interest in and to all
intangible property rights, including but not limited to inventions,
discoveries, trade secrets, processes, formulas, know-how, United States and
foreign patents, patent applications, trade names, including the name
"Wellesley Entertainment" or any derivation thereof, trademarks, trademark
registrations, applications for trademark registrations, copyrights, copyright
registrations, owned or, where not owned, used by the Seller in its business
and all licenses and other agreements to which the Seller is a party (as
licensor or licensee) or by which the Seller is bound relating to any of the
foregoing kinds of property or rights to any "know-how" or disclosure or use of
ideas (collectively, the "Intangible Property");
(x) all of the outstanding shares of capital stock of the subsidiaries of
the Seller set forth on Schedule 1.1(i) attached hereto (collectively, the
"Subsidiaries");
(xi) $1,000 in cash for each retail video store operated by the Seller;
(xii) except as specifically provided in Subsection 1.1(b) hereof, all
other assets, properties, claims, rights and interests of the Seller which
exist on the Closing Date, of every kind and nature and description, whether
tangible or intangible, real, personal or mixed.
(b) Notwithstanding the provisions of paragraph (a) above, the assets to
be transferred to the Buyer under this Agreement shall not include those assets
listed on Schedule 1.1(ii) attached hereto (the "Excluded Assets").
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(c) The Inventory, Accounts Receivable, Contract Rights, Fixed Assets,
Intangible Property and other properties, assets and business of the Seller
described in paragraph (a) above, other than the Excluded Assets, shall be
referred to collectively as the "Assets."
1.2 Further Assurances. At any time and from time to time after the
Closing, at the Buyer's request and without further consideration, the Seller
promptly shall execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as the
Buyer may reasonably request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Assets, to put the
Buyer in actual possession and operating control thereof, to assist the Buyer
in exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement.
1.3 Purchase Price.
(a) The purchase price for the assets shall be $2,205,000 (the "Purchase
Price"). The parties acknowledge and agree that the Purchase Price was
determined as a multiple of Net Operating Cash Flow (as defined in Subsection
1.8).
(b) At the Closing, the Buyer shall deliver to the Seller (i) 50% of the
Purchase Price in cash, by cashiers or certified check or by wire transfer of
immediately available funds to an account designated by the Seller, and (ii)
that number of shares of Common Stock, $.01 par value per share, of the Buyer
("Common Stock") as determined by dividing that portion of the balance of the
Purchase Price by the Market Value of a share of Common Stock. The "Market
Value" of a share of Common Stock shall equal the average of the closing price
of a share of Common Stock on the Nasdaq National Market for the 15 trading
days ending on the third business day prior to the Closing. The shares of
Common Stock issuable hereunder shall be registered under the Securities Act of
1933, as amended, pursuant to a Registration Statement on Form S-1 filed with
the Securities and Exchange Commission.
1.4 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and deliver an Instrument of
Assumption of Liabilities (the "Instrument of Assumption") substantially in the
form attached hereto as Exhibit A, pursuant to which it shall assume and agree
to perform, pay and discharge the following liabilities, obligations
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and commitments of the Seller (the "Assumed Liabilities"):
(i) All obligations of the Seller continuing after the Closing under the
leases and contracts set forth on Schedule 1.4 attached hereto which become due
and payable after the Closing Date; and
(ii) All other liabilities and obligations of the Seller specifically set
forth in Schedule 1.4 attached hereto.
(b) The Buyer shall not at the Closing assume or agree to perform, pay or
discharge, and the Seller shall remain unconditionally liable for, all accounts
payable, obligations, liabilities and commitments, fixed or contingent, of the
Seller other than the Assumed Liabilities.
1.5 Allocation of Purchase Price and Assumed Liabilities. The aggregate
amount of the Purchase Price and the Assumed Liabilities shall be allocated
among the Assets as set forth on Schedule 1.5 attached hereto.
1.6 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxx and Xxxx, 00
Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, on ____________, 1996 or on such
other date mutually agreeable to the Buyer and Seller (the "Closing Date").
The transfer of the Assets by the Seller to the Buyer shall be deemed to occur
at 9:00 a.m., Boston time, on the date of the Closing (the "Closing Date").
1.7 Restrictions on Transfer. Each of the Seller and the Principals
hereby confirm, covenant and agree that, without the prior written consent of
the Buyer, it or he will not, directly or indirectly, sell, offer to sell,
contract to sell, pledge, grant any option for the sale of, or otherwise
dispose of, (i) any shares of Common Stock issued or issuable to Seller or the
Principals hereunder prior to the date 12 months after the Closing Date and
(ii) 60% of such shares of Common Stock prior to the date 18 months after the
Closing Date.
1.8 Net Operating Cash Flow. For purposes hereof "Net Operating Cash
Flow" shall be equal to the pre-tax income for the 12-month period ending
December 31, 1995 as determined in accordance with Schedule 1.8 attached
hereto.
1.9 Fee Dispute. Seller hereby agrees to reimburse Buyer for the
aggregate costs in excess of $10,000 incurred by Seller in connection with the
satisfaction or release by Buyer of all claims by Xxxxx Xxxxxx and his
affiliates (including BMA Enterprises, Inc.) for brokers' or finders' fees (or
the like) in connection with the transaction contemplated hereby. At the
Closing Seller shall deliver to Buyer $35,000 (either by a reduction of the
cash portion of the Purchase Price or in cash, by cashiers or certified check)
as a prepayment of such reimbursement obligations. Buyer hereby agrees at
Seller's direction to deliver to Seller or to Xxxxx Xxxxxx (in cash or by
cashiers or certified check) the full amount of the aggregate costs up to and
including (but not to exceed) $10,000 so incurred by
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Seller against simultaneous delivery to Buyer of a release of Buyer, in form
and substance reasonably satisfactory to Buyer, of all claims by Xxxxx Xxxxxx
and his affiliates (including BMA Enterprises, Inc.). Upon resolution of the
amount, if any, payable to Mr. Bhalma and his affiliates, the Buyer shall
promptly return to Seller any unused portion of such prepayment.
2. Representations of the Seller
The Seller and the Principals, jointly and severally, represent and
warrant to the Buyer as follows:
2.1 Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and has all requisite power and authority (corporate and other) to own its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to
consummate the transactions contemplated hereby. Schedule 1.1(i) attached
hereto constitute a true, correct and complete list of all corporate,
partnership, joint venture and other entities in which the Seller holds,
directly or indirectly, a 50% or greater interest. Each of the Subsidiaries is
a corporation or other entity duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization and
has all requisite power and authority to own its properties and to carry on its
business as now being conducted. The Seller and the Subsidiaries are each duly
qualified to do business and in good standing in all jurisdictions in which
their ownership of property or the character of their business requires such
qualification. Certified copies of the charter, bylaws and other governing
instruments of each of the Seller and the Subsidiaries, each as amended to
date, have been previously delivered to the Buyer, are complete and correct,
and no amendments have been made thereto or have been authorized since the date
thereof. Except as set forth on Schedule 2.1, the Seller does not own any
capital stock of or other equity interest in any corporation, partnership or
other entity, other than the Subsidiaries. Schedule 2.1 sets forth a list of
each retail video rental store (including the location of each such store and
the name and address of all owners (if not Seller) of each such store) owned,
operated or licensed directly or indirectly by the Seller.
2.2 Capitalization of the Seller and the Subsidiaries. The Seller's
authorized capital stock consists of 200,000 shares of Common Stock, no par
value, of which 200 shares are issued and outstanding and held of record and
beneficially by the stockholders listed on Schedule 2.2 attached hereto. All
of such shares have been
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duly and validly issued and are fully paid and nonassessable. The authorized
capital stock of the Subsidiaries is as set forth on Schedule 2.2 attached
hereto. All of such shares have been duly and validly issued, are fully paid
and nonassessable and held of record by the Seller.
2.3 Authorization. The execution and delivery of this Agreement by the
Seller, and the agreements provided for herein, and the consummation by the
Seller of all transactions contemplated hereby, have been duly authorized by
all requisite corporate and shareholder action. This Agreement and all such
other agreements and obligations entered into and undertaken in connection with
the transactions contemplated hereby to which the Seller is a party constitute
the valid and legally binding obligations of the Seller, enforceable against
the Seller in accordance with their respective terms. The execution, delivery
and performance by the Seller of this Agreement and the agreements provided for
herein, and the consummation by the Buyer of the transactions contemplated
hereby and thereby, will not, with or without the giving of notice or the
passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Seller; (b) violate the provisions of the charter
or Bylaws of the Seller; (c) violate any judgment, decree, order or award of
any court, governmental body or arbitrator; or (d) conflict with or result in
the breach or termination of any term or provision of, or constitute a default
under, or cause any acceleration under, or cause the creation of any lien,
charge or encumbrance upon the properties or assets of the Seller pursuant to,
any indenture, mortgage, deed of trust or other instrument or agreement to
which the Seller is a party or by which the Seller or any of its properties is
or may be bound. Schedule 2.3 attached hereto sets forth a true, correct and
complete list of all consents and approvals of third parties that are required
in connection with the consummation by the Seller of the transactions
contemplated by this Agreement.
2.4 Ownership of the Assets. Schedule 2.4(i) attached hereto sets forth a
true, correct and complete list of all claims, liabilities, liens, pledges,
charges, encumbrances and equities of any kind affecting the Assets
(collectively, the "Encumbrances"). The Seller is, and at the Closing will be,
the true and lawful owner of the Assets, and will have the right to sell and
transfer to the Buyer good, clear, record and marketable title to the Assets,
free and clear of all Encumbrances of any kind, except as set forth on Schedule
2.4(ii) attached hereto (the "Permitted Encumbrances"). The delivery to the
Buyer of the instruments of transfer of ownership contemplated by this
Agreement will vest good and marketable title to the Assets in the Buyer, free
and clear of all liens, mortgages, pledges, security interests, restrictions,
prior assignments, encumbrances and claims of any kind or nature whatsoever,
except for the Permitted Encumbrances.
2.5 Financial Statements.
(a) The Seller has previously delivered to the Buyer its combined audited
balance sheets as of December 31, 1994 and 1995 (the "Audited Balance Sheets")
and the statements of income, shareholders' equity, retained earnings and
changes in financial condition of the Seller for the fiscal years ended
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December 31, 1993, 1994 and 1995 (collectively, including the Audited Balance
Sheets, the "Audited Financial Statements"). The Seller has also previously
delivered to the Buyer its balance sheet as of June 30, 1996 (the "Current
Balance Sheet") and the related statements of income, shareholders' equity,
retained earnings and changes in financial condition of the Seller for the
six-month period then ended (collectively, the "Current Financial Statements").
The Unaudited Financial Statements, the Current Financial Statements and the
interim financial statements (the "Interim Financial Statements") to be
delivered pursuant to Subsection 5.4 hereof (collectively, the "Financial
Statements") have been, or will be, prepared in accordance with generally
accepted accounting principles applied consistently with past practice and have
been, or will be, certified by an officer of the Seller.
(b) The Financial Statements fairly present, as of their respective dates,
the financial condition, retained earnings, assets and liabilities of the
Seller and the results of operations of the Seller's business for the periods
indicated; with respect to the contracts and commitments for the sale of goods
or the provision of services by the Seller, the Financial Statements contain
and reflect adequate reserves, which are consistent with previous reserves
taken, for all reasonably anticipated material losses and costs and expenses;
and the amounts shown as accrued for current and deferred income and other
taxes in the Financial Statements are sufficient for the payment of all accrued
and unpaid federal, state and local income taxes, interest, penalties,
assessments or deficiencies applicable to the Seller, whether disputed or not,
for the applicable period then ended and periods prior thereto.
(c) The Net Operating Cash Flow for the Seller is not less than $428,000.
2.6 Absence of Undisclosed Liabilities. Except as and to the extent (a)
reflected and reserved against in the Current Balance Sheet, (b) set forth on
Schedule 2.6 attached hereto or (c) incurred in the ordinary course of business
after the date of the Current Balance Sheet and not material in amount, either
individually or in the aggregate, the Seller does not have any liability or
obligation, secured or unsecured, whether accrued, absolute, contingent,
unasserted or otherwise, affecting the Assets. For purposes of this Subsection
2.6, "material" means any amount in excess of $10,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached hereto, the
Seller is not a party to, or to the Seller's best knowledge threatened with,
and
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none of the Assets are subject to, any litigation, suit, action, investigation,
proceeding or controversy before any court, administrative agency or other
governmental authority relating to or affecting the Assets or the business or
condition (financial or otherwise) of the Seller. The Seller is not in
violation of or in default with respect to any judgment, order, writ,
injunction, decree or rule of any court, administrative agency or governmental
authority or any regulation of any administrative agency or governmental
authority.
2.8 Insurance. Schedule 2.8 attached hereto sets forth a true, correct
and complete list of all fire, theft, casualty, general liability, workers
compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies insuring the Assets or
business of the Seller and of all life insurance policies maintained for any of
its employees, specifying the type of coverage, the amount of coverage, the
premium, the insurer and the expiration date of each such policy (collectively,
the "Insurance Policies") and all claims made under such Insurance Policies
since January 1, 1992. True, correct and complete copies of all of the
Insurance Policies have been previously delivered by the Seller to the Buyer.
The Insurance Policies are in full force and effect and are in amounts and of a
nature which are adequate and customary for the Seller's business. All
premiums due on the Insurance Policies or renewals thereof have been paid and
there is no default under any of the Insurance Policies.
2.9 Inventory. Schedule 2.9 attached hereto sets forth a true, correct
and complete list of the Inventory as of the date hereof, including a
description and the total book value thereof. Schedule 2.9, as updated
pursuant to Subsection 7.9 hereof, shall set forth a true, correct and complete
list of the Inventory as of the Closing Date, including a description and total
valuation thereof. Such Inventory consists of items of a quality and quantity
which are usable or saleable without discount in the ordinary course of the
business conducted by the Seller. Except as otherwise described on Schedule
2.9, the value of all items of obsolete materials and of materials of below
standard quality has been written down on a per store basis to realizable
market value, and the values at which such Inventory is carried reflect the
normal inventory valuation policy of the Seller of stating the Inventory at the
lower of cost or market value in accordance with generally accepted accounting
principles.
2.10 Fixed Assets. Schedule 2.10 attached hereto sets forth a true,
correct and complete list of all Fixed Assets as of the date hereof, including
a description and the total book value thereof. Schedule 2.10, as updated
pursuant to Subsection 7.9 hereof, shall set forth a true, correct and complete
list of all Fixed Assets as of the Closing Date, including a description and
total valuation thereof. All of the Fixed Assets are in good operating
condition and repair, normal wear and tear excepted, are currently used by the
Seller in the ordinary course of business and in the production of products of
the Seller and normal maintenance has been consistently performed with respect
to such Fixed Assets.
2.11 Leases. Schedule 2.11 attached hereto sets forth a true, correct and
complete list as of the date hereof of all leases of real property, identifying
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separately each ground lease, to which the Seller is a party (the "Leases").
True, correct and complete copies of the Leases, and all amendments,
modifications and supplemental agreements thereto, have previously been
delivered by the Seller to the Buyer. The Leases are in full force and effect,
are binding and enforceable against each of the parties thereto in accordance
with their respective terms and, except as set forth on Schedule 2.11, have not
been modified or amended since the date of delivery to the Buyer. No party to
any Lease has sent written notice to the other claiming that such party is in
default thereunder, which remains uncured. Except as set forth on Schedule
2.11 attached hereto, there has not occurred any event which would constitute a
breach of or default in the performance of any material covenant, agreement or
condition contained in any Lease, nor has there occurred any event which with
the passage of time or the giving of notice or both would constitute such a
breach or material default. The Seller is not obligated to pay any leasing or
brokerage commission relating to any Lease and, except as set forth on Schedule
2.11 attached hereto, will not have any enforceable obligation to pay any
leasing or brokerage commission upon the renewal of any Lease. No material
construction, alteration or other leasehold improvement work with respect to
any of the Leases remains to be paid for or to be performed by the Seller. The
Financial Statements contain adequate reserves to provide for the restoration
of the properties subject to the Leases at the end of the respective Lease
terms, to the extent required by the Leases.
2.12 Change in Financial Condition and Assets. Except as set forth on
Schedule 2.12 attached hereto, since the Balance Sheet Date, there has been no
change which materially and adversely affects the business, properties, assets,
condition (financial or otherwise) or prospects of the Seller. The Seller has
no knowledge of any existing or threatened occurrence, event or development,
including, without limitation, new or potential competition, which, as far as
can be reasonably foreseen, could have a material adverse effect on the Seller
or its business, properties, assets, condition (financial or otherwise) or
prospects.
2.13 Tax Matters.
(a) Except as set forth on Schedule 2.13 to this Agreement:
(i) Within the times and in the manner prescribed by law, the Seller has
filed all Returns which are required to be filed;
(ii) With respect to all amounts in respect of Taxes imposed upon the
Seller
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for which it could be liable, whether to Taxing Authorities (as, for example,
under law) or to other persons or entities (as, for example, under Tax
allocation agreements), with respect to all taxable periods or portions of
taxable periods ending on or before the Closing Date, all applicable tax laws
and agreements have been fully complied with, and all such amounts required to
be paid by the Seller to Taxing Authorities or others on or before the date
hereof have been paid.
(iii) All Returns filed by the Seller constitute complete and accurate
representations of the respective Tax liabilities of, or attributable to, the
Seller for such years;
(iv) No examination of the Returns of the Seller is currently in progress
nor, to the best knowledge of the Seller, threatened and no unresolved
deficiencies have been asserted or assessed against the Seller as a result of
any audit by any Taxing Authority and no such deficiency has been proposed or
threatened;
(v) Except as set forth on Schedule 2.13, there are no liens for Taxes
(other than for current Taxes not yet due and payable) upon the assets of the
Seller;
(vi) The Seller is not a person other than a United States person within
the meaning of the Code;
(b) For purposes of this Section 2.13: "Return" means any return,
declaration, report, statement or other document required to be filed in
respect of any Tax. "Tax" or "Taxes" means any federal, state, local, foreign
and other net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs duty or other tax, fee, assessment
or charge of any kind whatever, together with interest and any penalty,
addition to tax or additional amount with respect thereto. "Taxing Authority"
means any governmental authority responsible for the imposition of Taxes.
2.14 Accounts Receivable. Schedule 2.14 attached hereto sets forth a
true, correct and complete list of all Accounts Receivable, including an aging
thereof as of the Balance Sheet Date. Schedule 2.14, as updated pursuant to
Subsection 7.9 hereof, shall set forth a true, correct and complete list of the
Accounts Receivable as of the Closing Date, including an aging thereof. All
Accounts Receivable arose out of the sales or rentals of inventory or services
in the ordinary course of business and are collectible in the face value
thereof within 90 days of the date of invoice, using normal collection
procedures, net of the reserve for doubtful accounts as set forth thereon,
which reserve is adequate and was calculated in accordance with generally
accepted accounting principles consistently applied.
2.15 Books and Records. The general ledgers and books of account of the
Seller, all federal, state and local income, franchise, property and other tax
returns filed by the Seller, with respect to the Assets, and all other books
and records of the
18
Seller are in all material respects complete and correct and have been
maintained in accordance with good business practice and in accordance with all
applicable procedures required by laws and regulations.
2.16 Contracts and Commitments.
(a) Schedule 2.16 attached hereto contains a true, complete and correct
list and description of the following contracts and agreements, whether written
or oral (collectively, the "Contracts"):
(i) all loan agreements, indentures, mortgages and guaranties to which the
Seller is a party or by which the Seller or any of its property is bound;
(ii) all pledges, conditional sale or title retention agreements, security
agreements, equipment obligations, personal property leases and lease purchase
agreements relating to any of the Assets to which the Seller is a party or by
which the Seller or any of its property is bound;
(iii) all contracts, agreements, commitments, purchase orders or other
understandings or arrangements to which the Seller is a party or by which the
Seller or any of its property is bound which (A) involve payments or receipts
by the Seller of more than $2,000 in the case of any single contract,
agreement, commitment, understanding or arrangement under which full
performance (including payment) has not been rendered by all parties thereto or
(B) which may materially adversely affect the condition (financial or
otherwise) or the properties, assets, business or prospects of the Seller;
(iv) all collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, vacation policies,
deferred compensation agreements, pension plans, vacation policies and plans,
retirement plans, employee stock option or stock purchase plans and group life,
health and accident insurance and other employee benefit plans, agreements,
arrangements or commitments to which the Seller is a party or by which the
Seller or any of its property is bound;
(v) all agency, distributor, sales representative and similar agreements
to which the Seller is a party;
(vi) all contracts, agreements or other understandings or arrangements
19
between the Seller any stockholder or Affiliate of the Seller;
(vii) all leases, whether operating, capital or otherwise, under which the
Seller is lessor or lessee; and
(viii) any other material agreement or contract entered into by the
Seller.
(b) Except as set forth on Schedule 2.16 attached hereto:
(i) each Contract is a valid and binding agreement of the Seller,
enforceable against the Seller in accordance with its terms, and the Seller
does not have any knowledge that any Contract is not a valid and binding
agreement of the other parties thereto;
(ii) the Seller has fulfilled all material obligations required pursuant
to the Contracts to have been performed by the Seller on its part prior to the
date hereof, and the Seller has no reason to believe that it will not be able
to fulfill, when due, all of its obligations under the Contracts which remain
to be performed after the date hereof;
(iii) the Seller is not in breach of or default under any Contract, and no
event has occurred which with the passage of time or giving of notice or both
would constitute such a default, result in a loss of rights or result in the
creation of any lien, charge or encumbrance, thereunder or pursuant thereto;
(iv) to the best knowledge of the Seller, there is no existing breach or
default by any other party to any Contract, and no event has occurred which
with the passage of time or giving of notice or both would constitute a default
by such other party, result in a loss of rights or result in the creation of
any lien, charge or encumbrance thereunder or pursuant thereto;
(v) the Seller is not restricted by any Contract from carrying on its
business anywhere in the world; and
(vi) the Seller has no written or oral Contracts to sell products or
perform services which are expected to be performed at, or to result in, a
loss.
(c) Except as set forth on Schedule 2.3 or Schedule 2.16, the
continuation, validity and effectiveness of each Contract will not be affected
by the transfer thereof to Buyer under this Agreement and all such Contracts
are assignable to Buyer without a consent.
(d) True, correct and complete copies of all Contracts have previously
been delivered by the Seller to the Buyer.
2.17 Compliance with Agreements and Laws. The Seller has all requisite
licenses, permits and certificates, including environmental, health and safety
20
permits, from federal, state and local authorities necessary to conduct its
business and own and operate its assets (collectively, the "Permits").
Schedule 2.17 attached hereto sets forth a true, correct and complete list of
all such Permits, copies of which have previously been delivered by the Seller
to the Buyer. The Seller is not in violation of any law, regulation or
ordinance (including, without limitation, laws, regulations or ordinances
relating to building, zoning, environmental, disposal of hazardous substances,
land use or similar matters) relating to its properties, the violation of which
could have a material adverse effect on the Seller or its properties. The
business of the Seller does not violate, in any material respect, any federal,
state, local or foreign laws, regulations or orders (including, but not limited
to, any of the foregoing relating to employment discrimination, occupational
safety, environmental protection, hazardous waste (as defined in the Resource
Conservation and Recovery Act, as amended, and the regulations adopted pursuant
thereto), conservation, or corrupt practices, the enforcement of which would
have a material and adverse effect on the results of operations, condition
(financial or otherwise), assets, properties, business or prospects of the
Seller. Except as set forth on Schedule 2.17 attached hereto, the Seller has
not since January 1, 1993 received any notice or communication from any
federal, state or local governmental or regulatory authority or otherwise of
any such violation or noncompliance.
2.18 Employee Relations.
(a) The Seller is in compliance with all federal, state and municipal laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any unfair labor
practice, and there are no arrears in the payment of wages or social security
taxes.
(b) Except as set forth on Schedule 2.18 attached hereto:
(i) none of the employees of the Seller is represented by any labor union;
(ii) there is no unfair labor practice complaint against the Seller
pending before the National Labor Relations Board or any state or local agency;
(iii) there is no pending labor strike or other material labor trouble
affecting the Seller (including, without limitation, any organizational drive);
(iv) there is no material labor grievance pending against the Seller;
21
(v) there is no pending representation question respecting the employees
of the Seller; and
(vi) there are no pending arbitration proceedings arising out of or under
any collective bargaining agreement to which the Seller is a party, or to the
best knowledge of the Seller, any basis for which a claim may be made under any
collective bargaining agreement to which the Seller is a party.
(c) Schedule 2.18 attached hereto sets forth a true, correct and complete
list of (a) the employee benefits provided by the Seller to its employees and
all contracts or agreements between the Seller and its employees, and (b) the
Seller's current payroll, including the job descriptions and salary or wage
rates of each of its employees, showing separately for each such person who
received an annual salary in excess of $20,000 the amounts paid or payable as
salary and bonus payments for the year ending December 31, 1995.
(d) For purposes of this Subsection 2.18, the term "employee" shall be
construed to include sales agents and other independent contractors who spend a
majority of their working time on the Seller's business.
2.19 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.19 attached hereto, since the Balance Sheet Date, the Seller has not
entered into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, the Seller has
not:
(a) Incurred any material obligation or liability for borrowed money;
(b) Discharged or satisfied any lien or encumbrance or paid any obligation
or liability other than current liabilities reflected in the Current Balance
Sheet;
(c) Mortgaged, pledged or subjected to lien, charge or other encumbrance
any of the Assets;
(d) Sold or purchased, assigned or transferred any of its tangible assets
or cancelled any debts or claims, except for inventory sold and raw materials
purchased in the ordinary course of business;
(e) Made any material amendment to or termination of any Contract or done
any act or omitted to do any act which would cause the breach of any Contract;
(f) Suffered any losses, whether insured or uninsured, and whether or not
in the control of the Seller, in excess of $5,000 in the aggregate, or waived
any rights of any value;
(g) Made any changes in compensation of its officers, directors
22
or employees;
(h) Received notice of any litigation, warranty claim or products
liability claims; or
(i) Made any material change in the terms, status or funding condition of
any Employee Plan, as defined in Subsection 2.23 hereof.
2.20 Suppliers. Schedule 2.20 attached hereto sets forth a true, correct
and complete list of the names and addresses of the ten suppliers of the Seller
which accounted for the largest dollar volume of purchases by the Seller for
the fiscal year ending December 31, 1995. None of such suppliers has notified
the Seller that it intends to discontinue its relationship with the Seller.
2.21 Prepayments and Deposits. Schedule 2.21 attached hereto sets forth
all prepayments or deposits from customers for products to be shipped, or
services to be performed, after the Closing Date which have been received by
the Seller as of the date hereof.
2.22 Trade Names and Other Intangible Property.
(a) Schedule 2.22 attached hereto sets forth a true, correct and complete
list and, where appropriate, a description of, all Intangible Property. True,
correct and complete copies of all licenses and other agreements relating to
the Intangible Property have been previously delivered by the Seller to the
Buyer.
(b) Except as otherwise disclosed in Schedule 2.22 attached hereto, the
Seller is the sole and exclusive owner of all Intangible Property and all
designs, permits, labels and packages used on or in connection therewith. The
Intangible Property owned by the Seller is sufficient to conduct the Seller's
business as presently conducted and, when transferred to the Buyer pursuant to
this Agreement, will be sufficient to permit the Buyer to conduct the business
of the Seller as presently conducted by the Seller. The Seller has received no
notice of, and has no knowledge of any basis for, a claim against it that any
of its operations, activities, products or publications infringes on any
patent, trademark, trade name, copyright or other property right of a third
party, or that it is illegally or otherwise using the trade secrets, formulae
or any property rights of others. The Seller has no disputes with or claims
against any third party for infringement by such third party of any trade name
or other Intangible Property of the Seller. The Seller has taken all steps
reasonably
23
necessary to protect its right, title and interest in and to the Intangible
Property.
2.23 Employee Benefit Plans.
(a) The Seller does not now have or otherwise contribute to or participate
in, and has not in the past had or otherwise contributed to, any employee
benefit plan subject to the Employee Retirement Income Security Act of 1974.
(b) The Buyer assumes no liabilities with respect to any employee benefit
plan which liability relates to any period prior to the Closing Date,
including, without limitation, any taxes, accrued vacation or sick pay (whether
or not vested), accrued vacation, sick and personal leaves, employee policies,
employee benefit claims or liability to the Pension Benefit Guaranty
Corporation.
(c) Employee Plans. Schedule 2.23 attached hereto contains a true,
correct and complete list of all pension, benefit, profit sharing, retirement,
deferred compensation, welfare, insurance, disability, bonus, vacation pay,
severance pay and other similar plans, programs and agreements, whether reduced
to writing or not, relating to the Seller's employees, or maintained at any
time since January 1, 1991 by the Seller or by any other member of any
controlled group of corporations, group of trades or businesses under common
control, or affiliated service group (as defined for purposes of Section
414(b), (c) and (m), respectively, of the Internal Revenue Code of 1986, as
amended (the "Code")) (the "Employee Plans") and, except as set forth on
Schedule 2.23 attached hereto, the Seller has no obligations, contingent or
otherwise, past or present, under applicable law or the terms of any Employee
Plan.
2.24 Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Seller and which are necessary for the execution
and delivery by the Seller of this Agreement and the documents to be executed
and delivered by the Seller in connection herewith are set forth on Schedule
2.24 attached hereto and have been, or will be prior to the Closing Date,
obtained and satisfied.
2.25 Indebtedness to and from Officers, Directors and Shareholders.
Except as set forth on Schedule 2.25 attached hereto, the Seller is not
indebted, directly or indirectly, to any person who is an officer, director or
shareholder of the Seller or any affiliate of any such person in any amount
whatsoever other than for salaries for services rendered or reimbursable
business expenses, all of which have been reflected on the Current Financial
Statements, and no such officer, director, shareholder or affiliate is indebted
to the Seller, except for advances made to employees of the Seller in the
ordinary course of business to meet reimbursable business expenses anticipated
to be incurred by such obligor.
2.26 Powers of Attorney and Suretyships. Except as set forth on Schedule
2.26 attached hereto, the Seller has no general or special powers of attorney
outstanding (whether as grantor or grantee thereof) and has no obligation or
liability
24
(whether actual, accrued, accruing, contingent or otherwise) as guarantor,
surety, co-xxxxxx, endorser, co-maker, indemnitor or otherwise in respect of
the obligation of any person, corporation, partnership, joint venture,
association, organization or other entity, except as endorser or maker of
checks or letters of credit, respectively, endorsed or made in the ordinary
course of business.
2.27 Disclosure. No representation or warranty by the Seller in this
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading. The Seller
has disclosed to the Buyer all material facts pertaining to the transactions
contemplated by this Agreement. Any matter disclosed in any paragraph of any
disclosure schedule pursuant to any provision of this Agreement shall be deemed
disclosed for purposes of any other paragraph of any other disclosure schedule
to the extent applicable, but only if such matters are described in sufficient
detail in such paragraph of the disclosure schedule to permit the Buyer
reasonably to determine its relevance to the matter requiring disclosure under
the other paragraphs of any other disclosure schedule.
2.28 Investment Representations.
(a) The Seller is acquiring the securities of Buyer hereunder, for its
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of applicable law, nor with any
present intention of distributing or selling the same in violation of
applicable law; and the Seller has no present or contemplated agreement,
undertaking, arrangement, obligation, indebtedness or commitment providing for
the disposition thereof in violation of applicable law.
(b) The Seller has carefully reviewed the representations concerning the
Buyer contained in this Agreement, has made detailed inquiry concerning the
Buyer, its business and its personnel; the officers of the Buyer have made
available to the Seller any and all written information which they have
requested and have answered to the Seller's satisfaction all inquiries made by
the Seller; and the Seller has sufficient knowledge and experience so as to be
able to evaluate the risks and merits of an investment in the Buyer and is able
financially to bear the risks thereof.
25
(c) The Seller and the Principals understand that the securities to be
issued to them hereunder will be nontransferable for a period of at least 12
months (and up to 18 months for 60% of such securities) from the Closing Date.
3. Representations of the Buyer
The Buyer represents and warrants to the Seller as follows:
3.1 Organization and Authority. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and has requisite power and authority (corporate and other) to own
its properties and to carry on its business as now being conducted. The Buyer
has full power to execute and deliver this Agreement and the Instrument of
Assumption of Liabilities and to consummate the transactions contemplated
hereby and thereby. Certified copies of the Certificate of Incorporation and
the Bylaws of the Buyer, as amended to date, have been previously delivered to
the Seller, are complete and correct, and no amendments have been made thereto
or have been authorized since the date thereof.
3.2 Capitalization of the Buyer. On the date hereof, the Buyer's
authorized capital stock consists of 35,000,000 shares of Common Stock, $.01
par value ("Common Stock") and 2,000,000 shares of Preferred Stock, $.01 par
value per share, none of which shares of Preferred Stock are issued or
outstanding. As of September 9, 1996, 12,070,239 shares of Common Stock were
issued and outstanding. All of the outstanding shares of capital stock of the
Buyer have been and on the Closing Date will be duly and validly issued and
are, or will be, fully paid and nonassessable.
3.3 Authorization. The execution and delivery of this Agreement by the
Buyer, and the agreements provided for herein, and the consummation by the
Buyer of all transactions contemplated hereby, have been duly authorized by all
requisite corporate action. This Agreement and all such other agreements and
written obligations entered into and undertaken in connection with the
transactions contemplated hereby constitute the valid and legally binding
obligations of the Buyer, enforceable against the Buyer in accordance with
their respective terms. The execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Buyer; (b) violate
the provisions of the Buyer's Certificate of Incorporation or Bylaws; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
properties or assets of the Buyer pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which it or its properties is a party
or by which the Buyer is or may be bound. Schedule 3.3 attached hereto sets
forth a true, correct and complete list of all
26
consents and approvals of third parties that are required in connection with
the consummation by the Buyer of the transactions contemplated by this
Agreement.
3.4 Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the transactions contemplated by this Agreement have been, or will be prior
to the Closing Date, obtained and satisfied.
3.5 Disclosure. No representation or warranty by the Buyer in this
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant hereto, contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary in order to
make the statements contained therein not misleading. The Buyer has disclosed
to the Seller all material facts pertaining to the transactions contemplated by
this Agreement.
3.6 Issuance of Shares. The issuance and delivery of the shares of Common
Stock in accordance with this Agreement have been, or prior to the Closing,
will be, duly authorized by all necessary corporate action on the part of the
Buyer, and all the shares of Common Stock have been duly reserved for issuance.
The shares of Common Stock, when issued and delivered in accordance with the
provisions of this Agreement will be duly and validly issued, fully paid and
non-assessable.
4. Access to Information; Public Announcements
4.1 Access to Management, Properties and Records.
(a) From the date of this Agreement until the Closing Date, the Seller
shall afford the officers, attorneys, accountants and other authorized
representatives of the Buyer free and full access upon reasonable notice and
during normal business hours to all management personnel, offices, properties,
books and records of the Seller, so that the Buyer may have full opportunity to
make such investigation as it shall desire to make of the management, business,
properties and affairs of the Seller, and the Buyer shall be permitted to make
abstracts from, or copies of, all such books and records. The Seller shall
furnish to the Buyer such financial and operating data and other information as
to the Assets and the business of the Seller as the Buyer shall reasonably
request.
27
(b) If the Buyer, at its option and expense, prior to the Closing Date,
elects to have a report or reports prepared by an engineer or other
professional selected by the Buyer, certifying that the real property
associated with the Assets (i) complies with all applicable federal, state and
local environmental and wetlands laws, rules and regulations and that there is
not now, and never has been, manufacture, storage, or disposal of hazardous
wastes at the real estate in violation of said laws, rules and regulations,
(ii) complies with all applicable building, health and fire codes, and
subdivision control laws, rules and regulations, the Seller shall cooperate
with such engineer or professional to the extent necessary to prepare such
reports, including, without limitation, providing such engineer or professional
access to such real property and necessary records, and arranging interviews
with employees of the Seller.
(c) The Seller shall authorize the release to the Buyer of all files
pertaining to the Seller, the Assets or the business or operations of the
Seller held by any federal, state, county or local authorities, agencies or
instrumentalities.
4.2 Confidentiality. All information not previously disclosed to the
public or generally known to persons engaged in the respective businesses of
the Seller or the Buyer which shall have been furnished by the Buyer or the
Seller to the other party in connection with the transactions contemplated
hereby or as provided pursuant to this Section 4 shall not be disclosed to any
person other than their respective employees, directors, attorneys, accountants
or financial advisors or other than as contemplated herein. In the event that
the transactions contemplated by this Agreement shall not be consummated, all
such information which shall be in writing shall be returned to the party
furnishing the same, including, to the extent reasonably practicable, all
copies or reproductions thereof which may have been prepared, and neither party
shall at any time thereafter disclose to third parties, or use, directly or
indirectly, for its own benefit, any such information, written or oral, about
the business of the other party hereto. Notwithstanding the above, the Buyer
may include in its Registration Statement on Form S-1 and in the prospectus
included therewith information regarding the Seller, the business of the
Seller, the financial condition of the Seller and the terms of this Agreement.
4.3 Public Announcements. The parties agree that prior to the Closing
Date, except as otherwise required by law, any and all public announcements or
other public communications concerning this Agreement and the purchase of the
Assets by the Buyer shall be subject to the approval of the Buyer.
5. Pre-Closing Covenants of the Seller
From and after the date hereof and until the Closing Date:
5.1 Conduct of Business. The Seller shall carry on its business
diligently and substantially in the same manner as heretofore and shall not
make or institute any unusual or new methods of purchase, sale, shipment or
delivery, lease, management, accounting or operation, except as agreed to in
writing by the Buyer.
28
All of the property of the Seller shall be used, operated, repaired and
maintained in a normal business manner consistent with past practice.
5.2 Absence of Material Changes. Without the prior written consent of the
Buyer, the Seller shall not:
(a) Take any action to amend its charter or Bylaws;
(b) Issue any stock, bonds or other corporate securities or grant any
option or issue any warrant to purchase or subscribe to any of such securities
or issue any securities convertible into such securities;
(c) Incur any obligation or liability (absolute or contingent), except
current liabilities incurred and obligations under contracts entered into in
the ordinary course of business;
(d) Declare or make any payment or distribution to its shareholders with
respect to their stock or purchase or redeem any shares of its capital stock;
(e) Mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of the Assets;
(f) Sell, assign, or transfer any of the Assets, except for inventory sold
in the ordinary course of business, at a normal profit margin, and for not less
than replacement cost;
(g) Cancel any debts or claims, except in the ordinary course of business;
(h) Merge or consolidate with or into any corporation or other entity;
(i) Make, accrue or become liable for any bonus, profit sharing or
incentive payment, except for accruals under existing plans, if any, or
increase the rate of compensation payable or to become payable by it to any of
its officers, directors or employees, other than increases in the ordinary
course of business consistent with past practice;
29
(j) Make any election or give any consent under the Code or the tax
statutes of any state or other jurisdiction or make any termination, revocation
or cancellation of any such election or any consent or compromise or settle any
claim for past or present tax due;
(k) Modify, amend, alter or terminate any of its executory contracts of a
material value or which are material in amount;
(l) Take or permit any act or omission constituting a breach or default
under any contract, indenture or agreement by which it or its properties are
bound;
(m) Fail to (i) preserve the possession and control of its assets and
business, (ii) keep in faithful service its present officers and key employees,
(iii) preserve the goodwill of its customers, suppliers, agents, brokers and
others having business relations with it, and (iv) keep and preserve its
business existing on the date hereof until after the Closing Date;
(n) Fail to operate its business and maintain its books, accounts and
records in the customary manner and in the ordinary or regular course of
business and maintain in good repair its business premises, fixtures, furniture
and equipment;
(o) Enter into any leases, contracts, agreements or understandings other
than those entered into in the ordinary course of business calling for payments
which in the aggregate do not exceed $5,000 for each such lease, contract,
agreement or understanding;
(p) Engage any employee for a salary in excess of $20,000 per annum;
(q) Materially alter the terms, status or funding condition of any
Employee Plan;
(r) Make any loans to any person or entity; or
(s) Commit or agree to do any of the foregoing in the future.
5.3 Taxes. The Seller will, on a timely basis, file all tax returns for
and pay any and all taxes which shall become due or shall have accrued (a) on
account of the operation of the business of the Seller or the ownership of the
Assets on or prior to the Closing Date or (b) on account of the sale of the
Assets (including a pro-rata portion of all personal property and excise taxes
payable with respect to the Assets by the Seller).
5.4 Delivery of Interim Financial Statements. As promptly as possible
following the last day of each month after the date hereof, and in any event
30
within 15 days after the end of each such month, the Seller shall deliver to
the Buyer its balance sheet and related statements of income, shareholders'
equity, retained earnings and changes in financial condition for the one-month
period then ended, all certified by the Seller's Accountants or Seller's chief
financial officer (collectively, the "Interim Financial Statements").
5.5 Compliance with Laws. The Seller will comply with all laws and
regulations which are applicable to it, its ownership of the Assets or to the
conduct of its business and will perform and comply with all contracts,
commitments and obligations by which it is bound.
5.6 Continued Truth of Representations and Warranties of the Seller. The
Seller will not take any actions which would result in any of the
representations or warranties set forth in Section 2 hereof being untrue.
5.7 Continuing Obligation to Inform. From time to time prior to the
Closing, the Seller will deliver or cause to be delivered to the Buyer
supplemental information concerning events subsequent to the date hereof which
would render any statement, representation or warranty in this Agreement or any
information contained in any Schedule inaccurate or incomplete in any material
respect at any time after the date hereof until the Closing Date.
5.8 Exclusive Dealing. The Seller will not, directly or indirectly,
through any officer, director, agent or otherwise, (a) solicit, initiate or
encourage submission of proposals or offers from any person relating to any
acquisition or purchase of all or a material portion of the Assets, or any
equity interest in, the Seller or any equity investment, merger, consolidation
or business combination with the Seller, or (b) participate in any discussions
or negotiations regarding, or furnish to any other person, any non-public
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. The Seller shall promptly notify
the Buyer if any such proposal or offer, or any inquiry or contact with any
person with respect thereto, is made.
5.9 No Publicity. The Seller shall make no public announcement with
respect to this Agreement or the transactions contemplated hereby without the
express prior written consent of the Buyer. The Seller shall hold in
confidence, and use its best efforts to have all of its officers, directors and
personnel hold in confidence, the terms of this Agreement and the transactions
contemplated hereby.
31
6. Satisfaction of Conditions. The Seller and the Buyer covenant and
agree to use their commercially reasonable efforts to obtain the satisfaction
of the conditions specified in this Agreement.
7. Conditions to Obligations of the Buyer
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of the Buyer:
7.1 Continued Truth of Representations and Warranties of the Seller;
Compliance with Covenants and Obligations. The representations and warranties
of the Seller shall be true in all material respects (other than such
representations and warranties which are by their terms qualified as to
materiality, which shall be true in all respects) on and as of the Closing Date
as though such representations and warranties were made on and as of such date,
except for any changes permitted by the terms hereof or consented to in writing
by the Buyer. The Seller shall have performed and complied with all material
terms, conditions, covenants, obligations, agreements and restrictions required
by this Agreement to be performed or complied with by it prior to or at the
Closing Date.
7.2 Corporate Proceedings. All corporate and other proceedings required
to be taken on the part of the Seller to authorize or carry out this Agreement
and to convey, assign, transfer and deliver the Assets shall have been taken.
7.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Seller of the transactions contemplated by this
Agreement and the operation of the Seller's business by the Buyer shall have
consented to, authorized, permitted or approved such transactions.
7.4 Consents of Lenders, Lessors and Other Third Parties. The Seller
shall have received all requisite consents and approvals of all lenders,
lessors and other third parties whose consent or approval is required in order
for the Seller to consummate the transactions contemplated by this Agreement,
including, without limitation, those set forth on Schedule 2.3 attached hereto.
In addition, Agfa Corporation and Innes Photo shall have executed and
delivered to the Buyer the agreements described on Schedule 2.16, which
agreements shall be in form and substance reasonably satisfactory to the Buyer.
7.5 Adverse Proceedings. No action or proceeding by or before any court
or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or which might
affect the right of the Buyer to own or use the Assets after the Closing.
7.6 Opinion of Counsel. The Buyer shall have received an opinion of
32
counsel to the Seller, dated as of the Closing Date, in substantially the form
attached hereto as Exhibit B, and as to such other matters as may be reasonably
requested by the Buyer or its counsel.
7.7 Board of Directors and Shareholder Approval. The shareholders of the
Seller shall have duly authorized the transactions contemplated by this
Agreement.
7.8 The Assets. Except for the Permitted Encumbrances, at the Closing the
Buyer shall receive good, clear, record and marketable title to the Assets,
free and clear of all liens, liabilities, security interests and encumbrances
of any nature whatsoever.
7.9 Update. The Seller shall have provided the Buyer with a true, correct
and complete list and amount, as of the Closing Date, of:
(a) the Inventory;
(b) the Fixed Assets;
(c) the Accounts Receivable, including an aging
thereof; and
(d) the liabilities assumed pursuant to Subsection
1.4 hereof.
7.10 Cash Available for Working Capital Purposes. On the Closing Date,
the Seller will have available cash for working capital purposes of not less
than $1,000 per retail video store, which cash will be transferred to the Buyer
pursuant to the terms of this Agreement.
7.11 Payables. On the Closing Date, the Seller will have no obligations
to suppliers and vendors of goods and services and other trade creditors which
are either (i) in excess of $1,000 in the aggregate or (ii) are past due in
accordance with their terms and in no event shall the Seller have any of such
obligations outstanding for more than 60 days as of the Closing.
7.12 Engineer's Report. On or prior to the Closing Date, the Buyer shall
have received the engineer's report, if any, referred to in Subsection 4.1(b)
hereof.
33
7.13 Evidence of Tax Payment. On or prior to the Closing Date, the Seller
shall have obtained and delivered to the Buyer evidence of payment to the
Massachusetts Department of Revenue for the outstanding tax liability described
on Schedule 2.13.
7.14 Closing Deliveries. The Buyer shall have received at or prior to the
Closing each of the following documents:
(a) a xxxx of sale substantially in the form attached hereto as Exhibit C;
(b) such instruments of conveyance, assignment and transfer, in form and
substance satisfactory to the Buyer, as shall be appropriate to convey,
transfer and assign to, and to vest in, the Buyer, good, clear, record and
marketable title to the Assets;
(c) such contracts, files and other data and documents pertaining to the
Assets or the Seller's business as the Buyer may reasonably request;
(d) copies of the general ledgers and books of account of the Seller, and
all federal, state and local income, franchise, property and other tax returns
filed by the Seller with respect to the Assets since January 1, 1989;
(e) such certificates of the Seller's officers and such other documents
evidencing satisfaction of the conditions specified in Section 7 as the Buyer
shall reasonably request;
(f) a certificate of the Secretary of State of the
Commonwealth of Massachusetts as to the legal existence and good standing
(including tax) of the Seller in Massachusetts;
(g) certificates of the Chairman of the Board of Directors of the Seller
attesting to the incumbency of the Seller's officers, respectively, the
authenticity of the resolutions authorizing the transactions contemplated by
the Agreement, and the authenticity and continuing validity of the charter
documents delivered pursuant to Subsection 2.1;
(h) estoppel certificates from each lessor from whom the Seller leases
real or personal property consenting to the assumption of such lease by the
Buyer and representing that there are no outstanding claims against the Seller
under any such lease;
(i) the schedules listed in Subsection 7.9;
(j) cross receipt executed by the Buyer and the Seller;
(k) such other documents, instruments or certificates as the
34
Buyer may reasonably request.
7.15 Payment of Taxes. On or prior to the Closing Date, the Seller shall
have delivered to the Buyer evidence of satisfaction of all obligations of the
Seller set forth in Schedule 2.13.
8. Conditions to Obligations of the Seller
The obligations of the Seller under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing at the sole discretion of the Seller:
8.1 Continued Truth of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations. The representations and warranties
of the Buyer in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date,
except for any changes consented to in writing by the Seller. The Buyer shall
have performed and complied with all terms, conditions, obligations, agreements
and restrictions required by this Agreement to be performed or complied with by
it prior to or at the Closing Date.
8.2 Corporate Proceedings. All corporate and other proceedings required
to be taken on the part of the Buyer to authorize or carry out this Agreement
shall have been taken.
8.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this
Agreement shall have consented to, authorized, permitted or approved such
transactions.
8.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer shall
have received all requisite consents and approvals of all lenders, lessors and
other third parties whose consent or approval is required in order for the
Buyer to consummate the transactions contemplated by this Agreement, including,
without limitation, those set forth on Schedule 3.3 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before any court
or other governmental body shall have been instituted or threatened by any
35
governmental body or person whatsoever which shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement or which might
affect the right of the Seller to transfer the Assets.
8.6 Opinion of Counsel. The Seller shall have received an opinion of Xxxx
and Xxxx, counsel to the Buyer, dated as of the Closing Date, in substantially
the form attached hereto as Exhibit D, and as to such other matters as may be
reasonably requested by the Seller or its counsel.
8.7 Closing Deliveries. The Seller shall have received at or prior to the
Closing each of the following documents:
(a) such certificates of the Buyer's officers and such other documents
evidencing satisfaction of the conditions specified in this Section 8 as the
Seller shall reasonably request;
(b) a certificate of the Secretary of State of the State of Delaware as to
the legal existence and good standing (including tax) of the Buyer in Delaware;
(c) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered
pursuant to Subsection 3.1;
(d) Instrument of Assumption of Liabilities executed by the Buyer and
accepted by the Seller;
(e) payment of the Purchase Price;
(f) cross receipt executed by the Buyer and the Seller; and
(g) such other documents, instruments or certificates as the Seller may
reasonably request.
8.8 Stockholder Approval. The stockholders of the Seller shall have
approved the transactions contemplated by this Agreement after receipt and
review by each of them of a current prospectus relating to the Buyer's
Registration Statement on Form S-1, File No. 333-8683.
9. Indemnification
9.1 By the Buyer and the Seller and the Principals. The Buyer on the one
hand and the Seller and the Principals, jointly and severally, on the other
hand, each hereby indemnifies and holds harmless the other against all claims,
damages, losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any legal, accounting or other expenses for
investigating or defending any
36
actions or threatened actions) reasonably incurred by the Buyer or the Seller
in connection with each and all of the following:
(a) Any breach by the indemnifying party of any representation or warranty
in this Agreement;
(b) Any breach of any covenant, agreement or obligation of the
indemnifying party contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement; and
(c) Any misrepresentation contained in any statement, certificate or
schedule furnished by the indemnifying party pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement.
9.2 By the Seller and the Principals. The Seller and the Principals, on a
joint and several basis, further agree to indemnify and hold harmless the Buyer
from any and all claims, damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any legal, accounting or
other expenses for investigating or defending any actions or threatened
actions) reasonably incurred by the Buyer, in connection with each and all of
the following:
(a) Any claims against, or liabilities or obligations of, the Seller or
against the Assets not specifically assumed by the Buyer pursuant this
Agreement;
(b) The failure of the Buyer to obtain the protections afforded by
compliance with the notification and other requirements of the bulk sales laws
in force in the jurisdictions in which such laws may be applicable to either
the Seller or the transactions contemplated by this Agreement;
(c) Any violation by the Seller of, or any failure by the Seller to comply
with, any law, ruling, order, decree, regulation or zoning, environmental or
permit requirement applicable to the Seller, the Assets or its business,
whether or not any such violation or failure to comply has been disclosed to
the Buyer, including any costs incurred by the Buyer (i) in order to bring the
Assets into compliance with environmental laws as a consequence of
noncompliance with such laws on the Closing Date or (ii) in connection with the
transfer of the Assets;
(d) Any warranty claim or product liability claim relating to
37
the Seller's business or operation prior to the Closing Date;
(e) Any tax liabilities or obligations of the Seller; and
(f) Any claims against, or liabilities or obligations of, the Seller with
respect to obligations under Employee Plans not specifically assumed by the
Buyer pursuant to this Agreement.
9.3 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder the party seeking indemnification (the "Indemnified
Party"), shall promptly notify the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the facts constituting
the basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings
by a third-party, the notice to the Indemnifying Party shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom.
The Indemnified Party shall not settle or compromise any claim by a third party
for which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as
provided in Subsection 9.4 of this Agreement.
9.4 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within 30 days after the date such claim is made, (a) the
Indemnified Party may defend against such claim or litigation, in such manner
as it may deem appropriate, including, but not limited to, settling such claim
or litigation, after giving notice of the same to the Indemnifying Party, on
such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of
any such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner.
9.5 Payment of Indemnification Obligation. All indemnification by the
Buyer, the Seller or the Principals hereunder shall be effected by payment of
cash or delivery of a cashier's or certified check in the amount of the
indemnification liability. Notwithstanding the above, in no event shall the
aggregate liability of the
38
Sellers and the Principals under this Article 9 exceed 67% of the Purchase
Price.
9.6 Survival of Representations; Claims for Indemnification. All
representations and warranties made by the parties herein or in any instrument
or document furnished in connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of the parties hereto. All such
representations and warranties shall expire eighteen months after the Closing
Date, except for claims, if any, asserted in writing prior to the eighteenth
month after the Closing Date, which shall survive until finally resolved and
satisfied in full. All claims and actions for indemnity pursuant to this
Section 9 for breach of any representation or warranty shall be asserted or
maintained in writing by a party hereto on or prior to the expiration of such
eighteen-month period. Notwithstanding the above claims resulting from the
failure by the Seller to pay any tax when due shall expire one year after any
applicable statute of limitations.
39
10. Post-Closing Agreements
The Seller agrees that from and after the Closing Date:
10.1 Proprietary Information.
(a) The Seller shall hold in confidence, and use its best efforts to have
all of its officers, directors and personnel hold in confidence, all knowledge
and information of a secret or confidential nature with respect to the business
of the Seller and shall not disclose, publish or make use of the same without
the consent of the Buyer, except to the extent that such information shall have
become public knowledge other than by breach of this Agreement by the Seller.
(b) The Seller agrees that the remedy at law for any breach of this
Subsection 10.1 would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of
any provision of this Subsection 10.1.
10.2 No Solicitation or Hiring of Former Employees. Except as provided by
law, for a period of five years after the Closing Date, neither the Seller nor
any Affiliate thereof (including the Principals) shall solicit any person who
was an employee of the Seller on the Closing Date to terminate his employment
with the Buyer or to become an employee of the Seller or hire any person (other
than Xxxx Xxxxxx) who was such an employee on the date hereof or on the Closing
Date. Notwithstanding the above, (i) if employment with Buyer of any family
member of any Principal is terminated by Buyer, Seller and its Affiliates shall
not be restricted from hiring such terminated employee and (ii) the Seller and
its Affiliates shall not be restricted from soliciting or hiring any employee
of the Seller primarily responsible for performing office and/or administrative
duties for the Seller that is not hired by the Buyer within 15 days of the
Closing Date.
10.3 Non-Competition Agreement.
(a) For a period of five years after the Closing Date, neither the Seller
nor any Affiliate (including the Principals) thereof shall (i) market, rent or
sell any product which has the same or substantially the same form, function
and primary application as any existing or proposed product marketed, rented or
sold by the Seller on or prior to the Closing Date or (ii) engage in any
business competitive with the business of the Seller as conducted on the date
hereof or on the Closing Date, in the United States or any other country in
which the Seller conducted its business during the two years prior to the
Closing Date. Notwithstanding the above, with respect to Xxxxxx Xxxxxxx, this
paragraph (a) shall not apply to the business of film processing and any
restrictions related to the film processing business shall be as set forth in a
separate consulting agreement related thereto between Xx. Xxxxxxx and the
Buyer.
(b) The parties hereto agree that the duration and geographic
40
scope of the non-competition provision set forth in this Subsection 10.3 are
reasonable. In the event that any court determines that the duration or the
geographic scope, or both, are unreasonable and that such provision is to that
extent unenforceable, the parties hereto agree that the provision shall remain
in full force and effect for the greatest time period and in the greatest area
that would not render it unenforceable. The parties intend that this
non-competition provision shall be deemed to be a series of separate covenants,
one for each and every county of each and every state of the United States of
America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be
effective. The Seller agrees that damages are an inadequate remedy for any
breach of this provision and that the Buyer shall, whether or not it is
pursuing any potential remedies at law, be entitled to equitable relief in the
form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision.
10.4 Sharing of Data.
(a) The Seller shall have the right for a period of three years following
the Closing Date to have reasonable access to such books, records and accounts,
including financial and tax information, correspondence, production records,
employment records and other similar information as are transferred to the
Buyer pursuant to the terms of this Agreement for the limited purposes of
concluding its involvement in the business of the Seller prior to the Closing
Date and for complying with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. The Buyer shall have
the right for a period of three years following the Closing Date to have
reasonable access to those books, records and accounts, including financial and
tax information, correspondence, employment records and other records which are
retained by the Seller pursuant to the terms of this Agreement to the extent
that any of the foregoing relates to the business of the Seller transferred to
the Buyer hereunder or is otherwise needed by the Buyer in order to comply with
its obligations under applicable securities, tax, environmental, employment or
other laws and regulations.
(b) The Seller and the Buyer agree that from and after the Closing Date
they shall cooperate fully with each other to facilitate the transfer of the
Assets from the Seller to the Buyer and the operation thereof by the Buyer.
10.5 Use of Name. Without Buyer's prior written consent, the Seller and
each of the Principals each agrees not to use the name "Wellesley
Entertainment"
41
or any derivation thereof after the Closing Date in connection with any
business related to, competitive with, or an outgrowth of, the business
conducted by the Seller on the date hereof.
10.6 Cooperation in Litigation. Each party hereto will fully cooperate
with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such
party relating to or arising out of the conduct of the business of the Seller
prior to or after the Closing Date (other than litigation arising out the
transactions contemplated by this Agreement). The party requesting such
cooperation shall pay the out-of-pocket expenses (including legal fees and
disbursements) of the party providing such cooperation and of its officers,
directors, employees and agents reasonably incurred in connection with
providing such cooperation, but shall not be responsible to reimburse the party
providing such cooperation for such party's time spent in such cooperation or
the salaries or costs of fringe benefits or similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate at 5:00
p.m., Boston time, 60 days from the date hereof, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of the Buyer and Seller.
11.2 Termination by Agreement of the Parties. This Agreement may be
terminated by the mutual written agreement of the Buyer and Seller. In the
event of such termination by agreement, the Buyer shall have no further
obligation or liability to the Seller under this Agreement, and the Seller
shall have no further obligation or liability to the Buyer under this
Agreement.
11.3 Termination by Reason of Breach. This Agreement may be terminated by
the Seller, if at any time prior to the Closing there shall occur a material
breach of any of the representations, warranties or covenants of the Buyer or
the failure by the Buyer to perform any material condition or obligation
hereunder, which breach or failure is not cured within 30 days of written
notice thereof, and may be terminated by the Buyer, if at any time prior to the
Closing there shall occur a material breach of any of the representations,
warranties or covenants of the Seller or the failure of the Seller to perform
any material condition or obligation hereunder, which breach or failure is not
cured within 30 days of written notice thereof.
12. Transfer and Sales Tax
Notwithstanding any provisions of law imposing the burden of such taxes on
the Seller or the Buyer, as the case may be, the Seller shall be responsible
for and shall pay (a) all sales, use and transfer taxes, and (b) all
governmental charges, if any, upon the sale or transfer of any of the Assets
hereunder. If the Seller shall fail
42
to pay such amounts on a timely basis, the Buyer may pay such amounts to the
appropriate governmental authority or authorities, and the Seller shall
promptly reimburse the Buyer for any amounts so paid by the Buyer.
13. Brokers
13.1 For the Seller. The Seller represents and warrants that it has not
engaged any broker or finder or incurred any liability for brokerage fees,
commissions or finder's fees in connection with the transactions contemplated
by this Agreement. The Seller agrees to indemnify and hold harmless the Buyer
against any claims or liabilities asserted against it by any person acting or
claiming to act as a broker or finder on behalf of the Seller.
13.2 For the Buyer. The Buyer agrees to pay all fees, expenses and
compensation owed to any person, firm or corporation (including no more than
$10,000 to Anwar Bhalma and his affiliates, including BMA Enterprises, Inc.)
who has acted in the capacity of broker or finder on its behalf in connection
with the transactions contemplated by this Agreement. The Buyer agrees to
indemnify and hold harmless the Seller against any claims or liabilities
asserted against it by any person acting or claiming to act as a broker or
finder on behalf of the Buyer.
14. Notices
Any notices or other communications required or permitted hereunder shall
be sufficiently given if delivered personally or sent by telex, federal
express, registered or certified mail, postage prepaid, addressed as follows or
to such other address of which the parties may have given notice:
To the Seller: Xxxxxx Xxxxxxx
c/o Wellesley Entertainment
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
With a copy to: Xxxxxxx Xxxxxx, Esq.
Peabody & Xxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
To the Buyer: West Coast Entertainment Corporation
43
0000 Xxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
With a copy to: Xxxx and Xxxx
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Esq.
Unless otherwise specified herein, such notices or other communications shall
be deemed received (a) on the date delivered, if delivered personally; or (b)
three business days after being sent, if sent by registered or certified mail.
15. Arbitration
(a) Any dispute, controversy or claim between the parties arising out of
or relating to this Agreement, a breach hereof or the transactions contemplated
hereby, shall be settled by arbitration in accordance with the provisions of
this Section 15. Any arbitration pursuant to this Section 15 shall be
conducted by a single arbitrator appointed by the Boston, Massachusetts office
of the American Arbitration Association upon the request of either party. The
arbitrator shall have a minimum of five years of experience in the area of
business relevant to the particular dispute. Each party shall be permitted to
submit only one proposal to the arbitrator, and the arbitrator shall be
required to choose one of such two proposals as the resolution of the dispute.
The arbitrator may proceed to a resolution notwithstanding the failure of a
party to participate in the proceedings. Each of the parties shall pay its own
costs and expenses in connection with any such arbitration, and the parties
shall share equally in the fees and expenses of the arbitrator.
(b) The parties agree that any such arbitration will occur in Boston,
Massachusetts, any such arbitration award shall be final and binding upon the
parties, may be entered in any court having jurisdiction and shall not be
appealable by either party in any court.
16. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer and the Seller may not assign their respective obligations hereunder
without the prior written consent of the other party; provided, however, that
the Buyer may assign this Agreement, and its rights and obligations hereunder,
to a subsidiary or affiliate. Any assignment in contravention of this
provision shall be void. No assignment shall release the Buyer from any
obligation or liability under this Agreement.
17. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits hereto, and all
44
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior oral and
written and all contemporaneous oral negotiations, commitments and
understandings between such parties. The Buyer, the Seller and the Principals
may amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer and the Seller.
(b) If the provisions of any Schedule or Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provision of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
18. Expenses
Except as otherwise expressly provided herein (including in Sections 1.8
and 1.10), the Buyer and the Seller shall each pay their own expenses in
connection with this Agreement and the transactions contemplated hereby. Buyer
shall pay the costs and expenses of any audit conducted by, or at the request
of, the Buyer, and Seller shall pay the costs and expenses of any accounting
services provided to the Seller in connection with the transactions
contemplated hereby.
19. Legal Fees
In the event that legal proceedings are commenced by the Buyer against the
Seller, or by the Seller against the Buyer, in connection with this Agreement
or the transactions contemplated hereby, the party or parties which do not
prevail in such proceedings shall pay the reasonable attorneys' fees and other
costs and expenses, including investigation costs, incurred by the prevailing
party in such proceedings.
20. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware.
21. Section Headings
The section headings are for the convenience of the parties and in no
45
way alter, modify, amend, limit, or restrict the contractual obligations of the
parties.
22. Severability
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
23. Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be one and the same
document.
(end of page)
46
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
(Corporate Seal) WELLESLEY ENTERTAINMENT, INC.
ATTEST:
/s/ June X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------------- --------------------------------
Title: Vice President
-----------------------------
PRINCIPALS:
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
-----------------------------------
Xxxxxxx Xxxxxxx
(Corporate Seal) WEST COAST ENTERTAINMENT CORPORATION
ATTEST:
By: /s/ T. Xxxx Xxxxxxxx
--------------------------------
/s/ Xxxxx X. Xxxxxxxx Title: President
---------------------------- -----------------------------
