PURCHASE OF CORPORATION
THROUGH STOCK PURCHASES
THIS STOCK PURCHASE AGREEMENT, made and entered into this 28th day of
September, 1997, by and between Xxxxxx X. Xxxx, Xxxxxx X. Xxxxxxx, Xxxx
Xxxxxxxxxx and Xxxx Xxxxxxxxx, all of the Shareholders of KCK Corporation
(hereinafter collectively called "Sellers" and each hereinafter called
"Seller"), and Starlog Franchise Corporation, a corporation duly organized and
existing under and by virtue of the laws of the State of New Jersey (hereinafter
called "Purchaser");
WITNESSETH:
WHEREAS, Sellers are the owners of all of the issued and outstanding
shares of KCK Corporation, a North Carolina corporation (hereinafter called "the
Company"); and
WHEREAS, Sellers desire to sell and transfer to Purchaser, and Purchaser
desires to purchase and receive from Sellers, shares of common stock of the
Companies referred to herein for the consideration and upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual agreements
hereinafter set forth, the parties hereto agree as follows:
Section 1. Sale of Stock.
Upon and subject to the terms and subject to the conditions set forth in
this Agreement, each Seller hereby agrees to sell to Purchaser on the closing
date, free and clear of all liens, pledges and encumbrances of every kind,
character and description whatsoever, and Purchaser agrees to purchase from each
Seller on the said date the number of shares of common stock of the Company set
opposite their respective names below, to-wit:
Name of Number of Shares
Seller of Common Stock Of
------ ------------------
Xxxxxx X. Xxxx 300
Xxxxxx X. Xxxxxxx, Trustee 400
Xxxx X. Xxxxxxxxxx 200
Xxxx Xxxxxxxxx 100
TOTAL SHARES 1,000
Section 2. Closing Date.
2.1 The sale and purchase provided for in this Agreement shall be
consummated at a closing to be held at the offices of Purchaser in Tampa,
Florida at 10:00 o'clock A.M., E.S.T., on the 1st day of October, 1997, or at
such other place, time and date as the parties hereto shall mutually agree upon.
The date and event of such sale and purchase are, respectively, hererinafter
referred to as the "Closing Date" and the "Closing."
2.2 On the Closing Date, Sellers shall deliver to Purchaser certificates
evidencing and representing all of the issued and outstanding capital stock of
the Company, all of which is being sold hereunder, duly endorsed in blank or
accompanied by stock powers duly executed in blank in proper form for transfer.
Section 3. Consideration.
3.1 The consideration to be paid by purchaser to each Seller shall be $.01
Dollar for each share of the issued and outstanding capital stock of KCK
Corporation (for a total cash purchase price of $10.00 Dollars), the stock
warrants described in paragraph 12.8, and the other convenants set forth in this
Agreement. Such purchase price shall be paid to each Seller at closing.
Section 4. Transfer of Stock.
4.1 Sellers agree to cause the stock of KCK Corporation being sold
hereunder to be immediately transferred to and reissued in the name of
Purchaser.
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4.2 At the Closing, Sellers shall cause to be delivered to Purchaser
written resignations of all of the directors and officers of the Companies.
Sellers agree to cause meetings of the Board of Directors of the Companies to be
held upon due notice thereof or waiver thereof on the Closing Date, at which the
resignation of the respective officers and directors of the Companies shall be
accepted effective immediately and the vacancies created by such resignations
thereupon shall be filled by the persons designated by Purchaser.
Section 5. Access to Properties and Records of the Companies.
Sellers have previously allowed the officers, attorneys, accountants, and
other authorized representatives of Purchaser, free and full access to the
stores, properties, books, and records of the Company in order that Purchaser
may have full opportunity to make such investigation as it shall desire to make
of the affairs of the Company. Purchaser has not conducted an audit, valued
inventory or reviewed the accounts receivable.
Section 6. Representations as to Stocks.
Sellers jointly and severally represent and warrant to Purchaser that as
of the date hereof they are and on the Closing Date they will be, the owner of
the number of shares of common stock of the Company set opposite their name in
Section 1 hereof, and have good and marketable title thereto and the absolute
right to sell, assign, and transfer the same to Purchaser free and clear of all
liens, pledges, and encumbrances of any kind.
Section 7. Representations and Warranties of Sellers as to KCK
Corporation.
Sellers, jointly and severally, represent and warrant to Purchaser that:
7.1 KCK Corporation is a corporation duly organized and existing in good
standing under the laws of the State of North Carolina. The Company has the
corporate power to own their properties and assets and to carry on their
business as now being conducted.
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7.2 The Company has no subsidiaries.
7.3 Attached hereto, marked Exhibit A, and hereby made a part hereof, are
the balance sheets of the Company as of September 3, 1997, and income statements
for the period ending on such date (hereinafter collectively called the
"Financial Statements"). To the best of the knowledge of Sellers, the Financial
Statements present fairly the financial condition of the Company as of the date
thereof and the results of operations for the periods covered thereby, provided
however, it is acknowledged that the "Notes Payable-FUNB" is actually a
shareholder loan due Xxxxxx X. Xxxxxxx, and that the "Other Notes Payable" is
actually shareholder loans from Xxxxxx X. Xxxx and Xxxxxx X. Xxxxxxx which have
a current balance of approximately $590,000. To the extent it is determined that
the shareholder loans and accrued interest from Xxxxxx X. Xxxx and Xxxxxx X.
Xxxxxxx is greater than $590,000, the shareholder loans shall be adjusted upward
to no more than $600,000. Therefore, the unsecured shareholder loans will be no
more than $235,000 following conformance with paragraph 12.3 of this Agreement.
If it is determined that the shareholder loans and accrued interest is less than
$590,000, the unsecured shareholder loan will be reduced downward from $225,000
following conformance with paragraph 12.3 of this Agreement to reflect the
actual balance of the shareholder loans.
7.4 There are no loans or other obligations payable to officers,
directors, employees or stockholders of the Company, except salaries and
reimbursements of expenses incurred and accrued in the ordinary course of
business, and except as disclosed in the Financial Statements.
7.5 Other than as indicated in the Financial Statements and the exhibits
attached hereto, the Company has not, and from the date hereof to and including
the Closing Date the Company will not have
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(1) issued, authorized the issuance of, or sold or granted any option,
warrant, or right to purchase any of its stock, bonds, or other corporate
securities;
(2) incurred any obligation or liability, whether absolute or contingent,
except in the ordinary course of business;
(3) discharged or satisfied any lien or encumbrance or paid any obligation
or liability, whether absolute or contingent, other than in the ordinary course
of business;
Section 8. Representations and Warranties of Purchaser.
Purchaser represents and warrants unto Sellers that:
8.1 Purchaser is a corporation duly organized and existing and in good
standing under the laws of the State of New Jersey.
8.2 Purchaser has full power, in accordance with law, to execute and
perform this Agreement, and such execution and performance does not conflict
with any charter or by-law provision of Purchaser. The Board of Directors of
Purchaser has authorized, or before the Closing will have authorized, this
Agreement, the transactions contemplated herein, and the execution and delivery
hereof by Purchaser.
Section 9. Survival of Representations and Warranties.
The representations and warranties set forth in Section 6, Section 7 and
Section 8 hereof shall survive the Closing Date and shall not be affected by any
investigation, verification, or approval by any party hereto or by any one on
behalf of any of such parties.
Section 10. Conditions to Obligations of Purchaser.
The obligations of Purchaser under this Agreement are, at the option of
Purchaser, subject to the condition that, at or prior to the Closing Date:
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10.1 This Agreement shall have been signed by Sellers obligating and
committing Sellers to sell to Purchaser all of the issued and outstanding stock
of the Company, and all of Sellers shall at Closing on the Closing Date deliver
to Purchaser all of the shares of common stock of the Company to be sold by them
and all of Sellers shall in addition fully comply with the terms and provisions
hereof, it being understood and agreed that the obligation of Purchaser to
purchase shares of stock of the Company is conditioned upon performance
hereunder by all of Sellers.
10.2 All of the terms, covenants, and conditions of this Agreement to be
complied with or performed by Sellers at or before the Closing Date shall have
been duly complied with and performed.
10.3 The representations and warranties of Sellers hereof shall be true on
and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date. The
provisions of this subparagraph 10.3 shall be self-executing and each Seller, by
having closed the sale of his stock hereunder, shall be deemed conclusively to
have certified at Closing that all such representations and warranties were true
on and as of the Closing Date.
10.4 The business, properties, and operations of KCK Corporation shall not
have been materially adversely affected as a result of any fire, accident, or
other casualty or any Act of God or the public enemy unless they shall have been
protected by insurance and the resultant loss shall be fully covered by such
insurance.
10.5 There shall have been no changes in the business, properties,
operations, or financial condition of the Companies since the date of the
Financial Statements, other than changes in the ordinary course of business
which do not have a materially adverse affect on the value of the Company's
business.
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10.6 The usable merchandise inventory of the Companies as set forth in the
Financial Statements shall have been inspected by Purchaser or Purchaser's
agents and such inventory shall have been accepted by Purchaser, which
acceptance shall not be unreasonably withheld.
10.9 All legal proceedings in connection with the consummation of the
transactions contemplated by this Agreement, including the forms of all
documents of transfer and assignment, other documents, legal matters, opinions,
and procedure in connection therewith, shall have been approved in form and
substance by counsel for Purchaser, which approval shall not be unreasonably
withheld.
Section 11. Conditions to Obligations of Sellers.
The obligations of Sellers under this Agreement are, as the option of
Sellers, subject to the condition that, at or before the Closing Date, all the
terms, conditions, and covenants of this Agreement to be complied with and
performed by Purchaser at or before the Closing Date shall have been duly
complied with and performed.
Section 12. Additional Provisions.
The parties further agree to the following provisions which shall be
deemed inducements and additional consideration for the execution of this
Agreement:
12.1 Purchaser agrees to loan the Company an amount for operating
expenses, subject to any required approval from the Bankruptcy Court. Xxxxxx X.
Xxxx and Xxxxxx X. Xxxxxxx agree to subordinate their secured shareholder loan
to this new loan up to an amount of $350,000. Written confirmation of such loan
shall be provided to Xxxxxx X. Xxxx and Xxxxxx X. Xxxxxxx.
12.2 Xxxxxx X. Xxxx and Xxxxxx X. Xxxxxxx agree to exchange approximately
$240,000 of their secured debt for a KCK receivable due Broadway Squeeze, Inc.
in the amount of approximately $240,000, subject to Bankruptcy Court approval.
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12.3 The parties agree that Xxxxxx X. Xxxx and Xxxxxx X. Xxxxxxx shall
have a secured claim in the bankruptcy proceeding of $125,000, and an unsecured
claim of approximately $225,000. The secured loan to Xxxxxx X. Xxxx and Xxxxxx
X. Xxxxxxx shall be paid by KCK commencing November 1, 1997 with interest at ten
percent per annum, amortized over a sixty month period with the remaining unpaid
balance of principal and interest due October 1, 2002. Payment shall be made
each month in the amount of $2,655.89.
12.4 All parties agree to vote in favor of a bankruptcy plan of
reorganization that adopts the provisions of this Agreement, and agree not to
contest the valuations and interests as described in this Agreement.
12.5 Starlog agrees that in the event of a sale of substantially all of
the assets of KCK Corporation, Starlog will pay in full the then current balance
due all secured creditors.
12.6 Starlog shall commence management of the retail stores of KCK
Corporation upon execution of this Agreement.
12.7 Xxxxxxx County Bank and Nations Bank will remain secured creditors
and retain priority of their liens against the assets of KCK Corporation.
Starlog will cause the Company as soon as practicable following closing to
commence adequate protection payments to Xxxxxxx County Bank and Nations Bank.
Starlog agrees to cause the Company to to refinance the Xxxxxxx County and
Nations Banks loans prior to October 1, 2000. If both such loans have not been
refinanced on that date, the Company shall pay to the loan guarantors a penalty
provision in an amount $100 per day until refinancing has occured.
12.8 Starlog shall issue stock warrants upon the following terms and
conditions:
100,000 warrants to Xxxx Xxxxxxxxx at $.50 each to be exercised within two
years; and
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200,000 warrants to Xxxxxx X. Xxxx and 200,000 warrants to Xxxxxx X.
Xxxxxxx to be exercised at $.25 each if exercised within one year of
closing or at $.40 each if exercised within two years of closing. All such
warrants shall expire at the end of two years from the date of closing.
Starlog agrees to register the warrants issued pursuant to this agreement
in the same manner as all other stock, securities and warrants being
registered by Starlog under any Federal and State securities registration
provisions.
Section 13. Miscellaneous.
13.1 Sellers and Purchasers, at any time and from time to time after the
Closing Date, upon request of the other, will do, execute, acknowledge, and
deliver all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney, and assurances as may be required to convey and transfer to
and vest in Purchaser and to protect the right, title, and interest in and
enjoyment of, the common stock of the Company intended to be assigned,
transferred, and conveyed pursuant to this Agreement.
13.2 Subject to the terms and conditions hereof, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
13.3 Any notice, request, instruction, or other document to be given
hereunder to any party shall be in writing delivered personally or sent by
Registered Mail or Certified United States Air Mail, postage prepaid, or
telegram, as follows:
If to any of Sellers: % Xxxxxx X. Xxxx
0000 Xxx Xxxxxx
0
Xxxxxxx, Xxxxxx 00000
If to Purchaser: % President
Starlog Franchise Corporation
000 Xxxxxxxx Xxxxxx
Xxxxx, Xxx Xxxxxx 00000
Any party may change its address for purposes of this paragraph by giving notice
of such change of address to the other party in the manner herein provided for
giving notice.
13.4 This instrument contains the entire agreement between the parties
hereto with respect to the transaction contemplated hereby and shall not be
changed or terminated except by written amendment signed by the parties hereto.
13.5 This Agreement is declared to have been made under the laws of the
State of North Carolina.
13.6 This Agreement may be executed in a number of counterparts by
facsimile by different Sellers and Purchaser and all of such counterparts
executed by Purchaser and by such Sellers, together, shall constitute one and
the same agreement, and it shall not be necessary for Purchaser and all of
Sellers to execute the same counterpart hereof. Fax transmissions, with receipt
for sending shall be deemed originals.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SELLERS:
Signatures of the Parties:
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/s/ Xxxxxx X. Xxxx
---------------------------------
Xxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxxxxx
---------------------------------
Xxxx X. Xxxxxxxxxx
---------------------------------
Xxxx Xxxxxxxxx
PURCHASER:
ATTEST: Starlog Franchise Corporation
[ILLEGIBLE] By /s/ Xxxx Xxxxxxxxxx
------------------------------ -------------------------------
SECRETARY Title: President
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(Corporate Seal)
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