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EXHIBIT 2(a)
CREDIT AGREEMENT
Agreement dated as of September 25, 1996, between VGBS Acquisition
Corporation, a New York corporation having its principal office at ▇▇▇▇ ▇▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Lender"), and The Village Green
Bookstore, Inc., a New York corporation having its principal office at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Borrower" or "Company").
Contemporaneous with the execution of this Credit Agreement, Lender is
being issued a Secured Promissory Note and is being granted a Warrant to
purchase up to 2,400,000 shares in the Borrower pursuant to a Warrant dated as
of September 16, 1996 (the "Warrant") among Borrower and the Lender
(collectively the "Agreements"). As a material inducement to the Borrower's
agreement to grant the Warrant pursuant to the terms of the Agreement, Borrower
is entering into this Credit Agreement.
The parties hereby agree as follows:
1. Borrowing. Subject to and upon the terms and conditions set forth in
this Credit Agreement, the Company will borrow from the Lender, and the Lender
will lend to the Company up to $1.2 Million dollars in accordance with Schedule
2(a) which shall be utilized exclusively to repay outstanding principal
indebtedness of the Company's to Senior Subordinated Debentureholders.
2. Available Credit; Delivery to Debentureholders.
(a) The Lender agrees on the terms and conditions hereinafter
set forth, to make loans (the "Loans") to the Borrower
from time to time during the period from the date of this
Credit Agreement in an aggregate amount not to exceed One
Million Two Hundred Thousand Dollars ($1,200,000) ("Line
of Credit").
(b) Borrower may draw $300,000 against the Line of Credit upon
consummation of the Closing of the Agreements. Any draws
under the Line of Credit shall be delivered by Lender at
its option in the form of: (i) checks in the name of each
of the Debentureholders set forth on Schedule 2(b) as
repayment of the relative principal amount due and owing
each such Debentureholder; or (ii) in accordance with the
written instructions of Borrower delivered in accordance
with the terms of this Credit Agreement.
(c) After closing, Borrower may draw $300,000 against the Line
of Credit at the beginning of each of the periods set
forth on Schedule 2(a), provided Borrower has complied
with the terms of this Credit Agreement and the
representations and warranties made herein are accurate at
such time.
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(d) At the Closing Date the Company shall enter into an
agreement to pay to Bright Capital Group, LLC ("Bright") a
reorganization fee in the aggregate amount of $100,000, in
twelve equal monthly payments commencing November 1, 1996.
The Agreement between Bright and the Company shall be
executed in the form attached hereto as Exhibit 2(c).
(e) Each of the Lender and the Company agrees to bear all of
its own expenses incurred in connection with this
agreement and all transactions contemplated hereby.
3. Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place at 10:00 A.M., local time, on the ___ day of
September, 1996, at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such other time and place as the parties may
agree upon (the "Closing Date"). In the event any of the parties is entitled not
to close on the Closing Date because a condition to the Closing set forth in
Section 9 or 10 hereof has not been met or waived by the party entitled to waive
it, such party may postpone the Closing by giving written notice to the other
party, until the condition has been met (which all parties will use their best
efforts to cause to happen). However, the Closing Date shall be no later than
the 30th day of September, 1996.
4. Obligations at Closing.
(a) At the Closing, the Company will deliver to the Lender:
(i) the Warrant;
(ii) certified resolutions of the Board of Directors of
the Company approving the Credit Agreement and the
Agreements as well as an Incumbency Certificate as
title incumbency of the officer of Borrower
executing this Credit Agreement and the Agreements;
(iii) certificates as to the good standing of the Company
from the appropriate officials of the jurisdictions
in which it is incorporated or qualified and
authorized to do business as a foreign corporation
as of dates reasonably near the Closing Date; and
(iv) all other documents required to be delivered by the
Company to the Lender under the provisions of this
Agreement.
(b) At the Closing, the Lender will deliver to the Company:
(i) checks required by Section 2(b) hereof;
(ii) a copy of the resolutions of the Lender's Board of
Directors authorizing the execution, delivery and
performance of this Agreement and the transactions
contemplated hereunder.
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(iii) all other documents required to be delivered by the
Lender to the Company under the provisions of this
Agreement.
(c) At any time after the Closing, at the Lender's request and
in consideration of the agreements herein, the Company
will execute and deliver such other instruments of sale
and take such actions as the Lender may reasonably deem
necessary or desirable in order to carry out the intent of
this Credit Agreement.
5. Representations and Warranties by the Company. The Company represents
and warrants to the Lender as follows:
(a) Organization, Standing and Qualification. The Company is a
corporation organized, validly existing and in good
standing under the laws of the State of New York and is
not qualified to do business other than in the State of
Pennsylvania and neither the location of any of Borrower's
properties nor the nature of its activities require
Borrower to be qualified in any other jurisdiction. The
Company has all the requisite corporate power and
authority to own, lease or operate its business and
properties in the places where such business is now
conducted. The Company has made available to the Lender
true and complete copies of its Certificate of
Incorporation and the By-laws, and all amendments thereto,
and the minute book of the Company. Except as set forth in
Schedule 5(a), the Company has received no notification of
delisting of the Company from the NASDAQ small Cap Market
from the NASDAQ Stock Market.
(b) Subsidiaries. Schedule 5(b) sets forth each of the
Company's subsidiaries and their respective States of
incorporation. The Company has not made, nor will it make
prior to the Closing Date, any commitment to purchase any
interest, direct or indirect, in any other corporation or
of any partnership, joint venture or other business
enterprise or entity. The Company conducts the business
carried on by the Company only through the Company and its
subsidiaries.
(c) Execution, Delivery and Performance of Agreement;
Authority. Except as set forth in the Convertible
Debenture and any warrant thereto, the execution, delivery
and performance of this Agreement by the Company will not
conflict with, result in a default, right to accelerate or
loss of rights under or result in the creation of any
lien, charge or encumbrance pursuant to, or conflict with
any provision of the Company's Certificate of
Incorporation, By-laws, any franchise, mortgage, deed of
trust, material lease, license, agreement, law, rule or
regulation or any order, judgment or decree to which the
Company is a party or by which it may be bound. The
Company has the full capacity, power and authority to
enter into this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and
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constitutes, or prior to the Closing will constitute, a
valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except as the
enforceability hereof may be limited by (i) bankruptcy,
insolvency or other laws relating to or affecting
generally creditor's rights and (ii) general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) Government Approvals, Notice and Filings. No consent or
approval of, giving of notice to, registration with, or
taking of any action in respect of or by any Federal,
state, local or foreign governmental authority or agency
is required with respect to the execution, delivery or
performance by the Company of this Agreement.
(e) Capitalization. Except as set forth in Schedule 5(e),
there are no outstanding subscriptions, options, warrants,
calls, contracts, demands, commitments, convertible
securities or other agreements or arrangements under which
the Company is or may become obligated to issue, assign or
transfer any shares of the capital stock of the Company
other than as listed or described in the Company's
Commission Documents (as hereinafter defined).
(f) Ownership of the Stock. The authorized capital stock of
the Company consists of 10,000,000 shares of Common Stock,
par value $.001 per share, of which 3,741,155 shares are
currently issued and outstanding. The Company will deliver
at Closing a Warrant to purchase up to 2,400,000 shares of
Common Stock. After the Closing, and upon exercise of all
or part of the Warrant and receipt of valid consideration
therefor, the Company will issue and deliver up to
2,400,000 shares of Common Stock (previously defined
herein as the "Stock") to the Lender. The Company warrants
that it has the authority to issue the Stock issuable upon
exercise of the Warrant to be purchased hereunder. Upon
exercise and delivery of valid consideration to the
Borrower, the Lender will obtain good and marketable title
to the Stock, free and clear of all liens, claims,
encumbrances or restrictions of any kind. Upon exercise of
the Warrant and assuming valid consideration being
delivered to the Borrower upon exercise, the stock
issuable upon exercise of the Warrant will be validly
issued, fully paid and non-assessable and will not be
issued in violation of, and will not be subject to any
preemptive rights. The Company has reserved for issuance
the shares of stock issuable under the Warrant.
(g) Financial Statements. The Company has made available for
the Lender's inspection a true and complete copy of its
Registration Statement on Form SB-2 respecting the
registration of the Company's Common Stock with the
Securities and Exchange Commission (the "Commission") and
the Company's Annual Report on Form 10-KSB for the year
ended January 28, 1996 (collectively the "Commission
Documents"). Additionally, the
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Company has provided to the Lender (i) a balance sheet and
income statement (unaudited) dated June 30, 1996 (attached
hereto as Exhibit 5(g)(i)); (ii) projections for the six
months ending January 1997 for the Company's Monroe and
Perinton stores and the Company's two Kideology stores
(attached hereto as Schedule 5(g)(ii)); and (iii) an
analysis of the projected settlement costs on various
leases and lawsuits to which the Company has either
defaulted upon or is a party to (attached hereto as
Schedule 5(g)(iii)). As of their respective dates, none of
the documents described in this Section 5(g) contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary
to make statements made therein not misleading. The
financial statements of the Company included in the
Commission Documents comply as to form in all material
respects with applicable accounting requirements and with
the published Rules and Regulations of the Commission, and
have been prepared in accordance with generally accepted
accounting principals applied on a consistent basis during
the periods involved (except as may be indicated in the
notes thereto) and fairly present (subject, in the case of
the unaudited statements, to normal, recurring, audit
adjustments) the financial position of the Company as at
the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended.
(h) Absence of Undisclosed Liabilities. Except as otherwise
disclosed in this Agreement and except as set forth on
Schedule 5(h) and to the extent reflected or reserved
against on the Company Balance Sheet, as at June 30, 1996,
the Company does not have any debts, liabilities or
obligations. Except as otherwise disclosed in this
Agreement and except to the extent reserved adequately and
properly in the unaudited balance sheets, as of the
Closing the Company does not have any debts, liabilities,
obligations for the period commencing June 30, 1996
through the Closing Date, or any other debts, liabilities
or obligations relating to or arising out of any act,
transaction, circumstance or state of facts which occurred
or existed in the period commencing June 30, 1996, through
the Closing Date, then known, due or payable.
(i) Taxes. All taxes imposed by the United States or by any
other taxing authority, which are due or payable by the
Company and all interest and penalties thereon, have been
paid in full or properly reserved for; all tax returns and
reports required to be filed in connection therewith have
been accurately prepared and duly and timely filed; and
all deposits required by law to be made by the Company
with respect to estimated taxes, employees income
withholding and social security taxes have been duly made.
(j) Absence of Changes or Events. Except as set forth on
Schedule 5(j), since January 28, 1996 the Company has
conducted its business only in the ordinary course and has
not:
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(i) incurred any obligation or liability, whether due
or to become due, except liabilities for trade or
business obligations incurred in the ordinary
course of business and consistent with its prior
practice;
(ii) discharged or satisfied any lien, charge or
encumbrance other than those then required to be
discharged or satisfied, or paid any obligation or
liability other than current liabilities shown on
the Company Balance Sheet and current liabilities
incurred since June 30, 1996, in the ordinary
course of business and consistent with its prior
practice;
(iii) declared or made any payment of dividends or other
distribution in respect of any shares of its
capital stock, or purchased, retired or redeemed,
or obligated itself to purchase, retire or redeem,
any of its shares of capital stock or other
securities;
(iv) mortgaged, pledged or subjected to lien or any
other encumbrance any of its material property or
assets;
(v) sold, transferred, leased to others or otherwise
disposed of any of its material assets, except for
inventory sold in the ordinary course of business,
or canceled or compromised any debt or material
claim, or waived or released any right of
substantial value;
(vi) received any notice of termination of any contract,
lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by
insurance) which, in any case or in the aggregate,
has had or is reasonably likely to have a material
adverse effect on the business of the Company taken
as a whole;
(vii) encountered any material labor union organizing
activity, had any actual or, to the best knowledge
of the Company, threatened employee strikes, work
stoppages, slow-downs or lock-outs, or that any
material change in its relations with its
significant employees, agents, customers or
suppliers;
(viii) made any material change in the rate of
compensation payable to or paid or agreed or orally
promised to pay, any shareholder, director,
officer, employee, salesman, distributor or agent;
(ix) made any capital expenditures or capital additions
or betterments, or entered into any leases;
(x) entered into any transaction, contract or
commitment other than in the ordinary course of
business or paid or agreed to pay any brokerage,
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finder's fee or other similar expenses in
connection with, or incurred any severance pay
obligations; or
(xi) entered into any agreement or made any commitment
to take any of the types of action described in
subparagraphs (i) through (xi) above.
(xii) Except as set forth on Schedule 5(j)(xii), incurred
any material adverse change with regard to the
Company's vendors.
(k) Litigation. There is no claim, legal action, suit,
arbitration, governmental investigation or other legal or
administrative proceeding, nor any order, decree or
judgment in progress, pending or in effect, or, to the
best knowledge of the Company, threatened, against the
Company or the transactions contemplated by this Agreement
other than as listed on Schedule 5(g)(iii).
(l) Compliance with Laws and Other Instruments. The Company
has complied in all material respects with all existing
laws, rules, regulations, ordinances, orders, judgments
and decrees applicable to its business, properties or
operations as presently conducted. Neither the ownership
nor use of the properties nor the conduct of the business
of the Company conflicts with the rights of any other
person or violates, or with or without the giving of
notice or the passage of time, or both, will violate,
conflict with or result in a default, right to accelerate
or loss of rights under, any terms or provisions of the
Certificate of Incorporation or By-laws of the Company as
presently in effect, or any material lien, encumbrance,
mortgage, deed of trust, lease, license, agreement,
understanding, law, ordinance, rule or regulation, or any
order, judgment or decree to which the Company is a party
may be bound.
(m) Title of Properties. The Company has good, marketable and
insurable title to all the material properties and assets
it owns or purports to own in the operation of its
business. The Company has good, marketable and insurable
leasehold interests in or other rights to use all the
material properties and assets it uses or purports to use
in the operation of its business. None of such properties
and assets is subject to any mortgage, pledge, lien,
charge, security interest, encumbrance, restriction,
lease, license, easement, liability or adverse claim of
any nature whatsoever except as listed on Schedule
5(g)(iii). All the properties and assets which are in use
by the Company are in good operating condition and repair,
are suitable for the purposes used, are adequate and
sufficient for their current operations.
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(n) Schedules. Attached hereto are disclosure schedules to
this Credit Agreement. Such disclosure schedules, listed
below, are accurate and true as of the date hereof:
(i) Schedule 5(n)(i). All real property owned by the
Company or in which the Company has a leasehold or
other interest or which is used by the Company
together with a description of each related lease,
sublease, license, or other instrument.
(ii) Schedule 5(n)(ii). All machinery, tools, equipment,
motor vehicles, rolling stock, depreciable assets
and other tangible personal property owned, leased
or used by the Company, except for individual items
having a book value of not more than $1,000 in the
aggregate.
(iii) Schedule 5(n)(iii). All material patents, patent
applications patent licenses, trademarks, trademark
registrations, and applications therefor, service
marks, service names, trade names, copyrights and
copyright registrations, and applications therefor,
owned or held by the Company or used in the
operation of its businesses.
(iv) Schedule 5(n)(iv). All fire, theft, casualty,
liability and other insurance policies insuring the
Company.
(v) Schedule 5(n)(v). All material sales agency or
distributorship agreements or franchises or other
material agreements providing for the services of
an independent contractor to which the Company is a
party.
(vi) Schedule 5(n)(vi). All material contracts,
agreements, commitments or licenses relating to
patents, trademarks, trade names, copyrights,
inventions, processes, know how, formula or trade
secrets to which the Company is a party.
(vii) Schedule 5(n)(vii). All loan agreements, indentures
and mortgages; all pledges, conditional sale or
title retention agreements, security agreements,
equipment obligations, guaranties and leases or
lease purchase agreements covering any material
assets to which the Company is a party.
(viii) Schedule 5(n)(viii). All contracts, agreements and
commitments in respect of the issuance, sale or
transfer of the capital stock, bonds or other
securities of the Company or pursuant to which the
Company has acquired any substantial portion of its
business or assets.
(ix) Schedule 5(n)(ix). All collective bargaining
agreements, employment and consulting agreements,
executive compensation plans, bonus
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plans, deferred compensation agreements employee
pension plans or retirement plans, employee stock
options or stock purchase plans and group life,
health and accident insurance and other employee
benefit plans, agreements, arrangements or
commitments to which the Company is a party or
bound or which relate to the operation of its
business.
(x) Schedule 5(n)(x). All other material contracts,
agreements, commit- ments or arrangements not
described in the foregoing subparagraphs (i)
through (ix) of this Section 5(n) to which the
Company is a party and to which are not
substantially performed by any party thereto,
excluding (A) purchase and sales orders and
commitments made in the ordinary course of business
and consistent with its prior practice (B)
contracts entered into in the ordinary course of
business and consistent with its prior practice and
involving payments or receipts by the Company of
less than $1,000 in the case of any single contract
but not more than $10,000 in the aggregate, and (C)
contracts entered into in the ordinary course of
business which are terminable by the Company on
less than 30 days' notice without any penalty or
consideration.
(xi) Schedule 5(n)(xi). The names and current annual
salary rates of all persons who either receive a
salary from the Company or act as independent
commission agents whose annual compensation (direct
or indirect) from the Company is currently at the
rate of more than $100,000 per year.
(xii) Schedule 5(n)(xii). The names of all directors and
officers of the Company, the name of each bank in
which the Company has an account or safe deposit
box and the names of all persons authorized to draw
thereon or who have access thereto.
(xiii) All of the contracts and agreements given to Lender
for inspection and copying pursuant to this Section
5 (other than those which have been substantially
performed) are valid and binding, enforceable by
the Company in accordance with their respective
terms in full force and effect and, except as
otherwise specified by the Company or otherwise
provided herein will be unaffected by the sale of
the Stock to the Lender hereunder. True and
complete copies of all such contracts, agreements,
leases, licenses, policies, indentures, mortgages
and other documents described in this Section 5
(together with any and all material amendments
thereto) have been made available to the Lender for
inspection and copying.
(o) Guaranties. None of the obligations or liabilities of the
Company is guaranteed by any other person, firm or
corporation, nor has the Company
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guaranteed the obligations or liabilities of any other
person, firm or corporation.
(p) Inventory. The inventory and related supplies of the
Company and reflected on the Company's balance sheets or
thereafter acquired are merchantable, or suitable and
usable, for sale in the ordinary course of business.
(q) Receivables. All receivables of the Company have arisen
only from bona fide transactions in the ordinary course of
business and shall be fully collected within 120 days
after they arose except to the extent of the normal
allowance for doubtful accounts computed as a percentage
of sales consistent with prior practices as reflected on
the Company's balance sheets.
(r) Records. The books of account, minute books, stock
certificate books and stock transfer ledgers of the
Company are substantially complete and correct in all
material respects, and there have been no transactions
involving the business of the Company which are required
to have been set forth therein and which have not been so
set forth.
(s) Employee Benefit Plans.
(i) The Company has made available to the Lender for
inspection and copying all employee benefit plan
texts and other agreements adopted in connection
with any such plans, along with any other material
information and reports relating to each benefit
plan.
(ii) To the best of the Company's knowledge, with
respect to each employee benefit plan, full payment
has been made of all amounts which the Company is
or has been required under the terms of each such
plan to have paid as contributions to such plan.
(iii) To the best of the Company's knowledge, with
respect to each employee benefit plan, each such
plan conforms to, and its administration is in
compliance with, all applicable laws and
regulations.
(t) Environmental. Borrower is in full compliance with all
applicable Environmental Laws or Regulations, orders and
directives of Federal, state or local governments or
governmental authorities. The term "Environmental Laws or
Regulations" includes regulatory programs involving (1)
air emissions, (2) liquid discharges to streams, ponds,
ditches or other surface waters, (3) liquid discharges to
ground waters, (4) liquid discharges to publicly-owned
treatment works, (5) disposal of solid and/or hazardous
wastes, (6) marking, maintenance and/or removal of
electrical equipment containing PCBs, (7) manufacture
and/or construction (including
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renovation) involving asbestos materials, (8) activities
in or adjacent to fresh water wetlands, flood hazard
areas, coastal zone management areas and/or historic
preservation areas, (9) registration, operation, testing
and/or removal or replacement of storage tanks for
petroleum products and/or hazardous substances, and (10)
emergency, planning and community right-to-know laws,
including submission of hazardous substance inventory
information to Federal, state or local authorities.
(u) Disclosure. No representation or warranty made by the
Company in this Agreement or in any Schedule annexed
hereto contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material
fact required to make the statements herein or therein
contained not misleading.
(v) Disclaimer. Except for the warranties and representations
expressly set forth herein, the Company has not relied
upon and no representations have been made to them by the
Lender, its attorneys, agents, employees or
representatives with respect to the Lender, its respective
assets, financial condition, profitability, operations or
business prospects and/or potential.
6. Representations and Warranties by the Lender. The Lender represents
and warrants to the Company as follows:
(a) Organization. The Lender is a corporation duly organized,
validly existing and in good standing under the laws of
the State of New York and has all requisite corporate
power and authority to own, lease or operate its
properties as and in the places where such business is now
conducted. The Lender has all requisite corporate power
and authority to enter into this Agreement and to carry
out the transactions contemplated hereby.
(b) Execution, Delivery and Performance of Agreement and
Guaranties; Authority. The execution, delivery and
performance of this Agreement by the Lender will not
conflict with, or result in a default, right to accelerate
or loss of rights under, or result in the creation of any
lien, charge or encumbrance pursuant to, any provision of
the Lender's Certificate of Incorporation or By-laws, or
any franchise, mortgage, deed of trust, material lease,
license, agreement, law, ordinance, rule or regulation or
any order, judgment or decree to which the Lender is a
party or by which it may be bound. This Agreement has been
dully authorized by the Lender and constitutes a valid and
binding obligation of the Lender, enforceable against the
Lender in accordance with its terms.
(c) Purpose of Lender. Upon exercise of the Warrant, the
Lender will be acquiring the Stock solely for investment
purposes and not with a view to subsequent transfer or
resale. The Lender recognizes upon exercise, the Stock
will be "Restricted Securities" under the Securities Act
of 1933, as
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amended (the "Securities Act") and will be subject to
substantial limitations on resale or other transfer.
Accordingly, the Lender agrees to bear the economic risk
of investment in the Stock for an indefinite period of
time. The Lender agrees that the Company will restrict the
offer, sale, transfer, assignment or other disposition of
the Stock by placing a legend on the Stock to the effect
that the Company has not registered the Stock under the
Securities Act or any state securities laws and that the
holder may not sell or otherwise transfer the Stock
without registration or an opinion of counsel acceptable
to the Company that such transaction will not result in a
prohibited transaction under the Securities Act and
applicable state laws and by referring to the
above-described restrictions in the transfer records of
the Company. The Lender represents that it will not sell
or otherwise transfer the Stock without registration under
the Securities Act and applicable state laws, or
appropriate exemptions therefrom.
(d) Government Approvals, Notices and Filings. No consent or
approval of, giving of notice to, registration with, or
taking of any action in respect of or by, any Federal,
state or local governmental authority or agency is
required with respect to the execution, delivery or
performance by the Lender of this Agreement.
(e) Ownership of the Lender. The Lender was incorporated in
New York and as of the date of this Agreement has no
assets or liabilities, except immaterial assets and
liabilities created or arising as a result of its
incorporation. The Lender is an affiliate of ▇.▇. ▇▇▇▇▇▇ &
Co., Inc., a New York corporation with an address at 1895
Mt. Hope Avenue, Rochester, New York.
(f) Litigation. There is no claim, legal action, suit,
arbitration, governmental investigation or other legal or
administrative proceeding, nor any order, decree or
judgment in progress, pending or in effect, or to the best
knowledge of the Lender threatened, against or relating to
the Lender in connection with the transactions
contemplated by this Agreement.
(g) Disclosure. No representation or warranty made by the
Lender in this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit
to state any material fact required to make the statements
herein contained not misleading.
(h) Confidentiality. The Lender agrees not to disclose the
contents of this Agreement or any documents provided by
the Company to the Lender pursuant to this Agreement with
any party not affiliated with the Lender without the prior
written consent of the Company, which may be withheld for
any reason.
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7. Conduct of Business Prior to Closing.
(a) From and after the date hereof the Company shall use its
best efforts to conduct its business and affairs only in
the ordinary course of business and consistent with prior
practice and to maintain, keep and preserve its assets and
properties in good condition and repair and maintain
insurance thereon in accordance with present practices.
Without limiting the generality of the foregoing, prior to
the Closing the Company will not, without the Lender's
prior written consent after due consultation with the
Lender, permit the Company to:
(i) change its Certificate of Incorporation or By-laws
or merge or consolidate or obligate itself to do so
with or into any other entity;
(ii) enter into any material contract, agreement,
commitment or other understanding or arrangement.
(iii) perform, take any action or incur or permit to
exist in any of the acts, transactions, events or
occurrences of the type described in subparagraphs
(i), (ii), (iii), (iv), (v), (viii), (ix), (x),
(xi), or (xii) of Section 5(j) hereof which would
be inconsistent with the representations and
warranties set forth therein.
(b) The Company shall give the Lender prompt written notice of
any material change in any of the information contained in
the representations and warranties made in Section 5 or
elsewhere in this Agreement or the Schedules annexed
hereto which occurs prior to the Closing.
(c) From and after the date hereof, the Company shall refrain
from soliciting or engaging in negotiations or discussions
with respect to or entering into any agreement or
arrangement with any person for the transfer, sale,
pledge, assignment or other disposition of the capital
stock or all or substantially all of the assets of the
Company.
8. Access to Information and Documents. The Company will give the
Lender and the Lender's attorneys, accountants and other
representatives full access to the documents, contracts, books
and records of the Company as are necessary and required to
satisfy the Company's disclosure obligation under this Agreement.
9. Conditions Precedent to Lender's Obligations. All obligations of
the Lender at the Closing are subject to the fulfillment of each
of the following conditions at or prior to the Closing:
(a) All representations and warranties of the Company
contained herein and in any Schedule annexed hereto or
document delivered at the time of the
14
execution and delivery hereof shall be true and correct in
all material respects when made and at, and as of, the
Closing Date.
(b) All covenants, agreements and obligations required by the
terms of this Agreement to be performed by the Company at
or before the Closing shall have been duly and properly
performed.
(c) Since the date of this Agreement there shall not have
occurred any material adverse change in the properties,
assets, operations, business, financial condition or
prospects of the Company, taken as a whole.
(d) There shall be delivered to Lender a certificate executed
by the Chairman of the Board and President of the Company
on their own behalf dated the Closing Date, certifying
that the conditions set forth in paragraph (a), (b) (c)
and (f) of this Section 9 have been fulfilled.
(e) All documents required by this Agreement to be delivered
by the Company to the Lender at or prior to the Closing
shall have been so delivered.
(f) All guaranties by the Company of obligations or
liabilities of any other person shall have been
effectively discharged and terminated.
(g) Board of Directors. The Board of Directors of the Company
consists of four directors. Each Director shall deliver to
Lender his resignation in escrow at closing. Lender shall
have the absolute right to name replacement directors.
(h) The Lender shall have received a fully executed agreement
between Bright and the Company in the form attached hereto
as Exhibit 2(c).
10. Conditions Precedent to the Company's Obligations. All
obligations of the Company at the Closing are subject to the
fulfillment of each of the following conditions at or prior to
the Closing:
(a) All representations and warranties of the Lender contained
herein shall be true and correct when made and at and as
of the Closing Date.
(b) All covenants, agreements and obligations required by the
terms of this Agreement to be performed by the Lender at
or before the Closing shall have been duly and properly
performed.
(c) There shall be delivered to the Company a certificate
executed by the President and Secretary of the Lender,
dated the Closing Date, certifying that the conditions set
forth in paragraphs (a) and (b) of this Section 10 have
been fulfilled.
15
(d) All documents required by this Agreement to be delivered
by the Lender to the Company at or prior to the Closing
shall have been so delivered.
11. Indemnification.
(a) For a period commencing on the Closing Date and ending one
year thereafter, the Company hereby agrees that in the
event the assets set forth in Schedule 5(g)(i) prove to be
less than represented, the liabilities set forth in
Schedule 5(g)(i) prove to be greater than projected, or
the settlement costs set forth in Schedule 5(g)(iii) prove
to be greater than projected, that the Lender shall be
entitled to receive an additional Warrant to purchase that
number of additional shares of Stock equal to the
disparity multiplied by a factor of "2."
(b) For a period commencing on the Closing Date and ending one
year thereafter, each of the Lender and the Borrower
hereby indemnifies and agrees to hold the Company harmless
from, against and in respect of, and shall on demand
reimburse it for:
(i) Any and all loss, liability or damage suffered or
incurred by the Company by reason of any untrue,
incorrect or incomplete representation or warranty
or nonfulfillment or nonperformance of any covenant
or agreement by either party contained herein;
(ii) Any and all loss, liability or damage suffered or
incurred by the Company by reason of or in
connection with any claim for finder's fee or
brokerage or other commission arising by reason of
any services alleged to have been rendered to or at
the instance of either party with respect to this
Agreement or the transactions contemplated hereby;
and
(iii) Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and
expenses, including, without limitation, reasonable
legal fees and expenses, incident to any of the
foregoing or incurred in investigating or
attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
(c) Whenever any claim shall arise for indemnification under
Section 11(a) or (b) hereof, the party claiming
indemnification shall promptly notify the other party of
the claim and, when known, the facts constituting the
basis for such claim, except that in the event of any
claim for indemnification hereunder resulting from or in
connection with any claim, action, suit or legal
proceeding by a third party, the notice shall specify, if
known, the amount or an estimate of the amount of the
liability arising therefrom. Should the parties hereto be
unable to agree as to the amount of indemnification or the
date payment is to be made, the claim shall be
16
submitted to binding arbitration subject to the rules of
the American Arbitration Association.
12. Survival of Representations and Warranties. Each statement,
representation, warranty, indemnity, covenant and agreement made by any party
hereto shall (i) survive any audit or investigation by or on behalf of any other
party hereto and (ii) survive the Closing Date for a period of one year, unless
any other party hereto gives written notice to such party prior to the
expiration of such one year period of the assertion of any claim for liability
under this Agreement, in which case they shall survive until the final
settlement or judicial resolution of such claim.
13. Notices. Any and all notices or other communications required or
permitted to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally delivered or
three days after mailing by first class registered mail, return receipt
requested, or one day after delivery to an overnight courier, addressed to the
parties at the addresses set forth herein or as each party may from time to time
designate. A copy of any notice given to Lender shall be sent in accordance with
this Section 13 to ▇▇▇▇▇▇▇ ▇▇▇▇ at Morse, Zelnick, Rose & Lander, LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. A copy of any notice given to the
Company shall be sent in accordance with this Section 13 to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ at
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
14. Additional Covenants.
(a) Public Announcements. Prior to the Closing, each of the
Company and the Lender covenants and agrees to refrain
from issuing any public announcement, statement or
communication regarding the matters contemplated hereby
without first notifying the other party, providing them
with a copy of the text thereof and requesting written
consent thereto, which shall not be unreasonably withheld.
15. Termination Rights. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of the Company and the Lender;
(b) by the Company, if there has been a material
misrepresentation, breach of covenant or breach of
warranty of the Lender's respective representations,
warranties and covenants as set forth herein;
(c) by the Lender, if there has been a material
misrepresentation, breach of covenant or breach of
warranty of the Company's representations, warranties and
covenants set forth herein;
17
(d) by the Company, if any of the conditions provided in
Section 10 herein have not been met at the Closing and
have not been waived by the Company;
(e) by the Lender if any of the conditions provided in Section
9 herein have not been met at the Closing and have not
been waived by the Lender;
(f) by either party if the Closing has not occurred on or
before September 30, 1996.
16. Effect of Termination.
(a) If this Agreement is terminated pursuant to Section 15
herein, this Agreement shall be of no further force and
effect and there shall be no further liability hereunder
on the part of either party or its affiliates, directors,
officers, shareholders, agents or other representatives.
(b) Notwithstanding anything to the contrary contained herein,
the provisions of Sections 15 and 16 shall survive any
termination of this Agreement.
17. Miscellaneous.
(a) This writing, together with the Schedules and Exhibits
annexed hereto, constitutes the entire agreement of the
parties with respect to the subject matter hereof and
supersedes all prior understandings with respect thereto,
and may not be modified, amended or terminated except by a
written agreement signed by the parties hereto.
(b) No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party
giving such waiver. No delay or omission to exercise any
right or remedy against any party hereto shall be
construed to be a waiver thereof.
(c) This Agreement shall be binding upon and inure to the
benefit of the Lender, its successors and assigns. The
Lender may assign this Agreement to an affiliate.
(d) The section and paragraph headings contained herein are
for the purposes of convenience only and are not intended
to define or limit the contents of said sections or
paragraphs. Words and definitions in the singular shall be
read and construed as though in the plural, and vice
versa, unless the context otherwise requires, and words in
the masculine, neuter or feminine gender shall be read and
construed as though in either of the other genders where
the context so requires.
18
(e) Each party hereto shall cooperate, shall take such further
action and shall execute and deliver such further
documents as may be reasonably requested by any other
party in order to carry out the provisions and purposes of
this Agreement.
(f) This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed
one original.
(g) Unless the context otherwise requires, (a) all references
to Sections, Articles, Schedules or Exhibits are to
Sections, Articles, Schedules or Exhibits of or to this
Agreement, (b) each term defined in this Agreement has the
meaning so assigned to it, (c) each accounting term not
otherwise defined in this Agreement has the meaning
assigned to it in accordance with the GAAP, (d) all
references to the "knowledge" of a party will be deemed to
refer to the actual knowledge of such party after due
inquiry, (e) all references to a party's "best efforts"
and references of like import will be deemed to refer to
the best efforts of such party in accordance with
reasonable commercial practice and without incurring
unreasonable expense, and (g) as used in this Agreement, a
"material" change shall be interpreted as referring to a
change or effect that has a significant impact on a
party's business as a whole.
(h) No provision of this Agreement will be interpreted in
favor of, or against, any party by reason of the extent to
which any such party or its counsel participated in the
drafting thereof or by reason of the extent to which any
such provision is inconsistent with any prior draft of
such provision or of this Agreement.
(i) Except as previously provided herein, nothing contained in
this Agreement is intended to confer upon any person,
other than the parties and their successors and permitted
assigns, any rights or remedies under or by reason of this
Agreement.
(j) This Agreement and all amendments hereof shall be governed
by construed and enforced in accordance with the internal
laws of the State of New York, without regard to such
state's laws regarding the conflict of laws.
19
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.
VGBS ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
THE VILLAGE GREEN BOOKSTORE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
20
CREDIT AGREEMENT
BETWEEN
VGBS ACQUISITION CORPORATION
AND
THE VILLAGE GREEN BOOKSTORE, INC.
IDENTIFICATION OF CONTENTS OF OMITTED SCHEDULES AND EXHIBIT
SCHEDULE OR EXHIBIT
Schedule 2(a): Timing of Draws
Schedule 2(b): List of Debentureholders and the Principal Amount Owed to
Each Debentureholder
Schedule 2(c): Financial Consulting Agreement With Bright Capital Group,
LLC
Schedule 5(a): Organization, Standing and Qualification
Schedule 5(b): List of Subsidiaries
Schedule 5(e): Capital Obligations
Schedule 5(g)(i): Unaudited Balance Sheet dated June 30, 1996
Schedule 5(g)(ii): Projections
Schedule 5(g)(iii): Projected Settlement Costs
Schedule 5(h): Liabilities
Schedule 5(j): Changes and Events
Schedule 5(k): Litigation
Schedule 5(n)(i): Leases
Schedule 5(n)(ii): Tangible Personal Property
Schedule 5(n)(iii): Trademarks
Schedule 5(n)(iv): Insurance
Schedule 5(n)(v): Material Agreements
Schedule 5(n)(vi): Intellectual Property
Schedule 5(n)(vii): Tangible Personal Property Leases
Schedule 5(n)(viii): Stock Options and Warrants
Schedule 5(n)(ix): Employment and Employee Benefit Agreements
Schedule 5(n)(x): Other Material Agreements
Schedule 5(n)(xi): Employees Earning More Than $100,000 Per Year
Schedule 5(n)(xii): Officers, Directors and Bank Accounts
Exhibit (9)(i): Notices to Debentureholders