Exhibit (e)
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ASSET PURCHASE AGREEMENT
by and among
GREAT NECK KARATE, INC.,
and
NORTHERN NASSAU KARATE, INC.
Dated as of January 10, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I - DEFINITIONS, PURCHASE OF THE
ASSETS, ASSUMPTION OF ASSUMED LIABILITIES,
PURCHASE PRICE; CLOSING ADJUSTMENTS;
CONDITION OF ASSETS............................................1
1.1. Certain Definitions.............................................1
1.2. Transfer of the Assets..........................................3
1.3. Assumption by Buyer of Certain
Liabilities.....................................................4
1.4. Non-Assumed Liabilities.........................................4
1.5. Purchase Price for the Assets...................................4
1.6. Intentionally Omitted...........................................4
1.7. Limitations on Assignment; Further
Assurance.......................................................4
1.8 Condition of Assets and Business ...............................4
1.9 Management Operating Agreement..................................4
ARTICLE II - CLOSING.........................................................5
2.1. The Closing.....................................................5
2.2. Additional Actions to be Taken on
the Closing Date................................................5
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF THE SELLER................................................6
3.1. Organization and Qualification..................................6
3.2. Subsidiaries and Affiliates.....................................6
3.3. Validity and Execution of Agreement.............................6
3.4. Litigation......................................................6
3.5. The Assets......................................................6
3.6. Contracts and Other Agreements..................................6
3.7. Real Estate.....................................................7
3.8. Disclosure......................................................7
3.9. Survival........................................................7
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF THE BUYER..................................................7
4.1. Organization and Qualification..................................7
4.2. Validity and Execution of Agreement.............................7
4.3. No Conflict.....................................................8
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4.4. Litigation......................................................8
4.5. Disclosure......................................................8
4.6. Survival........................................................8
ARTICLE V - INDEMNIFICATION..................................................8
5.1. Indemnification.................................................8
5.2. Method of Asserting Claims......................................9
ARTICLE VI - POST-CLOSING COVENANTS OF THE PARTIES..........................11
6.1. Confidentiality................................................11
6.2. Non-Competition ...............................................11
6.3. Operation of the Business .....................................12
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING ..........................12
7.1. Consents; Stockholder Approval ................................12
7.2. No Suits or Actions ...........................................12
ARTICLE VIII - MISCELLANEOUS................................................12
8.1. No Other Representations.......................................12
8.2. Sales and Transfer Taxes.......................................13
8.3. Post-Closing Further Assurances................................13
8.4. Notices........................................................13
8.5. Publicity......................................................14
8.6. Entire Agreement...............................................14
8.7. Waivers and Amendments.........................................14
8.8. Governing Law..................................................14
8.9. Binding Effect; No Assignment..................................14
8.10. Variations in Pronouns.........................................14
8.11. Counterparts...................................................14
8.12. Exhibits and Schedules.........................................15
8.13. Effect of Disclosure on Schedules..............................15
8.14. Headings.......................................................15
8.15. Severability of Provisions.....................................15
8.16. Brokers........................................................15
8.17 Termination....................................................15
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TABLE OF CONTENTS
(Continued)
EXHIBIT A - ▇▇▇▇ OF SALE
EXHIBIT B - LANDLORD'S CONSENT
EXHIBIT C - SECURED PROMISSORY NOTE
EXHIBIT D - OPERATING AGREEMENT
SCHEDULES
1.1(a) - Excluded Assets
1.1(b) - Permitted Liens
1.2 - Assets
1.3(b) - Assumed Liabilities
3.4 - Litigation - Seller and Subsidiaries
3.6 - Material Agreements
3.7 - Real Estate
4.4 - Litigation - Buyer
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated January 10, 1997 by and between GREAT NECK
KARATE, INC., a New York corporation (the "Seller"), and NORTHERN NASSAU KARATE,
INC., a New Jersey corporation (the "Buyer").
W I T N E S E T H :
WHEREAS, the Seller is engaged in the business of owning and operating a
martial arts instruction center located at ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇
(the "Business"); and
WHEREAS, the Seller owns certain assets comprising the Assets (as
hereinafter defined) which are related to the conduct of the Business; and
WHEREAS, the Seller wishes to sell, and the Buyer wishes to acquire the
Assets and assume certain liabilities of the Seller comprising the Assumed
Liabilities (as hereinafter defined) on terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual terms, conditions and other
agreements set forth herein, the Seller and the Buyer hereby agree as follows:
ARTICLE I
DEFINITIONS; PURCHASE OF THE ASSETS;
ASSUMPTION OF ASSUMED LIABILITIES; PURCHASE PRICE;
CLOSING ADJUSTMENTS; CONDITION OF ASSETS
1.1. Certain Definitions. As used in this Agreement, the following terms
have the following meanings unless the context otherwise requires:
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person; provided,
however, that for purposes of Section 3.2, controlling or controlled shall be
deemed to occur if any Person holds or has the right to vote ten (10%) percent
or more of the voting stock of such other Person.
"Assets" has the meaning specified in Section 1.2.
"Assigned Contracts" executory contracts (including without limitation,
licenses and purchase orders) set forth on Schedule 3.6, unless indicated
otherwise therein.
"▇▇▇▇ of Sale" means an instrument substantially in the form of Exhibit A
attached hereto.
"Business" has the meaning specified in the Recitals.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required by law to close in New York
City.
"Buyer" has the meaning specified in the introductory paragraph of this
Agreement.
"Claim Notice" has the meaning specified in Section 5.2(a).
"Closing" has the meaning specified in Section 2.1(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means those assets of the Seller or an Affiliate of
Seller set forth on Schedule 1.1(a).
"Governmental or Regulatory Body" means any government or political
subdivision thereof, whether federal, state, county, local or foreign, or any
agency, authority or instrumentality of any such government or political
subdivision.
"Indemnified Party" has the meaning specified in Section 5.2.
"Indemnifying Party" has the meaning specified in Section 5.2.
"IRS" means the Internal Revenue Service.
"Landlord's Consent" means an instrument substantially in the form of
Exhibit B attached hereto.
"Leases" has the meaning specified in Section 3.7.
"Liabilities" has the meaning specified in Section 1.3.
"Lien" means any lien, pledge, hypothecation, mortgage, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
transfer restriction under any stockholder or similar agreement, encumbrance or
any other restriction or limitation whatsoever.
"Losses" has the meaning specified in Section 5.1.
"Material Adverse Effect" means any change or changes or effect or effects
that individually or in the aggregate are or may reasonably be expected to be
materially adverse to (a) the Assets, operations, income or conditions
(financial or otherwise) of the Business or the transactions contemplated by
this Agreement or (b) the ability of the Seller to perform its obligations under
this Agreement.
"Material Agreements" has the meaning specified in Section 3.6.
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"Non-Assumed Liabilities" has the meaning specified in Section 1.4.
"Permitted Liens" means (a) Liens for taxes not yet due and (b) the Liens
set forth on Schedule 1.1(b).
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock Company, trust, unincorporated organization,
Governmental or Regulatory Body or other entity.
"Plan" means any plan, fund, program, understanding, policy, arrangement,
contract or commitment, whether qualified or not qualified for federal income
tax purposes, whether formal or informal, whether for the benefit of a single
individual or more than one individual, which is in the nature of (a) an
employee pension benefit plan (as defined in ERISA ss. 3(2)) (b) an employee
welfare benefit plan (as defined in ERISA ss. 3(1)) or (c) an incentive,
deferred compensation, or other benefit arrangement for employees, former
employees, their dependents or their beneficiaries.
"Purchase Price" has the meaning specified in Section 1.5.
"Real Estate Documents" has the meaning specified in Section 3.7.
"Seller" has the meaning specified in the introductory paragraph of this
Agreement.
"Tax" or "Taxes" mean all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign Taxing Authority,
including, without limitation, gross income, gross receipts, income, capital,
excise, property (tangible and intangible), sales, transfer, value added,
employment, payroll and franchise taxes and such terms shall include any
interest, penalties or additions attributable to or imposed on or with respect
to such assessments.
"Tax Return" means any return, report, information return, or other
document (including any related or supporting information) filed or required to
be filed with any federal, state, or local governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax (whether or not such Tax is imposed on the Seller) or the administration of
any laws, regulations or administrative requirements relating to any Tax.
1.2 Transfer of the Assets. Subject to the terms and conditions set forth
in this Agreement, the Seller agrees that, on the Closing Date, the Seller shall
transfer, assign, convey and deliver to the Buyer, and Buyer agrees that, on the
Closing Date, Buyer shall acquire and accept from the Seller, all of the assets
owned, used or held by the Seller to conduct the Business and as set forth on
Schedule 1.2, other than the Excluded Assets (the "Assets"), free and clear of
all Liens, other than Permitted Liens.
1.3 Assumption by the Buyer of Certain Liabilities. Subject to the terms
and conditions set forth in this Agreement, Buyer agrees that, on the date
hereof, Buyer shall assume and thereafter pay, perform or discharge, as the case
may be, the following obligations and liabilities of the Seller outstanding on
the date hereof (the "Assumed Liabilities"):
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(a) all obligations and liabilities of the Seller arising out of, or in
connection with, the Assigned Contracts, except with regard to
student contracts where Buyer assumes only the obligation to provide
martial arts instruction; and
(b) all liabilities of the Seller reflected on Schedule 1.3 (b) attached
hereto.
1.4 Non-Assumed Liabilities. The Buyer shall not assume nor be responsible
for any liabilities or obligations of the Seller or any of its Affiliates other
than the Assumed Liabilities (the "Non-Assumed Liabilities") and those
liabilities and obligations that arise from the Buyer's operation and management
of the Assets.
1.5 Purchase Price for the Assets. The consideration for the Assets shall
be the (i) assumption by the Buyer of the Assumed Liabilities; and (ii) the
delivery by the Buyer to the Seller on the Closing Date of a secured promissory
note in the aggregate principal amount of $105,000 (the "Note") in the form
attached hereto as Exhibit C.
1.6 Intentionally Omitted
1.7 Limitations on Assignment; Further Assurance. To the extent that the
assignment of any Assigned Contract to be assigned to the Buyer, as provided
herein, shall require the consent of another party thereto, this Agreement shall
not constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof. The Seller agrees that it will use all reasonable
efforts to obtain the written consent of all necessary parties to the assignment
to the Buyer of all Assigned Contracts.
1.8 Condition of Assets and Business. Buyer acknowledges that before
entering into this Agreement Buyer has inspected the Assets and the operation,
income and expenses of the Business and all other matters affecting or relating
to this transaction as Buyer deemed necessary. Buyer also acknowledges that
Buyer is fully familiar with the condition of the Assets and the Business and,
except as set forth in Section 3.5, agrees to accept the same "AS IS" and in
their present condition.
1.9 Operating Agreement. Simultaneous with the execution of this
Agreement, the Buyer and the Seller shall enter into that certain Operating
Agreement, a form of which is attached hereto as Exhibit D.
ARTICLE II
CLOSING
2.1 The Closing. (a) Subject to the satisfaction of the conditions set
forth in Article VII hereof, the consummation of the transactions contemplated
by this Agreement (the "Closing") shall
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be held at 10:00 a.m. (New York City time) on March 31, 1997 at ▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇. In the event that the condition contained in Section
7.1 is not satisfied by March 31, 1997, the Closing may be extended by Seller to
the date upon which such condition is satisfied, but in no event later than May
31, 1997 (such date and time of Closing being referred to herein as the "Closing
Date").
(b) At the Closing, the Seller shall execute and deliver or cause to be
executed and delivered to the Buyer, all documents and instruments necessary to
transfer to the Buyer, all of the right, title and interest of the Seller in and
to the Assets, including, without limitation:
(i) the ▇▇▇▇ of Sale signed by the Seller; and
(ii) each Landlord's Consent, signed by the Seller.
(c) At the Closing:
(i) the Buyer shall execute and deliver to the Seller the
Note; and
(ii) the Buyer shall assume the Assumed Liabilities.
2.2 Additional Actions to be Taken on the Closing Date.
(a) Liens/Consents. The Seller shall have satisfied and discharged all
Liens on the Assets, except for Permitted Liens and provided the Buyer with
evidence of such satisfaction and discharge as well as all necessary consents to
transfer or assign the Assets to Buyer, in form and substance satisfactory to
the Buyer.
(b) Shareholder Approval. The Seller shall have received the affirmative
vote of a majority of voting stock outstanding of its parent corporation, Master
▇▇▇▇▇▇▇'▇ Karate International, Inc., to the transactions contemplated by this
agreement (the "Shareholder Approval").
(c) Landlord Consent. The Seller shall have received the consent of the
landlord of Seller's principal place of business to the assignment of its lease
(the "Lease") to the Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
3.1 Organization and Qualification. Seller is a corporation validly
existing and in good standing under the laws of the State of New York and has
all requisite corporate power and authority to (a) own, lease and operate their
properties and assets as they are now owned, leased and
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operated and (b) carry on their business as now presently conducted and as
proposed to be conducted. Seller is duly qualified to do business in each
jurisdiction in which the nature of its business or properties makes such
qualification necessary, except where the failure to do so would not have a
Material Adverse Effect.
3.2 Subsidiary and Affiliates. There are no subsidiaries of the Seller.
3.3. Validity and Execution of Agreement. The Seller has the full legal
right, capacity and power and all requisite corporate authority and approval
required to enter into, execute and deliver this Agreement and any other
agreement or instrument contemplated hereby, and to perform fully its
obligations hereunder and thereunder. This Agreement and such other agreements
and instruments have been duly executed and delivered by Seller and each
constitutes the valid and binding obligation of Seller enforceable against it in
accordance with its terms.
3.4 Litigation. Except as set forth on Schedule 3.4, there are no
outstanding orders, judgments, injunctions, investigations, awards or decrees of
any court, Governmental or Regulatory Body or arbitration tribunal by which the
Seller, or any of its securities, assets, properties or business is bound.
Except as set forth on Schedule 3.4, there are no actions, suits, claims,
investigations, legal, administrative or arbitral proceedings pending or, to the
best knowledge of the Seller, threatened (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) against or affecting
the Seller, or any of its assets or properties, that, individually or in the
aggregate, could, if determined adversely to the Seller, reasonably be expected
to have a Material Adverse Effect, nor, to the best knowledge of the Seller, are
there any facts which could reasonably be expected to give rise to any such
action, suit, claim, investigation or legal, administrative or arbitral
proceeding.
3.5 The Assets. The Seller owns outright and has good and marketable title
(except for leasehold interests specifically set forth on Schedules 3.6 and 3.7)
to all of the Assets free and clear of any Lien, other than Permitted Liens. The
Assignment and Assumption Agreement and such other conveyancing documents as
shall have been executed and delivered to the Buyer will convey good and
marketable title to the Assets, free and clear of any Liens, except for
Permitted Liens.
3.6 Contracts and Other Agreements. Schedule 3.6 sets forth all written
agreements (and, to the best knowledge of the Seller, any oral agreement) and
arrangements that materially affect the operations of the Business or which are
binding upon any of the Assets (collectively, the "Material Agreements").
3.7 Real Estate. Schedule 3.7 sets forth a list of (a) all real property
owned by the Seller; (b) all leases, subleases or other agreements (the
"Leases") under which the Seller is a lessor or lessee of any real property; (c)
all options held by the Seller or contractual obligations on its respective part
to purchase or acquire any interest in real property (as set forth on Schedule
3.7) and (d) all options granted by the Seller or contractual obligations on any
such Persons' part to sell or dispose of any interest in real property (as set
forth on Schedule 3.7) (collectively, the "Real Estate Documents"). All of the
Real Estate Documents, true, correct and complete copies of which have been
delivered or made available to the Buyer, are in full force and effect and the
Seller has not
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received any notice of any default thereunder, nor does the Seller anticipate
any such notice of default. Except for each Landlords' Consent, no approval or
consent of any person is needed for the Real Estate Documents to continue to be
in full force and effect and such documents will not become unenforceable by the
Buyer following the consummation of the transactions contemplated by this
Agreement by virtue of the assignment thereof to the Buyer.
3.8 Disclosure. Neither the representations or warranties of the Seller
set forth in this Agreement, nor any Schedule to this Agreement made pursuant
thereto contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading. All
statements, documents, certificates or other items prepared or supplied by the
Seller with respect to the transactions contemplated hereby are true, correct
and complete and contain no untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein not misleading.
3.9 Survival. All of the representations and warranties of the Seller
contained herein shall survive the Closing Date until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
4.1 Organization and Qualification of the Buyer. The Buyer is a
corporation validly existing and in good standing under the laws of the State of
New York and has all requisite corporate power and authority to (a) own, lease
and operate its properties and assets as they are now owned, leased and operated
and (b) carry on its business as now presently conducted and is duly qualified
to do business in each jurisdiction in which the nature of its business or
properties makes such qualification necessary.
4.2 Validity and Execution of Agreement. The Buyer has the full legal
right, capacity and power and all requisite corporate authority and approval
required to enter into, execute and deliver this Agreement and any other
agreement or instrument contemplated hereby, and to perform fully its
obligations hereunder and thereunder. The board of directors of the Buyer has
approved the transactions contemplated by this Agreement and each of the other
agreements required to be entered into pursuant hereto by the Buyer. This
Agreement and such other agreements and instruments have been duly executed and
delivered by the Buyer and each constitutes the valid and binding obligation of
the Buyer enforceable against it in accordance with its terms.
4.3 No Conflict. Neither the execution and delivery of this Agreement nor
the performance by the Buyer of the transactions contemplated herein will (a)
violate or conflict with any of the provisions of its Certificate of
Incorporation or By-Laws or other organizational documents; and (b) violate or
conflict with any provision of any law, rule, regulation, order,
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judgment, decree or ruling of any court or federal, state or local Governmental
or Regulatory Body applicable to the Buyer.
4.4 Litigation. There are no outstanding orders, judgments, injunctions,
investigations, awards or decrees of any court, Governmental or Regulatory Body
or arbitration tribunal by which the Buyer, or any of its securities, assets,
properties or business are bound. There are no actions, suits, claims,
investigations, legal, administrative or arbitral proceedings pending or, to the
best knowledge of the Buyer, threatened (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) against or affecting
the Buyer, or any of its assets or properties, that, individually or in the
aggregate, could, if determined adversely to the Buyer, reasonably be expected
to have a material adverse effect on the business or the assets, operations or
income of the Buyer, nor to the best knowledge of the Buyer, are there any facts
which could reasonably be expected to give rise to any such action, suit, claim,
investigation, or legal, administrative or arbitral proceeding.
4.5 Disclosure. Neither the representations or warranties of the Buyer set
forth in this Agreement, nor any Schedule to this Agreement made pursuant
thereto, contains an untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein not
misleading. All statements, documents, certificates or other items prepared or
supplied by the Buyer with respect to the transactions contemplated hereby are
true, correct and complete and contain no untrue statement of a material fact or
omit a material fact necessary to make the statements contained therein not
misleading.
4.6 Survival. All of the representations and warranties of the Buyer
contained herein shall survive the Closing Date until the date upon which the
liability to which any claim relating to any such representation or warranty is
barred by all applicable statutes of limitations.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification. (a) The Seller and its parent corporation, Master
▇▇▇▇▇▇▇'▇ Karate International, Inc. agree to indemnify, defend and hold
harmless the Buyer and its respective directors, officers, employees,
shareholders and any Affiliates of the foregoing, and their successors and
assigns (collectively, the "Buyer Group") from and against any and all losses,
liabilities, expenses, claims, Liens or other obligations of any nature
whatsoever (hereinafter individually, a "Loss" and collectively, "Losses")
suffered or incurred by the Buyer Group which, directly or indirectly, arise out
of, result from or relate to (i) the operation of the business prior to the
signing date of this Agreement, (ii) any material inaccuracy in or any breach of
any representation or warranty of the Seller contained in Article III of this
Agreement or in any other document contemplated by this Agreement, (iii) any
claim brought by a shareholder of the Selling Group, and (iv) any claim, action,
suit or proceeding brought against the Buyer Group by the United States
Securities and Exchange Commission involving the transactions contemplated
hereby.
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(b) The Buyer agrees to indemnify, defend and hold harmless the Seller and
its parent corporation, Master ▇▇▇▇▇▇▇, and their respective directors,
officers, employees, and shareholders, and any Affiliates of the foregoing, and
their successors and assigns from and against any and all Losses suffered or
incurred by them which, directly or indirectly, arise out of, result from or
relate to (i) any inaccuracy in or any breach of any representation or warranty
of the Buyer contained in Article IV and (ii) the operation of the Business
following the date hereof, except for student refunds, which shall be governed
by Section 5.1 (d).
(c) Notwithstanding any provision to the contrary of this Agreement or in
any other agreement entered into on the date hereof between Seller's Affiliates
and Buyer's Affiliates or in any document contemplated by this Agreement or such
other agreements (collectively, the "Purchase Documents"), the obligations of
the Selling Group to indemnify, defend and hold harmless the Buyer Group
pursuant to the Purchase Documents shall not exceed the amount of the Purchase
Price paid to the Seller and its Affiliates pursuant to the Purchase Documents,
other than the obligations to indemnify the Buyer Group for Losses relating to
any tax liabilities and actions taken by the S.E.C. or other securities
authority (which shall not be so limited as provided herein).
(d) The Seller and Master ▇▇▇▇▇▇▇'▇ Karate International, Inc., its parent
corporation, agree to indemnify, defend and hold harmless the Buyer and its
respective directors, officers, employees, shareholders and any Affiliates of
the foregoing, and their successors and assigns from and against any losses
arising from the refund of any money paid to the Seller by any student of the
Karate Center, transferred hereby from Seller to Buyer, under a student contract
with the Seller. Should a claim for a refund be made by such student, Buyer
shall immediately notify Seller and Seller shall indemnify Buyer from such loss
if Buyer is unsuccessful in defending such claim and it is determined that the
loss is not the fault of the Buyer. A claim shall not be determined to be the
fault of the Buyer if it results from the initial change in instructors,
instructional style or schedule of instruction, or a conflict in personalities
between the instructor and the student. A claim based on the intentional
misconduct or negligence of the Buyer, its employees or independent contractors
shall be considered to be the fault of the Buyer. Should a claim be made by a
student who did not contract with the Seller, any such loss shall be the sole
responsibility of the Buyer, with no recourse or indemnification from the
Seller.
5.2 Method of Asserting Claims. The party making a claim under this
Article V is referred to as the "Indemnified Party" and the party against whom
such claims are asserted under this Article V is referred to as the
"Indemnifying Party". All claims by any Indemnified Party under this Article V
shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against or sought
to be collected from such Indemnified Party by a third party, said Indemnified
Party shall with reasonable promptness notify in writing the Indemnifying Party
of such claim or demand, specifying the nature of the specific basis for such
claim or demand, and the amount or the estimated amount thereof to the extent
then feasible (which estimate shall not be conclusive of the final amount of
such claim and demand; any such notice, together with any notice given pursuant
to Section 5.2(b) hereof, collectively being the "Claim Notice"); provided,
however, that any failure to give such Claim Notice will not be deemed
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a waiver of any rights of the Indemnified Party except to the extent the rights
of the Indemnifying Party are actually prejudiced. The Indemnifying Party, upon
request of the Indemnified Party, shall retain counsel (who shall be reasonably
acceptable to the Indemnified Party) to represent the Indemnified Party, and
shall pay the fees and disbursements of such counsel with regard thereto,
provided, further, that any Indemnified Party is hereby authorized prior to the
date on which it receives written notice from the Indemnifying Party designating
such counsel, to retain counsel, whose reasonable fees and expenses shall be at
the expense of the Indemnifying Party, to file any motion, answer or other
pleading and take such other action which it reasonably shall deem necessary to
protect its interests or those of the Indemnifying Party until the date on which
the Indemnified Party receives such notice from the Indemnifying Party. After
the Indemnifying Party shall retain such counsel, the Indemnified Party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of such counsel or (ii) the named parties of any such proceeding
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The Indemnifying Party shall not, in connection with any proceedings or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one such firm for the Indemnified Party (except to the
extent the Indemnified Party retained counsel to protect its (or the
Indemnifying Party's) rights prior to the selection of counsel by the
Indemnifying Party). The Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any claim or demand which the
Indemnifying Party defends. No claim or demand may be settled by an Indemnifying
Party or, where permitted pursuant to this Agreement, by an Indemnified Party
without the consent of the Indemnified Party in the first case or the consent of
the Indemnifying Party in the second case, which consent shall not be
unreasonably withheld, unless such settlement shall be accompanied by a complete
release of the Indemnified Party in the first case or the Indemnifying Party in
the second case.
(b) In the event any Indemnified Party shall have a claim against any
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party. If the Indemnifying Party does not dispute such claim, the
amount of such claim shall be paid to the Indemnified Party within twenty (20)
days of receipt of the Claim Notice.
(c) So long as any right to indemnification exists pursuant to this
Article V, the affected parties each agree to retain all books, records,
accounts, instruments and documents reasonably related to the Claim Notice. In
each instance, the Indemnified Party shall have the right to be kept informed by
the Indemnifying Party and its legal counsel with respect to all significant
matters relating to any legal proceedings. Any information or documents made
available to any party hereunder, which information is designated as
confidential by the party providing such information and which is not otherwise
generally available to the public, or which information is not otherwise
lawfully obtained from third parties or not already within the knowledge of the
party to whom the information is provided (unless otherwise covered by the
confidentiality provisions of any other agreement among the parties hereto, or
any of them), and except as may be required by applicable
10
law or requested by third party lenders to such party, shall not be disclosed to
any third Person (except for the representatives of the party being provided
with the information, in which event the party being provided with the
information shall request its representatives not to disclose any such
information which it otherwise required hereunder to be kept confidential).
ARTICLE VI
POST-CLOSING COVENANTS OF THE PARTIES
6.1 Confidentiality. (a) From and after the Closing Date, the Seller and
its shareholders shall not disclose or furnish to any other Person, except to
the respective directors, officers, employees, accountants and lawyers of the
Seller and except to the extent required by law or by order of any court or
governmental agency or regulatory authority, any information relating to the
operations or financial status of the Business of Buyer including customer lists
which is not specifically a matter of public record.
(b) The Buyer shall not disclose or furnish to any Person, except to the
respective directors, officers, employees, accountants and lawyers of Buyer and
except to the extent required by law or by order of any court or governmental
agency, any information relating to the operations or financial status of the
Seller and its Affiliates which is not specifically a matter of public record.
6.2 Non-Competition. The Seller acknowledges that the Seller's ownership
of the Assets and its operation of the Business has brought it in close contact
with certain confidential affairs of the Business not readily available to the
public, and the Buyer would not purchase the Assets, but for the agreements and
covenants of the Seller and its shareholders contained in this Section 6.2. The
Seller and Master ▇▇▇▇▇▇▇'▇ Karate International, Inc. shall not directly or
indirectly, for a period of time equal to the remaining term of the Lease so
long as the same is in full force and effect including any renewal thereof, (i)
engage in any business similar to the Business within the State of New York,
(ii) acquire a proprietary interest in any Person having a facility located
within the State of New York engaged in activities similar to the Business as a
partner, officer, director, shareholder, principal, agent, trustee, consultant,
lender or in any other relationship or capacity, except for investments by the
Seller or its Subsidiaries or Affiliates in securities traded on a national
stock exchange or the over the counter market which do not exceed five (5)
percent of the total outstanding shares of such securities.
▇▇▇▇ ▇▇▇▇▇▇▇, individually, shall not directly or indirectly, for a period
of five (5) years, (i) engage in any business similar to the Business within the
State of New York, (ii) acquire a proprietary interest in any Person having a
facility located within the State of New York engaged in activities similar to
the Business as a partner, officer, director, shareholder, principal, agent,
trustee, lender or in any other relationship or capacity, except that commencing
on the beginning of the twenty fifth (25) month after the date hereof, ▇▇▇▇
▇▇▇▇▇▇▇ may engage in a business similar to the Business and/or acquire a
proprietary interest in a Person engaged in activities similar to the Business
within the State of New York on the condition that such business is not: (a)
conducted within a five (5) mile radius of any place of operations of the Buyer
or any Affiliate; and (b)
11
conducted within the counties of New York, Queens, Rockland, Westchester,
Nassau, and Richmond for the remaining term of the Lease assigned by Seller or
its Affiliate to Buyer, including any renewal thereof.
If any court determines that this covenant, or any part thereof, is
unenforceable because of the duration of such provision or the area covered
thereby, such court shall have the power to reduce the duration or area of such
provision and, in its reduced form, such provision shall then be enforceable and
shall be enforced.
6.3 Operation of the Business; Access to Records. The Buyer shall maintain
and operate the business in accordance with past practice. The Buyer shall
permit Seller and its agents to inspect its books and records (upon reasonable
notice and during reasonable times) in order to review the contracts assigned to
Educational Funding Co.
6.4 Non-Solicitation. Seller and its Affiliates agree that for the term of
the Lease assigned by Seller to Buyer, they shall not employ or attempt to
employ any person who is or shall become an employee of the Buyer or its
Affiliates within the one (1) year period from and after the date hereof.
6.5 Non-Interference. Seller and its Affiliates agree that they shall not
enter into negotiations for leased premises for the purpose of commencing the
operation of a business similar to the Business if Buyer or one of its
Affiliates is currently engaged in negotiations for said premises and provided
written notice of such fact to Seller or its Affiliates.
6.6 Consulting. Nothing contained in this Article VI, should be construed
to prohibit ▇▇▇▇ ▇▇▇▇▇▇▇, individually, from engaging in, performing, or
providing martial arts "consulting" services to martial arts business owners. As
used herein, the term "consulting" shall under no circumstances be construed to
permit ▇▇▇▇ ▇▇▇▇▇▇▇ to own or operate, in any capacity, a martial arts school in
violation of the covenants set forth above.
ARTICLE VII
CONDITIONS PRECEDENT TO THE CLOSING
Section 7. Conditions Precedent to Parties's Obligations. The obligations of
Seller to sell the Assets is subject to the fulfillment, prior to or at the
Closing Date, of each of the following conditions, any one or portion of which
may be waived in writing by the Seller:
7.1 Consents; Stockholder Approval. The Seller shall have obtained all
necessary consents to assignments of all parties to material contracts with the
Seller, including but not limited to the Landlord's Consent. Additionally, as
required by law, the Seller shall have obtained the Shareholder Approval.
7.2 No Suits or Actions. At the Closing Date, no suit, action, or other
proceeding shall have been threatened or instituted to restrain, enjoin, or
otherwise prevent the consummation of this
12
Agreement or the transactions contemplated hereby. Additionally, there shall be
no other action, suit, claim, investigation or legal, administrative or arbitral
proceeding , either pending or threatened, against the Seller or the Buyer,
except as listed on Schedules 3.4 and 4.4. Further, there shall have been no
change in any such action, suit, claim, investigation or legal, administrative
or arbitral proceeding as listed on Schedules 3.4 and 4.4 that would have a
Material Adverse Effect on the Business of the Seller or the Buyer.
ARTICLE VIII
MISCELLANEOUS
8.1 No Other Representations. In entering into this Agreement, Buyer has
not been induced by and has not relied upon any representations, warranties or
statements, express or implied, made by the Seller or any agent, employee or
other representative of the Seller or by any broker or any other person
representing or purporting to represent the Seller, that are not expressly set
forth in this Agreement, whether or not any said representations, warranties or
statements were made in writing or orally. Buyer hereby acknowledges that the
Seller shall only be liable to the Buyer with respect to the representations,
warranties or statements of the Seller contained in this Agreement or in the
Schedules annexed hereto.
8.2 Sales and Transfer Taxes. All required filings under any applicable
Federal, state, foreign or local sales tax, stamp tax or similar laws or
regulations shall be made in a timely manner by the party responsible therefor
under such laws and regulations, and, at the Closing, such party shall deliver
to the other parties either (a) proof of the payment of any sales tax assessed
pursuant to such filings or (b) statements of no sales tax due, as the case may
be. The parties agree to pay any and all transfer, sales or stamp taxes and any
similar taxes or assessments imposed on the transfer of the Assets and the
Assumed Liabilities in accordance with the terms of this Agreement, such taxes
and assessments to be borne entirely by the Buyer.
8.3 Post-Closing Further Assurances. At any time and from time to time
after the Closing Date at the request of either party, and without further
consideration, the other party will execute and deliver, or cause the execution
and delivery of, such other instruments of sale, transfer, conveyance,
assignment and confirmation and take or cause to be taken such other action as
the party requesting the same may reasonably deem necessary or desirable in
order to transfer, convey and assign more effectively to the requesting party
all of the property and rights intended to be conveyed to such party pursuant to
the provisions of this Agreement.
8.4 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, telegraphed, telefaxed, sent by facsimile transmission or sent
by prepaid air courier or certified, registered or express mail, postage
prepaid. Any such notice shall be deemed to have been given (a) when received,
if delivered in person, telegraphed, telexed, sent by facsimile transmission and
confirmed in writing within three (3) Business Days thereafter or sent by
prepaid air courier or (b) three (3) Business Days following the mailing
thereof, if mailed by certified first class mail, postage prepaid,
13
return receipt requested, in any such case as follows (or to such other address
or addresses as a party may have advised the other in the manner provided in
this Section 8.4):
If to Seller, to:
Master ▇▇▇▇▇▇▇'▇ Karate International, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone Number (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone Number (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇'▇ Karate
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
8.5 Publicity. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Buyer and the Seller.
8.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules) and the agreements, certificates and other documents delivered
pursuant to this Agreement contain the entire agreement among the parties with
respect to the transactions described herein, and supersede all prior
agreements, written or oral, with respect thereto.
8.7 Waivers and Amendments. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties hereto or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
14
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
8.9 Binding Effect; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors, assigns
and legal representatives. This Agreement is not assignable except by operation
of law and any other purported assignment shall be null and void.
8.10 Variations in Pronouns. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.
8.11 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
8.12 Exhibits and Schedules. The Exhibits and Schedules are a part of this
Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
8.13 Effect of Disclosure on Schedules. Any item disclosed on any Schedule
shall only be deemed to be disclosed in connection with (a) the specific
representation and warranty to which such Schedule is expressly referenced, (b)
any specific representation and warranty which expressly cross-references such
Schedule and (c) any specific representation and warranty to which any other
Schedule to this Agreement is expressly referenced if such other Schedule
expressly cross-references such Schedule.
8.14 Headings. The headings in this agreement are for reference only, and
shall not affect the interpretation of this Agreement.
8.15 Severability of Provisions. If any provision or any portion of any
provision of this Agreement or the application of such provision or any portion
thereof to any Person or circumstance, shall be held invalid or unenforceable,
the remaining portion of such provision and the remaining provisions of this
Agreement, or the application of such provision or portion of such provision as
is held invalid or unenforceable to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affect thereby.
8.16 Brokers. Each party hereto represents and warrants that no broker or
finder is entitled to any brokerage or finder's fee or other commission from
such party, based on agreements, arrangements or undertakings made by such
party, in connection with the transactions contemplated hereby.
15
8.17 Termination. This Agreement may be terminated (i) upon written
consent of the parties, or (ii) by Seller or Buyer, in the event that the
conditions contained in Article VII have not been satisfied by May 31, 1997;
provided however, that Seller shall reimburse Buyer for its expenses in an
amount equal to $66,666 if Seller's failure to close is as a result of Seller's
failure to receive the Shareholder Approval (such date being the "Termination
Date").
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NORTHERN NASSAU KARATE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
GREAT NECK KARATE, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
As to Section 6.2 only:
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, individually
As to Section 6.2 only:
MASTER ▇▇▇▇▇▇▇'▇ KARATE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
17
Schedule 1.1 (a)
Excluded Assets
All pictures, photographs, newspaper articles and manuals bearing the
proprietary logo or tradename of Buyer.
18
Schedule 1.1(b)
Permitted Liens
None
19
Schedule 1.2
Assets
Asset Purchase Price Allocation
----- -------------------------
Current Lease Term $72,250.00
Renewal Term $12,750.00
Equipment $ 5,000.00
Leasehold Improvements $10,000.00
The term "Equipment" as used above refers to all furniture, fixtures, and
personal property of the Seller situated within the premises described in
Schedule 3.7 on the date hereof, exclusive of those items of constituting
Excluded Assets listed in Schedule 1.1(a).
20
Schedule 1.3(b)
Assumed Liabilities
Buyer assumes all liabilities associated with:
1. All obligations to teach martial arts to current students of the
Business
2. The Seller's obligation to pay telephone bills for lines currently
existing at the Business; and
3. The Seller's obligation to pay for Yellow Pages advertising.
21
Schedule 3.4
Litigation
None
22
Schedule 3.6
Material Agreements
*1. All student contracts for martial arts instruction. [Attach list]
*2. That certain Lease Agreement dated March 1, 1994 by and between the
Seller and Great Neck Plaza, L.P.
----------
* indicates Assigned Contracts, except for contracts assigned to Educational
Funding Co. (a copy of which is attached).
23
Schedule 3.7
Real Estate
Lease by and between Great Neck Plaza, L.P., as Landlord, and Master
▇▇▇▇▇▇▇'▇ Karate International, Inc., dated March 1, 1994 for a term of ten (10)
years with one (1) renewal period of five (5) years. The Lease is for
approximately two thousand three hundred (2,300) square feet of space located at
the shopping center, at ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇.
24
Schedule 4.4
Litigation
None
25
EXHIBIT A
▇▇▇▇ OF SALE
KNOW ALL MEN BY THESE PRESENTS, that GREAT NECK KARATE, INC., a New
York corporation, (the "Seller") for and in consideration of the sum of Ten
Dollars ($10.00) and other good and valuable consideration, the receipt of which
is hereby acknowledged by these presents, and pursuant to an Asset Purchase
Agreement dated January 10, 1997 ("Purchase Agreement") between Seller and
NORTHERN NASSAU KARATE, INC. a New Jersey corporation ("Buyer") (except as
otherwise provided herein, all capitalized terms contained and not defined
herein shall have herein the respective meanings ascribed to them in the
Purchase Agreement), hereby transfers, conveys, assigns and delivers unto Buyer
all of the right, title and interest of Seller in and to the Assets.
Seller agrees to cooperate with Buyer in obtaining any consents or
waivers of third parties necessary to transfer to Buyer all property and rights
provided to be transferred to Buyer under the Purchase Agreement.
TO HAVE AND TO HOLD the Assets unto Buyer, its successors and
assigns, for its use and its use forever.
At any time and from time to time after the date hereof at the
request of Buyer, and without further consideration, Seller shall execute and
deliver such other instruments of transfer, conveyance, assignment and
confirmation and take such other action as Buyer may reasonably request as
necessary or desirable in order to more effectively transfer, convey and assign
to Buyer, and to confirm Buyer's title to or rights in, all of the Assets, and
to put Buyer in actual possession and operating control thereof.
IN WITNESS WHEREOF, the parties have caused this ▇▇▇▇ of Sale to be
executed as of January 10, 1997.
GREAT NECK KARATE, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
ACCEPTED THIS 10th DAY
OF JANUARY, 1997
NORTHERN NASSAU KARATE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
EXHIBIT B
LANDLORD'S CONSENT
SECOND MODIFICATION OF
LEASE AND ASSIGNMENT AGREEMENT
AGREEMENT made this 10th day of January 1997 by and between GREAT NECK
PLAZA, L.P. ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ (hereinafter
"Landlord") and MASTER ▇▇▇▇▇▇▇'▇ KARATE INTERNATIONAL, INC., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ (hereinafter "Tenant-Assignor") and
NORTHERN NASSAU KARATE, INC. with offices at ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ (hereinafter "Assignee").
W I T N E S S E T H
WHEREAS, the Tenant-Assignor is the Tenant pursuant to a certain Lease
dated as of the 1st day of March, 1994 which Lease was amended by Agreement
dated the 7th day of March 1994 (hereinafter collectively referred to as the
"Lease"); and
WHEREAS, the Tenant-Assignor has requested the Landlord's permission to
assign said Lease to the Assignee and the Assignee desires to assume all the
obligations of the Tenant thereunder; and
WHEREAS, the Assignee has requested that the Lease be modified in certain
respects as hereinafter set forth it is
NOW THEREFORE, in consideration of the mutual covenants and conditions
contained herein and such other good and valuable consideration the receipt and
sufficiency of which is
1
hereby acknowledged by the parties hereto agreed as follows:
1. Upon execution hereof, Tenant-Assignor shall pay to the Landlord the
sum of $70,000.00 as and for an assignment fee in consideration of the
Landlord's consent given hereunder and in consideration of the modification of
the Lease in accordance herewith. In consideration thereof, the Landlord hereby
releases the Tenant-Assignor from any obligations as Tenant under the Lease,
and the Assignee shall be solely liable as Tenant under the Lease as if it was
the Original Tenant named thereunder.
2. Assignor hereby assigns to the Assignee any and all right, title and
interest in and to the Lease and the premises occupied thereunder and Assignee
hereby assumes any and all rights and obligations of the Tenant under said
Lease from the date hereof as if said Lease had been originally signed by the
Assignee as tenant. Assignee agrees that the obligations assumed shall benefit
the Landlord named in the Lease as well as the Assignor. Nothing herein
contained shall be construed to modify, waive, impair or affect any of the
covenants, agreements, terms, provisions or conditions contained in the Lease,
or to waive any breach of Tenant in the due keeping, observance or performance
thereof unless specifically set forth herein.
3. Assignee shall be responsible for the due keeping, performance and
observance throughout the Term of the Lease, of all of the covenants,
agreements, terms, provisions and conditions therein set forth on the part of
Tenant to be kept, performed and observed from the date hereof, and for its
entire Term and for the payment of the Fixed Rent, Additional Rent and
2
all other sums now and/or hereafter payable thereunder, expressly including as
such Additional Rent, any and all charges for any property, material, labor,
utility or other services furnished or rendered by Landlord in or in connection
with the premises demised by the Lease, whether for, or at the request of,
Tenant or Assignee.
4. The Landlord's consent thereto shall not be construed as a consent by
Landlord, to, or as permitting, any other or further assignment and/or
subletting by either Tenant or Assignee, and no such further assignment or
subletting shall be made except in accordance with the Lease. Neither this
Assignment and Assumption Agreement, a Memorandum hereof or any other document
setting forth any of the information contained herein shall be recorded.
5. Tenant hereby transfers and conveys to the Landlord any and all right,
title and interest in and to the security deposit presently held by the
Landlord under the Lease in the sum of $15,660.00 and Tenant and Assignee
consent and agree to the release of such funds to the Landlord and irrevocably
waive any claims to said deposit which shall hereafter be the sole and
exclusive property of the Landlord. Tenant and Assignee acknowledge and agree
that notwithstanding anything to the contrary contained in the Lease, the
Landlord shall not hold any security deposit thereunder and the provisions of
the Lease relating thereto including, but not limited to, the definition of
"Security Deposit" contained in Article 1 of the Lease and Article 34 of the
Lease shall be and are hereby DELETED in their entirety.
6. Effective as of November 1, 1996 the following provision shall be
deleted from
3
Article 1, "Definitions" of the Lease:
"Minimum Base Rent" The Minimum Base Rent payable during the
first and second Lease Years is $75,600.00
per annum payable in equal monthly
installments in advance of $6,300.00.
The Minimum Base Rent payable during the
third Lease Year is $78,624.00 per annum
payable in equal monthly installments in
advance of $6,552.00
The Minimum Base Rent payable during the
forth Lease Year is $81,768.96 per annum
payable in equal monthly installments in
advance of $6,814.08.
The Minimum Base Rent payable during the
fifth Lease Year is $85,039.72 per annum
payable in equal monthly installments in
advance of $7,086.64.
The Minimum Base Rent payable during the
sixth Lease Year is $88,441.31 per annum
payable in equal monthly installments in
advance of $7,370.11.
The Minimum Base Rent payable during the
seventh Lease Year is $91,978.96 per annum
payable in equal monthly installments in
advance of $7,664.91.
The Minimum Base Rent payable during the
eighth Lease Year is $95,658.12 per annum
payable in equal monthly installments in
advance of $7,971.51.
The Minimum Base Rent payable during the
ninth Lease Year is $99,484.44 per annum
payable in equal monthly installments in
advance of $8,290.37.
The Minimum Base Rent payable during the
tenth Lease Year is $103,463.81 per annum
payable in equal monthly installments in
advance of $8,621.98.
and inserted in their place as part of Article 1, "Definitions" shall be the
following:
"Minimum Base Rent" The Minimum Base Rent payable for the period
4
beginning on March 1, 1994 and ending on
February 28, 1996 is $75,600.00 per annum
payable in equal monthly installments in
advance of $6,300.00
The Minimum Base Rent payable during the
period from March 1, 1996 to December 31,
1996 is $78,624.00 per annum payable in
equal monthly installments in advance of
$6,552.00.
The Minimum Base Rent payable during the
period from January 1, 1997 to December 31,
1998 shall be $58,950.00 per annum payable
in equal monthly installments in advance of
$4,912.50.
The Minimum Base Rent payable during the
period from January 1, 1999 to December 31,
1999 shall be $60,718.50 per annum payable
in equal monthly installments in advance of
$5,059.88.
The Minimum Base Rent payable during the
period from January 1, 2000 to December 31,
2000 shall be $62,540.06 per annum payable
in equal monthly installments in advance of
$5,211.67.
The Minimum Base Rent payable during the
period from January 1, 2001 to December 31,
2001 shall be $64,416.26 per annum payable
in equal monthly installments in advance of
$5,368.02.
The Minimum Base Rent payable during the
period from January 1, 2002 to December 31,
2002 shall be $66,348.74 per annum payable
in equal monthly installments in advance of
$5,529.06.
The Minimum Base Rent payable during the
period from January 1, 2003 to February 29,
2004 shall be $68,339.21 per annum payable in
equal monthly installments in advance of
$5,694.93.
7. Effective as of the date hereof, paragraph 3.04 of the Lease shall be
deleted and paragraph 12.01, 12.02, 12.03, 12.05 and 12.06 shall be deleted.
5
8. Effective as of the date hereof, the following provisions shall be
deleted from Article 1, Definitions:
"Permitted Use" Martial arts training classes, related
exercise instruction and for retail sale of
martial arts equipment, juice bar which
serves fitness shakes and gator-aid
(electrolyte) drinks to members of Tenant's
karate center only, and for no other
purpose."
and inserted in its place shall be the following provisions:
"Permitted Use" Instruction of martial arts and physical
fitness, retail sale of martial arts
clothing and related products including, but
not limited to, uniforms, shorts, hats,
sweats, shirts, and other equipment, and
sale of vitamins, juices and fitness
performance products, and for no other
purpose."
9. Effective on the date hereof, the words "within three (3) miles of
the outer perimeter of the Shopping Center" contained in the radius restriction
of paragraph 6.04 of the Lease shall be deleted and inserted in their place the
words "within one (1) mile from the outer perimeter of the Shopping Center."
10. Effective on the date hereof, the following provision shall be added
to the end of paragraph 6.02(5):
"Notwithstanding the foregoing, it is agreed that
if Landlord, in its sole discretion and judgment,
determines that Tenant's use of the Demised
Premises causes excessive and/or objectionable
noises outside of the Demised Premises or in any
other part of the Shopping Center, Landlord, at
its sole cost, may retain such consultants and/or
experts to determine the extent and quantity of
work necessary to alleviate such noises and any
work determined to be necessary by said consultant
shall
6
be paid for by Tenant."
11. Effective on the date hereof the following provision shall be added
as paragraph 45.05 to the Lease"
"Notwithstanding the foregoing provisions of
paragraph 45.01, Landlord agrees not to relocate
Tenant to any premises located in the
cross-hatched areas set forth on Exhibit F hereto
and that notwithstanding any relocation under this
paragraph, no relocation shall result in an
increase in the Minimum Base Rent or Additional
Rent payable by the Tenant hereunder."
12. Effective on the date hereof, paragraphs 49.02 and 49.03 shall be
deleted in their entirety and inserted in their place shall be the following
provision:
"49.02 Provided Tenant timely and properly
exercises its option to renew pursuant to
paragraph 49.01 above, the Minimum Base Rent
payable by Tenant for the Option Period shall be
as follows:
For the period beginning on March 1, 2004
and ending on February 28, 2005, the sum of
$70,389.39 per annum, payable in equal monthly
installments in advance of $5,865.78.
For the period beginning on March 1, 2005
and ending on February 28, 2006, the sum of
$72,501.06 per annum, payable in equal monthly
installments in advance of $6,041.76.
For the period beginning on March 1, 2006
and ending on February 28, 2007, the sum of
$74,676.09 per annum, payable in equal monthly
installments in advance of $6,223.01.
For the period beginning on March 1, 2007
and ending on February 28, 2008, the sum of
$76,916.38 per annum, payable in equal monthly
7
installments in advance of $6,409.70.
For the period beginning on March 1, 2008
and ending on February 28, 2009, the sum of
$79,223.87 per annum, payable in equal monthly
installments in advance of $6,601.99.
13. This Second Modification of Lease and Assignment Agreement (the
"Agreement") is subject to and contingent upon approval of the terms and
conditions contained herein by the Board of Directors of Master ▇▇▇▇▇▇▇'▇ Karate
International, Inc. ("Board Approval"). In the event Board Approval is not
obtained on or before April 30, 1997, Tenant-Assignor shall notify Landlord and
Assignee in writing sent by regular and certified mail at the addresses set
forth above that Board Approval has not been obtained in which event: (i) the
terms and conditions of the Agreement shall be deemed null and void and of no
further force and effect as of the first day of the calendar month immediately
folowing delivery of the notice (the "Effective Date"); (ii) Assignee shall
surrender and Tenant-Assignor shall resume possession of the Premises on the
Effective Date; (iii) the $70,000 payment referenced in paragraph 1 shall be
applied by the Landlord and the Assignor shall be obligated to pay out of said
sum the difference between the rents the Landlord would have been entitled to
under the Lease had this Agreement not been made and the modified amounts of
Minimum Base Rent paid by the Assignee pursuant to this Agreement prior to the
Effective Date as well as any other Minimum Base Rent or Additional Rent due or
become due under the Lease from the Effective Date until the monies have been
fully applied; and (iv) the Security Deposit of $15,660 referenced in paragraph
5 shall be returned to an account to be maintained by Landlord for the benefit
of Tenant-Assignor to be held or applied in accordance with the terms of the
Lease.
8
14. In the event Tenant-Assignor fails to deliver to Landlord notice
that it has not obtained Board of Approval by April 30, 1997, time being of the
essence, or in the event that Tenant-Assignor delivers written notice to
Landlord that it has obtained Board Approval at any time prior to April 30,
1997, the terms of this Agreement shall be deemed firm and shall remain in full
force and effect.
15. Upon execution hereof and as a condition precedent to the Landlord's
consent to the assignment herein, the principal of the Assignee, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, shall execute a guaranty in the form annexed hereto as Exhibit "G"
and the Tenant shall pay to the Landlord, Landlord's attorney's fees, costs and
expenses incurred in connection herewith in the sum of $2,500.00.
16. All prior understandings and agreements between Landlord, Tenant and
Assignee are merged herein and this Second Modification of Lease Agreement and
Assignment Agreement and the Lease may not be further changed, amended,
cancelled or extended except in a writing duly signed by both parties. The
parties agree that the Lease and this Agreement contain the entire agreement
between Landlord, Tenant and Assignee and except to the extent herein modified,
the parties ratify and reaffirm all of the terms and conditions of the Lease
which the parties agree is in full force and effect. No representations,
warranties or agreements claimed to have been made by the Landlord to Tenant
with respect to the Lease or this Agreement which are not contained in the Lease
or Agreement shall have any force or effect.
17. Nothing herein shall be deemed binding upon the Landlord unless and
until a fully executed copy of this Agreement is delivered to the Tenant and to
the Assignee.
9
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
GREAT NECK PLAZA, L.P.
NSM Development Corp., General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
MASTER ▇▇▇▇▇▇▇'▇ KARATE
INTERNATIONAL, INC.
By: /s/
-----------------------------------------
NORTHERN NASSAU KARATE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
10
THE GARDENS AT GREAT NECK
[MAP]
EXHIBIT G
GUARANTY OF LEASE
WHEREAS, NORTHERN NASSAU KARATE INC. is desirous of assuming the
obligations of the Tenant under the Lease as hereinafter mentioned as "Tenant";
and
WHEREAS, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (hereinafter "Guarantor") has requested Great
Neck Plaza, L.P., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ hereinafter
designated as the "Landlord", to consent to the Assignment of the Lease to
NORTHERN NASSAU KARATE INC., as Tenant of the premises described in said Lease
and located in the Gardens at Great Neck Shopping Center, Middleneck Road and
Great Neck Road, Great Neck Plaza, New York; and
WHEREAS, the Landlord has refused to consent to the Assignment of said
Lease unless the Guarantor guarantees said Lease in the manner hereinafter set
forth; it is
NOW, THEREFORE, to induce the Landlord to consent to the Assignment of said
Lease and the modification thereof pursuant to the Second Lease Modification and
Assignment Agreement dated the date hereof, the undersigned ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
residing at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, the Guarantor,
hereby agrees:
1. (a) The Guarantor unconditionally guarantees to the Landlord and the
successors and assigns of the Landlord the full and punctual performance and
observance, by the Tenant, of all the terms, convenants and conditions in said
lease contained on Tenant's part to be kept, performed or observed subject to
the limitation set forth in paragraph "5" hereof. This guaranty shall include
any liability of Tenant which shall accrue under said lease for any period
preceding as well as any period following the Term in said lease specified. The
Guarantor waives notice of any breach or default by Tenant.
(b) If, at any time, default shall be made by the Tenant in the
performance or observance of any of the terms, covenants or conditions in said
lease contained on the
G-1
Tenant's part to be kept, performed or observed, the Guarantor will keep,
perform and observe the same, as the case may be, in place and stead of the
Tenant subject to the limitation set forth in paragraph "5" hereof.
2. Any act of the Landlord, or the successors or assigns of the
Landlord, consisting of a waiver of any of the terms or conditions of said
lease, or the giving of any consent to any manner or thing related to said
lease, or the granting of any indulgences or extensions of time to the Tenant,
may be done without notice to the Guarantor and without releasing the
obligations of the Guarantor hereunder.
3. The obligations of the Guarantor hereunder shall not be released by
Landlord's receipt, application or release of security given for the performance
and observance of covenants and conditions in said lease contained on Tenant's
part to be performed or observed; nor by any modification of such lease, but in
case of any such modification the liability of the Guarantor, shall be deemed
modified in accordance with the terms of any such modification of the lease.
4. The liability of the Guarantor hereunder shall in no way be affected
by (a) the release or discharge of the Tenant in any creditors', receivership,
bankruptcy or other proceedings, (b) the impairment, limitation or modification
of the liability of the Tenant or the estate of the Tenant in bankruptcy, or of
any remedy for the enforcement of the Tenant's said liability under the lease,
resulting from the operation of any present or future provision of the National
Bankruptcy Act or other statute or from the decision in any court; (c) the
rejection or disaffirmance of the lease in any such proceedings; (d) the
assignment or transfer of the Lease by the Tenant; (e) any disability or other
similar defense of the Tenant, or (f) the cessation from any cause whatsoever of
the liability of the Tenant except arising out of Landlord's default.
5. If Tenant shall have fully and faithfully complied with all the
terms and conditions on its part to be performed under the Lease including the
payment of all installments of Minimum Base Rent and all Additional Rent and
does not default in any of the provisions thereafter until the Vacate Date (as
hereinafter defined) including but not limited to the timely
G-2
payment of all Minimum Base Rent and Additional Rent due until said Vacate Date,
and provided further that Tenant shall give irrevocable written notice to
Landlord at least one hundred and eighty days (180) days prior to the last day
of a calendar month that it shall vacate the subject premises on or before the
last day of said calendar month (hereinafter "Vacate Date") and provided further
that Tenant actually vacates the Demised Premises on or before the Vacate Date
specified in the said written notice in rentable condition and in the condition
required to be given to the Landlord at the expiration of the Term of the Lease
as provided for in the Lease, the Guarantor's liability under this Guaranty
shall be limited to the full and punctual performance and observance by the
tenant of all the terms, convenants, and conditions in the Lease on Tenant's
part to be performed, including the payment of all Minimum Base Rent and
Additional Rent to be paid by Tenant to Landlord from the date hereof until: (i)
the date which is three (3) months after the Vacate Date if the Vacate Date
occurs during the first three (3) Lease Years; or (ii) the date which is two (2)
months after the Vacate Date if the Vacate Date occurs during the fourth or
fifth Lease Years; or (iii) the date which is one (1) month after the Vacate
Date if the Vacate Date occurs during the sixth (6th) through tenth (10th) Lease
Years; or (iv) the Vacate Date if the Vacate Date occurs during the eleventh
(11th) through fifteenth (15th) Lease Years, provided that on or before said
Vacate Date the Tenant actually vacates the Demised Premises free of all
tenancies and relinquishes legal and physical possession of the Demised
Premises, in rentable condition and in the condition required to be given to
Landlord by Tenant pursuant to the provisions of the Lease. If Tenant does not
vacate on or before the Vacate Date specified in its written notice and/or the
written notice to Landlord from Tenant is not at least one hundred and eighty
(180) days prior to the Vacate Date specified in the written notice, and/or if
Tenant shall prior to the Vacate Date, default in the payment of Minimum Base
Rent or Additional Rent, which default shall not have been cured prior to the
Vacate Date, the Guarantor's liability under this Guaranty shall continue and be
unaffected by the Tenant's vacatur of the Demised Premises, and in such event,
notwithstanding the actual vacatur by the Tenant, the Guarantor shall in all
respects remain liable for the full and punctual performance and observance by
the Tenant of all the terms, covenants and conditions of the Lease on Tenant's
part to be kept, performed or observed including any liability of the Tenant
which shall accrue under said Lease for any period preceding as well as any
period following the Term of
G-3
said Lease. Nothing contained in this paragraph 5 shall be in any way construed
or deemed to create any right by the Tenant to terminate, cancel and/or
surrender the Lease prior to the expiration of the Term thereof and the
provisions of this paragraph shall operate solely to limit the liability of the
Guarantor in the event the Tenant vacates the Demised Premises prior to the
expiration of the Term in strict accordance with all the terms and conditions
hereof.
6. This Guaranty shall apply to the said Lease, any extension or
renewal thereof and to any holdover term following the term hereby granted or
any extension or renewal thereof. This Guaranty shall be governed by the laws of
the State of New York and any and all proceedings hereunder shall be brought in
the courts of competent jurisdiction located in the County of Nassau, State of
New York. In any action or proceeding to enforce any of the terms, covenants and
conditions of this Guaranty and/or the Lease, the Landlord shall be entitled to
recover from the Guarantor any attorneys fees, costs and expenses incurred
therein.
7. This Guaranty constitutes the entire agreement between the parties
and any and all prior negotiations, conversations, and representations are
merged herein. This instrument may not be changed, modified, discharged or
terminated orally or in any manner other than by an agreement in writing signed
by the Guarantor and the Landlord.
IN WITNESS WHEREOF, the Guarantor has hereunto set his hand and seal the
_____ day of January 1997.
Witness for Tenant:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------- --------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
S.S.#: ###-##-####
-------------------------
Date of Birth: 7/2/62
-----------------
▇-▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ )
) s.s.:
COUNTY OF NASSAU )
On this _________, day of January 1997, before me personally came ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, to me known, who being by duly sworn, did depose and say that he
resides at ________________________________ and that he is the individual
described herein who executed the foregoing and duly acknowledged to me that he
executed the same.
_________________________________
NOTARY PUBLIC
G-5
EXHIBIT C
SECURED PROMISSORY NOTE
SECURED PROMISSORY NOTE
$105,000 ______________, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇
FOR VALUE RECEIVED, NORTHERN NASSAU KARATE, INC., together with its
successors and assigns (the "Buyer"), hereby unconditionally promises to pay to
the order of GREAT NECK KARATE, INC., together with their successors and assigns
(the "Seller"), in lawful currency of the United States of America, at the
Seller offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇, or at such other address as shall be designated by the Seller in a
written notice to the Buyer, by thirty months following the Initial Payment
Date, as that term is defined herein (the "Maturity Date"), the principal sum of
$105,000 without interest on the principal amount hereof. The outstanding
principal amount shall be paid on the first day of each calendar month in thirty
(30) equal installments of $3,500.00, commencing on the first day of the
calendar month following the Closing, but under no circumstances within thirty
(30) days of the Closing (the "Initial Payment Date") and ending on the Maturity
Date. This Note is being delivered in connection with the closing of the
transactions contemplated by that certain Asset Purchase Agreement dated January
10, 1997 between the Buyer and the Seller (the "Asset Purchase Agreement").
Capitalized terms not otherwise defined shall have the meaning ascribed to them
in the Asset Purchase Agreement.
SECTION 1. Default, Acceleration. In the event that: (i) the Buyer shall
fail to pay any principal hereunder for a period of five (5) days after such
payment is due; or (ii) the Buyer shall fail to observe or perform any of the
covenants of the Buyer contained herein
1
for a period of ten (10) days after written notice thereof from Seller; or
(iii) the Buyer shall file a petition or enter into any voluntary case under any
bankruptcy or similar law; or (iv) there is commenced against the Buyer an
involuntary case or other similar proceeding under any bankruptcy or similar law
which remains undismissed for a period of sixty (60) days, then and in any such
event (an "Event of Default"), upon written notice to the Buyer from the Seller,
the principal amount hereof and all other amounts due hereunder, shall become
immediately due and payable without any further demand, presentment, protest,
notice of protest, dishonor, notice of dishonor or notice of any other kind, all
of which are hereby expressly waived by the Buyer.
SECTION 2. Optional Prepayment. At its option, the Buyer may prepay at any
time all or any part of the principal amount of this Secured Promissory Note,
without premium or penalty, upon two (2) days prior written notice to the
Seller.
SECTION 3. Mandatory Prepayment. In the event that the Buyer shall elect
to sell all or any part of the Collateral (as hereinafter defined) outside of
the ordinary course of business in accordance with the terms of this Secured
Promissory Note, the net cash proceeds of any such sale (after allowance for any
federal, state and local income taxes payable with respect to such sale) shall
be applied by the Buyer as a mandatory prepayment of the outstanding principal
amount of this Secured Promissory Note.
SECTION 4. Pledge; Security Interest. In order to secure the payment and
performance in full of all of the obligations under this Secured Promissory
Note, whether existing as of this date or any time thereafter, the Buyer hereby
pledges and assigns to the Seller, and grants to the Seller a continuing
security interest in, the following Assets (as defined in the Asset Purchase
Agreement)
2
of the Selling Group acquired by the Buyer in the Asset Purchase Agreement,
dated even date herewith (the "Collateral"):
(a) Accounts The proceeds of and each and every right of the Buyer
to the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other Asset by the Buyer, out of a
rendering of services by the Buyer, out of a loan by the Buyer, out of the
overpayment of taxes or other liabilities of the Buyer, or otherwise
arises under any contract or agreement, whether such right to payment is
or is not already earned by performance, and howsoever such right to
payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which the Buyer may at any
time have by law or agreement against any account the Buyer or other
obligor obligated to make any such payment or against any of the property
of such account the Buyer or other obligor; all including, but not limited
to, all present and future debt instruments, chattel papers and accounts
of the Buyer which arise from the Assets purchased by the Buyer from the
Seller;
(b) Chattel Paper Any writing or writings evidencing both a monetary
obligation and a security interest in or a lease of specific goods now
owned or hereafter acquired by the Buyer in relation to the operation of
the Business;
(c) Equipment and Fixtures Goods used or bought for use primarily in
the Business (as defined in the Asset Purchase Agreement), whether or not
an interest therein arises under real property law, now owned or hereafter
acquired by the Buyer in relation to the Business;
3
(d) General Intangibles Any personal property other than goods,
accounts, contract rights, chattel paper, documents, instruments and
money, including, but not limited to, things in or choices of actions,
licenses, rights of all types under leases and license agreements and all
manufacturing and processing rights, patents, patent rights, licenses,
trademarks, trade names and copyrights now owned or hereafter acquired
which relate to the Business acquired from the Seller;
(e) Inventory All personal property now owned or hereafter acquired
by the Buyer in relation to the Business acquired from the Seller which is
held for sale or lease, or furnished or to be furnished under contracts of
service, or held as raw materials, work in process or materials used or
consumed or to be used or consumed in the Business, and all returned or
repossessed goods;
(f) Leasehold Improvements All improvements made by the Buyer to any
leasehold of the Buyer acquired from the Seller, including, but not
limited to, all structures, buildings, accessions, accessories,
attachments, parts, equipment and repairs now or hereafter attached,
affixed or made to any leasehold, whether or not an interest therein
arises under real property law;
(g) Property in Possession of Selling Group Property of every kind
and description in which the Buyer has or may acquire any interest, now or
hereafter at any time in the possession or control of the Seller for any
reason, including, without limitation, instruments, money, documents or
other property deposited with or delivered to Seller as collateral, for
safekeeping or for collection or exchange for other property; and all
dividends and distributions on, or other rights in connection with such
property;
4
(h) Customer and Mailing Lists All lists and compilations (whether
compiled in writing, magnetic tape or discs or otherwise) pertaining to
actual or potential customers, subscribers or others in which the Buyer
has or may acquire an interest in relation to the Business acquired from
the Seller;
(i) Proceeds All property received upon the sale, exchange,
collection or other disposition of Collateral or proceeds of Collateral
(including, but not limited to, insurance payable by reason of loss or
damage to the Collateral) whether cash or non-cash proceeds, including,
but not limited to, Inventory, Equipment or Fixtures acquired with cash
proceeds; and
(j) Products Goods manufactured, processed, assembled or commingled
with any of the foregoing Collateral; together with (i) all substitutions
and replacements for and proceeds of any and all of the foregoing
property, and in the case of all tangible Collateral, all accessions,
accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any such goods, and (ii)
all warehouse receipts, bills of lading and other documents of title now
or hereafter covering such assets.
SECTION 5. Security for Obligations. The pledge and security interest
granted pursuant to this Secured Promissory Note secures the payment of all
obligations of the Buyer under this Secured Promissory Note (all such
obligations of the Buyer being herein called the "Obligations").
SECTION 6. Financing Statements. Uniform Commercial Code financing
statements and any other instruments or documents deemed advisable by Seller to
perfect and continue its security interest in the Pledge Collateral.
5
SECTION 7. Further Assurances. The Buyer agrees that at any time and from
time to time, the Buyer will promptly execute and deliver all further
instruments and documents, and take all further action, that may be reasonably
necessary, or that the Seller may reasonably request, in order to perfect and
preserve any security interest granted or purported to be granted hereby or to
enable the Seller to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
SECTION 8. Covenants.
8.1 Affirmative Covenants. As long as there remains any amount outstanding
under the Note, the Buyer shall, unless waived in writing by the Seller:
(a) Maintenance of Corporate Existence. Conduct the same general
type of business as that now being carried on by the Buyer and maintain
its separate corporate existence in good standing under the laws of the
State of New Jersey and in such other states as the Buyer may now be
qualified to conduct business or may later have to be qualified.
(b) Taxes. Pay and discharge as the same shall become due and
payable, all taxes, assessments and other governmental charges and levies
against or on any of its property, as well as claims of any kind which, if
unpaid, might become a lien upon any of its properties, unless such tax,
levy, charge, assessment or lien is being contested in good faith by the
Buyer and is supported by an adequate book reserve. The Buyer shall make
or cause to be made all required withholding deposits.
(c) Notices. As soon as possible, but in no event later than 5 days
after obtaining knowledge thereof, give notice to the Seller of-
(i) The commencement of any litigation relating to the Buyer
involving claimed damages in excess of $100,000;
6
(ii) The commencement of any material arbitration or
governmental proceeding or investigation not previously disclosed to
the Seller which has been instituted or, to the knowledge of the
Buyer, is threatened against the Buyer or its property;
(iii) Any actual or threatened Event of Default under this
Agreement (provided, however, that such notice shall in no event be
construed as delaying the occurrence of any Event of Default or
changing the rights and remedies of the Seller with respect
thereto); and
(iv) Any action by a third party, including without
limitation, any governmental entity, which could result in the
closing of the Business on a temporary or permanent basis.
In addition, Buyer shall give Seller prompt notice of its intention to
terminate the Business on a temporary or permanent basis, but in no event shall
such notice be given less than sixty (60) days prior to the relevant termination
date of the Business.
(d) Insurance. Insure and keep insured all of the Assets acquired
from the Seller of an insurable value under all-risk policies issued by
insurance companies authorized to do business in the relevant states in an
amount and with such deductibles as are consistent with past practices.
(e) Maintain Property. Maintain and keep the Assets, property and
equipment in good repair, working order and condition and from time to
time make or cause to be made all needed renewals, replacements and
repairs.
7
(f) Prompt Performance. Promptly perform in all material respects
each and every term and condition of this Agreement and of each document
delivered in connection herewith, time being of the essence.
8.2 Negative Covenants. As long as there remains any amount outstanding
under the Note, the Buyer shall not, unless waived in writing by the Seller:
(a) Consolidation, Merger, Sale of Assets. Consolidate with or merge
into or with any other entity other than an Affiliate of the Buyer, or
sell (other than sales of inventory in the ordinary course of business),
transfer, lease or otherwise dispose of all or a substantial part of the
Assets to any entity other than an Affiliate of the Buyer.
(b) Liens. Create, incur, assume or suffer to exist any lien on any
of the property, real or personal, acquired from the Seller.
(c) Payment of Other Indebtedness. Default upon or fail to pay any
of its other debts or obligations as the same mature.
(d) Dissolution or Liquidation. Dissolve or liquidate any member of
the Buyer;
(e) Transactions Outside the Ordinary Course. Effect any material
change in the general business in which the Buyer is engaged on the date
hereof;
(f) Contracts. Execute or amend of any license, subcontracting or
lease agreement or other contract outside the ordinary course of the
Buyer's business.
SECTION 9. Remedies upon Default. (a) In the event that the (i) Buyer
shall be in breach of any provision contained in this Agreement for five (5)
days following written notice thereof from the Seller or (ii) the obligations of
the Buyer under this Secured Promissory Note shall remain
8
unpaid after the Maturity Date or after the principal amount of this Secured
Promissory Note shall have been declared due and payable prior to the stated
maturity thereof in accordance with the terms hereof:
(i) The Seller may, without demand of performance or other
demand, advertisement or notice of any kind to or upon the Buyer or
any other person (all of which are hereby expressly waived by the
Buyer), forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, assign,
give options to purchase, contract to sell or otherwise dispose of
and deliver the Collateral, or any part thereof, in one or more
parcels at public or private sales, at any exchange or broker's
board or at any of the Seller's offices or elsewhere, upon such
terms and conditions as it may deem advisable and at such prices as
it may deem best, for cash or on credit or for future delivery,
without assumption of any credit risk, with the right upon any such
sale, public or private, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the
Buyer, which right or equity is hereby expressly waived and released
by the Buyer; provided, however, that the Buyer shall not be
credited with the net proceeds of any sale on credit or for future
delivery until the cash proceeds thereof are actually received by
the Seller;
(ii) The Seller may, instead of exercising the power of sale
herein conferred upon it, proceed by a suit at law or in equity to
foreclose the pledge and security interest under this Secured
Promissory Note and sell the Collateral, or any
9
part thereof, under a judgment or decree of a court of competent
jurisdiction or as otherwise authorized by applicable law;
(iii) The Seller may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for herein, all
the rights and remedies of a secured party on default under the
Uniform Commercial Code (whether or not the Uniform Commercial Code
applies to the affected Collateral) and all rights and remedies
otherwise available to it under applicable law.
(b) The Buyer agrees that, to the extent notice of sale or
other disposition of any of the Collateral shall be required by
applicable law, the Seller need not give more than twenty (20) days
notice of the time and place of any public sale or of the time after
which a private sale or other intended disposition is to take place
and that such notice is reasonable notification of such matters. No
notification need be given to the Buyer if, in the event that the
obligations of the Buyer under this Secured Promissory Note shall
remain unpaid after the Maturity Date or after the principal amount
of this Secured Promissory Note shall have been declared due and
payable prior to the stated maturity thereof in accordance with the
terms hereof, the Buyer shall have signed a statement renouncing or
modifying any right to notification of any sale or other intended
disposition. The Seller shall not be obligated to make any sale
pursuant to any such notice. The Seller may, without notice or
publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place
to which the same may be so
10
adjourned. In case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be
retained by the Seller until the selling price is paid by the
purchaser thereof, but the Seller shall incur no liability in the
case of the failure of such purchaser to take up and pay for the
Collateral so sold, and in case of any such failure such Collateral
may again be sold on like notice. To the extent permitted by law,
the Buyer waives all claims, damages and demands against the Seller
arising out of the retention, sale or other disposition of the
Collateral or any part thereof, except any such claims, damages and
demands arising out of the gross negligence or willful misconduct of
the Seller.
(c) The Buyer recognizes that the Seller may be unable to
effect a public sale of any or all of the Collateral by reason of
certain prohibitions contained in applicable statutes and
regulations, but may be compelled to resort to one or more private
sales thereof to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such Collateral for
their own account for investment and not with a view to the
distribution or resale thereof. The Buyer acknowledges and agrees
that any such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private
sale made in good faith to a bona fide third party shall not be
deemed to have been made in a commercially unreasonable manner by
virtue of its private nature.
SECTION 10. Amendments. No amendment or waiver of any provision of this
Secured Promissory Note nor consent to any departure by the Buyer here from
shall in any event be effective
11
unless the same shall be in writing and signed by the Seller, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 11. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and shall be given by mail, if to the
Buyer, addressed to it at the address indicated on the signature page hereof, if
to the Seller, addressed to it at ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, or, as to either party, at such other address as shall be
designated by such party in a written notice to the other party complying as to
delivery with the terms of this Section 11. All such notices and other
communications shall be effective three (3) business days after being deposited
in the mails, postage prepaid, addressed as aforesaid.
SECTION 12. Continuing Security Interest; Transfer of Note. This Secured
Promissory Note shall create a continuing security interest in the Collateral
and shall remain in full force and effect until payment in full of the
obligations hereunder. The rights and obligations of the Buyer hereunder may not
be assigned without the prior written consent of the other party and any
purported assignment shall be null and void.
SECTION 13. Consent to Jurisdiction and Service; Waiver of Jury Trial. The
Buyer hereby absolutely and irrevocably consents and submits to the jurisdiction
of the Courts of the State of New York and of any Federal Court located in said
State in connection with any actions or proceedings brought against the Buyer by
the Seller arising hereunder. In any such action or proceeding, the Buyer hereby
absolutely and irrevocably waives personal service of any summons, complaint,
declaration or other process and hereby absolutely and irrevocably agrees that
the service thereof may be made, in addition to other methods permitted by law,
by certified, registered or recorded first-class mail directed to the Buyer at
the address set forth in Section 11. The Buyer
12
hereby waives and agrees not to assert in any such action or proceeding, in
case, to the fullest extent permitted by applicable law, any claim that (a) the
Buyer is not personally subject to the jurisdiction of any such court, (b) the
Buyer is immune from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to it or its property, (c) any such suit, action or
proceeding is brought in an inconvenient forum, (d) the venue of such suit,
action or proceeding is improper, (e) that this Secured Promissory Note may not
be enforced in or by any such court and (f) any right to a trial by jury in any
action, proceeding or counterclaim concerning any rights under this Secured
Promissory Note. Anything hereinbefore to the contrary notwithstanding, the
Seller may ▇▇▇ the Buyer in the courts of any country, State of the United
States or place where the Buyer or any of the property or assets of the Buyer
may be found or in any other appropriate jurisdiction.
SECTION 14. Expenses. Should all or any part of the indebtedness
represented by this Secured Promissory Note be collected by action at law, or in
bankruptcy, insolvency, receivership or other court proceedings, or should this
Secured Promissory Note be placed in the hands of attorneys for collection after
default, the Buyer hereby promises to pay to the Seller, upon demand by the
Seller at any time, in addition to principal of, interest on and any other
amount owing in respect of this Secured Promissory Note or the indebtedness
evidenced hereby, all court costs and reasonable attorneys, fees and all other
reasonable collection charges and expenses incurred or sustained by the Seller.
SECTION 15. Governing Law; Terms. This Secured Promissory Note shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles
13
of conflicts of law. Unless otherwise defined herein, terms defined in Article 9
of the Uniform Commercial Code in the State of New York are used herein as
therein defined.
14
IN WITNESS WHEREOF, the Buyer has executed this instrument on the date
first above written.
NORTHERN NASSAU KARATE, INC.
By:___________________________________
Name:
Title:
GREAT NECK KARATE, INC.
By:___________________________________
Name:
Title:
15
EXHIBIT D
OPERATING AGREEMENT
OPERATING AGREEMENT
THIS OPERATING AGREEMENT (the "Agreement") is entered into as of
this 10th day of January 1997, by and among Great Neck Karate, Inc., (the
"Seller") and Northern Nassau Karate, Inc., (the "Buyer").
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereinafter set forth, the Seller and Buyer agree as follows:
1. Retention as Operator. Subject to each of the terms, conditions
and provisions of this Agreement, the Seller hereby retains Buyer and Buyer
hereby agrees to be retained by the Seller to perform those operating functions
set forth in Section 4 of this Agreement.
2. Term. Subject to the provisions for termination set forth herein,
the term of this Agreement shall be from the date of this Agreement through the
earlier of the Closing Date or the Termination Date (as such terms are defined
in those certain Asset Purchase Agreement dated as of the date hereof by and
among Great Neck Karate, Inc., and Northern Nassau Karate, Inc. (the "Purchase
Agreement"). In the event this Agreement is terminated as a result of the
Seller's failure to close the transactions contemplated by the Purchase
Agreement, the Seller shall (i) continue to operate the Business and teach the
Buyer students, (ii) refund all funds required to be repaid to students and
(iii) be entitled to collect all accounts receivable generated by the Business.
If certain students transfer to a ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇'▇ Karate martial arts center
(or one managed by an affiliate of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇'▇ Karate), then Buyer shall
refund all funds to be repaid to such students and retain all accounts
receivable relating to such students.
3. Compensation. In consideration for Buyer's operation of Great
Neck Karate, Inc. located at ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, as a
martial arts instruction center (the "Business"), Buyer shall receive all gross
proceeds from such operations during the Term of this Agreement, without
deduction from or payment to the Seller.
4. Duties of Buyer. Buyer shall operate the Business in the usual
course of business in accordance with past practice, under the name of ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇'▇ Karate, including but not limited to the hiring of qualified
personnel and providing accounting, maintenance, operational and administrative
services for the Business (the "Services"). Buyer shall devote as much time as
reasonably necessary to complete its obligations hereunder. Buyer represents and
warrants that it is currently licensed to operate martial arts instruction
centers in the State of New York and that its operation of the Business shall
comply with all requirements of applicable law.
5. Expenses. Buyer shall be responsible for all direct and indirect
expenses incurred by it during the Term of this Agreement relating to the
operation of the Business.
6. Insurance. Seller shall list the Buyer as an additional insured
in an amount equal to $115,000 in comprehensive insurance coverage, in exchange
for which, Buyer shall pay $100 per month on the first day of each month during
the term of this agreement. Buyer shall remain liable to the Seller for any
losses or damages to the Assets of the Business as a result of Buyer's
negligence or intentional misconduct and to the extent such losses or damages
are either not fully covered or are excluded from coverage by such insurance
policies.
7. Decisions. Buyer shall have the right to make all decisions for
the Business, unless such decisions would constitute willful misconduct or gross
negligence on the part of Buyer, or are outside the ordinary course of business
in accordance with past practice. Under no circumstances shall any liability
enure to the Seller for any decisions relating to the Business, or otherwise,
made by Buyer during the term of this Agreement.
8. Authority of Buyer. Buyer shall have no authority to enter into
any agreement or to make any representation, commitment or warranty binding upon
the Business or to obtain or incur any right, obligation or liability on behalf
of the Business without the prior written consent of the Seller, except for
student contracts assumed by Buyer under Section 2(i).
9. Books and Records. The Business' books and records with respect
to the Services and any costs ("Books and Records") shall be kept at Buyer's
offices located at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇. The Books and
Records shall be kept in accordance with recognized accounting principles and
practices, consistently applied, and shall be made available for the Seller or
the Seller's representatives, with inspection and copying at all times being
made available during regular office hours.
10. Confidential Information.
10.1 The parties acknowledge that during the course of provision of
the Services, the Seller may disclose information to Buyer or its affiliated
companies. Buyer shall treat such information as the Seller's confidential
property and safeguard and keep secret all such information about the Seller,
including reports and records, customer lists, trade lists, trade practices, and
prices pertaining to the Seller's business.
10.2 Buyer shall exercise its best efforts and shall cause any of
its affiliated companies to exercise their best efforts to prevent any
confidential information from being disclosed to third parties, except as
necessarily required in the performance of the Services and except under terms
of confidentiality satisfactory to the Seller. This obligation shall remain in
effect until the Seller shall release Buyer or its affiliated companies from
their obligations under this paragraph 10, but in no event later than the
completion of the Services on the Closing Date. Buyer shall not use any of the
Seller's confidential information in any way that is or may be
detrimental to the interests of the Seller, directly or indirectly, either
during the term of this Agreement or at any time thereafter.
10.3 The parties also acknowledge that during the term of this
Agreement, the Buyer may disclose information to Seller or its affiliated
companies through Seller's right to enter and inspect the premises of the
Business, as well as it right to inspect the Books and Records of the Business.
Seller shall treat such information as the Buyer's confidential property and
safeguard and keep secret all such information about the Buyer, including
reports and records, customer lists, trade lists, trade practices, and prices
pertaining to the Buyer's business.
10.4 Seller shall exercise its best efforts and shall cause any of
its affiliated companies to exercise their best efforts to prevent any
confidential information from being disclosed to third parties, except as
necessarily required in the inspection of the premises and Books and Records of
the Business and except under terms of confidentiality satisfactory to the
Buyer. This obligation shall remain in effect until the Buyer shall release
Seller or its affiliated companies from their obligations under this paragraph
10, but in no event later than the completion of the Services on the Closing
Date. Seller shall not use any of the Buyer's confidential information in any
way that is or may be detrimental to the interests of the Buyer, directly or
indirectly, either during the term of this Agreement or at any time thereafter.
11. Indemnification. Buyer agrees to indemnify and hold the Seller
and its officers, directors and agents harmless from damages, losses or
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred or paid directly or indirectly, by Buyer as a result of or
arising out of any actions taken by Buyer in connection with the performance of
the Services under this Agreement, or for any claims made against Seller by a
student for a refund arising from the transfer of that student to another ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Karate martial arts center. Additionally, Seller agrees to indemnify
and hold Buyer and its officers, directors and agents harmless from damages,
losses or expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred or paid directly or indirectly, by Buyer as a result of
or arising out of any actions taken by Buyer in connection with the provisions
of Section 2 (ii) of this Agreement.
12. Notices and Communications.
12.1 All communications relating to the day-to-day activities
necessary to render the Services shall be exchanged between the respective
representatives of the Seller and Buyer, who will be designated by the parties
promptly upon commencement of the Services.
12.2 All other notices, demands, and communications required or
permitted hereunder shall be in writing and shall be delivered personally to the
respective representatives of the Seller and Buyer set forth below or shall be
sent by a nationally recognized overnight courier or mailed by registered mail,
postage prepaid, return receipt requested. Notices, demands and communications
hereunder shall be effective: (i) if delivered personally, on delivery; or (ii)
if mailed, forty-eight (48) hours after deposit thereof in the United States
mail addressed to the
party to whom such notice, demand, or communication is given. Until changed by
written notice, all such notices, demands and communications shall be addressed
as follows:
If to the Seller:
Master ▇▇▇▇▇▇▇'▇ Karate International, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
President
If to Buyer:
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
Attn:
President
13. Assignments. Buyer shall not assign this Agreement in whole or
in part without the prior written consent of the Seller.
14. Applicable Law and Severability. This document shall, in all
respects, be governed by the laws of the State of New York applicable to
agreements executed and to be wholly performed within the State of New York.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provisions contained herein and any contrary present or future statute, law,
ordinance or regulation, the latter shall prevail, but the provision of this
document which is affected shall be curtailed and limited only to the extent
necessary to bring it within the requirements of the law.
15. Further Assurances. Each of the parties hereto shall execute and
deliver any and all additional papers, documents and other assurances, and shall
do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
16. Attorneys' Fees. In the event any action is instituted by a
party to enforce any of the terms and provisions contained herein, the
prevailing party in such action shall be entitled to such reasonable attorneys'
fees, costs and expenses as may be fixed by the court.
17. Successors and Assigns. Subject to the foregoing, all the terms
and conditions contained herein shall inure to the benefit of and shall be
binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.
18. Captions. The captions appearing at the commencement of the
paragraphs hereof are descriptive only and for convenience and reference. Should
there be any conflicts between any such caption and the paragraph at the head of
which it appears, the paragraph and not such caption shall control and govern in
the construction of this document.
19. Modifications or Amendments. No amendment, change or
modification of this document shall be valid unless it is in writing and signed
by all the parties hereto and expressly states that it is an amendment, change
or modification of this Agreement is intended.
20. Separate Counterparts. This document may be executed in one or
more separate counterparts, each of which, when so executed, shall be deemed to
be an original. Such counterparts shall, together, constitute and be one and the
same.
21. Entire Agreement. This Agreement shall constitute the entire
understanding and agreement between the parties hereto and shall supersede any
and all letters of intent, whether written or oral, pertaining to the subject
matter of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GREAT NECK KARATE, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
NORTHERN NASSAU KARATE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
