EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AGREEMENT dated January 2, 2006 by and among ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇"),
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
("▇▇▇▇▇"), and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"; Sam, Benjamin, Adina, David,
and ▇▇▇▇▇▇▇▇▇ are each referred to as a "Seller" and collectively as the
"Sellers") and ALLIANCE DISTRIBUTORS HOLDING INC., a Delaware corporation having
its principal office at ▇▇-▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
("Purchaser"). Sellers own all of the outstanding shares of common stock (the
"Common Stock") of FOTO ELECTRIC SUPPLY CO., INC., a New York corporation having
its principal office at ▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Company").
W I T N E S S E T H:
IN CONSIDERATION of the mutual covenants and agreements hereinafter set forth,
the parties hereby agree as follows:
1. Purchase and Sale of Securities; Contribution of Certain Assets.
(a) Subject to and upon the terms and conditions set forth in this
Agreement, each Seller will sell to Purchaser, and Purchaser will
purchase, at the Closing hereunder, from each Seller, the number of
shares of Common Stock that are set forth in Schedule 1 opposite
such Seller's name. The shares of Common Stock to be sold by Sellers
constitute in the aggregate all shares of capital stock of the
Company that are outstanding on the date hereof (the "Common
Shares"), and that shall be outstanding on the Closing Date. Sellers
shall convey the Common Shares to Purchaser free and clear of all
liabilities, obligations, liens and encumbrances, rights of first
refusal, preemptive rights or similar rights.
(b) Prior to the Closing , Sellers shall contribute or cause to be
contributed to the Company all of the assets of BNA Ltd., d/b/a
Beyma Car Stereo ("BNA"), subject to BNA's liabilities.
2. Purchase Price.
(a) In consideration for the Common Shares, and in reliance upon the
representations and warranties made herein by each Seller, Purchaser
will, in full payment thereof, pay to Sellers at the Closing a total
purchase price calculated as follows:
(i) $70,000,000; plus
(ii) 6.67 times the amount (if any) up to $750,000 by which 2005
EBITDA (as hereinafter defined) shall exceed $10,500,000 (but
the portion of the purchase price calculated under this clause
(ii) shall not exceed $5,000,000); plus
(iii) 5 times the amount (if any) up to $200,000 by which 2005
EBITDA shall exceed $11,250,000; plus
(iv) 4 times the amount (if any) up to $250,000 by which 2005
EBITDA shall exceed $11,450,000; plus
(v) 3 times the amount (if any) up to $333,333 by which 2005
EBITDA shall exceed $11,700,000;
(b) By way of illustration:
(i) if 2005 EBITDA is $11,350,000 the purchase price shall be
$70,000,000 under clause (i) of Section (a), plus $5,000,000
under clause (ii), plus $500,000 under clause (iii)
(ii) if 2005 EBITDA equals or exceeds $12,033,000 the purchase
price shall be $78,000,000.
(c) Of the aggregate purchase price, $70,000,000 (the " Closing Purchase
Price") shall be payable at the Closing as provided in Section 2(d),
and any balance of the purchase price (the "Excess Purchase Price")
shall be payable at the Excess Closing as provided in Section 4(b)
below. Both the Closing Purchase Price and the Excess Purchase Price
shall be allocated among Sellers in proportion to the number of
shares of Common Stock sold by them.
(d) The $70,000,000 Closing Purchase Price shall be payable at the
Closing by delivery of:
(i) $50 million in cash by wire transfer to Sellers ("Up Front
Purchase Price");
(ii) $12.5 million, in 3-year notes of Purchaser (the "Notes") in
the aggregate principal amount of $12.5 million and in the
form of Exhibit 2(b).
(iii) $7.5 million, by the issuance to Sellers of Purchaser equity
securities ("Restricted Equity Securities") that have an
aggregate value of $7.5 million at the valuation applicable to
equity securities ("investor equity securities") to be
purchased by investors who fund the Cash Purchase Price as
more fully described in Section 10(f), and that have the same
terms (including registration rights and restrictions) as the
investor equity securities.
(e) For the purposes of Section 2 above, "2005 EBITDA" means the
Company's earnings before interest, depreciation, taxes and
amortization for 2005 to be calculated by Purchaser in accordance
with GAAP (as hereinafter defined), but adjusted as set forth in
Schedule 3(e) attached hereto, for the purposes of preparing
Purchaser's audited financial statements for 2005, and delivered to
▇▇▇▇▇▇▇▇ within 120 days after the Closing Date. The calculation of
the 2005 EBITDA shall be subject to the same mechanism for dispute
resolution, and ▇▇▇▇▇▇▇▇ shall have the same rights to dispute such
calculation, as are set forth in Section 3 below in connection with
the Closing Date Statement.
(f) The Excess Purchase Price shall be payable at the Excess Closing by
way of additional Restricted Equity Securities that have an
aggregate value, at the valuation set forth above, equal to the
amount of the Excess Purchase Price.
3. Purchase Price Adjustment
(a) Purchaser shall promptly, but not more than 120 days after the
Closing Date, prepare and present to ▇▇▇▇▇▇▇▇ a draft balance sheet
of Seller as of the Closing Date (the "Draft Closing Date
Statement").
(b) The Closing Date Statement shall be prepared in accordance with
generally accepted accounting principles, ("GAAP") as applied by the
Company in preparation of the Audited Financial Statements that are
referred to in Section 5.
(c) If within 60 days after ▇▇▇▇▇▇▇▇ receives the Draft Closing Date
Statement, ▇▇▇▇▇▇▇▇ shall not by notice to Purchaser dispute the
correctness thereof, the Draft Closing Date Statement shall be
deemed the "Final Closing Date Statement" for the purposes of this
Section.
(d) Should ▇▇▇▇▇▇▇▇ within 60 days dispute the Draft Closing Date
Statement by notice to Purchaser, and Purchaser and ▇▇▇▇▇▇▇▇ cannot
agree, the dispute shall be submitted to a mutually acceptable
accounting firm, whose determination of the Final Closing Date
Statement shall be binding. The fees of such accounting firm shall
be divided between Purchaser and Sellers in proportion to the
variance of each party's proposed Net Worth from that derived from
the Final Closing Date Statement. The date on which the Final
Closing Date Statement is determined is referred to herein as the
"Delivery Date."
(e) The term "Net Worth" as used herein means the net worth of the
Company as reflected on the face of the Final Closing Date Statement
in accordance with GAAP, including, without limitation, an accrual
for taxes, and adjusted as set forth on Schedule 3(e) attached
hereto.
(f) If the Net Worth is less than $13 million by any amount (the
"Shortfall"), such Shortfall shall be satisfied in the manner and
order set forth in Section 12(b) below.
(g) If the Net Worth exceeds $13 million by any amount, Purchaser shall
pay the excess to Sellers (allocated among Sellers in proportion to
the number of shares of Common Stock sold by them) in 12 equal
monthly installment of principal, together with interest at prime
plus 1%, over the 12 month period commencing with the Delivery Date,
all as set forth in a one year promissory note that is substantially
in the form of the Notes and that provides for cross defaults
between this note and the Notes.
(h) In the event of a dispute in the determination of the Final Closing
Date Statement, the parties shall pending the resolution of the
dispute make such payments under this Section as to which there is
no dispute, in the manner provided for in this Section, and the
balance, if any, shall be payable on the determination of such
dispute and in the manner provided in this Section.
4. Closing.
(a) The Closing shall take place at 10:00 A.M., local time, on the first
Monday after satisfaction of the conditions set forth in Sections 10
and 11 at the offices of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other time and place as the
parties may agree upon. Should such conditions not be satisfied on
or before February 28, 2006, this Agreement shall terminate except
that the parties shall continue to be liable for any breach by them
of any covenant hereunder to use commercially reasonable efforts
(without resort to litigation) to cause such conditions to be
satisfied. The day on which the Closing actually takes place is
herein sometimes referred to as the Closing Date.
(b) The Excess Closing shall take place at 10:00 A.M., local time, on
the first business day that is not less than five business days
after the determination of the 2005 EBITDA. The day on which the
Excess Closing actually takes place is herein sometimes referred to
as the Excess Closing Date.
5. Financial Statements. Sellers shall deliver to Purchaser, on or before
Closing copies of audited financial statements of the Company for the
years ended December 31, 2004, 2003 and 2002 (the "Audited Financial
Statements") prepared by Leshkowitz and Company, LLP ("Leshkowitz"),
together with interim unaudited financial statements for the fiscal
quarters ended March 31, 2005, June 30, 2005, and September 30, 2005 (the
"Interim 2005 Statements"), and, if the Closing occurs after January 31,
2006, for the fiscal quarter ended December 31, 2005. The term "Balance
Sheet" means the unaudited balance sheet dated as of September 30, 2005
that will be included in the Interim 2005 Statements, and the Balance
Sheet Date is September 30, 2005, except that if the Closing occurs after
January 31, 2006, the term "Balance Sheet" means the unaudited balance
sheet dated as of December 31, 2005, and the Balance Sheet Date is
December 31, 2005.
6. Other Transactions at Closing; Further Assurances.
(a) At the Closing, Sellers will deliver to Purchaser:
(i) general mutual releases by Sellers and the Company, provided
that such releases shall not release any claim arising under
this Agreement, and provided further that Net Worth will be
calculated after giving effect to such releases;
(ii) certificates for the Common Shares registered in the name of
Purchaser;
(iii) copies of the certificate of incorporation of the Company
certified as of a date within 60 days of the Closing Date by
the Secretary of State of the State of New York;
(iv) a certificate from the Secretary of State of the State of New
York as to the good standing of the Company as of a date
within 60 days of the Closing Date;
(v) copies of the bylaws of the Company, certified by its
Secretary as a true and correct copy thereof as of the Closing
Date;
(vi) all consents from shareholders, lenders and other third
parties as are required to consummate the sale of the Common
Shares;
(vii) [RESERVED];
(viii)board resolutions certified by the Secretary of the Company
appointing ▇▇▇ ▇▇▇▇▇▇ as the sole nominee authorized to sign
checks and other orders for the withdrawal of funds from the
bank account(s) of the Company;
(ix) resignations of all officers and directors of the Company;
(x) a copy of the resolutions of the Board of Directors of the
Company, together with any and all required resolutions or
consents of the shareholders thereof, approving the execution
and delivery of this Agreement and the consummation of all of
the transactions contemplated hereby, duly certified by an
officer of the Company; and
(xi) such other documents as may be required pursuant to this
Agreement or as may reasonably be requested by Purchaser and
its counsel.
(b) On the Closing Date, Purchaser shall deliver or cause to be
delivered to Seller the following:
(i) payment of the Closing Purchase Price;
(ii) a copy of the resolutions of the Board of Directors of
Purchaser, together with any and all required resolutions or
consents of the shareholders thereof, approving the execution
and delivery of this Agreement and the consummation of all of
the transactions contemplated hereby, duly certified by an
officer of Purchaser;
(iii) [omitted]
(iv) such other documents as may be required pursuant to this
Agreement or as may reasonably be requested by Sellers and
their counsel.
(c) At the Closing:
(i) Purchaser and ▇▇▇▇▇▇▇▇ shall execute and deliver an employment
agreement in the form of Exhibit 6 (c) (i);
(ii) [omitted]
(iii) Purchaser will enter into an employment agreement with ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ in the forms respectively attached as exhibits,
and with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, whose employment agreement will be
in the form of the agreement for ▇▇▇▇▇▇▇▇ except that his base
salary will be $250,000 per year and will be effective when
▇▇▇▇▇ is available and notifies Purchaser of his availability,
but Purchaser need not enter into an employment agreement with
▇▇▇▇▇ should ▇▇▇▇▇ not become available for employment within
eighteen months of the Closing Date;
(iv) [omitted]
(v) Sellers and ▇▇▇▇▇ ▇▇▇▇▇ shall each execute and deliver a
non-solicitation agreement in the form of Exhibit 6 (v),
provided that the Sellers and ▇▇▇▇▇ ▇▇▇▇▇ will not be
prohibited from soliciting or engaging each other; and
(vi) Purchaser will enter into a lease in the form of Exhibit
6 (c) (viii) for approximately 72,000 square feet of
warehouse space and approximately 18,000 square feet of office
space in the premises currently occupied by the Company.
(d) At the Closing, Sellers hereby jointly and severally assume all
obligations of the Company ("Tax Liabilities") for corporate income
taxes and accrued interest and penalties (if any) thereon relating
to income earned through the Closing Date. Also at the Closing, the
Company will pay to ▇▇▇▇▇ ▇▇▇▇▇▇ (the "escrow agent") in escrow an
amount equal to $1,691,697 plus an amount that the Company and
▇▇▇▇▇▇▇▇ then estimate shall have accrued for such taxes, interest
and penalties from October 1, 2005 to the date of Closing. The
escrow agent upon joint written notice to him from the Company and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ will distribute amounts from escrow towards
payment of the Tax Liabilities. The escrow agent upon joint written
notice to him from the Company and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ will, upon
expiration of the statute of limitations for all Tax Liabilities,
pay to Sellers any amounts then remaining in escrow that are in
excess of that required to pay all Tax Liabilities. For purposes of
calculating Net Worth, the Tax Liabilities (to the extent that they
do not exceed amounts paid into escrow as aforesaid) and the amounts
paid into escrow will not be taken into account as liabilities and
assets, respectively. The Purchaser agrees not to unreasonably
withhold or delay any such notice to the escrow agent.
7. Representations and Warranties by Sellers. Sellers jointly and severally
represent and warrant to Purchaser as follows (all Schedules referred to
in this Section shall be set forth on a separate Disclosure Schedule
initialed by ▇▇▇▇▇▇▇▇ on the date hereof):
(a) Organization, Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of New York; it has all requisite corporate power and
authority and is entitled to carry on its business as now being
conducted and to own, lease or operate its properties as and in the
places where such business is now conducted and such properties are
now owned, leased or operated; and it is duly qualified, licensed or
domesticated and in good standing as a foreign corporation
authorized to do business in the states listed on Schedule 7 (a) ,
which, except as set forth on Schedule 7(a), are the only states
where the nature of the activities conducted by it or the character
of the properties owned, leased or operated by it require such
qualification, licensing or domestication. Sellers have delivered to
Purchaser true and complete copies of the Company's certificate of
incorporation and all amendments thereto, certified by the Secretary
of State of the State of New York, and the by-laws of the Company as
presently in effect, certified as true and correct by the Company's
Secretary.
(b) Subsidiaries. The Company has no subsidiaries except those listed on
Schedule 7 (b) ("Subsidiaries"). The Company has no interest,
direct or indirect, and has no commitment to purchase any interest,
direct or indirect, in any other corporation or in any partnership,
joint venture or other business enterprise or entity other than as
set forth on Schedule 7 (b). The business carried on by the Company
has not been conducted through any other direct or indirect
subsidiary or affiliate of any shareholder or other affiliate of any
Seller other than the landlord of the premises and Etronics, Inc..
(c) Transactions with Certain Persons.
(i) Except as set forth on Schedule 7 (c) (i), during the past
three years the Company has not, directly or indirectly,
purchased, leased from others or otherwise acquired any
property or obtained any services from, or sold, leased to
others or otherwise disposed of any property or furnished any
services to, or otherwise dealt with (except with respect to
remuneration for services rendered as a director, officer or
employee of the Company), in the ordinary course of business
or otherwise, Sellers or any person, firm or corporation
which, directly or indirectly, alone or together with others,
controls, is controlled by or is under common control with any
Seller.
(ii) Except as set forth on Schedule 7 (c) (i) (ii), the Company
does not owe any amount to, or have any contract with or
commitment to, any of its shareholders, directors, officers,
employees or consultants (other than compensation for current
services not yet due and payable and reimbursement of expenses
arising in the ordinary course of business), and none of such
persons owes any amount to the Company.
(iii) Except as set forth on Schedule 7 (c)(iii), no part of the
property or assets of any Seller is used by the Company.
(d) Authorization and Approval of Agreement. All proceedings or
corporate action required to be taken by Sellers relating to the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been taken at or prior
to the Closing.
(e) Execution, Delivery and Performance of Agreement; Authority. Neither
the execution, delivery nor performance of this Agreement by Sellers
will, with or without the giving of notice or the passage of time,
or both, conflict with, result in a default, right to accelerate or
loss of rights under, or result in the creation of any lien, charge
or encumbrance pursuant to, any provision of the Company's
certificate of incorporation or by-laws or any franchise, mortgage,
deed of trust, lease, license, agreement, understanding, law, rule
or regulation or any order, judgment or decree to which Sellers or
the Company is a party or by which any of them may be bound or
affected. Sellers have the full power and authority to enter into
this Agreement and to carry out the transactions contemplated
hereby, all proceedings or corporate action required to be taken by
them to authorize the execution, delivery and performance of this
Agreement and the agreements relating hereto have been properly
taken and this Agreement constitutes a valid and binding obligation
of Sellers.
(f) Capitalization. The presently authorized, issued and outstanding
shares of capital stock of the Company and the names and addresses
of the record and beneficial owners thereof are as set forth on
Schedule 1. The Common Shares constitute all of the outstanding
shares of capital stock of the Company and shall constitute all of
the outstanding shares of capital stock of the Company as of the
Closing Date, and are legally issued, fully paid and non-assessable.
(g) Except as set forth on Schedule 7 (g), there are no outstanding
subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or
arrangements of any character or nature whatever under which Sellers
or the Company is or may become obligated to issue, assign or
transfer any shares of the capital stock of the Company, and there
are no rights of first refusal, preemptive rights or similar rights
with respect to any such shares.
(h) Each Seller owns the entire record and beneficial interest in his
shares of Common Stock set forth in Schedule 1, and there are no
impediments to the sale and transfer to Purchaser of such record and
beneficial interests. Such Common Stock is free and clear of all
liens, charges, mortgages, pledges, security interests, claims,
assessments, options, warrants, rights and encumbrances whatsoever.
(i) Financial Statements.
(i) The Audited Financial Statements and the Interim 2005
Statements that Sellers shall provide in accordance with
Section 5 shall be complete and correct, shall have been
prepared from the books and records of the Company in
accordance with generally accepted accounting principles
consistently applied and maintained throughout the periods
indicated and shall fairly present the financial condition of
the Company as at their respective dates and the results of
its operations for the periods covered thereby.
(ii) The statements of earnings to be included in the Audited
Financial Statements and in the Interim 2005 Statements will
not contain any items of special or nonrecurring income or any
other income not earned in the ordinary course of business
except as expressly specified therein, and all interim
financial statements include all adjustments, which consist
only of normal recurring accruals, necessary for such fair
presentation.
(j) Absence of Undisclosed Liabilities. Except as and to the extent to
be reflected or reserved against on the face of the Balance Sheet
and except as set forth on Schedule 7(j), as of the Balance Sheet
Date the Company had no debts, liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature
whatsoever, including, without limitation, any foreign or domestic
tax liabilities or deferred tax liabilities incurred in respect of
or measured by the Company's income, or its property or authorized
or outstanding capital stock on the Balance Sheet Date or any other
debts, liabilities or obligations relating to or arising out of any
act, transaction, circumstance or state of facts which occurred or
existed on the Balance Sheet Date, whether or not then known, due or
payable. None of the Company's employees is now or, will by the
passage of time hereafter become, entitled to receive any vacation
time, vacation pay or severance pay attributable to services
rendered prior to the Balance Sheet Date except as disclosed on the
face of the Balance Sheet.
(k) Taxes. All taxes, including, without limitation, income, property,
sales, use, franchise, added value, employees' income withholding
and social security taxes, imposed by the United States or by any
foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or
by any other taxing authority, which are due and payable by the
Company, and all interest and penalties thereon, whether disputed or
not, have been paid in full, all tax returns required to be filed in
connection therewith have been accurately prepared and duly and
timely filed and all deposits required by law to be made by the
Company with respect to employees' withholding taxes have been duly
made. The Company and the Sellers have not been delinquent in the
payment of any foreign or domestic tax, assessment or governmental
charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it, and there is no basis for any such
deficiency or claim. The Company's corporate income tax returns have
not been audited by the Internal Revenue Service, or any state or
municipality for its prior six fiscal years through the year ended
(and to Seller's knowledge, there is no audit which is pending),
there is not now in force any extension of time with respect to the
date on which any tax return was or is due to be filed by or with
respect to the Company, or any waiver or agreement by it for the
extension of time for the assessment of any tax. The Company (and
any predecessor) has been a validly electing subchapter S
corporation since 1980. The Company does not have any subsidiaries.
(l) Absence of Changes or Events. Except as set forth on Schedule 7(l)
and except in connection with the transaction contemplated by this
Agreement, since January 1, 2005:
(i) the business of the Company has been conducted in the ordinary
course and consistent with past practice;
(ii) there has not been:
(1) any material adverse change in the relationships of the
Company with its licensees, customers, suppliers,
payors, reimbursers, and/or persons or organizations
that refer business to it;
(2) any material damage, destruction or casualty loss
(whether or not covered by insurance) suffered by
Company;
(3) any transaction material to the business or the assets
of the Company, except in the ordinary course of
business;
(4) any employment agreement or deferred compensation
agreement entered into between the Company and any of
their respective employees;
(5) any issuances or grants of capital stock, subscriptions,
options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements
or arrangements of any character or nature whatever
under which Sellers or the Company is or may become
obligated to issue, assign or transfer any shares of the
capital stock of the Company;
(6) any increase, not in the ordinary course of business, in
the compensation payable or to become payable by the
Company or the adoption of any new (or amendment to or
alteration of any existing) bonus, incentive,
compensation, pension, stock, matching gift, profit
sharing, retirement, death benefit or other fringe
benefit plan;
(7) any increase in the aggregate indebtedness for borrowed
money or any increase in purchase commitments or other
liabilities or obligations (whether absolute, accrued,
contingent or otherwise) incurred by the Company, except
for liabilities, commitments and obligations incurred in
the ordinary course of business consistent with past
practice;
(8) any lien created on any of the assets of the Company,
other than liens for taxes not yet due and payable;
(9) any material labor dispute involving the employees of
the Company;
(10) any sale, assignment, transfer or other disposition or
license of any material tangible or intangible assets of
the Company, other than the sale of inventory in the
ordinary course of business consistent with past
practice;
(11) any amendment, termination or waiver by the Company of
any right of substantial value belonging to it;
(12) any amendment of the certificate of incorporation or
by-laws of the Company;
(13) inventory purchases or sales or other dealings out of
the ordinary course of business;
(14) any one or more capital expenditures or commitments by
the Company not fully paid for in excess of $50,000 in
the aggregate; or
(15) any change, event or condition which, in any case or in
the aggregate, has had or may have a materially adverse
affect on Seller's condition (financial or otherwise),
properties, assets, liabilities, operations or
prospects, taken as a whole, including, without
limitation, any change in Seller's revenues, costs,
backlog or relations with its employees, agents,
customers or suppliers;
(16) any transaction, contract or commitment other than in
the ordinary course of business or paid or agreed to pay
any legal, accounting, brokerage, finder's fee, taxes or
other expenses in connection with, or incurred by
severance pay obligations by reason of, this Agreement
or the transactions contemplated hereby; or
(17) any agreement or any commitment to take any of the
foregoing actions.
(m) Litigation. Except as set forth in Schedule 7 (m), there is no
claim, legal action, suit, arbitration, governmental investigation
or other legal or administrative proceeding, nor any order, decree
or judgment in progress, pending or in effect, or to the knowledge
of Sellers threatened, against or relating to the Company, its
officers, directors or employees, its properties, assets or business
or the transactions contemplated by this Agreement, and Sellers do
not know or have reason to be aware of any basis for the same.
(n) Compliance with Laws and Other Instruments. Except as set forth
Schedule 7 (n), the Company has complied with all existing laws,
rules, regulations, ordinances, orders, judgments and decrees now or
hereafter applicable to its business, properties or operations as
presently conducted. Neither the ownership nor use of the Company's
properties nor the conduct of its business conflicts with the rights
of any other person, firm or corporation or violates, or with or
without the giving of notice or the passage of time, or both, will
violate, conflict with or result in a default, right to accelerate
or loss of rights under, any terms or provisions of its certificate
of incorporation or by-laws as presently in effect, or any lien,
encumbrance, mortgage, deed of trust, lease, license, agreement,
understanding, law, ordinance, rule or regulation, or any order,
judgment or decree to which the Company is a party or by which it
may be bound or affected; and Sellers are not aware of any proposed
laws, rules, regulations, ordinances, orders, judgments, decrees,
governmental takings, condemnations or other proceedings which would
be applicable to its business, operations or properties and which
might adversely affect its properties, assets, liabilities,
operations or prospects, either before or after the Closing.
(o) Title to Properties.
(i) The Company has good title to all the properties and assets
reflected in its books and records and in the Balance Sheet
(except for inventory sold after the Balance Sheet Date in the
ordinary course of business).
(ii) None of such properties and assets are subject to any
mortgage, pledge, lien, charge, security interest,
encumbrance, restriction, lease, license, easement, liability
or adverse claim of any nature whatsoever, direct or indirect,
whether accrued, absolute, contingent or otherwise, except as
expressly set forth in the Balance Sheet as securing specific
liabilities or as otherwise expressly permitted by the terms
hereof or those imperfections of title and encumbrances, if
any, which
(1) are not substantial in character, amount or extent and
do not materially detract from the value of the
properties subject thereto,
(2) do not interfere with either the present and continued
use of such property or the conduct of the Company's
normal operations and
(3) have arisen only in the ordinary course of business.
(iii) All of the properties and assets owned, leased or used by the
Company are in operating condition, are suitable for the
purposes used, are adequate and sufficient for all current
operations of the Company and are directly related to the
business of the Company.
(p) Schedule 7 (p) includes an accurate and complete list and
description of:
(1) All real property owned by the Company or in which the
Company has a leasehold or other interest or which is
used by the Company in connection with the operation of
its business, together with a description of each lease,
sublease, license, or any other instrument under which
the Company claims or holds such leasehold or other
interest or right to the use thereof or pursuant to
which the Company has assigned, sublet or granted any
rights therein, identifying the parties thereto, the
rental or other payment terms, expiration date and
cancellation and renewal terms thereof.
(2) As of a date no earlier than September 30, 2005, all of
the Company's receivables (which shall include accounts
receivable, loans receivable and any advances), together
with detailed information as to each such listed
receivable which has been outstanding for more than 90
days.
(3) All machinery, tools, equipment, motor vehicles, rolling
stock and other tangible personal property (other than
inventory and supplies), owned, leased or used by the
Company except for items having a value of less than
$10,000 which do not, in the aggregate, have a total
value of more than $250,000.
(4) All patents, patent applications, patent licenses,
trademarks, trademark registrations, and applications
therefor, service marks, service names, trade names,
copyrights and copyright registrations, and applications
therefor, wholly or partially owned or held by the
Company or used in the operation of the Company's
business.
(5) All fire, theft, casualty, liability and other insurance
policies insuring the Company.
(6) All sales agency or route distributorship agreements or
franchises or agreements providing for the services of
an independent contractor to which the Company is a
party or by which it is bound.
(7) All contracts, agreements, commitments or licenses
relating to patents, trademarks, trade names,
copyrights, inventions, processes, know-how, formulae or
trade secrets to which the Company is a party or by
which it is bound.
(8) All loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security
agreements, equipment obligations, guaranties, leases or
lease purchase agreements to which the Company is a
party or by which it is bound.
(9) All contracts, agreements and commitments, whether or
not fully performed, in respect of the issuance, sale or
transfer of the capital stock, bonds or other securities
of the Company or pursuant to which the Company has
acquired any substantial portion of its business or
assets.
(10) All contracts, agreements, commitments or other
understandings or arrangements to which the Company is a
party or by which it or any of its property is bound or
affected by excluding purchase and sales orders and
commitments made in the ordinary course of business.
(11) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans,
bonus plans, deferred compensation agreements, employee
pension plans or retirement plans, employee stock
options or stock purchase plans and group life, health
and accident insurance and other employee benefit plans,
agreements, arrangements or commitments, whether or not
legally binding, including, without limitation, holiday,
vacation, and bonus practices, to which the Company is a
party or is bound which relate to the operation of the
Company's business.
(12) The names and current annual salary rates of all persons
(including independent commission agents) who are
employed or retained by the Company as of the date of
this Agreement, showing separately for each such person
the amounts paid or payable as salary, bonus payments
and any indirect compensation in 2005.
(13) The names of all of the Company's directors and
officers; the name of each bank in which the Company has
an account or safe deposit box and the names of all
persons authorized to draw thereon or have access
thereto, and the names of all persons, if any, holding
tax or other powers of attorney from the Company and a
summary of the terms thereof.
(14) All of the contracts, agreements, leases, licenses and
commitments required to be listed on any Schedule to
this Agreement (other than those which have been fully
performed) are valid and binding, enforceable in
accordance with their respective terms, and in full
force and effect. Except as disclosed in such Schedule,
there is not under any such contract, agreement, lease,
license or commitment any existing default, or event
which, after notice or lapse of time, or both, would
constitute a default or result in a right to accelerate
or loss of rights. True and complete copies of all such
contracts, agreements, leases, licenses and other
documents listed on the Schedules attached to this
Agreement (together with any and all amendments thereto)
have been delivered to Purchaser.
(q) Intangible Property.
(i) Schedule 7 (q) sets forth a complete list and concise
description of the following:
(1) all trademarks, service marks, trade names, label
filings, patents, copyrights, royalty rights, logos,
applications therefor and registrations thereof and
inventions owned or used (pursuant to license agreements
or otherwise) by the Company or any of its Subsidiaries
in or applicable to the businesses of the Company and
its Subsidiaries (collectively, the "Proprietary
Rights"), and the jurisdictions in which the Proprietary
Rights have been registered, filed or issued;
(2) contracts, agreements or understandings pursuant to
which the Company or any of its Subsidiaries has
authorized any person to use any of the Proprietary
Rights; and
(3) all research and development results, records of
experiments, scientific, technical, engineering and
marketing data and literature and other know-how,
formulae and techniques, recorded or available in any
form whatsoever which are used in connection with the
operation of the businesses of the Company and its
Subsidiaries (collectively, the "Trade Secrets").
(4) The Proprietary Rights have been properly registered,
filed or issued in the offices and jurisdictions in
which such registration, filing or issuance is necessary
to protect the rights therein of Company and its
Subsidiaries for the conduct of their businesses, and
all applicable fees due and payable have been paid.
Except as otherwise indicated in Schedule 7 (q), the
Company and its Subsidiaries are the sole and exclusive
owners of the Proprietary Rights and the Trade Secrets
and all rights related thereto.
(5) Except as set forth in Schedule 7 (q), there are no
claims or demands of any person pertaining to the
Proprietary Rights or the Trade Secrets or the rights of
the Company and its Subsidiaries thereunder, and no
proceedings have been instituted or are pending or, to
the knowledge of Sellers, threatened which challenge the
rights of the Company in respect thereof, and none of
the issued trademarks, service marks, trade names, label
filings, patents, copyrights, logos, registrations
thereof, or, as the case may be, the rights granted to
the Company in respect thereof and to be listed in
Schedule 7 (q), infringes on or is being infringed upon
by others, and none is subject to any outstanding order,
decree, judgment, stipulation, injunction, restriction
or agreement restricting the scope of the use by the
Company.
(6) Except as disclosed in Schedule 7 (q), the Company is
not infringing or violating, and during the past five
years, the Company has not infringed or violated, any
Proprietary Rights of others, nor used any confidential
information or trade secrets or patentable or
unpatentable inventions of any former employer of any
employee of the Company.
(7) Except as is disclosed in Schedule 7 (q), Sellers have
no knowledge of any patented device or application
therefor which could materially and adversely affect the
operation of the businesses of the Company, as now
conducted.
(8) Except as indicated in Schedule 7 (q), the Trade
Secrets have been, and will not be, disclosed by the
Company to any person other than Purchaser and its
agents and representatives, and comprise all of the same
necessary to permit the continued operation of the
businesses of the Company and its Subsidiaries.
(r) Securities Representations
(i) Each Seller represents and warrants that the portion of the
Purchase Price consisting of Restricted Equity Securities, as
more fully set forth in Section 2, is being purchased for
investment solely for the Seller's own account and not with a
view to or for the resale or distribution thereof.
(ii) Each Seller understands that the Seller may sell or otherwise
transfer the Equity Restricted Securities only if such
transaction is duly registered under the Securities Act of
1933, as amended (the "Act"), under a registration statement
or otherwise, or if Seller shall have received the favorable
opinion of counsel to the holder, which opinion shall be
reasonably satisfactory to counsel to the Purchaser, to the
effect that such sale or other transfer may be made in the
absence of registration under the Act, and registration or
qualification in every applicable state. The certificates
representing the aforesaid securities will be legended to
reflect these restrictions, and stop transfer instructions
will apply. Seller realizes that the equity securities are not
a liquid investment.
(iii) Each Seller represents and warrants that it has not relied
upon the advice of a "Purchaser Representative" (as defined in
Regulation D of the Act) in evaluating the risks and merits of
the investment in the equity securities of the Purchaser, and
that Seller has the knowledge and experience to evaluate the
Purchaser and the risks and merits relating thereto.
(iv) Each Seller represents and warrants that the Seller is an
"accredited investor" as such term is defined in Rule 501 of
Regulation D promulgated pursuant to the Act, and shall be
such on the date any securities are issued to the holder;
Seller acknowledges that Seller is able to bear the economic
risk of losing Seller's entire investment in the securities
and understands that an investment in the Purchaser involves
substantial risks.
(s) No Guaranties. Except as indicated on Schedule 7 (s), none of the
obligations or liabilities of the Company is guaranteed by any other
person, firm or corporation, nor has the Company guaranteed the
obligations or liabilities of any other person, firm or corporation.
(t) Inventory. Except as indicated on Schedule 7 (t), all items of the
Company's inventory and related supplies (including raw materials,
work-in-process and finished goods) reflected on the Balance Sheet
or thereafter acquired (and not subsequently disposed of in the
ordinary course of business) are merchantable, or suitable and
usable for the production or completion of merchantable products,
for sale in the ordinary course of business as first quality goods
at normal ▇▇▇▇-ups and ▇▇▇▇-▇▇▇▇▇ that are consistent with Seller's
past practice, none of the inventory so reflected is below standard
quality and each item of such inventory to be reflected in the
Balance Sheet and the books and records of the Company is so
reflected on the basis of a complete physical count as of September
30, 2005 and is valued at the lower of cost (on a first --in,
first--out basis) or market in accordance with generally accepted
accounting principles consistently applied.
(u) Receivables. Except as indicated on Schedule 7(u), all receivables
of the Company (including accounts receivable, loans receivable and
advances) which are to be reflected in the Balance Sheet, and all
such receivables which will have arisen since the date thereof,
shall have arisen only from bona fide transactions in the ordinary
course of the Company's business.
(v) Labor Matters. Except as set forth in Schedule 7 (v), the Company
is not a party to any collective bargaining agreement and there are
no material or formal complaints, charges, cases or controversies or
any conciliation agreement, consent or decree pending or threatened
the Company and any of its employees acting individually or in
concert and/or any administrative agency of the United States
government and no organization is presently attempting to gain,
petitioning for or asserting representational status with respect to
any group or groups of employees of the Company, and the Company is
in material compliance with Federal and state laws respecting
employment practices, terms and conditions of employment, wages and
hours, and is not presently engaged in any unfair labor practice,
There is no labor strike or other labor dispute and there is no
complaint, proceeding or other action instituted under the Equal
Opportunity Act pending, threatened against the Company.
(w) Records. The books of account, minute books, stock certificate books
and stock transfer ledgers of the Company are complete and correct
in all material respects, and there have been no transactions
involving the business of the Company which properly should have
been set forth therein and which have not been accurately so set
forth.
(x) Proceedings re Employee Benefit Plans. There has not been any (i)
termination of any "defined benefit plan" within the meaning of the
Employee Retirement Income Security Act of 1974 ("ERISA") maintained
by the Company or any person, firm or corporation ("Affiliate")
which is under "common control" (within the meaning of Section
4001(b) of ERISA) with the Company, or (ii) commencement of any
proceeding to terminate any such plan pursuant to ERISA, or
otherwise or (iii) written notice given to the Company or any
Affiliate of the intention to commence or seek the commencement of
any such proceeding. All accrued benefits under each pension plan of
the Company covering employees who are to be transferred to the
employ of Purchaser following the Closing ("Transferred Employees")
shall be fully provided for as of the date of the Closing by any one
or more of (i) annuity contracts for the benefit of such Transferred
Employees issued by an insurance company acceptable to Purchaser,
(ii) the transfer to a successor plan established or maintained by
Purchaser for the benefit of such Transferred Employees of assets
having a fair market value of not less than the present value of all
such accrued benefits and/or (iii) in the case of any multi-employer
plan or any single employer plan which Purchaser shall assume, by
the fair market value of the assets of such plan as of the date of
the Closing being not less than the present value of all accrued
benefits under such plan at such date. The amount of accrued
benefits and the present value thereof under each such pension plan
shall be computed by Purchaser's actuary on the basis of "Acceptable
Actuarial Assumptions," which term is defined to mean actuarial
assumptions and methods to which Purchaser consents in writing
(which consent shall not be unreasonably withheld). The Company has
no knowledge or information of any planned or required increase in
the level of contributions or benefits under any such pension plan,
or of any circumstances which would suggest that such an increase
may be required, or that any union representing employees covered
under any such plan will attempt to negotiate for such an increase.
In the case of each pension plan to which the Company makes
contributions on behalf of Transferred Employees under which
contributions are fixed pursuant to a collective bargaining
agreement, the level of contributions currently provided for in the
applicable collective bargaining agreement is sufficient to meet the
funding requirements of ERISA applicable to such plan, based on
Acceptable Actuarial Assumptions. Each funded pension plan
maintained by the Company for one or more Transferred Employees
constitutes a qualified plan under section 40l(a) of the Internal
Revenue Code of l954 and meets all applicable requirements of ERISA.
(y) Absence of Certain Business Practices. Neither Sellers nor the
Company nor any officer, employee or agent of Sellers or the
Company, nor any other person acting on its behalf, has, directly or
indirectly, within the past five years given or agreed to give any
gift or similar benefit to any customer, supplier, governmental
employee or other person who is or may be in a position to help or
hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (A) might
subject the Company to any damage or penalty in any civil, criminal
or governmental litigation or proceeding, (B), if not given in the
past, might have had an adverse effect on the assets, business or
operations of the Company or (C), if not continued in the future,
might adversely affect the Company's assets, business, operations or
prospects or which might subject the Company to suit or penalty in
any private or governmental litigation or proceeding.
8. Representations and Warranties by Purchaser. Representations and
Warranties by Purchaser. Purchaser represents and warrants to Sellers as
follows (all Schedules referred to in this Section shall be set forth on a
separate Disclosure Schedule initialed by Purchaser on the date hereof):
(a) Organization, Standing and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of Delaware; it has all requisite corporate power and
authority and is entitled to carry on its business as now being
conducted and to own, lease or operate its properties as and in the
places where such business is now conducted and such properties are
now owned, leased or operated; and it is duly qualified, licensed or
domesticated and in good standing as a foreign corporation
authorized to do business in the states disclosed in its SEC
Documents (defined below) or as disclosed and listed on Schedule
8(a), which, except as disclosed in its SEC Documents or as
disclosed and set forth on Schedule 8(a), are the only states where
the nature of the activities conducted by it or the character of the
properties owned, leased or operated by it require such
qualification, licensing or domestication.
(b) Subsidiaries. Except as disclosed in Purchaser's SEC Documents, and
except as disclosed and listed on Schedule 8(b), the Purchaser has
no subsidiaries ("Subsidiaries"). Except as disclosed in its SEC
Documents, and except as disclosed in and set forth in Schedule
8(b), the Purchaser has no interest, direct or indirect, and has no
commitment to purchase any interest, direct or indirect, in any
other corporation or in any partnership, joint venture or other
business enterprise or entity. Except as disclosed in its SEC
Documents, and except as disclosed in and set forth in Schedule
8(b), the business carried on by the Purchaser has not been
conducted through any other direct or indirect subsidiary or
affiliate of any shareholder.
(c) Transactions with Certain Persons.
(i) Except as disclosed in Purchaser's SEC Documents, and except
as set forth on Schedule 8 (c) (i), during the year ended 2005
and for the period beginning July, 2004 through December 31,
2004, the Purchaser has not, directly or indirectly,
purchased, leased from others or otherwise acquired any
property or obtained any services from, or sold, leased to
others or otherwise disposed of any property or furnished any
services to, or otherwise dealt with (except with respect to
remuneration for services rendered as a director, officer or
employee of the Purchaser), in the ordinary course of business
or otherwise, any shareholder of Purchaser owning more than 5%
of the outstanding shares of common stock of the Purchaser
("Substantial Shareholder") or any person, firm or corporation
which, directly or indirectly, alone or together with others,
controls, is controlled by or is under common control with any
Substantial Shareholder of the Purchaser ("Substantial
Shareholder Affiliate").
(ii) Except as disclosed in Purchaser's SEC Documents, and except
as set forth on Schedule 8 (c) (i) (ii), the Purchaser does
not owe any amount to, or have any contract with or commitment
to, any of its shareholders, directors, officers, employees or
consultants (other than compensation for current services not
yet due and payable and reimbursement of expenses arising in
the ordinary course of business), and none of such persons
owes any amount to the Purchaser.
(iii) Except as disclosed in Purchaser's SEC Documents, and except
as set forth on Schedule 8(c)(iii), no part of the property or
assets of Purchaser is used by the any shareholder of
Purchaser.
(d) Authorization and Approval of Agreement. All proceedings or
corporate action required to be taken by Purchaser relating to the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been taken at or prior
to the Closing.
(e) Execution, Delivery and Performance of Agreement; Authority. Neither
the execution, delivery nor performance of this Agreement by
Purchaser will, with or without the giving of notice or the passage
of time, or both, conflict with, result in a default, right to
accelerate or loss of rights under, or result in the creation of any
lien, charge or encumbrance pursuant to, any provision of the
Purchaser's certificate of incorporation or by-laws or any
franchise, mortgage, deed of trust, lease, license, agreement,
understanding, law, rule or regulation or any order, judgment or
decree to which the Purchaser is a party or by which it may be bound
or affected. Purchaser has the full power and authority to enter
into this Agreement and to carry out the transactions contemplated
hereby, all proceedings or corporate action required to be taken by
it to authorize the execution, delivery and performance of this
Agreement and the agreements relating hereto have been properly
taken and this Agreement constitutes a valid and binding obligation
of Purchaser.
(f) Capital Structure. The authorized capital stock of the Purchaser
Buyer consists of 100,000,000 shares of common stock, $0.001 par
value, and 10,000 shares of Preferred Stock, $0.001 par value, of
which there were issued and outstanding as of the close of business
on the date hereof, 47,368,756 shares of Common Stock and 346,663
shares of Series A Convertible Non Redeemable Preferred Stock
("Series A Preferred Stock"), respectively, as of the close of
business on the date hereof. All outstanding shares of common stock
and Series A Preferred Stock have been duly authorized, validly
issued, fully paid and are nonassessable.
(g) Except as set forth in the Purchaser's SEC Documents, and except as
set forth on Schedule 8(g), there are no outstanding subscriptions,
options, warrants, calls, contracts, demands, commitments,
convertible securities or other agreements or arrangements of any
character or nature whatever under which Purchaser is or may become
obligated to issue, assign or transfer any shares of the capital
stock of the Purchaser, and there are no rights of first refusal,
preemptive rights or similar rights with respect to any such shares.
(h) Issuance of Shares. The issuance and delivery of the equity
securities in accordance with this Agreement shall be, at or prior
to the Closing Date, duly authorized by all necessary corporate
action on the part of Purchaser, and, when issued on the Closing
Date as contemplated hereby, such shares of equity securities will
be duly and validly issued, fully paid and nonassessable. Such
equity securities, when so issued and delivered in accordance with
the provisions of this Agreement, shall be free and clear of all
liens and encumbrances and adverse claims, other than restrictions
on transfer created by applicable securities laws and will not have
been issued in violation of their respective properties or any
preemptive rights or rights of first refusal or similar rights.
(i) SEC Documents; Financial Statements. Purchaser has filed all
reports, schedules, forms, statements and other documents required
to be filed by it with the Securities and Exchange Commission
("SEC") pursuant to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") (all of the foregoing
filed prior to the date hereof (including all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein) being hereinafter referred to as
the "SEC Documents"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of
the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. None of the
SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under
which they were made, not misleading. As of their respective dates,
the consolidated financial statements of Purchaser included in the
SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto.
(j) Absence of Undisclosed Liabilities. Except as disclosed in
Purchaser's SEC Documents, and except as set forth on Schedule 8(j),
as of the Balance Sheet Date the Purchaser had no debts, liabilities
or obligations (whether absolute, accrued, contingent or otherwise)
of any nature whatsoever, including, without limitation, any foreign
or domestic tax liabilities or deferred tax liabilities incurred in
respect of or measured by the Purchaser's income, or its property or
authorized or outstanding capital stock on the Balance Sheet Date or
any other debts, liabilities or obligations relating to or arising
out of any act, transaction, circumstance or state of facts which
occurred or existed on the Balance Sheet Date, whether or not then
known, due or payable.
(k) Financings. To the best of its knowledge Purchaser is not in default
under any of its agreements with any of its lenders.
(l) Absence of Changes or Events. Except as disclosed in Purchaser's SEC
Documents, and except as set forth on Schedule 8(l) and except in
connection with the transaction contemplated by this Agreement,
since January 1, 2005:
(i) the business of the Purchaser has been conducted in the
ordinary course and consistent with past practice;
(ii) there has not been:
(1) any material adverse change in the relationships of the
Purchaser with its licensees, customers, suppliers,
payors, reimbursers, and/or persons or organizations
that refer business to it;
(2) any material damage, destruction or casualty loss
(whether or not covered by insurance) suffered by
Purchaser;
(3) any transaction material to the business or the assets
of the Purchaser, except in the ordinary course of
business;
(4) any employment agreement or deferred compensation
agreement entered into between the Purchaser and any of
their respective employees;
(5) any issuances or grants of capital stock, subscriptions,
options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements
or arrangements of any character or nature whatever
under which Purchaser is or may become obligated to
issue, assign or transfer any shares of the capital
stock of the Purchaser;
(6) any increase, not in the ordinary course of business, in
the compensation payable or to become payable by the
Purchaser or the adoption of any new (or amendment to or
alteration of any existing) bonus, incentive,
compensation, pension, stock, matching gift, profit
sharing, retirement, death benefit or other fringe
benefit plan;
(7) any increase in the aggregate indebtedness for borrowed
money or any increase in purchase commitments or other
liabilities or obligations (whether absolute, accrued,
contingent or otherwise) incurred by the Purchaser,
except for liabilities, commitments and obligations
incurred in the ordinary course of business consistent
with past practice;
(8) any lien created on any of the assets of the Purchaser,
other than liens for taxes not yet due and payable;
(9) any material labor dispute involving the employees of
the Purchaser;
(10) any sale, assignment, transfer or other disposition or
license of any material tangible or intangible assets of
the Purchaser, other than the sale of inventory in the
ordinary course of business consistent with past
practice;
(11) any amendment, termination or waiver by the Purchaser of
any right of substantial value belonging to it;
(12) any amendment of the certificate of incorporation or
by-laws of the Purchaser;
(13) inventory purchases or sales or other dealings out of
the ordinary course of business;
(14) any one or more capital expenditures or commitments by
the Purchaser not fully paid for in excess of $50,000 in
the aggregate; or
(15) any change, event or condition which, in any case or in
the aggregate, has had or may have a materially adverse
affect on Purchaser's condition (financial or
otherwise), properties, assets, liabilities, operations
or prospects, taken as a whole, including, without
limitation, any change in Purchaser's revenues, costs,
backlog or relations with its employees, agents,
customers or suppliers;
(16) any transaction, contract or commitment other than in
the ordinary course of business or paid or agreed to pay
any legal, accounting, brokerage, finder's fee, taxes or
other expenses in connection with, or incurred by
severance pay obligations by reason of, this Agreement
or the transactions contemplated hereby; or
(17) any agreement or any commitment to take any of the
foregoing actions.
(m) Litigation. Except as disclosed in Purchaser's SEC Documents, and
except as set forth in Schedule 8 (m), there is no claim, legal
action, suit, arbitration, governmental investigation or other legal
or administrative proceeding, nor any order, decree or judgment in
progress, pending or in effect, or to the knowledge of Purchaser
threatened, against or relating to the Purchaser, its officers,
directors or employees, its properties, assets or business or the
transactions contemplated by this Agreement, and Purchaser does not
know or have reason to be aware of any basis for the same.
(n) Compliance with Laws and Other Instruments. Except as disclosed in
Purchaser's SEC Documents, and except as set forth Schedule 8 (n),
the Purchaser has complied with all existing laws, rules,
regulations, ordinances, orders, judgments and decrees now or
hereafter applicable to its business, properties or operations as
presently conducted. Neither the ownership nor use of the
Purchaser's properties nor the conduct of its business conflicts
with the rights of any other person, firm or corporation or
violates, or with or without the giving of notice or the passage of
time, or both, will violate, conflict with or result in a default,
right to accelerate or loss of rights under, any terms or provisions
of its certificate of incorporation or by-laws as presently in
effect, or any lien, encumbrance, mortgage, deed of trust, lease,
license, agreement, understanding, law, ordinance, rule or
regulation, or any order, judgment or decree to which the Purchaser
is a party or by which it may be bound or affected; and Purchaser is
not aware of any proposed laws, rules, regulations, ordinances,
orders, judgments, decrees, governmental takings, condemnations or
other proceedings which would be applicable to its business,
operations or properties and which might adversely affect its
properties, assets, liabilities, operations or prospects, either
before or after the Closing.
(o) Title to Properties. Except as disclosed in Purchaser's SEC
Documents:
(i) The Purchaser has good title to all the properties and assets
reflected in this Agreement or its books and records and in
the financial statements set forth in the Purchaser's Form
10-QSB filed with the SEC on November 7, 2005 ("Form 10-QSB
Financial Statements") (except for inventory sold after the
Balance Sheet Date in the ordinary course of business).
(ii) None of such properties and assets are subject to any
mortgage, pledge, lien, charge, security interest,
encumbrance, restriction, lease, license, easement, liability
or adverse claim of any nature whatsoever, direct or indirect,
whether accrued, absolute, contingent or otherwise, except as
expressly set forth in the Form 10-QSB Financial Statements as
securing specific liabilities or as otherwise expressly
permitted by the terms hereof or those imperfections of title
and encumbrances, if any, which
(1) are not substantial in character, amount or extent and
do not materially detract from the value of the
properties subject thereto,
(2) do not interfere with either the present and continued
use of such property or the conduct of the Purchaser's
normal operations and
(3) have arisen only in the ordinary course of business.
(iii) All of the properties and assets owned, leased or used by the
Purchaser are in operating condition, are suitable for the
purposes used, are adequate and sufficient for all current
operations of the Purchaser and are directly related to the
business of the Purchaser.
(p) [omitted ]
(q) [omitted]
(r) [omitted]
(s) No Guaranties. Except as disclosed in Purchaser's SEC Documents, and
except as indicated on Schedule 8 (s), none of the obligations or
liabilities of the Purchaser is guaranteed by any other person, firm
or corporation, nor has the Purchaser guaranteed the obligations or
liabilities of any other person, firm or corporation.
(t) Inventory. Except as disclosed in Purchaser's SEC Documents, and
except as indicated on Schedule 8 (t), all items of the Purchaser's
inventory and related supplies (including raw materials, work in
process and finished goods) reflected on the Form 10-QSB Financial
Statements or thereafter acquired (and not subsequently disposed of
in the ordinary course of business) are merchantable, or suitable
and usable for the production or completion of merchantable
products, for sale in the ordinary course of business as first
quality goods at normal ▇▇▇▇-ups and ▇▇▇▇-▇▇▇▇▇ that are consistent
with Purchaser's practice in 2005, none of the inventory so
reflected is below standard quality.
(u) Receivables. Except as disclosed in Purchaser's SEC Documents, and
except as indicated on Schedule 8(u), all receivables of the
Purchaser (including accounts receivable, loans receivable and
advances) which are reflected in the Form 10-QSB Financial
Statements, and all such receivables which will have arisen since
the date thereof, shall have arisen only from bona fide transactions
in the ordinary course of the Purchaser's business.
(v) Labor Matters. Except as disclosed in the Purchaser's SEC Documents,
and except as set forth in Schedule 8 (v), the Purchaser is not a
party to any collective bargaining agreement and there are no
material or formal complaints, charges, cases or controversies or
any conciliation agreement, consent or decree pending or threatened
the Purchaser and any of its employees acting individually or in
concert and/or any administrative agency of the United States
government and no organization is presently attempting to gain,
petitioning for or asserting representational status with respect to
any group or groups of employees of the Purchaser, and the Purchaser
is in material compliance with Federal and state laws respecting
employment practices, terms and conditions of employment, wages and
hours, and is not presently engaged in any unfair labor practice,
There is no labor strike or other labor dispute and there is no
complaint, proceeding or other action instituted under the Equal
Opportunity Act pending, threatened against the Purchaser.
(w) Records. The books of account, minute books, stock certificate books
and stock transfer ledgers of the Purchaser are complete and correct
in all material respects, and there have been no transactions
involving the business of the Purchaser which properly should have
been set forth therein and which have not been accurately so set
forth.
(x) [omitted].
(y) Absence of Certain Business Practices. Neither Purchaser nor any
officer, employee or agent of Purchaser, nor any other person acting
on its behalf, has, directly or indirectly, during the year ended
2005 and for the period beginning July, 2004 through December 31,
2004, given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other person who is or
may be in a position to help or hinder the business of the Purchaser
(or assist the Purchaser in connection with any actual or proposed
transaction) which (A) might subject the Purchaser to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding, (B), if not given in the past, might have had an adverse
effect on the assets, business or operations of the Purchaser or
(C), if not continued in the future, might adversely affect the
Purchaser's assets, business, operations or prospects or which might
subject the Purchaser to suit or penalty in any private or
governmental litigation or proceeding.
9. Conduct of Business Prior to Closing.
(a) Prior to the Closing, the Company shall conduct its business and
affairs only in the ordinary course and consistent with its prior
practice and shall maintain, keep and preserve its assets (except in
connection with distributions to Sellers) and properties in good
condition and repair and maintain insurance thereon in accordance
with present practices, and the Company and each Seller will use its
or their best efforts to preserve the business and organization of
the Company intact, to keep available to Purchaser the services of
Seller's present officers and employees, to preserve for the benefit
of Purchaser the goodwill of Company's suppliers and customers and
others having business relations with it and to cooperate with
Purchaser in its efforts to obtain the financing of the Cash
Purchase Price in accordance with the provisions of this Agreement.
Without limiting the generality of the foregoing, prior to the
Closing, except in the ordinary course of business, Sellers will not
without Purchaser's prior written approval, cause or permit the
Company to:
(i) change its certificate of incorporation or by-laws or merge or
consolidate or obligate itself to do so with or into any other
entity;
(ii) enter into any contract, agreement, commitment or other
understanding or arrangement except for those of the type
which would not have to be listed and described under Section
7; or
(iii) Perform, take any action or incur or permit to exist any of
the acts, transactions, events or occurrences of the type
described in Section 7 which would have been inconsistent
with the representations and warranties set forth therein had
the same occurred prior to the date hereof.
(b) Sellers will cause the Company to give Purchaser and Purchaser's
attorneys, accountants and other representatives, upon reasonable
notice to Sellers, full access (so long as it does not interfere
with the Company's operations), during the Company's regular
business hours, to the Company's personnel and all properties,
documents, contracts, books and records of the Company and will
furnish Purchaser with copies of such documents (certified by the
Company's officers if so requested) and with such information with
respect to the affairs of the Company as Purchaser may from time to
time request, and Purchaser will not improperly disclose the same
prior to the Closing. Any such furnishing of such information to
Purchaser or any investigation by Purchaser shall not affect
Purchaser's right to rely on any representations and warranties made
in this Agreement. Purchaser shall not contact any employee,
customer or vender of the Company without the prior written approval
of the Company
(c) The confidentiality agreement between certain of the parties is
incorporated herein and shall remain in effect until the Closing.
(d) Until the termination of this Agreement, no Seller will directly or
indirectly, through any agent or otherwise, solicit, accept,
initiate or encourage (by providing confidential information or
otherwise) submission of proposals or offers from any person or
entity or negotiate or suggest negotiations at any future time with
or to any other person with respect to any sale of any of the assets
of the Company (other than sales of inventory in the ordinary
course) or any stock or other equity interest in the Company.
(e) Sellers will not revoke the Company's subchapter S election prior to
Closing. Sellers and the Company will not, prior to Closing, change
any tax election, tax accounting period or tax accounting method;
settle any tax dispute; or extend any statute of limitations for the
assessment or collection of any tax without the consent of
Purchaser.
(f) Notwithstanding the foregoing, the Company may, prior to Closing,
freeze its pension plan, rollover its profit sharing plan (to a
401-k type plan), and/or distribute the assets of the plans to the
plan's participants.
(g) Sellers may, until the Closing Date, update the Disclosure Schedules
attached hereto in respect of facts or events that arise or of which
they become aware after the date of this Agreement which facts
and/or events cause a variance from the representations and
warranties made by Sellers in this Agreement. Such updates shall be
delivered to Purchaser in writing. Such updates shall amend and
supplement the Disclosure Schedules delivered on the date hereof.
Notwithstanding any provision in this Agreement to the contrary,
unless Purchaser provides the Sellers with a termination notice (in
which event this Agreement is terminated and of no further force or
effect except for the confidentiality obligations of each party to
the other) within five (5) days after delivery to Purchaser of such
updates, Purchaser shall be deemed to have waived any objection to
such updates, and the representations and warranties delivered by
Sellers at Closing shall be as amended and supplemented by the
updates.
10. Conditions Precedent to Purchaser's Obligations. All obligations of
Purchaser hereunder are subject at the option of Purchaser, to the
fulfillment of each of the following conditions at or prior to the
Closing, and Sellers shall jointly and severally exert their best efforts
to cause each such condition to be so fulfilled:
(a) All representations and warranties of Sellers contained herein or in
any document delivered pursuant hereto shall be true and correct in
all material respects when made and shall be deemed to have been
made again at and as of the date of the Closing, and shall then be
true and correct in all material respects except for changes in the
ordinary course of business after the date hereof in conformity with
the covenants and agreements contained herein.
(b) All covenants, agreements and obligations required by the terms of
this Agreement to be performed by Sellers at or before the Closing
shall have been duly and properly performed in all material
respects.
(c) Since the date of this Agreement there shall not have occurred any
material adverse change in the condition (financial or otherwise),
business, properties, assets or prospects of the Company, taken as a
whole (except for distributions to Sellers).
(d) There shall be delivered to Purchaser a certificate executed by the
President and Secretary of Seller, dated the date of the Closing,
certifying that
(i) the conditions set forth in paragraphs (a), (b), and (c) of
this Section have been fulfilled.
(ii) and that a schedule that is attached to the certificate and
lists the Company's receivables and inventory as of the day
prior to the Closing (provided that the Closing is on a
Monday) is true and correct.
(e) All documents required under this Agreement to be delivered to
Purchaser at or prior to the Closing shall have been so delivered.
(f) Purchaser shall have obtained $50 million in equity financing.
(g) the Balance Sheet and the notes thereto shall reflect as of the
Balance Sheet Date a Net Worth of not less than $10,000,000;
(h) The mortgagee on ▇ ▇▇▇▇ ▇▇▇▇▇▇ shall have consented to the lease
referred to in Section 6(c)(vi), and all other requisite consents
thereto shall also have been obtained.
11. Conditions Precedent to Seller's Obligations. All obligations of Sellers
at the Closing are subject, at the option of Sellers, to the fulfillment
of each of the following conditions at or prior to the Closing, and
Purchaser shall exert its best efforts to cause each such condition to be
so fulfilled:
(a) All representations and warranties of Purchaser contained
herein or in any document delivered pursuant hereto shall be
true and correct in all material respects when made and as of
the Closing.
(b) All obligations required by the terms of this Agreement to be
performed by Purchaser at or before the Closing shall have
been duly and properly performed in all material respects.
(c) There shall be delivered to Sellers a certificate executed by
the President and Secretary of Purchaser, dated the date of
the Closing, certifying that the conditions set forth in
paragraphs (a) and (b) of this Section have been fulfilled.
(d) There shall be delivered to Sellers cancellations of all
personal guarantees that any and all Sellers have executed in
respect of obligations of the Company and that are set forth
in Seller's Disclosure Schedule under Section 7, provided that
in connection with the personal guaranties of Sellers to Bank
Leumi, Purchaser's satisfaction of the Company's debt to Bank
Leumi in full will satisfy this requirement.
(e) There shall have been no material adverse change in the
condition of Purchaser taken as a whole.
(f) Purchaser shall have satisfied the Company's debt to Bank
Leumi.
(g) Purchaser shall have, or have a commitment for, debt
financings in an aggregate amount of no less than $20,000,000.
12. Indemnification.
(a) Sellers jointly and severally hereby undertake and agree to
indemnify Purchaser (and its shareholders, officers, and directors
and their respective successors, heirs and assigns) and hold it and
them harmless against and in respect of (and shall on demand
reimburse the indmenitees for) the following:
(i) any and all loss, liability or damage suffered or incurred by
Purchaser by reason of any untrue representation, breach of
warranty or non-fulfillment of any covenant by Sellers
contained herein or in any certificate, document or instrument
delivered to Purchaser pursuant hereto;
(ii) any and all loss, liability or damage suffered or incurred by
Purchaser by reason of or in connection with any claim for
finder's fee or brokerage or other commission arising by
reason of any services alleged to have been rendered to or at
the instance of Sellers with respect to this Agreement or any
of the transactions contemplated hereby;
(iii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including,
without limitation, legal fees and expenses, incident to any
of the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
(iv) No claims for any indemnity under this Section shall be made
by Purchaser for the first $100,000 of claims for which
indemnification would otherwise be required under this
Agreement. In no event shall a claim for indemnification be
asserted by Purchaser unless such claim (or series of related
claims) equals or exceeds $10,000 individually. Total
indemnification payments by Sellers shall in no event exceed
$62,500,000. Sellers shall be entitled to a credit against
Sellers' indemnification obligations in respect of any matter
to the extent that Sellers make payment in respect of such
matter under Section 3(f) by reason of a resulting reduction
in Net Worth.
(b) Indemnification obligations of Sellers to Purchaser pursuant shall
be satisfied in the following order:
(i) First, by offset against outstanding interest under the Notes;
(ii) second, by deeming the principal amount of the Notes to be
reduced in an amount equal to the required indemnification;
all such offsets and reductions in principal amounts to be
applied among the Notes issued to the various Sellers pro rata
with their principal amounts, and such reduced principal
amounts to be payable under the Notes in equal installments
over the then remaining installments under the Notes, together
with interest as provided in the Notes;
(iii) Third, by canceling the Restricted Equity Securities issued to
Sellers in an amount equal to additional required
indemnification, such Restricted Equity Securities being
valued for this purpose at the valuation provided in Section
2(d)(iii) above;
(iv) And finally, by payment by the Sellers personally, jointly and
severally, to Purchaser. Such amounts shall accrue interest
from the later of (x) the date any such loss is incurred or
payment is made underlying the claim, or (y) the date the
demand for indemnification is made, until paid at the regular
rate provided for interest in the Notes.
(c) Purchaser hereby undertakes and agrees to indemnify Sellers (and
their respective successors, heirs and assigns), and hold them
harmless against and in respect of (and shall on demand reimburse
Sellers for) the following:
(i) any and all loss, liability or damage suffered or incurred by
Sellers by reason of any untrue representation, breach of
warranty or non-fulfillment of any covenant by Purchaser
contained herein or in any certificate, document or instrument
delivered to Purchaser pursuant hereto;
(ii) any and all loss, liability or damage suffered or incurred by
Sellers by reason of or in connection with any claim for
finder's fee or brokerage or other commission arising by
reason of any services alleged to have been rendered to or at
the instance of Purchaser with respect to this Agreement or
any of the transactions contemplated hereby;
(iii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses, including,
without limitation, legal fees and expenses, incident to any
of the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
(iv) No claims for any indemnity under this Section shall be made
by Sellers for the first $50,000 of claims for which
indemnification would otherwise be required under this
Agreement. In no event shall a claim for indemnification be
asserted by Sellers unless such claim (or series of related
claims) equals or exceeds $10,000 individually.
(d) Indemnity Procedure.
(i) In the event a party seeks indemnification pursuant to this
Agreement (the "Indemnified Party"), the Indemnified Party
shall give prompt notice to the party or parties from whom
such indemnification is sought (the "Indemnifying Party") of
the assertion of any claim, or the commencement of any action
or proceeding, in respect of which indemnity may be sought
hereunder.
(ii) The Indemnifying Party shall have the right to, and shall at
the request of the Indemnified Party, assume the defense of
any such action or proceeding at its own expense.
(iii) In any such action or proceeding, the Indemnified Party shall
have the right to retain its own counsel; but the fees and
expenses of such counsel shall be at its own expense unless
(i) the Indemnifying Party and the Indemnified Party shall
have mutually agreed to the retention of such counsel or (ii)
the named parties to any suit, action or proceeding (including
any impleaded parties) include both the Indemnifying Party and
the Indemnified Party and representation of all parties by the
same counsel would be inappropriate due to actual or potential
conflict of interests between them.
(iv) An Indemnifying Party shall not be liable under this Agreement
for any settlement effected without its consent of any claim,
litigation or proceeding in respect of which indemnity may be
sought hereunder. (v) The Indemnifying Party may settle any
claim without the consent of the Indemnified Party, but only
if the sole relief awarded is monetary damages that are paid
in full by the Indemnifying Party. The Indemnified Party
shall, subject to its reasonable business needs, use
reasonable efforts to minimize the indemnification sought from
the Indemnifying Party under this Agreement.
13. Survival of Representations, Warranties, Covenants and Obligations.
(a) Each statement, representation, warranty, indemnity, covenant and
agreement made by the Sellers in this Agreement or in any document,
certificate or other instrument delivered by the Sellers pursuant to
this Agreement or in connection herewith shall be deemed the joint
and several statement, representation, warranty, indemnity, covenant
and agreement of each Seller.
(b) Notwithstanding any right of the Purchaser to fully investigate the
affairs of the Company and notwithstanding any knowledge of facts
determined or determinable by the Purchaser pursuant to such
investigation or right of investigation, the Purchaser has the right
to rely fully upon the representations and warranties of the Sellers
contained in this Agreement.
(c) The representations, warranties, covenants and obligations of each
party shall survive the execution and delivery of this Agreement and
the Closing hereunder and shall thereafter continue in full force
for 18 full calendar months after the Closing Date. However, the
representations and warranties contained in Section 7(k) (Taxes)
shall continue until 30 days after all liability relating thereto is
barred by all applicable statutes of limitation. If any claim for
indemnification hereunder that has been previously asserted by a
party to this Agreement in accordance with Section 12(a) is still
pending at the expiration of the applicable survival period, such
claim shall continue to be subject to the indemnification provisions
of this Agreement until resolved.
(d) The indemnification provision set forth in Section 12 above is the
sole remedy of either party for any breaches by the other party of
representations, warranties or covenants contained in this
Agreement.
(e) Purchaser agrees that, in the event that there is a tax audit of the
Company involving any periods prior to the Closing, the Company will
be represented in the audit by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (and his firm) at the
direction of Sellers but at the expense of Purchaser for the first
$150,000 of such fees, and then at the expense of Sellers jointly
and severally for the balance of such fees. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and his
firm will also at the expense and direction of Purchaser (but
subject to Seller's approval to the extent that Purchaser is not
prejudiced thereby) prepare and file tax returns that are
attributable to pre-Closing periods but are due after Closing.
(f) Sellers will at the request of the Company after the Closing
reasonably cooperate with the Company in the filing of tax returns,
the defense of tax audits, and the prosecution and settlement of any
tax litigation or other tax proceedings.
14. Notices. Any and all notices or other communications required or permitted
to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally
delivered or when forwarded for priority delivery by Federal Express or
other recognized courier, addressed, if to the Company, to it at its then
headquarters address, and, if to any other party, to ▇▇▇▇▇▇▇▇ at ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ with a copy to ▇▇▇▇ ▇▇▇▇. Esq.,
Moritt ▇▇▇▇ Hamroff & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (or at such other address as any party may specify
by notice to all other parties given as aforesaid).
15. Miscellaneous.
(a) This writing constitutes the entire agreement of the parties with
respect to the subject matter hereof and may not be modified,
amended or terminated except by a written agreement specifically
referring to this Agreement signed by all of the parties hereto.
(b) No waiver of any breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach
or default of the same or similar nature.
(c) This Agreement shall be binding upon and inure to the benefit of
each corporate party hereto, its successors and assigns, and each
individual party hereto and his heirs, personal representatives,
successors and assigns.
(d) The paragraph headings contained herein are for the purposes of
convenience only and are not intended to define or limit the
contents of said paragraphs.
(e) Each party hereto shall cooperate, shall take such further action
and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement.
(f) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed one original.
(g) This Agreement and all amendments thereof shall be governed by and
construed in accordance with the law of the State of New York
applicable to contracts made and to be performed therein.
(h) The parties consent to the exclusive jurisdiction of the State and
Federal courts sitting in New York in any action arising out of or
connected in any way with this Agreement, and Sellers further agree
that the service of process or of any other papers upon them or any
of them in the manner provided for notices hereunder shall be deemed
good, proper and effective service upon them.
(i) This Agreement may be signed by facsimile and in counterparts.
(j) Purchaser and Sellers shall each be responsible for their own fees
and expenses (including attorneys fees) relation to the transaction
set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
SELLERS
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
ALLIANCE DISTRIBUTORS HOLDING INC.
By:
---------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
SCHEDULE 3(e)
Additional Matters relating to the Calculation of EBITDA and Net Worth
In calculating Net Worth or EBITDA, as noted:
1. Bonuses distributed to the Shareholders (Sellers) in respect of taxes will be
added back to EBITDA.
2. Legal and accounting fees incurred in respect of the transaction contemplated
by the Agreement will be added back to EBITDA.
3. Accrual of interest and penalties in respect of all periods prior to Closing
for corporate income tax will be added back to EBITDA to the extent accrued
during 2005. in respect of corporate income in all periods prior to Closing.
4. There will be added to Net Worth the amount (not in excess of $125,000) by
which the market value of the trucks owned by the Company exceed the book value
of these trucks.
5. All rebates received by the Company prior to and including the ninetieth day
following the Closing Date that are demonstrated to be in respect of sales made
in 2005 but not accrued in 2005 will be added back to Net Worth.
6. Since all amounts due from/to related parties and all amounts due from/to
shareholders will be released by the general releases referred to in Section
6(a), such released amounts will not be reflected in calculating Net Worth.
Exhibit (2)(c)
Principal Sum: [aggregate of $______ for all Holders]
Holder:
Holder's Address:
Dated: [___________]
Maturity Date: [third anniversary of date of issuance]
NOTE (the "Note")
ALLIANCE DISTRIBUTORS HOLDING INC.
FOR VALUE RECEIVED, ALLIANCE DISTRIBUTORS HOLDING INC., a Delaware corporation
(hereinafter called the "Company" or the "Borrower"), with a principal office at
_________________________________________, hereby promises to pay to the order
of Holder the principal sum set forth above (the "Principal Amount"), together
with interest.
Interest shall accrue on the Principal Amount at the prime rate (as published by
the Wall Street Journal from time to time) plus one percent, except that during
any Subordination Period (as defined below) this Note shall accrue interest at
the rate equal to the lesser of 15 percent per annum, or prime plus 4.25%,
provided that in no event shall interest during such Period accrue at a rate (i)
that is less than prime plus 1% or (ii) that exceeds the maximum permitted by
law. Interest shall accrue and be calculated on the unpaid principal balance of
this Note outstanding from time to time on the basis of a three hundred and
sixty day year and the actual number of days elapsed.
The Principal Amount shall be payable in 36 equal monthly payments of $_____ on
the first day of each of the 36 months beginning on the first day of the first
month that is at least 15 days after the Closing. The Company shall pay all
accrued interest together with each installment of principal.
This Note is non-negotiable until the 18th month anniversary of the date hereof.
Principal and interest otherwise payable hereunder are subject to offset and
reduction to the extent and in the manner provided in the Stock Purchase
Agreement among the Company, Holder and certain other parties dated ___________
(the "Purchase Agreement"). Prospective purchasers and assignees of this Note
should determine in advance whether such offsets and reductions have been made
or may be made prospectively. Except as aforesaid, this Note shall be paid
without claim of set-off, defense, counterclaim or deduction of any type or
nature or for any cause whatsoever.
1. Holder acknowledges that this Note has not been registered under the
Securities Act of 1933 (the "Act"), and covenants and agrees that such Holder is
taking and holding this Note for investment purposes and not with a view to, or
for sale in connection with, a distribution thereof.
2. Subordination. The Company's indebtedness to Holders under this Note shall
be subordinate to indebtedness from time to time outstanding to Senior Lenders
("Senior Lenders" means ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ or any successor or substitute
bank or institutional lender) to the fullest extent from time to time requested
by the Senior Lenders, provided that
(a) During the first 18 months of the term of this Note, the Company will
be permitted to make scheduled monthly principal and interest payments on this
Note, provided that the Senior Lenders, by notice to the Company and Holder, may
prohibit such payments if either (i) the Company has failed to make a payment to
the Senior Lenders when the Senior Lenders demanded payment (unless such failure
was subsequently cured) or (ii) the Company has to borrow above its availability
in order to make the payment.
(b) During the balance of the term of this Note, the Company will be
permitted to make scheduled monthly principal and interest payments on this
Note, provided that the Senior Lenders, by notice to the Company and Holder, may
prohibit such payments if (i) the Company has failed to make a payment to the
Senior Lenders when the Senior Lenders demanded payment (unless such failure was
subsequently cured), or (ii) after giving effect to the payments on the note the
Company will not be in compliance with financial covenants, or (iii) the Company
has to borrow above his availability in order to make the payment.
(c) The Company and the Senior Lenders will agree that the Company will
leave undrawn a minimum of $500,000 of availability at all times until this Note
is paid in full, it being understood, however, that such amounts may be drawn
only to pay scheduled payments of principal and interest under this Note. If any
amount aforesaid is drawn to pay principal and interest under this Note, the
Company will replenish such drawn amount within 21 days thereafter. This
requirement is referred to herein as the Minimum Availability Requirement.
(d) "Availability" is determined exclusively by reference to the formula
provisions of the Company's agreement with the Senior Lenders (e.g. percentage
of Eligible Receivables and Eligible Inventory against which the Company may
borrow) without reference to any other covenants or provisions.
(e) Holder will be permitted to retain all funds paid to it as permitted
by this proviso and will not be deemed to hold such funds in trust or otherwise
for the benefit of the Senior Lenders.
The term "Subordination Period" means any period during which by reason of the
subordination provided in this Section the Company does not make to Holder any
payment of principal or interest that would otherwise be required hereunder.
3. Acceleration:
(a) A default with respect to this Note shall exist if any of the
following shall occur:
(i) The Company shall fail to make any payment of interest or
principal on this Note when due, or the Company shall otherwise breach any
other provision of this Note, and such failure to make payment shall
continue for five business days or such other breach shall continue for 20
business days, in either case after written notice by Holder to the
Company, provided that no such notice or cure period applies after two
payment defaults (whether or not cured) within any twelve month period.
(ii) A receiver, liquidator or trustee of the Company or of a
substantial part of its properties shall be appointed by court order and
such order shall remain in effect for more than 45 calendar days; or the
Company shall be adjudicated bankrupt or insolvent; or a substantial part
of the property of the Company shall be sequestered by court order and
such order shall remain in effect for more than 45 calendar days; or a
petition to reorganize the Company under any bankruptcy, reorganization or
insolvency law shall be filed against the Company and shall not be
dismissed within 45 calendar days after such filing.
(iii) The Company shall file a petition in voluntary bankruptcy or
request reorganization under any provision of any bankruptcy,
reorganization or insolvency law, or shall consent to the filing of any
petition against it under any such law.
(iv) The Company shall make an assignment for the benefit of its
creditors or consent to the making of any such assignment, or admit in
writing its inability to pay its debts generally as they become due, or
consent to the appointment of a receiver, trustee or liquidator of the
Company, or of all or any substantial part of its properties.
(v) The Company defaults under the promissory note delivered in
connection with the net worth adjustment under the Purchase Agreement.
(b) If a default shall occur, or if the Company sells all or substantially
all of its assets (or the assets of Foto Electric Supply Co., Inc. ("FESCO")),
or a majority of the outstanding stock of the Company (or of FESCO) is sold to
an unaffiliated entity or is converted to equity of an unaffiliated entity, then
the Holder may, in addition to Holder's other remedies, by written notice to the
Company (an "Acceleration Notice") declare the principal amount of this Note,
together with all interest accrued thereon, to be due and payable immediately.
Upon any such declaration, such amount shall become immediately due and payable
subject to the subordination provisions in Section 2 above.
4. Borrower may prepay this Note in whole or in part at any time without
premium or penalty. Permitted partial prepayments shall be applied first to
accrued and unpaid interest and principal payments past due, and then against
installments of principal due hereunder in reverse order of maturity. Permitted
partial prepayments shall be in amounts no less than $25,000, and shall be
transmitted with notice that it is a prepayment.
5. [omitted]
6. Assignment. This Note is assignable by Holder on or after the 18th month
anniversary of the date hereof provided that Holder gives notice of such
assignment to the Company which notice includes the name and address of the
assignee.
7. Miscellaneous.
(a) All notices and other communications required or permitted to be given
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt or refusal) by delivery to the address stated above
(or any other address to which the parties have been notified in accordance with
this section) in person, by telegram, by facsimile, recognized overnight mail
carrier, telex or other standard form of telecommunications, or by registered or
certified mail, postage prepaid, return receipt requested.
(b) This Note and all amendments thereof shall be governed by and
construed in accordance with the law of the State of New York applicable to
contracts made and to be performed therein.
(c) Holder and the Company hereby each consent to the exclusive
jurisdiction of the State and Federal courts sitting in New York in any action
arising out of or connected in any way with this Note.
(d) This Note may be signed by facsimile and in counterparts.
(e) The Holder of this Note shall be entitled to recover his costs of
collecting on this Note (including without limitation reasonable legal fees),
and such costs shall be deemed added to the principal amount of this Note.
(f) The Company waives protest, notice of protest, presentment, dishonor,
notice of dishonor and demand.
(g) This Note shall be paid without claim of set-off, defense,
counterclaim or deduction of any type or nature or for any cause whatsoever,
except that the Company may offset against payments as expressly provided, and
only to the extent provided, in the Purchase Agreement.
(h) This Note is binding on the Company and its successors.
(i) This Note is payable to the Holder and his heirs, representatives and
estate.
(j) This Note may not be changed or terminated orally, but only in a
writing signed by both the Company and the Holder, and no waiver shall be
applicable except in the specific instance in which given.
(k) The Section headings in this Note are for convenience only; and the
term "his" shall also mean "hers" as the context requires.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on the
date set forth above.
ALLIANCE DISTRIBUTORS HOLDING INC.
By:
---------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
AMENDMENT TO PROMISSORY NOTE EXHIBIT
To the Stock Purchase Agreement dated January 2, 2006
The undersigned acknowledges and agrees that the Exhibit is deemed to provide
that Holder is not required to agree to any subordination provision or concept
that is both (i) inconsistent with the attached marked form of subordination
agreement and (ii) not expressly provided for in the Note.
Dated :
-------------------------
ALLIANCE DISTRIBUTORS HOLDING INC.
By:
---------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
EXHIBIT 6(c)(i)
EMPLOYMENT AGREEMENT
This Agreement between ALLIANCE DISTRIBUTORS HOLDING INC., a Delaware
corporation (the "Company"), and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("Executive") is hereby
entered into on December __, 2005 ("Effective Date").
In consideration of the mutual promises, terms, covenants and conditions set
forth herein and the performance of each, it is hereby agreed as follows:
1. Employment and Duties. During the period beginning with the Effective Date
and ending on the 30th month anniversary of the Effective Date (the "Term"), the
Company shall employ Executive on the terms and conditions herein set forth.
Executive's title shall be President. Executive shall perform such duties as are
commensurate with his title. Executive accepts this employment upon the terms
and conditions herein contained and agrees to devote his full business time
attention and efforts \ to promote and further the business and services of the
Company. Subject to a separate Confidentiality and Non-Compete Agreement between
the Company and Executive, Executive may during his personal time continue his
personal business involvements, provided that such involvements are not material
in respect of time committed.
2. Compensation and Other Benefits. For all services rendered by Executive to
the Company, the Company shall compensate the Executive as follows:
(a) Base Salary and Bonus. Executive's base salary and bonus from time
to time during the Term shall be equal to the same base salary and
bonus then paid by the Company to ▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), provided
that the base salary will be at an annual rate not less than
$450,000. The payment of base salary and bonuses shall be subject to
all applicable federal, state and local withholding taxes, social
security deductions and similar obligations. Such compensation shall
be paid in accordance with the Company's normal payroll practices,
but no less than twice per month.
(b) Vacation. Executive shall be entitled to five weeks of paid vacation
during each 12-month period of his employment hereunder at times
mutually acceptable to Executive and the Company. Unused vacations
will be carried forward and accumulate and paid upon termination.
(c) Other Compensation and Benefits. Executive shall be entitled to
participate in the Company's group health insurance plan and shall
be provided with all executive level benefits and such other
benefits and perquisites as the Company may from time to time make
available. Notwithstanding the foregoing, Executive may choose his
health insurance plan and the Company will pay the entire premium.
(d) Reimbursement. The Company shall reimburse Executive for properly
documented expenses which are incurred by Executive on behalf of the
Company.
(e) Car. The Company will lease a car of Executive's choosing for
Executive's use, including providing the insurance coverage
therefor. The Company will also reimburse him for garage, fuel and
maintenance costs for this car.
(f) Grant of Options. The Company will during the Term grant to
Executive the same number of options that it from time to time
grants to ▇▇▇▇▇▇, if any, during the Term.
(g) The Company shall provide Executive with office, facilities and
staffing commensurate with his position, such facility to be located
in Brooklyn, Queens or Manhattan.
(h) Except for attendance at trade shows, Executive will be required to
travel outside of the Metropolitan New York City area no more than
one day per month.
3. Termination; Rights of Termination.
(a) This Agreement and Executive's employment may terminate in any one
of the following ways:
(i) The death of Executive;
(ii) A notice of resignation by the Executive presented to the
Company;
(iii) The Board of Directors of the Company may terminate
Executive's employment after ten days' written notice to
Executive for Cause, which shall be defined to mean:
(A) The failure by Executive to substantially perform his
duties hereunder, other than (except as set forth in
Section (B)) any such failure resulting from Executive's
incapacity due to physical or mental illness, if, after
being notified in writing by the Company that he has
failed to perform his duties hereunder (which provides
specifics as to the failure) and has been given 30 days
to cure any such failure, such failure is not cured;
(B) If, because of illness or physical or mental disability
or other incapacity ("Disability") which continues for a
period in excess of four consecutive months in any
consecutive 16-month period, Executive is unable to
perform his duties under this Agreement; or
(C) The conviction of Executive for any felony from which
all appeals have been exhausted.
(iv) It is understood, however, that no failure to achieve
financial or other business results shall be a basis for
termination of Executive for Cause.
(v) Executive may terminate his employment for Good Reason (as
hereinafter defined) at any time.
(b) For purposes of this Agreement, Good Reason shall mean:
(i) The assignment to Executive of any duties materially
inconsistent with Executive's positions, duties, authority,
responsibilities or reporting requirements as set forth in
Section 1; or
(ii) At any time during the term of this Agreement, a reduction or
material delay in payment of Executive's compensation, as set
forth herein, and (to the extent in the Company's control)
equity-based compensation and benefits from those required to
be provided in accordance with the provisions of this
Agreement, or the breach of any other material provision of
this Agreement; or
(iii) Default by the Company in the making of any payment to
Executive that the Company is required to make to him under a
promissory note dated as of this date or under a Stock
Purchase Agreement dated _______, which default shall not have
been cured within 10 days after notice thereof by Executive to
the Company.
(c) In the event of a termination of Executive's employment by the
Company other than for Cause, or by Executive for Good Reason,
Executive shall in addition to his other rights and remedies be
entitled to receive in a lump sum an amount (net of withholding and
social security taxes) equal to a pro rated bonus for the year of
termination and three times the base salary that would be payable to
him by the Company from the date of termination through the balance
of the Term had his employment hereunder continued through such
date.
(d) Executive shall not be obligated to seek other employment in
mitigation of the amounts payable under any provision of this
Agreement. The obtaining of any such other employment shall in no
event effect any reduction of the Company's obligations to make the
payments and arrangements required to be made under this Agreement.
4. Confidentiality and-Non-Compete Agreement: The parties confirm and
incorporate herein the Confidentiality and Non-Compete Agreement entered between
them of even date herewith.
5. Indemnification.
(a) The Company shall indemnify Executive to the fullest extent
permitted by law.
(b) The Company shall obtain and maintain, during the Term, Directors
and Officers Insurance in an amount no less than $3 million.
6. Miscellaneous.
(a) Complete Agreement. This agreement sets forth in full all
understandings of the parties with respect to the subject matter
hereof, and it may be amended or terminated only in writing.
(b) Costs. In the event that the Executive shall prevail in any legal
proceedings between the Company and the Executive as to the
interpretation of this Agreement, including the defense by Executive
against legal proceedings instituted by the Company, the Company
shall reimburse Executive for his out of pocket costs and expenses
with respect thereto, including reasonable attorney's fees and
expenses.
(c) Notice. Any and all notices or other communications required or
permitted to be given under any of the provisions of this Agreement
shall be in writing and shall be deemed to have been duly given when
personally delivered or when forwarded for priority delivery by
Federal Express or other recognized courier, addressed, if to the
Company, to it at its then principal offices, attn: ▇▇▇ ▇▇▇▇▇▇, and,
if to the Executive, to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ at ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ with a copy to ▇▇▇▇ ▇▇▇▇. Esq., Moritt ▇▇▇▇
Hamroff & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ (or at such other address as any party may specify by
notice to all other parties given as aforesaid).
(d) Governing Law; Resolution of Disputes; Service of Process. This
Agreement shall in all respects be construed according to the laws
of the State of New York. Service of process shall be effective when
given in the manner provided for notices hereunder. Any legal action
resulting from, arising under, out of or in connection with,
directly or indirectly, this Agreement shall be commenced
exclusively in the Supreme Court, State of New York, County of
Nassau or the U.S. District Court for the Eastern District of New
York. All parties to this Agreement hereby submit themselves to the
jurisdiction of any such court, and agree that service of process on
them in any such action, suit or proceeding may be effected by the
means by which notices are to be given under this Agreement. In the
event of litigation by a party hereto to enforce its rights
hereunder, the prevailing party shall be entitled to recover its
reasonable attorney's fees, costs and disbursements.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
aforesaid.
ALLIANCE DISTRIBUTORS HOLDING INC.
BY:
---------------------------------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman and Chief Executive Officer
EXECUTIVE:
-------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
EXHIBIT 6(c)(iv)
EMPLOYMENT AGREEMENT
This Employment Agreement between ALLIANCE DISTRIBUTORS HOLDING INC., a Delaware
corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("Employee") is hereby
entered into on December __, 2005 ("Effective Date").
In consideration of the mutual promises, terms, covenants and conditions set
forth herein and the performance of each, it is hereby agreed as follows:
7. Duties: The Company hereby engages Employee to assist the Company on tasks
reasonably assigned to him from time to time in writing by the Chief Executive
Officer of the Company. Employee hereby accepts this engagement upon the terms
and conditions herein contained and agrees to devote a portion of his business
time, attention, and efforts to perform such duties, subject, in Employee's sole
discretion, to his other personal and business commitments. Such duties shall be
performable in person or by telephone, wherever Employee may be. Employee shall
not be required to provide any minimum number of hours to the Company.
8. Compensation and Other Benefits. For all services rendered by Employee to
the Company, the Company shall compensate the Employee a salary at the rate of
$150,000 per year. The payment of salary shall be subject to all applicable
federal, state and local withholding taxes, social security deductions and
similar obligations. Such compensation shall be paid in accordance with the
Company's normal payroll practices, but no less than twice per month.
Additionally, the Company shall provide Executive with (i) an automobile of
Employee's choosing (substantially similar to the automobile utilized by
Employee immediately prior to the date hereof), plus insurance, fuel and
maintenance in connection therewith, (ii) direct payment, or prompt
reimbursement for, the cost of the premiums for family coverage by the health
insurance carrier and plan of Employee's choosing, (iii) continued use of his
office and (iv) continued use of his present designated parking space.
9. Termination; Rights of Termination.
(a) The term of this Agreement is two years, provided that Employee
shall be entitled to continue to use his office for as long as the
Company or any of its affiliates leases the premises it currently
occupies.
(b) This Agreement and Employee's consultancy may terminate in any one
of the following ways:
(i) The death of Employee;
(ii) A notice of resignation by the Employee presented to the
Company;
(iii) The Board of Directors of the Company may terminate Employee's
consultancy after ten days' written notice to Employee for
Cause, which shall be defined to mean:
(A) The failure by Employee to substantially perform his
duties hereunder, other than (except as set forth in
Section (B)) any such failure resulting from Employee's
incapacity due to physical or mental illness, after
being notified in writing by the Company that he has
failed to perform his duties hereunder (which notice
provides specifics as to such failure) and has been
given 30 days to cure any such failure and has not cured
such failure within such time;
(B) If, because of illness or physical or mental disability
or other incapacity ("Disability") which continues for a
period in excess of four consecutive months in any
consecutive 16-month period, Employee is unable to
substantially perform his duties under this Agreement;
or
(C) The conviction of Employee for any felony from which all
appeals have been exhausted.
(iv) It is understood, however, that no failure to achieve
financial or other business results shall be a basis for
termination of Employee for Cause.
10. Confidentiality and-Non-Compete Agreement: The parties confirm and
incorporate herein the Confidentiality and Non-Compete Agreement entered between
them of even date herewith.
11. Miscellaneous.
(a) Complete Agreement. This agreement sets forth in full all
understandings of the parties with respect to the subject matter
hereof, and it may be amended or terminated only in writing.
(b) Costs. In the event that the Employee shall prevail in any legal
proceedings between the Company and the Employee as to the
interpretation of this Agreement, including the defense by Employee
against legal proceedings instituted by the Company, the Company
shall reimburse Employee for his out of pocket costs and expenses
with respect thereto, including reasonable attorney's fees and
expenses.
(c) Notice. Whenever any notice is required hereunder, it shall be given
in writing addressed to the Company at its then principal offices,
attn: ▇▇▇ ▇▇▇▇▇▇, and to Employee at ____________ _____________.
(d) Governing Law; Resolution of Disputes; Service of Process. This
Agreement shall in all respects be construed according to the laws
of the State of New York. Service of process shall be effective when
given in the manner provided for notices hereunder.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
aforesaid.
ALLIANCE DISTRIBUTORS HOLDING INC.
BY: ------------------------------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman and Chief Executive Officer
EMPLOYEE:
------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
EXHIBIT 6(C)
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
The undersigned (the "Executive") is a shareholder or an employee of FOTO
ELECTRIC SUPPLY CO., INC., ("Fesco"), and wishes to induce ALLIANCE
DISTRIBUTORS HOLDING INC. (the "Corporation") to purchase all of the
capital stock of Fesco concurrently herewith. Fesco and the Corporation
are each hereafter sometimes referred to as the "Company."
In consideration of the foregoing and the Executive's being employed or
retained to perform or to continue to perform services for the Company
(the period of such employment or retention being referred to herein as
the "Employment Period"), Executive hereby agrees as follows:
1. Obligation of Confidentiality.
1.1 "Confidential Information" means any information and data of a
confidential nature disclosed by the Company whether in oral, written, graphic,
or machine-readable form, but does not include any information which (a) at the
time of disclosure was part of the public domain; (b) after disclosure becomes
part of the public domain by publication or otherwise, except by breach of this
agreement by Executive; (ca) is independently created or discovered by Executive
at any time more than three months after the termination of the Employment
Period; or (d) at any time after the termination of the Employment Period is
disclosed to Executive by a third party not known to Executive to be under any
confidentiality obligation to the Company.
1.2 The Executive hereby agrees to hold the Company's Confidential
Information in strict confidence and not to disclose such Confidential
Information to any third parties nor make use of such Confidential Information
for its own benefit or for the benefit of another, or for any use other than in
the course of providing services for the Company in the course of employment.
1.3 Upon the written request of Company or termination of the Executive's
relationship with the Company, for any reason whatsoever, the Executive shall
return to Company and/or destroy all Confidential Information, and all copies
thereof, properly belonging to Company, unless otherwise instructed in writing
by Company. In addition, upon request by the Company, the Executive shall
promptly deliver a written certification affirming that Executive has complied
with this Section.
1.4 The obligations of confidentiality set forth in this Section 1 shall
bind the Executive during his employment or retention by the Company and at all
times thereafter.
2. Obligation Not To Compete
2.1 The term "Restricted Period" means the period beginning on the date of
this Agreement and ending on the later of (i) the fifth anniversary of the date
of this Agreement, or (ii) [For ▇▇▇▇▇▇▇▇ and ▇▇▇; three (3) years] [For ▇▇▇▇▇;
two (2) years] after the termination of his employment or retention by the
Company or Executive for any reason or for no reason and whether or not for
cause.
2.2 During the Restricted Period, except on behalf of the Company,
Executive will not anywhere directly or indirectly (whether through family
members or other affiliated parties or otherwise)
2.2.1 be employed or retained by, provide financing for, or solicit,
contract or offer to provide or sell or purchase (i) product or service similar
to or in competition with any product or service purchased or provided by the
Company at the time of termination of his employment or during the twelve months
immediately preceding such termination, or (ii) any product or service that is
provided or sold by any division of any supplier that during such period sold
any products to the Company; or
2.2.2 otherwise compete with the Company, either directly or
indirectly, in respect of any product or service aforesaid.
2.3 In addition to the restrictions that apply during the Restricted
Period, but only during that the portion of the Restricted Period that is during
the period of his employment with the Company, except on behalf of the Company,
Executive will not anywhere directly or indirectly (whether through family
members or other affiliated parties or otherwise)
2.3.1 contact, purchase from, or distribute products or services
for, any person or entity who was a supplier to the Company at any time, or any
affiliate of any such person, or
2.3.2 contact, sell any products or services to any person or entity
who was a customer of the Company at any time, or any affiliates of any such
person.
provided that ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ may provide passive short-term financing to
unaffiliated persons who purchase or sell products not described in Section
2.2.1 or 2.2.2 to persons or entities referred to in Sections 2.31 and 2.3.2,
provided that ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ does not himself or though any of his
affiliates contact or deal with any such person or entity or representative
thereof.
3. No-Hire. Executive covenants that at all times during the Restricted
Period, Executive will not directly or indirectly:
3.1 solicit or hire or retain any person who was an Executive or
consultant of the Company at any time during the then preceding two years, or
3.2 encourage or solicit any person to leave the employ of the Company;
provided this Section 3 shall not prohibit any member of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇'▇
family from soliciting or hiring or terminating any other member of such family
or ▇▇▇▇▇ ▇▇▇▇▇.
4. Intellectual Property.
4.1 All inventions, software, ideas, strategies, methods, trade secrets,
and associated documentation, whether or not patentable or copyrightable, made
or conceived solely or jointly by Executive during the Executive's employment at
Fesco or during the Employment Period, which relate in any manner to the actual
or anticipated business, including research and development, of the Company or
are suggested by Executive or result from work assigned to Executive or work
performed by Executive ("Intellectual Property"), shall be the property of the
Company. In addition, Executive agrees:
a. To promptly and fully disclose in writing to the Company all such
Intellectual Property;
b. To cooperate with the Company in all proper ways to protect the
Company's rights therein, including the execution of papers deemed by the
Company to be desirable or necessary to enable the Company to apply for, secure,
and maintain patent or copyright protection thereon in the United States and in
foreign countries;
4.2 To the extent the Company's ownership of the Intellectual Property is
ever at issue, Executive, on behalf of Executive and Executive's heirs and
successors in interest, does hereby irrevocably assign, free of any liens or
encumbrances, all my worldwide rights, title and interest in and to said
Intellectual Property to the Company, including, without limitation, any and all
copyrights and all patents of said Intellectual Property, to have and to hold
unto its successors and assigns, and this Agreement shall be proper evidence
thereof.
5. Remedies. In the event of breach or threatened breach by Executive of any
provision of this Agreement, the Company shall be entitled to apply for relief
by temporary restraining order, temporary injunction, or permanent injunction,
without requirement of posting a bond or any other security, and to all other
relief to which it may be entitled, including any and all monetary damages which
the Company may incur as a result of said breach, violation or threatened breach
or violation.
6. No Offsets. The validity of this Agreement and the covenants thereunder
shall in no way be affected by any valid or invalid claims or causes of action
that Executive has or will have against the Company for any matter or thing,
including without limitation, the termination by the Company of Executive's
employment without cause, breach by the Company of any agreement with the
Company or the failure by the Company to pay any amount to the Executive.
7. Miscellaneous.
7.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and embodies all of the understandings and
obligations between the parties with respect to the subject matter hereof. This
agreement supersedes all prior agreements entered into by the parties with
respect to the subject matter hereof. In the event of any inconsistency between
this Agreement and any other agreement with the Executive, this Agreement shall
govern and be binding. This Agreement shall not be changed, modified or amended
except in a writing signed by both parties.
7.2 This Agreement is not an employment agreement and gives no right to
Executive to be retained for any period or any duration, or any other rights.
7.3 To the extent any provision of this Agreement is held to be
unenforceable or invalid, the remainder of the Agreement shall be remain in full
force and effect and the Agreement shall be interpreted to give effect to the
such provision to the maximum extent permitted by law.
7.4 No failure or delay (in whole or in part) on the part of either party
hereto to exercise any right or remedy hereunder will impair any such right or
remedy, operate as a waiver thereof, or affect any right or remedy hereunder.
All rights and remedies hereunder are cumulative and are not exclusive of any
other rights or remedies provided hereunder or by law.
7.5 Notice. Any and all notices or other communications required or
permitted to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally delivered or
when forwarded for priority delivery by Federal Express or other recognized
courier, addressed, if to the Company, to it at its then principal offices,
attn: ▇▇▇ ▇▇▇▇▇▇, and, if to the Executive, to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ at ▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ with a copy to ▇▇▇▇ ▇▇▇▇. Esq., Moritt ▇▇▇▇ Hamroff &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (or at
such other address as any party may specify by notice to all other parties given
as aforesaid).
7.6 Governing Law; Resolution of Disputes; Service of Process. This
Agreement shall in all respects be construed according to the laws of the State
of New York. Service of process shall be effective when given in the manner
provided for notices hereunder. Any legal action resulting from, arising under,
out of or in connection with, directly or indirectly, this Agreement shall be
commenced exclusively in the Supreme Court, State of New York, County of Nassau
or the U.S. District Court for the Eastern District of New York. All parties to
this Agreement hereby submit themselves to the jurisdiction of any such court,
and agree that service of process on them in any such action, suit or proceeding
may be effected by the means by which notices are to be given under this
Agreement.
7.7 Executive acknowledges receipt of this Agreement.
7.8 This Agreement may be signed by facsimile and in counterparts.
Dated _________ 2006
ALLIANCE DISTRIBUTORS HOLDING INC.
By: ▇▇▇ ▇▇▇▇▇▇ Executive __________________
Name: ▇▇▇ ▇▇▇▇▇▇ Name: ______________________
Title: Chief Executive Officer Date:_______________________
Date: ____________________
RIDER TO LEASE ▇▇▇▇▇▇▇
▇ ▇▇▇▇ ▇▇▇▇▇▇ REALTY LLC, AS LANDLORD
AND ALLIANCE DISTRIBUTORS HOLDING INC., AS TENANT
DATED _________________, 200_
================================================================================
37. (a) PREMISES. The Premises shall be defined as the land and structure
located at ▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The entire Premises are
leased to Tenant hereunder and Tenant is entitled to immediate occupancy
thereof, provided that until June 30, 2006 E-Tronics may continue to occupy that
part of the Premises it currently occupies, and provided that commencing no
later than July 1, 2006, time being of the essence, Tenant shall be entitled
also to occupy the portion of the Premises currently occupied by E-Tronics. The
Premises may be used by Tenant for the purposes of office and warehouse
activities, and for any other lawful purposes as the Landlord consents to in
writing.
(b) Landlord hereby assigns to Tenant the benefits of any "Economic
Designated Zone" or similar status that applies to the Premises.
(c) TERM. This Lease shall be for a term (the "Original Term") of five (5)
years beginning on the commencement date as defined in sub-paragraph (d) unless
sooner terminated pursuant to the other terms and conditions of this Lease,
provided that by written notice given by Tenant to Landlord at least 90 days
prior to the expiration of the Original Term, this Lease shall be extended for
an additional five-year term (the "Additional Term"). The Original Term and the
Additional Term, if any, are referred to herein as the "Term." The last date of
the Term, or the earlier termination hereof, shall hereinafter be referred to as
the Expiration Date.
(d) COMMENCEMENT DATE. The Lease Commencement Date shall be the date of
this Lease.
(e) LEASE YEAR. The first Lease Year shall be the twelve (12) month period
of time from the first day of the first month that begins after the Commencement
Date. Each Lease Year thereafter shall be successive periods of twelve (12)
months.
38. FIXED RENT. (a) Tenant's obligation to pay fixed rent shall commence
on the Commencement Date. Tenant agrees to pay to Landlord, during the Term,
annual fixed rent (the "Fixed Rent") in equal monthly installments ("Monthly
Installments") without prior demand and without any set off or deduction
whatsoever. The Monthly Installments will be due and payable on the Commencement
Date and on the first day of each and every month thereafter for the Term. All
Monthly Payments and payments of Additional Rent (defined in Paragraph 40
hereof) shall be sent to the Landlord at the address herein set forth or such
other address as Landlord may designate. The Fixed Rent during the first three
Lease Years of the Term shall be as follows: $1,080,000.00, with each Monthly
Installment being $90,000.00, except that during the occupancy by E-Tronics as
aforesaid, the Fixed Rent and the Monthly Installments, as well as Additional
Rent referred to below, shall each be reduced by 24.5%. The first month's
Monthly Installment, shall be paid by Tenant upon execution hereof.
(b) The Fixed Rent shall be increased by two (2.5%) per annum of the first
day of the fourth Lease Year and on the first of each Lease Year thereafter
(including each Lease Year during the Additional Term, if any), such increases
to be on a cumulative, compounded basis.
(e) In the event that the obligation to pay Fixed Rent or Additional Rent
shall commence on any day other than the first of the month, the Fixed Rent and
Additional Rent shall be pro-rated for the period upon which the obligation to
pay rent accrues, to the last day of the calendar month.
39. TAXES. (a) The Tenant agrees to pay, as Additional Rent during the
Term hereof, 100% ("Proportionate Share") of any and all real estate taxes
and/or other taxes, or assessments levied or assessed on or against the Premises
(collectively, the "Taxes"). Tax bills or other documents supplied by Landlord
to Tenant shall be conclusive evidence of the amount of such Taxes and shall be
used for the calculation of the amounts to be paid by the Tenant.
(b) Taxes shall be pro-rated for any partial year during the Term, as
applicable.
(c) Landlord hereby appoints Tenant as Landlord's attorney in fact to
file, at Tenant's expense, certiorari and related petitions and actions to seek
to reduce real estate taxes otherwise payable by Tenant.
40. ADDITIONAL RENT. (a) All costs and expenses which Tenant assumes or
agrees to pay pursuant to this Lease (including without limitation Taxes) shall
at Landlord's election be treated as additional rent ("Additional Rent"), and,
in the event of nonpayment, Landlord shall have all the rights and remedies
herein provided for in the case of nonpayment of Fixed Rent.
(b) If Tenant shall default in making any payment required to be made by
Tenant (other than the payment of Fixed Rent required by this Lease), or shall
default in performing any term, covenant or condition of this Lease on the part
of the Tenant to be performed, and after ten (10) day written notice thereof has
been given Tenant, Landlord, at its option, may, (but shall not be obligated
to), make such payment or, on behalf of Tenant, expend such sum as may be
necessary to perform and fulfill such term, covenant and condition, including
reasonable attorney's fees. In such event, any and all sums so expended by
Landlord, with interest thereon at the highest rate permitted by law, but no
more than eighteen (18%) percent per annum from the date of such expenditure
shall be deemed to be Additional Rent, and shall be repaid by Tenant to Landlord
on demand, but no such payment or expenditure by Landlord shall be deemed a
waiver of Tenant's default nor shall it affect any other remedy of Landlord by
reason of such default.
(c) Payment of Additional Rent shall be made by Tenant to Landlord within
ten (10) days after Landlord shall have presented Tenant with an invoice
therefor.
41. SECURITY DEPOSIT. (a) Simultaneously with the execution of the within
Lease, Tenant shall pay to Landlord, the sum of $180,000.00 as security for the
full and faithful performance by the Tenant of all the terms, covenants and
conditions of this Lease upon its part to be performed (the "Security Deposit"),
which sum shall be deposited by Landlord in an interest bearing account (which
interest will be added to the Security Deposit), and shall be returned to the
Tenant after the time fixed as the expiration of the Term herein, provided the
Tenant has fully and faithfully carried out all of said terms, covenants and
conditions on its part to be performed. In the event of a bona fide sale,
subject to this Lease, the Landlord shall have the right to transfer the
security to the purchaser for the benefit of the Tenant, which purchaser shall
continue to hold the Security Deposit in a separate account as aforesaid, and
the Landlord shall be considered released by the Tenant from all liability for
the return of such security to the extent transferred to the purchaser, and the
Tenant agrees to look to the new Landlord solely for the return of the said
security, and it is agreed that this shall apply to every transfer or assignment
made on the security to a new landlord.
(b) The Security Deposit shall not be mortgaged, assigned or encumbered by
the Tenant without the express written consent of the Landlord.
42. NO LANDLORD'S WORK. Landlord shall not be required to perform any work
in connection with Tenant's occupancy of the Premises under this Lease, except
for structural repairs as expressly set forth in this Lease.
43. ALTERATIONS. The Tenant may, at its own expense, make such
alterations, improvements, additions and changes to the Premises in order to
equip and operate its business for the purposes and uses set forth herein
subject to the following:
(a) Such alterations, improvements, additions and changes shall be
to the interior of the Premises only; and any alterations, improvements,
additions and changes to the Premises shall require the prior, written
consent of the Landlord, which shall not be unreasonably withheld or
delayed;
(b) The Tenant shall not tear down or demolish any of the
improvements on the Premises, or make any change or alterations in such
existing improvements which, when completed, will diminish the value of
the Premises without the prior written consent of the Landlord, which
shall not be unreasonably withheld or delayed;
(c) The Tenant shall not make any change in or improvement,
additions or alteration to the Premises which will violate the terms of
any mortgage on the Premises, or of any policy of insurance in force with
respect to the Premises.
(d) All alterations, improvements, additions and changes shall be
performed in a good and workmanlike manner and shall conform to all
building codes, ordinances, rules and regulations of any municipality or
governmental authority having jurisdiction thereof;
(e) Before commencing any work, or installations of any kind, Tenant
shall obtain the necessary consents, authorizations and licenses from
Federal, State, local and/or municipal authorities having jurisdiction
over the work or installations to be done, and no work or installations
shall be started unless and until all such necessary consents,
authorizations and licenses shall have first been duly obtained by the
Tenant (and/or its contractor or other persons doing the work or
performing installations on behalf of Tenant) and given to Landlord;
(f) Tenant or any contractor, sub-contractor, materialmen or other
employed by the Tenant or any other persons who will do the work or
installations as aforesaid shall be fully covered by workmen's
compensation insurance and the certificate thereof shall be furnished to
the Landlord prior to the commencement of any work by such contractor,
sub-contractor, materialmen or persons as aforesaid. Tenant covenants and
agrees to indemnify and hold Landlord harmless from any and all claims for
personal injury, death or property damage occasioned during the progress
or as a result of any or all of the work done as aforesaid in or about the
Premises.
44. REPAIRS. (a) Anything contained herein to the contrary
notwithstanding, it is agreed that the Tenant shall be responsible for all
non-structural repairs (and all structural repairs to the extent same is
necessitated as a result of the actions or failure to act of Tenant, its
employees, representatives, agents, successors, assigns or invitees) and the
repair, maintenance and replacement of the heating system, air-conditioning
units, elevator, electrical system, plumbing system and other mechanical systems
servicing the Premises. Tenant covenants to keep the Premises including but not
limited to the heating system, air conditioning units elevator, electrical
system, plumbing system and other mechanical systems in good repair. Tenant
shall also generally maintain the Premises including all masonry work and
landscaping and the interior and exterior of the Premises (so that it is free
from refuse, debris and kept in a clean and orderly fashion). Tenant shall
notify Landlord prior to performing any structural repairs as required herein,
including, without limit, the replacement of any air conditioning units, which
structural repairs shall be subject to the prior consent of Landlord, which
consent shall not be unreasonably withheld. Except as provided herein, Landlord
shall be responsible for the repair of the structural portions of the Premises,
including any repairs to the roof, provided that Landlord shall not be required
to (i) make any repairs caused by Tenant's failure to maintain the Premises;
and/or (ii) repair, maintain or replace any kitchen or bathroom fixtures.
(b) All maintenance, alterations, repairs and other work to be performed
by either party shall be performed by it in good and workmanlike manner and
shall conform to all building codes, ordinances, rules and regulations of any
municipality or governmental authority having jurisdiction thereof.
45. INCREASE IN INSURANCE. If by reason of Tenant's use and occupancy or
abandonment of the Premises, or any other action on its part, the fire and/or
liability insurance rates for the building or any adjoining or nearby buildings
owned by the Landlord shall be increased, Tenant shall pay such increase as an
item of Additional Rent, upon demand by Landlord.
46. INDEMNITY; INSURANCE. (a) Each party shall indemnify, defend and hold
harmless the other party from and against any and all liability and damage and
all such claims and demands of any kind and nature, including but not limited to
reasonable counsel fees arising out of any injury or damage however occurring
which shall or may occur on or about the Premises or adjacent streets,
sidewalks, curbs and parking areas and from and against any matter or thing
arising out of the breach of any covenant or condition of this Lease or the
carelessness, negligence or improper conduct of the indemnifying party or its,
agents, servants, employees or customers.
(b) Tenant shall provide and keep in full force and effect at Tenant's
sole cost and expense for the benefit of the Landlord and Tenant, comprehensive
public liability insurance, acceptable to Landlord, with companies authorized to
do business in the State of New York in which the limits of coverage shall not
be less than Ten Million Dollars ($10,000,000.00) combined single limit per
occurrence (the minimum limits of the comprehensive general liability policy of
insurance shall in no way limit or diminish Tenant's liability hereunder) and
property insurance, acceptable to Landlord, providing all fixtures, personalty
and equipment on, in or appurtenant to the Premises, including all additions and
improvements with insurance against loss or damage by fire with all standard
extended coverage which limits of coverage shall not be less than Five Million
Dollars ($5,000,000.00) (the minimum limits of the comprehensive general
liability policy of insurance shall in no way limit or diminish Tenant's
liability hereunder). Said policy or policies of insurance shall name the
Landlord, and any mortgagee of Landlord, as applicable, as an additional insured
and/or loss payee, as applicable, shall contain a waiver of subrogation against
Landlord and shall provide that said policy or policies may not be canceled
prior to the transmission to the Landlord of thirty (30) days' written notice.
(c) Tenant shall deliver certificates of insurance for all insurance
required pursuant to this Lease to the Landlord prior to the beginning of the
term of this Lease and thereafter not less than thirty days prior to the
expiration of any such policy. In the event Tenant shall fail to furnish any
insurance herein required, Landlord may (but is not obligated to) obtain said
insurance and pay the premium therefor and the premium so paid by Landlord shall
be deemed Additional Rent payable by Tenant on demand.
47. CONDEMNATION. (a) If the Premises shall be taken under the right of
eminent domain in accordance with the terms of subparagraph (c) below, this
Lease shall expire on the date of the passing of title to the authorities so
exercising such right and the Fixed Rent shall be apportioned as of that date.
No part of any award shall belong to the Tenant except insofar as the Tenant may
be entitled to a separate award that does not in any manner diminish the award
made to the Landlord, it being distinctly understood and agreed that the Tenant
shall have no claim against Landlord or the condemning authority for the value
of any unexpired term of this Lease. In the event of a condemnation, any award
specifically made for the value of the trade fixtures shall belong to the
Tenant.
(b) If the Premises shall be condemned or taken in accordance with the
terms of subparagraph (d) below, all awards made to either compensate Landlord
or Tenant shall be paid to Landlord; Landlord shall promptly and at its sole
cost and expense to the extent of the award, restore the remaining portion of
the Premises or building in substantially the same condition and the Lease shall
continue effective in all respects, except as that there shall be a reduction of
Fixed Rent in the ratio that the rent then applicable to the portion of the
Premises so taken bears to the current rent for the entire premises at the time
of the taking. Nothing herein contained shall be deemed a waiver by Tenant of
its right to claim and receive an award for the taking of its trade fixtures and
equipment which right is herein specifically preserved .
(c) If such partial taking results in a reduction of the floor area of the
Premises by more than thirty-three (33%) percent, or if the Premises may not
reasonably be used for substantially the same purposes as prior to the taking,
then in such event, the provisions of paragraph (a) shall apply.
(d) If such partial taking shall result in a reduction of the floor area
of the Premises by thirty-three (33%) percent or less or if the Premises may
reasonably be used for substantially the same purposes as prior to the taking,
then the provisions of paragraph (b) above of this Rider shall apply.
48. ASSIGNMENT. (a) The Tenant shall not assign or sublet this Lease
without the express, written consent of the Landlord which consent shall be in
Landlord's sole discretion.
(b) Any subletting or assignment of this Lease shall be on the following
terms and conditions:
(1) The uses and purposes shall be exactly as set forth herein;
(2) Prior to entering into any sublease or assignment of the
Premises, Tenant shall submit the terms of the proposed subletting or
assignment, the name of the proposed subtenant or assignee, financial references
of the proposed subtenant or assignee and such other information as to the
financial responsibility and standing of the proposed subtenant or assignee as
Landlord may reasonably require together with a copy of the proposed sublease or
assignment;
(3) In the event that Landlord consents to an assignment or
sublease, fifty (50%) percent of the amount of any rent, additional rent or
other consideration required to be paid pursuant to the assignment or sublease
which exceeds the rent, additional rent or other consideration payable
hereunder, shall be payable directly to the Landlord, it being the intent of the
parties that the rents and additional rents hereunder shall be deemed increased
by the amount of such excess rents payable pursuant to the sublease or
assignment. The sublessee or assignee shall deposit with the Landlord as
additional security an amount equal to one (1) months' rent in effect at the
time of the sublease or assignment.
(c) The consent by the Landlord to any assignment or subletting shall not
be deemed to release the Tenant from the within Lease or any of its obligations
to fully perform all of the terms and covenant contained herein.
(d) If, at the time of such assignment and/or subletting, the Tenant is in
default in any of the terms, covenants and conditions of the within Lease, the
Landlord may withhold and/or revoke its consent to such assignment or subletting
and the parties agree that this refusal shall not be deemed unreasonable,
arbitrary or capricious.
(e) The proposed subtenant or assignee shall be required to execute in a
form reasonably satisfactory to Landlord or its attorneys, an agreement which
shall obligate it to duly perform all of the Tenant's covenants and obligations
under the Lease, including any accrued obligations at the time of the assignment
or subletting.
(f) The assignee shall execute, in a form reasonably satisfactory to the
Landlord, an assignment and assumption agreement. A copy of said assignment and
assumption agreement shall be forwarded to the Landlord within ten (10) days
thereof;
(g) The subtenant shall execute, in a form satisfactory to Landlord, a
sublease, a copy of which shall be forwarded to Landlord within ten (10) days
thereof.
(h) Landlord shall not be liable to the Tenant for monetary damages as a
result of the unreasonable delay or refusal to provide consent.
(i) That the effective date of the assignment or subletting may not be
earlier than the Commencement Date of the Term.
49. SUBORDINATION. This Lease and all rights of Tenant hereunder are
subject and subordinate (i) to any mortgage or deed of trust, blanket or
otherwise (the "Permanent Mortgage"), which does now or may hereafter affect the
Premises (and which may also affect other property), such mortgagee with respect
to same being hereinafter referred to as the "Superior Mortgagee" and (ii) to
any and all increases, renewals, modifications, consolidations, replacements and
extensions of any such Permanent Mortgage, and (iii) each underlying lease which
may now or hereafter affect all or any portion of the Premises or any interest
therein, such lessor with respect to such lease, hereinafter referred to as the
"Superior Lessor," provided that Landlord shall use reasonable commercial
efforts to obtain a non-disturbance agreement from any party to whom this Lease
is subordinated. Tenant shall execute, acknowledge and deliver any instrument
reasonably requested by Landlord, a Superior Lessor or Superior Mortgagee
(including without limitation subordination, lockbox and payment agreements) to
evidence such subordination, but no such instrument shall be necessary to make
such subordination effective. Tenant agrees that (a) Tenant shall attorn to the
Superior Mortgagee, and (b) any cancellation, surrender or amendment of this
Lease without the prior written consent of the Superior Mortgagee shall be
voidable by the Superior Mortgagee.
50. LATE CHARGE. In the event that the Tenant shall not have paid the
Fixed Rent or any item of Additional Rent on or before ten (10) days of the date
it is due, (the "Grace Period") then, Tenant shall pay a late charge equal to 3%
of such rent. Tenant shall also pay interest thereon from the expiration of the
Grace Period to the date of Landlord's receipt thereof at the lesser of (i) 1%
per month or (ii) the maximum rate permitted by law. The demand for and
collection of the aforesaid late charges and interest shall in no way be deemed
a waiver of any and all other remedies that the Landlord may have under the
terms of this Lease by summary proceedings or otherwise. Tenant agrees this
amount is for Landlord's costs related to such late payment, is reasonable, is
not punitive and is not intended to be a penalty.
51. TRIPLE NET. (a) The rent specified in this Lease shall be "triple net"
to Landlord in each year, during the Term and any extension or modification
thereof and the parties hereto intend that Landlord shall receive all Fixed Rent
and all Additional Rent payable hereunder free and clear of any and all
liability or responsibility of Landlord for impositions, taxes, liens, charges
or expenses, offsets, or similar deductions of any nature whatsoever.
(b) Tenant shall pay all costs, expenses and damage which are attributable
to Tenant or the ownership, use or possession of the Premises and which, except
for the execution of this Lease, would have been chargeable against the Premises
or otherwise payable by the Landlord and Tenant shall indemnify and hold
Landlord harmless against such expenses and obligations. Tenant shall pay, or
cause to be paid all utility services rendered or furnished to the Premises,
including but not limited to heat, water, gas, air-conditioning and electric,
and shall pay or cause to be paid all fire protection, security protection,
sewer treatment facilities, sanitation, janitorial, landscaping, snow and
garbage removal, and the like, together with all taxes levied or other charges
on such utilities. Tenant will be responsible for assuring that all billing
statements for all utilities will be mailed directly to Tenant for payment.
(c) Tenant understands and agrees that, except as provided otherwise
herein, Landlord is to have no obligation whatsoever under this Lease or
otherwise in respect of the repair, operation, maintenance and/or replacement of
the Premises or for the quality or compliance with applicable law of its
construction (or in either case, the lack thereof) with all such obligations
being those of the Tenant, at its sole cost and expense. Except as specifically
and expressly set forth in this Lease, Landlord is to furnish no improvements,
equipment or fixtures of any kind, either on or to the interior or on or to the
exterior of the Premises. It is agreed between the parties, that anything not
expressly set forth herein which must be done in, on or to the Premises in order
to make the same ready for Tenant's business, will be done and accomplished by
Tenant at its own cost and expense. The intent of the parties is that this Lease
be "triple net" with no expenditures required by Landlord in connection with
Tenant's use, operation or maintenance of the Premises.
(d) Notwithstanding the foregoing, Landlord may perform such repairs
and/or alterations at or to the Premises (i) to the extent same is not performed
by Tenant hereunder, and the cost of performing such work shall be charged
against Tenant as Additional Rent, and (ii) as Landlord, in its sole discretion
determines would improve or increase the value of the Premises, so long as such
work does not impair Tenant's ability to use the Premises as provided for
herein.
52. SIGNS. (a) Tenant shall not display, erect or affix any lettering,
signs, posters, streamers, plaquerts or any other like advertising media on the
windows or exterior of the Premises or upon the building or buildings at which
they form a part without the Landlord's prior written approval, which approval
shall not be unreasonably withheld delayed or conditioned.
(b) Tenant shall submit to Landlord, with its request for permission to
erect or install any sign, lettering or like advertising media, complete sign
drawings and specifications or prior approval.
(c) Upon obtaining approval of the Landlord, the approved sign shall be
installed by the Tenant at its own cost and expense and shall at all times be in
total compliance with all laws, rules, regulations, ordinances or requirements
of any governmental authority, municipality or agency having jurisdiction
thereof.
53. ARMS-LENGTH. Landlord and Tenant acknowledge that this Lease is the
product of an arms length negotiation engaged between Landlord, Tenant and their
respective attorneys with each party contributing to the final instrument. In
consequence thereof, should any dispute arise involving the construction or
interpretation of this Lease, no presumption or inference shall be drawn against
one party by the other.
54. ATTORNEYS' FEES, COUNTERCLAIMS AND JURY WAIVER. (a) Tenant shall, in
addition to all court costs, expenses or fees, pay to Landlord, as Additional
Rent reasonable attorney's fees, costs, expenses or disbursements incurred by
the Landlord in connection with any breach or default by Tenant or to protect or
preserve any of Landlord's rights hereunder or in any action, proceeding,
summary proceeding or arbitration arising out of this Lease or the
Landlord-Tenant relationship. These items shall be deemed "Additional Rent" and
shall be due and payable when incurred by Landlord and may be includable in any
summary proceeding or other action. TENANT WAIVES THE RIGHT TO ASSERT ANY
COUNTERCLAIMS OR SET OFFS IN A SUMMARY PROCEEDING, AND EACH PARTY WAIVES TRIAL
BY JURY IN ANY ACTION BROUGHT IN CONNECTION WITH THIS LEASE. In the event of
litigation by a party hereto to enforce its rights hereunder, the prevailing
party shall be entitled to recover its reasonable attorney's fees, costs and
disbursements.
55. PLATE GLASS. Tenant, at its own cost and expense, shall maintain plate
glass insurance for the Premises for and in the name of the Landlord.
56. COLLECTION AGAINST LANDLORD. Tenant agrees that it shall look solely
to the estate and property of Landlord in the land and buildings comprising the
building for the collection of any judgment (or other judicial process)
requiring the payment of money by Landlord in the event of any default or breach
by Landlord with respect to any of the terms, covenants and conditions of this
Lease to be observed or performed by Landlord; and no other assets of the
Landlord or any partner, member, owner, stockholder or other principal of
Landlord shall be subject to levy, execution or other procedures for the
satisfaction of Tenant's remedies.
57. UNCOLLECTED FUNDS. In the event that any payment by the Tenant of
Fixed Rent or Additional Rent shall be dishonored for any reason whatsoever,
including but not limited to "uncollected funds", "insufficient funds", etc.,
the Landlord shall, thereafter, have the right to insist that the replacement
payment shall be made by certified check, bank check or cash.
58. WAIVER. (a) The failure of the Landlord to insist upon strict
performance of any term, covenant or condition to be performed on the part of
the Tenant, shall not be deemed or construed to constitute a waiver thereof, or
consent by the Landlord to any future performance.
(b) The acceptance by the Landlord of any item of Fixed Rent or Additional
Rent, with notice, whether constructive or actual, of any default on the part of
the Tenant shall not be deemed a waiver, forgiveness or condonation of said
default on the part of the Landlord.
59. MECHANIC'S LIENS. The Landlord shall not be liable for any labor or
materials furnished or to be furnished to the Tenant and no Mechanic's or other
liens for any such labor or materials shall attach to or affect the interest of
the Landlord in and to the Premises. If any Mechanic's Lien is filed against the
Premises, based on any act or interest of the Tenant or anyone claiming through
the Tenant, its Subtenants or assigns, or if any security agreement is filed for
or affecting any materials, machinery or fixtures used in the construction,
repair or operation by the Tenant, the Tenant shall immediately take such action
by bonding, deposit or payment as will remove the lien or security interest. If
the Tenant has not removed the lien or security interest within fourteen (14)
days after notice to the Tenant, the Landlord may in its sole option (but is not
obligated to), pay the amount of the lien or security interest or discharge the
same by deposit and the amount so paid or deposited with interest thereon shall
be deemed Additional Rent under this Lease and shall be payable immediately upon
demand. In addition to the remedies previously set forth and as may elsewhere be
set forth in the written Lease, failure on the part of the Tenant to discharge,
bond or otherwise remove the lien or security interest within fourteen (14)
days, shall be deemed a default hereunder. In such event, the Lease may then be
terminated pursuant to its terms.
60. ENTIRE AGREEMENT. This Lease contains the entire agreement between the
parties and all prior agreements, conversations, set ups, or representations, if
any, shall be deemed to have merged herein. Tenant is not relying upon
representations or agreements other than those contained in this Lease. This
Lease may not be changed, altered or modified unless in writing, signed by each
of the parties hereto.
61. UNENFORCEABILITY. If any term or provision of this Lease or its
application to any person or circumstances is to any extent declared to be
invalid or unenforceable by a court of competent jurisdiction, the remainder of
this Lease, or the application of such term or provision to persons or
circumstances, other than those as to which is held invalid or unenforceable
shall not be affected thereby and each term and provision shall be valid and
enforced to the fullest extent permitted by law.
62. AS-IS. Tenant represents and warrants to the Landlord that it has
inspected the Premises and is fully familiar with the condition thereof. NEITHER
LANDLORD NOR ITS AGENT MAKE ANY WARRANTY OR REPRESENTATION OF ANY KIND WITH
RESPECT TO THE PHYSICAL CONDITION OF THE PREMISES, BUILDING OR LAND UPON WHICH
IT IS ERECTED, AND TENANT AGREES TO ACCEPT THE PREMISES IN "AS IS" CONDITION.
Landlord makes no representation that Tenant's use of the Premises is in
accordance with the Certificate of Occupancy with respect to the Premises.
63. NOTICES. Any notice required to be served herein, shall be deemed
properly served, if sent registered, or certified mail, return receipt
requested, or by a recognized, reputable overnight courier service, as follows:
If to Landlord to: ▇ ▇▇▇▇ ▇▇▇▇▇▇ REALTY LLC
___________________________
____________, New York
Attention:
With a copy to Landlord's attorneys:
Moritt, Hock, Hamroff & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Tenant: ALLIANCE DISTRIBUTORS HOLDING INC.
____________________________
____________________________
With a copy to Tenant's attorneys:
▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
64. HOLDING-OVER AND POSSESSION. Any holding over after the expiration of
the term of this Lease or any renewal hereof shall be construed to be a tenancy
from month-to-month at a minimum annual rent equal to twice the Fixed Rent
(prorated on a monthly basis) then being paid by Tenant; together with a sum
equal to all Additional Rent payable hereunder for each month or part thereof
during which the Tenant remains in possession of the Premises beyond the
expiration of the term hereof and said tenancy shall otherwise be on the terms,
covenants, conditions, and provisions specified in this Lease, to the extent
that the foregoing shall be applicable.
65. NOT AN OFFER. Submission of this document for examination or signature
by Tenant does not constitute an offer for a lease by Landlord, and it is not to
be effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
66. FURTHER ASSURANCES. Each of the parties hereto, without cost to the
other, shall at any time and from time to time hereafter, execute and deliver
any and all further instruments and assurances and perform any acts that the
other party may reasonably request for the purpose of giving full force and
effect to the provisions of this agreement
67. HEADINGS. Headings are for convenience only, and are not meant to
confer any rights or obligations on the parties hereto.
68. COUNTERPARTS AND SIGNATURES. The printed form of Lease and the Rider
may be signed by the undersigned in counterparts. Facsimile signatures shall
have the same effect as originals.
69. USE OF FACILITIES BY ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇. Notwithstanding anything in
this Lease to the contrary, for so long as this Lease is in effect, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ will have exclusive use of the office, kitchen and dining room that he
utilized immediately prior to the Commencement Date, and he will retain the
right to use the other facilities in the Premises (including the conference room
when not in use by Tenant) for his personal business interests.
70. ENVIRONMENTAL. Landlord represents and warrants that it and, during
Landlord's ownership, its tenants, have, prior to the Commencement Date,
complied strictly and in all respects with the applicable laws, statutes,
ordinances, permits, orders, decrees, guidelines, rules, regulations and orders
pertaining to health or the environment ("Applicable Environmental Laws"),
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") and the Resource Conservation
and Recovery Act ("RCRA"), as each of the foregoing may be amended from time to
time. Tenant, and its agents, contractors, employees and invitees, shall comply
strictly and in all respects with the Applicable Environmental Laws, including
without limitation CERCLA and RCRA, as each of the foregoing may be amended from
time to time. Each party does hereby, for itself and its heirs, legal
representatives, successors and assigns agree to and hereby does indemnify,
defend and hold harmless the other party, and its heirs, legal representatives,
successors and assigns, from any and all liabilities, assessments, suits,
damages, costs and expenses, attorneys' fees and judgments related to or arising
out of (a) the breach of any of the agreements of the indemnifying party under
this section, (b) the handling, installation, storage, use, generation,
treatment or disposal by the indemnifying party of Hazardous Materials (as
hereinafter defined), including any cleanup, remedial, removal or restoration
work required by the Applicable Environmental Laws which is necessitated by
indemnifying party's violation of the provisions of this Section or (c) the
assertion of any lien or claim upon the Premises pursuant to the Applicable
Environmental Laws which is instituted due to any action of the indemnifying
party; provided however, as between Landlord and Tenant, in connection with any
such indemnification arising out of any event occurring after the Commencement
Date, unless the event can be shown to be the action or omission of the
Landlord, the Tenant shall indemnify the Landlord in connection therewith. The
covenants and agreements of Tenant under this section shall survive the
expiration or termination of this Lease. As used in this Lease, the term
"Hazardous Materials" means any flammables, explosives, radioactive materials,
asbestos-containing materials, petroleum products, the group of organic
compounds known as polychlorinated byphenyls and other hazardous waste, toxic
substances or related materials, including without limitation, substances
defined as hazardous substances, hazardous materials, toxic substances or solid
waste in CERCLA, the Hazardous Materials Transportation Act and RCRA, as each of
the foregoing may be amended from time to time.
71. BROKER. Each party represents and warrants to the other that no real
estate broker brought about this transaction. Each party agrees to indemnify
(the "Indemnifying Party") and hold the other harmless from and against all
causes of action, liabilities and costs (including reasonable attorney's fees)
arising out of a claim for a commission by any other broker purporting to have
acted on behalf of the Indemnifying Party.
72. LANDLORD'S AUTHORITY. Landlord represents and warrants that it is the
sole owner of the land, buildings and equipment described on Appendix A attached
hereto, together with all buildings, improvements, facilities and fixtures
located on the land, and any easements, rights of access and other property
rights necessary to allow Tenant unobstructed use and occupancy of the Premises.
Landlord represents and warrants that it has full right and authority to lease
the Premises to Tenant and to otherwise enter into this Lease on the terms and
conditions set forth herein, and that the provisions of this Lease do not
conflict with or violate the provisions of existing agreements between the
Landlord and third parties.
73. RIGHT OF FIRST REFUSAL. Should Landlord during the Term enter into an
agreement to sell the Premises, or any portion thereof, to a non-affiliated
third party ("Sales Agreement"), Landlord shall provide to Tenant a written
notice of intent to sell ("Notice") with a copy of the Sales Agreement. Tenant
shall have and may exercise an option to acquire the Premises, or the portion
thereof subject to the Sales Agreement, on the same terms and conditions, other
than as to the identity of the Tenant and date for closing, as are set forth in
the Sales Agreement. If Tenant does not within 30 days after receiving the
Notice and copy of the Sales Agreement give Landlord written notice of Tenant's
intention to exercise such option, then subject to and as provided by the Sales
Agreement Landlord may sell the Premises or portion thereof covered by the Sales
Agreement by no later than the 150th day after receipt by Tenant of the Notice
and copy of the Sales Agreement. If Landlord does not timely so sell the
Premises or varies the material terms of the Sales Agreement, Landlord shall
again comply with the terms of this Section 15 as if no Notice had ever been
given. If Tenant timely notifies Landlord of its intent to exercise such option,
then at such time as Tenant may specify, but no later than 60 days following
receipt by Landlord of such notice from Tenant, and at such place within the
city or town where the Premises is located as Landlord may specify, or such
other place and time and Landlord and Tenant may agree, Tenant shall exercise
its option by purchasing, and Landlord shall sell to Tenant, the Premises or
portion thereof subject to the Sales Agreement. In the event that Tenant
exercises such option but fails to timely close (other than because of default
by Landlord), then this Section 73 and the right of first refusal hereunder are
terminated and of no further effect.
74. RIDER CONTROLS. In the event of a conflict between the terms of this
Rider and the printed form of the Lease to which the Rider is attached, the
terms hereof shall govern.
1 REWE STREET REALTY LLC, Landlord
By:
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Name:
Title:
ALLIANCE DISTRIBUTORS HOLDING INC., Tenant
By:
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Name:
Title: