EXHIBIT 10.17
AGREEMENT FOR PURCHASE AND
SALE OF ASSETS
Among
TVN Entertainment Corporation,
W&K Pharmacy, Inc., d/b/a
PandaAmerica Corp. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF ASSETS...................................... 1
1.1 Purchased Assets................................................. 1
1.2 Leases........................................................... 3
1.3 Excluded Assets.................................................. 3
1.4 Option to Acquire Additional Assets.............................. 3
ARTICLE II NON-ASSUMPTION OF LIABILITIES................................... 4
2.1 Non-Assumption of Liabilities.................................... 4
2.2 Assumed Liabilities.............................................. 4
2.3 Excluded Liabilities............................................. 4
ARTICLE III PURCHASE PRICE................................................. 5
3.1 Purchase Price................................................... 5
3.2 Allocation of the Purchase Price................................. 6
3.3 Transfer Taxes................................................... 6
3.4 Guarantee of Accounts Receivable................................. 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
SHAREHOLDER........................................................... 6
4.1 Organization and Qualification of the Company.................... 6
4.2 Subsidiaries..................................................... 7
4.3 Authority Relative to this Agreement............................. 7
4.4 Compliance of Transaction With Laws and Other
Instruments...................................................... 7
4.5 Financial Statements............................................. 8
4.6 Title to Purchased Assets; Liens; Condition of
Purchased Assets................................................. 8
4.7 Absence of Undisclosed Liabilities............................... 9
4.8 Collectibility of Gross Accounts Receivable...................... 9
4.9 Inventories...................................................... 9
4.10 Absence of Certain Changes....................................... 10
4.11 Intellectual Property Rights..................................... 11
4.12 Contracts and Commitments........................................ 12
4.13 ERISA; Employees................................................. 12
4.14 Permits; Governmental Agreements................................. 14
4.15 Borrowings and Guarantees........................................ 14
4.16 Insurance........................................................ 14
4.17 Environmental Matters............................................ 14
4.18 Outstanding Claims............................................... 15
4.19 Compliance with Applicable Law; Adverse Restriction.............. 15
4.20 Litigation....................................................... 16
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TABLE OF CONTENTS
(continued)
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4.21 Finder's Fee................................................... 16
4.22 Transactions with Interested Persons........................... 16
4.23 Consents....................................................... 16
4.24 Information.................................................... 16
4.25 Questionable Payments.......................................... 16
4.26 Taxes.......................................................... 17
4.27 Operation of Business.......................................... 17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER........................ 17
5.1 Organization................................................... 17
5.2 Binding Obligation............................................. 18
5.3 Consents....................................................... 18
ARTICLE VI CERTAIN UNDERSTANDINGS AND AGREEMENTS......................... 18
6.1 Access and Audit............................................... 18
6.2 Operation of Business.......................................... 18
6.3 Expenses....................................................... 20
6.4 News Releases.................................................. 20
6.5 Notice of Adverse Developments................................. 20
6.6 Exclusivity.................................................... 21
6.7 Confidentiality................................................ 21
6.8 Preserve Accuracy of Representations and Warranties............ 21
6.9 Certain Events................................................. 22
6.10 Best Efforts and Mutual Cooperation............................ 22
6.11 Further Assurances............................................. 22
6.12 Third Party Consents........................................... 22
6.13 Offers of Employment........................................... 22
6.14 Performance and Payment by Buyer............................... 22
6.15 Application for Tax Certificates............................... 22
6.16 1.44 Tax Returns............................................... 23
6.17 Post-Closing Date Access to Information........................ 23
6.18 Final Schedules of Purchased Assets and Assumed
Liabilities.................................................... 23
ARTICLE VII CONDITIONS TO OBLIGATIONS TO CLOSE........................... 23
7.1 Conditions Precedent to Obligations of the Company
and Shareholder................................................ 23
7.2 Conditions Precedent to Obligations of Buyer................... 24
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TABLE OF CONTENTS
(continued)
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ARTICLE VIII CLOSING DELIVERIES........................................... 26
8.1 At the Closing, Buyer shall deliver to the Company:............ 26
8.2 At the Closing, the Company and Shareholder shall deliver to
Buyer:......................................................... 26
8.3 After the Closing:............................................. 27
ARTICLE IX INDEMNIFICATION................................................ 27
9.1 Survival of Representations, Etc............................... 27
9.2 Indemnification of Buyer....................................... 28
9.3 Indemnification of the Company and Shareholder................. 28
9.4 Minimum Indemnification........................................ 28
9.5 Procedures for Indemnification................................. 29
9.6 Payment of Indemnification Claims.............................. 30
9.7 Tax Indemnification............................................ 31
9.8 Limitations on Liabilities..................................... 32
9.9 Sole Remedy.................................................... 32
ARTICLE X TERMINATION..................................................... 33
10.1 Termination.................................................... 33
10.2 Liability of the Parties....................................... 33
ARTICLE XI MISCELLANEOUS PROVISIONS....................................... 33
11.1 Entire Agreement: Amendment.................................... 33
11.2 Assignment and Binding Effect.................................. 33
11.3 Waivers........................................................ 34
11.4 Notices........................................................ 34
11.5 Governing Law.................................................. 35
11.6 Counterparts; Execution........................................ 35
11.7 Interpretation................................................. 35
11.8 Severability................................................... 35
11.9 Arbitration.................................................... 35
11.10 Knowledge...................................................... 35
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Exhibits:
A Form of Equipment Lease Assignment Agreement
B-1 Secured Promissory Note
B-2 Security Agreement
C Employees
D Form of Consulting Agreement
E Form of ▇▇▇▇ of Sale
F Dispute Resolution
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SCHEDULES
Schedule No. Title
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1.1.1 Inventory
1.1.2 Fixed Assets
1.1.3 Gross Accounts Receivable
1.2.1 Third Party Real Property Leases
1.2.2 Equipment Leases
1.3 Excluded Assets
2.3 Enumerated Excluded Liabilities
4.4 Compliance of Transaction with Laws and Other Instruments
4.5 Company Financial Statements
4.6 Title to Purchased Assets; Location of all facilities
4.8 Collectibility of Gross Accounts Receivable
4.9 Unsalable Inventory
4.10 Certain Changes
4.11 Licenses with Respect to Company Intellectual Property Rights
4.12 Contracts and Commitments
4.15 Borrowings and Guarantees
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AGREEMENT FOR PURCHASE AND
SALE OF ASSETS
THIS AGREEMENT is made as of January 18, 1999 by and among TVN
Entertainment Corporation, a Delaware corporation ("Buyer"), W&K Pharmacy, Inc.,
d/b/a PandaAmerica Corp., a California corporation (the "Company"), and ▇▇▇▇▇▇
▇. ▇▇▇▇▇ ("▇▇▇▇▇") (▇▇▇▇▇ may sometimes be referred to herein as "Shareholder").
R E C I T A L S
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WHEREAS, the Company owns, has been and is currently in the business of
operating a televised home shopping network known as "Panda Shopping Network"
(the "Business") along with a precious metals and coin business (the "Excluded
Business");
WHEREAS, Shareholder is the majority shareholder, President and Chief
Executive Officer of the Company; and
WHEREAS, pursuant to the terms and conditions of this Agreement, Buyer
desires to purchase, and the Company desires to sell, substantially all of the
assets, properties and rights related to, associated with and used in the
Business, and Buyer desires to assume, and Shareholder desires to transfer,
specified liabilities which have been incurred in connection with the operation
of the Business.
NOW, THEREFORE, for and in consideration of the mutual promises herein
made, and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged,
THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
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PURCHASE AND SALE OF ASSETS
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1.1 Purchased Assets. Subject to and upon the terms and conditions
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hereof, and in reliance upon the representations, warranties and covenants made
herein by a party to the others, on the Closing Date (as defined in Article
VIII), the Company agrees to sell, transfer, assign, convey and deliver to
Buyer, and Buyer agrees to purchase and acquire from the Company, all right,
title, claim, and interest in and to all of the assets of the Company, wherever
situated, which are directly or indirectly used for or associated with the
Business but not the Excluded Business, including, but not limited to, the
following, except to the extent that any such assets are Excluded Assets (as
defined in Section 1.3 below) (collectively, the "Purchased Assets"):
(a) Inventory. All inventories of all merchandise held for resale in
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connection with the operation of the Business including, without limitation,
those inventory items set forth in Schedule 1.1.1 (collectively, the "Gross
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Inventory").
(b) Equipment and Other Fixed Assets. All equipment and other fixed
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assets owned by the Company and related to or used in the Business, wherever
located including, without limitation, the equipment and assets set forth or
described in Schedule 1.1.2 (collectively, the "Fixed Assets").
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(c) Cash. All cash owned by or in the possession of the Company which
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was derived in the ordinary course of the Business, including customer deposits,
and existing on the Closing Date.
(d) Accounts Receivable and Other Current Assets. Trade accounts
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receivable from the sale of Gross Inventory or other activities of the Company
and the Business prior to the Closing Date ("Gross Accounts Receivable"),
including, without limitation, those Gross Accounts Receivable and other current
assets set forth on Schedule 1.1.3.
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(e) Assigned Contracts. All contracts or orders obligating the Company
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to purchase, television time and/or the right to place commercial insertions,
Gross Inventory, Fixed Assets, supplies, components, parts, goods, packaging or
promotional material, services or other items used in connection with the
operation of the Business, relating to the Purchased Assets or which may affect
the conduct of the Business after Closing as defined in Article VIII
(collectively, the "Purchase Orders"); all warranty rights and, unless otherwise
excluded by the terms of this Agreement, claims against third parties relating
to or arising under any of the Purchased Assets; such other contracts and other
agreements relating to the marketing or sale of Gross Inventory, relating to the
Purchased Assets or which may affect the conduct of the Business after Closing
(all of the foregoing in this Section 1.1(5) are collectively referred to herein
as the "Assigned Contracts").
(f) Business Records. All existing books and records (excluding the
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minute books, corporate seal and stock records of the Company) reasonably
necessary to enable Buyer to continue the uninterrupted marketing and sale of
Gross Inventory, ownership or use of the Purchased Assets and conduct of the
Business including, without limitation, all customer, vendor and other lists,
information, records, files, literature, brochures, catalogs, correspondence,
displays and other similar data relating to financial, operating, customer,
supplier, vendor, manufacturer and promotional matters or relating to the
marketing and sale of Gross Inventory, ownership or use of the Purchased Assets
or conduct of the Business (collectively, the "Business Records").
(g) Intellectual Property Rights. All patents, registered and
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unregistered trademarks and service marks, registered and unregistered
copyrights, trade names and any applications therefor, technology, know-how, MIS
systems, computer software programs and applications (in both source code and
object code form), and tangible or intangible proprietary information or
material which relate to or are a part of the products of the Business or are
used in the Business ("Company Intellectual Property Rights").
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(h) Permits; Governmental Agreements. The right to operate under all
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governmental licenses, permits, franchises and approvals and all related vendor
numbers which are required or appropriate to conduct the Business, where and as
such Business is conducted ("Licenses").
(i) Other Purchased Assets. Except as otherwise provided in this
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Agreement, all causes of action, judgments, claims and demands of every nature
whatsoever in favor of, or arising in connection with the operation of the
Business and relating to the Purchased Assets; and all labels, signs, packaging,
promotional materials, sales literature, advertising, catalogs, brochures,
documents and other such items relating to the marketing or sale of Gross
Inventory or otherwise used in connection with the Business, together with all
goodwill associated with the Business and the Purchased Assets.
1.2 Leases.
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(a) Third Party Real Property Leases. The Company currently leases
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certain office space and premises used for the Business from third parties
pursuant to real property leases listed on Schedule 1.2.1 (the "Third Party Real
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Property Leases"), including the building structures, fixtures and improvements.
The Company will permit Buyer to occupy such portion of the premises currently
used to operate the Business and covered by such Third Party Real Property
Leases and Buyer hereby agrees to reimburse the Company on a monthly basis for
the monthly rent, utilities and expenses directly related to such premises.
Buyer will not become a party as a subtenant or otherwise to any Third Party
Real Property Leases.
(b) Assignment of Equipment Leases. The Company currently leases
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certain equipment used in the Business from third parties pursuant to equipment
leases listed on Schedule 1.2.2 (the "Equipment Leases"). The Company will
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assign such Equipment Leases to Buyer, subject to Company obtaining the consent
of the lessors under such leases, if required, pursuant to the terms of one or
more equipment lease assignment agreements in the form attached hereto as
Exhibit A (the "Equipment Lease Assignment Agreements") as may be requested by
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Buyer.
1.3 Excluded Assets. Anything contained in this Agreement to the contrary
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notwithstanding, the Company's wholesale and retail precious metals and coins
business (the "Excluded Business"), including the rights, properties and assets
directly related thereto (the "Excluded Assets") as listed on Schedule 1.3, and
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the Company's right, title and interest under the Camino Real Agreement (as set
forth in Section 1.4) are not included in the Purchased Assets.
1.4 Option to Acquire Additional Assets. Until the July 22, 1999, Buyer
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shall have the right but not the obligation to acquire, for no additional
consideration, all of the Company's right, title and interest under that certain
joint television broadcasting company agreement with JB Broadcasting Inc., dated
March 23, 1998, (the "Camino Real Agreement"), providing for the joint ownership
and operation of the Low Power Television ("LPTV") licenses and stations
described therein. Buyer may exercise this right by written notice to the
Company. Upon the exercise of such right by Buyer, the Camino Real Agreement
shall be deemed a Purchased Asset under the terms of this Agreement.
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ARTICLE II
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NON-ASSUMPTION OF LIABILITIES
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2.1 Non-Assumption of Liabilities. Other than with respect to the Assumed
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Liabilities (as defined in Section 2.2 below), on the Closing Date Buyer will
not assume, agree to perform, discharge or indemnify the Company or Shareholder
against, or otherwise have any liability or obligation with respect to, any
liability, debt, contract or obligation of the Company or Shareholder, or any
liability, debt, contract or obligation which is or was directly or indirectly
associated with or related to the Business, the Purchased Assets or otherwise.
The Company and/or Shareholder shall remain solely responsible for satisfying,
discharging or performing all of its liabilities, debts, contracts and
obligations on a timely basis in accordance with their respective terms.
2.2 Assumed Liabilities. On the Closing Date, Buyer will assume only the
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following liabilities, responsibilities and obligations, which exclude the
Excluded Liabilities as defined in Section 2.3 below (collectively, the "Assumed
Liabilities"):
(a) Contract Obligations. All liabilities, responsibilities and
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obligations of the Company under the Assigned Contracts, including any
obligation for performance thereon.
(b) Specific Financial Obligations. The liabilities of the Business
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specified on Schedule the Company's balance sheet as of January 18, 1999.
(c) Conduct of Business After Closing. All other liabilities,
---------------------------------
responsibilities and obligations directly arising out of, resulting from, or
relating to the use, ownership and operation of the Purchased Assets by Buyer
after the Closing, or the normal, good faith conduct of the Business by Buyer
after the Closing.
2.3 Excluded Liabilities. For purposes hereof, the term "Excluded
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Liabilities" means any and all liabilities, responsibilities and obligations not
listed in Section 2.2, including but not limited to the following liabilities
and obligations:
(a) The Company's Other Businesses. All liabilities, responsibilities
------------------------------
and obligations incurred by the Company in connection with the conduct of the
Excluded Businesses, and such liabilities and obligations not expressly assumed
by Buyer under Section 2.2(c) above.
(b) Litigation. All liabilities, responsibilities and obligations,
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whether now existing or hereafter arising, in respect to litigation brought or
claims made under any legal theory whatsoever against the Company and/or Buyer
by or on behalf of third parties, including without limitation any government
agencies, which result from occurrences on or prior to the Closing with respect
to the conduct of the Business or ownership of the Purchased Assets by the
Company.
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(c) Employment Matters. Any liability to employees of the Company
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whether direct or indirect, accrued or absolute, contingent or otherwise,
relating to any event, occurrence or set of facts which took place as of or
prior to the Closing except to the extent such liability relates to agreements
between Buyer and such employees.
(d) Environmental Liabilities. Any and all environmental liabilities
-------------------------
arising from the Company's operations on or prior to the Closing or from the
Company's operation of the Business on or prior to the Closing.
(e) Taxes. Except as assumed pursuant to Section 2.2(c) or as provided
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in Section 3.3, all liabilities and obligations for Taxes (as that term is
defined in Section 4.26) relating or attributable to (i) the use and ownership
of the Purchased Assets by the Company on or prior to Closing, (ii) the conduct
of the Business by the Company and (iii) Taxes for which the Company is
responsible.
(f) Conduct of Company After Closing. All debts, obligations,
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responsibilities, contracts and liabilities arising out of, resulting from or
relating to the conduct of the Company after the Closing.
(g) Obligations in Connection with this Agreement. All liabilities,
---------------------------------------------
debts, obligations and responsibilities incurred by the Company in violation of,
or as a result of the Company's or Shareholder's violation of, this Agreement.
(h) Other Excluded Liabilities. All debts, obligations,
--------------------------
responsibilities, contracts and liabilities of the Company relating to the
Excluded Business or the Excluded Assets.
(i) Enumerated Excluded Liabilities. Those debts, obligations,
-------------------------------
responsibilities, contracts and liabilities enumerated on Schedule 2.3, which
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would otherwise fall within the scope of Section 2.2.
ARTICLE III
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PURCHASE PRICE
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3.1 Purchase Price. In reliance on the warranties and representations of
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the Company and Shareholders contained herein, and in consideration of the
aforesaid sale, assignment, transfer and delivery of the Purchased Assets, Buyer
shall pay to the Company in full payment for the Purchased Assets, and in full
payment for the agreements of the Company and Shareholders, consideration in the
form of the assumption of the Assumed Liabilities for an aggregate purchase
price (the "Purchase Price") that is equal to (i) the amount of the Assumed
Liabilities less (ii) the amount of $245,000 (the "Cash Rebate"), which Cash
Rebate shall be paid by Company to Buyer pursuant the terms of the Secured
Promissory Note attached hereto as Exhibit B-1, the obligations of which shall
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be secured by the Excluded Assets pursuant to the terms of the Security
Agreement attached hereto as Exhibit B-2.
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3.2 Allocation of the Purchase Price. At the Closing Date, Buyer and the
--------------------------------
Company shall prepare an allocation of the Purchase Price among the Purchased
Assets together with those Assumed Liabilities that are required to be
capitalized for federal income tax purposes (the "Allocation"). The parties
agree that all tax returns and reports (including IRS Form 8594) and all
financial statements shall be prepared in a manner consistent with (and the
parties shall not otherwise take a position inconsistent with) the Allocation.
The Allocation is intended to comply with Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code") and the Regulations promulgated
thereunder.
3.3 Transfer Taxes. The Company shall pay and promptly discharge when due
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the entire amount of any and all excise, sales, use, transfer, stamp,
registration or other similar taxes ("Transfer Taxes") imposed or levied by
reason of or in connection with or attributable to the transactions contemplated
by this Agreement. The parties shall cooperate with each other to the extent
reasonably requested and legally permitted to minimize any such Transfer Taxes.
Sales taxes on the book value of assets prior to any revaluation of such assets
resulting from property appraisals required under the terms of this Agreement
shall be divided equally between the Buyer and the Company. Any sales taxes in
excess of the book value shall be the responsibility of the Buyer. Buyer
acknowledges that the Inventory being purchased hereunder is for "resale
purposes" and will provide the Company with a California Resellers Certificate.
3.4 Guarantee of Accounts Receivable. The amount of trade accounts
--------------------------------
receivable from the sale of Gross Inventory (the "Receivables"), net of reserves
for uncollectible accounts receivable, is referred to as the "Net Receivables."
Company shall use its best efforts to collect all the Receivables prior to and
during the ninety (90) day period after the Closing Date, referred to herein as
"Actual Collections." If more than one invoice is outstanding for any customer,
the "first-in, first-out" principle shall be applied in determining the invoice
to which a payment relates, unless a customer specifies which invoice a payment
should be credited to.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDER
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In order to induce Buyer to enter into this Agreement, subject to
exceptions as disclosed in schedules referring specifically to the
representations and warranties in this Agreement, which shall be attached to
this Agreement and which shall identify by the section and/or subsection to
which such disclosure relates (however all information disclosed therein shall
be deemed disclosed under and incorporated into any other section of the
Agreement where such disclosure would be appropriate) and which are supplied by
the Company and Shareholder to Buyer and dated as of the date hereof, the
Company and Shareholder make the following representations and warranties to
Buyer:
4.1 Organization and Qualification of the Company. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California has all requisite power and authority to own, lease
and operate the Purchased Assets and to conduct the Business as now
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being conducted. The nature and conduct of the Business or the ownership or
leasing of the Purchased Assets do not require that the Company be qualified to
do business in any other jurisdiction, except where the failure to be so
qualified would not have a material adverse effect on the Business or the
Purchased Assets. The Company has delivered to Buyer complete and correct copies
of the Articles of Incorporation and Bylaws of the Company, in each case as
amended to the date hereof.
4.2 Subsidiaries. Except as to any securities listed on Schedule 1.3 as
------------ ------------
Excluded Assets, the Company does not own any securities issued by, or have any
other ownership interest in, any other corporation, business organization or
entity. The Company is not a partner or participant in any joint venture or
partnership of any kind. The Company is not subject to any obligation or
requirement to provide funds to or to make any investment (in the form of a
loan, capital contribution or otherwise) in any entity or to any individual.
4.3 Authority Relative to this Agreement. The Company has all requisite
------------------------------------
corporate power and authority to enter into this Agreement and any agreement or
document contemplated hereby and, upon the requisite approval of its
shareholders, the Company will have all requisite corporate power and authority
to consummate the transactions contemplated hereby; and the Company has the
requisite power and authority to sell, transfer, convey, assign and deliver to
Buyer all right, title and interest to all of the Purchased Assets under this
Agreement, free and clear of all liens, claims, encumbrances, charges,
liabilities or obligations of every kind and nature whatsoever including,
without limitation, tax liens, except those assumed by Buyer hereunder
(collectively "Liens"). The execution and delivery of this Agreement, and any
agreement or document contemplated hereby, and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement, and all agreements
or documents contemplated hereby, have been duly executed and delivered by the
Company and the obligations imposed on the Company by this Agreement, or by any
agreement or document contemplated hereby, constitute the valid and binding
obligations and agreements of the Company enforceable against the Company in
accordance with its terms except: (i) that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditor's rights; and (ii) that the remedy of
specific performance and injunctive and other forms of equitable relief, may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
4.4 Compliance of Transaction With Laws and Other Instruments. The
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Company is not in violation of its Articles of Incorporation or Bylaws in any
respect. The execution, delivery and performance by the Company of this
Agreement, and the other agreements and documents contemplated hereby and the
performance and consummation of the transactions contemplated hereby by the
Company: (i) do not require on behalf of the Company any material approval,
consent, order or authorization of, registration, declaration or filing with,
any governmental agency, court, or other authority which has not been obtained
and which is not in full force and effect as of the date hereof; (ii) will not
conflict with, or result in a breach or violation of any provision of the
Articles of Incorporation or Bylaws of the Company; (iii) will not result in a
violation of any law, regulation,
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statute, ordinance, rule, judgment, writ, injunction, license, permit, order or
decree of any court or governmental or regulatory authority (federal, state,
local or otherwise) to which the Company or its properties or assets (including
the Purchased Assets) are subject, the effect of which would be materially
adverse to the Business or the Purchased Assets; and (iv) except as set forth on
Schedule 4.4, will not require the approval, consent or waiver of, or filing
------------
with any party to, violate or conflict with or result in a breach of, or
constitute a default or acceleration of or give rise to a right of termination
(or an event which with notice or lapse of time or both would become a default)
under, any provision of any contract (including the Assigned Contracts),
indenture, mortgage, lease, agreement or other instrument to which the Company
is a party or to which any of its assets or properties (including the Purchased
Assets) are subject, the effect of which would be material and adverse to the
Business or the Purchased Assets.
4.5 Financial Statements. Attached as Schedule 4.5 hereto are the
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unaudited, financial statements of the Company for the year in the period ended
June 30, 1998 (the "Yearly Financials"), which statements fairly present the
financial position of the Company, including operations of the Business, as of
the dates thereof and the results of its operations for the periods covered
thereby. All such financial statements are sometimes referred to herein as the
"Financial Statements." The balance sheet dated January 18, 1999 (the "Balance
Sheet") has been prepared in accordance with generally accepted accounting
principles ("GAAP"), and to the extent GAAP would require such items to be
disclosed therein, properly reflects all transactions, both ordinary and
extraordinary, engaged in by the Company. The Yearly Financials have been
prepared by the Company on a basis consistent with the Company's accounting
policy in prior periods and properly reflect all transactions, both ordinary and
extraordinary, engaged by the Company.
4.6 Title to Purchased Assets; Liens; Condition of Purchased Assets.
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(a) Title to Purchased Assets; Liens. Except as disclosed on Schedule
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4.6, (i) none of the Purchased Assets are subject to any Liens except for Liens
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for taxes not yet due and payable and Liens arising by operation of law or the
Assigned Contracts or the Assumed Liabilities, and the Company agrees to sell
and transfer the Purchased Assets to Buyer free and clear of all Liens and
subject to no restrictions with respect to the transferability thereof and,
without requiring the consent of any third party; (ii) the Purchased Assets
comprise all of the tangible assets owned, used in or necessary for the conduct
of the Business; (iii) the Company owns all leasehold estates and other rights
purported to be granted by the leases to which it is a party and all such leases
are valid, enforceable and subsisting and no default by the Company exists under
any thereof; (iv) there are no other agreements, written or oral concerning the
Company's right, title or interest in and to any Purchased Asset or leased
property; and (v) the Company has no notice of any claim, suit, or proposal by a
taxing authority which could have a material adverse impact on the value, use or
condition of any leased property. Schedule 4.6 also sets forth the addresses
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or locations of all facilities (whether leased or owned) of the Company and the
addresses or locations of all places where the Company operates the Business or
stores personal property.
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(b) Condition of Purchased Assets. (i) The Purchased Assets and all
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assets which are the subject of the Equipment Leases are in good working
condition, ordinary wear and tear excepted, have been properly maintained, are
suitable for the purposes for which they are used, and substantially conform to
the requirements of all laws, ordinances and regulations applicable to their use
and ownership or lease by the Company; and (ii) the buildings and structures
leased and occupied by the Company are suitable and properly zoned for the
purpose for which they are used, have been properly maintained to the extent the
Company is required to do so, and there are no material outstanding work orders
with respect to any painting, maintenance, repair or alterations to be performed
thereon.
4.7 Absence of Undisclosed Liabilities.
----------------------------------
(a) The Company does not have any liability or obligation (absolute,
accrued, contingent or otherwise) of a nature required by GAAP to be reflected
on the Financial Statements or disclosed in the notes thereto, and there is no
basis for any such liability or obligation except: (i) liabilities stated or
adequately reserved against in the Financial Statements; and (ii) liabilities
incurred in the ordinary course of business and which are not individually or in
the aggregate material to the financial condition or earnings of the Company or
the value of the assets of the Company; and
(b) To the Company's knowledge, there is no fact, which is not
disclosed in this Agreement or in any Schedule furnished herewith, that would
have a material adverse effect on, or that may in the future materially and
adversely affect the Business or the Purchased Assets. The Company has not been
notified or is otherwise aware that any supplier, client or customer of the
Business has made, or intends to make, a reduction in its present level of
business with the Company as a result of this Agreement and the transactions
contemplated hereby or for any other reason, except for such suppliers that have
reduced or cancelled shipments due to nonpayment or slow payment.
4.8 Collectibility of Gross Accounts Receivable. The Gross Accounts
-------------------------------------------
Receivable represent valid claims against account debtors for goods delivered or
services rendered by the Company. To the Company's knowledge, there is no reason
why all such Gross Accounts Receivable will not be collected in the ordinary
course of business, and such Gross Accounts Receivable are not subject to set-
off or counterclaim. The Company does not have any accounts or loans receivable
from any person, firm or corporation which is employed by or affiliated with it
or any of its or shareholders, directors, officers or managerial employees, or
from any shareholder, director, officer or managerial employee of the Company,
or from any parent, spouse or child of them, which relate to or in any way
affect or diminish the value of the Business or Purchased Assets.
4.9 Inventories. The Gross Inventory was acquired in the ordinary course
-----------
of business and in a manner consistent with past practices, and is of a quality
and quantity usable or salable in the ordinary course of the Business, except
for obsolete and slow moving items and items below standard quality which have
been written down on the Closing Balance Sheet to net realizable value or have
been provided for by adequate reserves. All items of Gross Inventory which are
damaged, previously returned, obsolete (which shall include all Gross Inventory
which has been held for more than six months), discontinued or otherwise for any
reason not salable in the ordinary course of business
-9-
including, without limitation, any Gross Inventory items representing more than
a supply of such item based on the Company's average historical monthly usage
records over the last twelve months (or for such shorter period of the existence
of a particular product). The Gross Inventory is stated consistent with past
practices.
4.10 Absence of Certain Changes. Except as indicated on Schedule 4.10,
-------------------------- -------------
since January 18, 1999 there has not been:
(a) any material adverse change in the Purchased Assets or Assumed
Liabilities;
(b) any material contingent liability incurred by the Company whether
(i) by reason of an event, accident or occurrence or (ii) as guarantor, surety
or otherwise with respect to the obligations of others;
(c) any material obligation or liability incurred by the Company,
including the obligation to perform services, other than obligations and
liabilities incurred in the ordinary course of business;
(d) any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the services,
properties or assets of the Company, except in the ordinary course of business;
(e) any material damage, destruction or loss, whether or not covered
by insurance, affecting the Purchased Assets or the Business;
(f) any declaration, setting aside or payment of any dividend, or the
making of any other distribution in respect of, any class of the capital stock
of the Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of its own capital stock;
(g) any pending or threatened labor disputes or strikes, labor union
organizational activity, any material claim or threatened claim of unfair labor
practices, or any material adverse change in relations with employees involving
the Business generally;
(h) any change in the compensation payable or to become payable to any
employee of the Business outside of the ordinary course of business of the
Company as heretofore conducted, or payments of bonuses to any employees that
exceed $10,000 in the aggregate;
(i) any material change in the Company's invoicing or collection
procedures or any discounts, rebates or returns granted to any customer of the
Business other than in the normal and customary manner consistent with the
Company's prior practice;
(j) any material settlement, compromise or agreement to settle or
compromise any claim, litigation, action or proceeding relating to the Purchased
Assets or the Business;
-10-
(k) any material increase in the amount of Gross Accounts Receivable
which are more than thirty-one (31) days past the date such amounts are due
pursuant to their terms, or any notes or Gross Accounts Receivable or portions
thereof written off by the Company as uncollectible or specifically reserved for
on the books of the Company;
(l) any amendment or termination of any material Assigned Contract;
(m) any change in the Company's accounting methods, principles or
practices;
(n) any net decrease in the net worth of the Company;
(o) any change by the Company in the amount of insurance coverage
relating to the Business or the Purchased Assets or change in insurance
carriers;
(p) expenditures made by the Company which are not reflected as an
asset in the Company's accounts or which are not deductible for federal income
tax purposes which in the aggregate are material;
(q) any action taken by the Company outside of the ordinary course of
business, including, but not limited to, those actions described in Sections
6.2(b)(i) through (xiv);
(r) any material adverse change in the information contained in the
October Balance Sheet; or
(s) any agreement or understanding by the Company to do any of the
foregoing.
4.11 Intellectual Property Rights. To the best of the Company's knowledge,
----------------------------
the Company owns or is licensed or otherwise possesses legally enforceable
rights to use all Company Intellectual Property Rights that are necessary to
conduct the Business. No claims with respect to the Company Intellectual
Property Rights, including software, programs and MIS systems and materials, or
any trade secret material to the Business have been asserted or are threatened
by any person, nor does the Company know of any valid grounds for any bona fide
claims (i) to the effect that the sale or use of any product as now used or sold
or proposed for use or sale by the Company infringes on any copyright, patent,
trademark, service ▇▇▇▇ or trade secret; (ii) against the use by the Company of
any trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the Company's
business as currently conducted or as proposed to be conducted by the Company;
or (iii) challenging the ownership, validity or effectiveness of any of the
Company Intellectual Property Rights or other trade secret material to the
Company. All registered trademarks, service marks and copyrights held by the
Company are valid and subsisting. To the Company's knowledge, there is no
material unauthorized use, disclosure, infringement or misappropriation of any
of the Company Intellectual Property Rights or any trade secret material to the
Company, by any third party, including any employee or former employee of the
Company.
-11-
4.12 Contracts and Commitments. Except as set forth in Schedule 4.12 (and
------------------------- -------------
specifically referenced to the paragraph below to which it relates) hereto:
(a) Other than the Assigned Contracts and the Assumed Liabilities, the
Company has no contract or commitment which may materially restrict the use or
materially adversely affect a Purchased Asset or the Business, and has no
Assigned Contract which will result in a loss to the Buyer in conducting the
Business or which will have an adverse effect on the Business, the Purchased
Assets or the Buyer after Closing.
(b) The Company has no Purchase Orders which were incurred or placed
by the Company outside of the normal, ordinary, usual and current course of the
Business.
(c) The Company has not given a power of attorney, which is currently
in effect, to any person, firm, entity or company regarding the Purchased Assets
or the Business, except pursuant to this Agreement or documents required hereby.
(d) All Assigned Contracts are valid and enforceable contracts in
accordance with their respective terms and the Company is not materially in
breach of or default under any Assigned Contract or any other contract or
commitment by which any of the Purchased Assets may be bound or affected nor has
any event occurred, which, through the passage of time or the giving of notice,
or both, would constitute a default thereunder or cause the acceleration of any
of the obligations thereunder or result in the creation of any Lien upon any
Purchased Asset. No third party has canceled or terminated any Assigned
Contract nor is in material default under any Assigned Contract or any other
contract or commitment by which any of the Purchased Assets may be bound or
affected nor has any event occurred which, through the passage of time or the
giving of notice, or both, would constitute a default thereunder or cause the
acceleration of any obligation owed thereunder. True and correct copies of all
Assigned Contracts (and all amendments and modifications thereto) have been
delivered to Buyer.
(e) The Company is not restricted by agreement or otherwise (except as
the Company may be restricted by applicable laws and statutes) from carrying on
the Business anywhere in California, except pursuant to this Agreement or
documents required hereby.
4.13 ERISA; Employees.
----------------
(a) The Company has made available to Buyer copies of all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar employee benefit plans, programs or arrangements, and any
current employment or executive compensation or severance agreements or
arrangements, written or otherwise, for the benefit of, or relating to, any
current or former employee of the Company or any trade or business (whether or
not incorporated) which is a member or which is under common control with the
Company (an "ERISA Affiliate") within the meaning of Section 414 of the Code, or
any subsidiary of the Company (together, the "Company Employee Plans").
-12-
(b) (i) None of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person except as required by
applicable law, including but not limited to COBRA; (ii) all Company Employee
Plans are in compliance in all material respects with the requirements
prescribed by any and all applicable statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or beneficiaries or the Department of Labor, Internal Revenue Service (the
"IRS") or Secretary of the Treasury), and the Company has performed all
obligations required to be performed by it under, is not in default under or in
violation of, and has no knowledge of any default or violation by any other
party to any of the Company Employee Plans; (iii) with respect to each Company
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code, either a favorable
determination letter with respect to each such Company Employee Plan and trust
has been received from the IRS or there is still remaining a period of time
under applicable Treasury Regulations or IRS pronouncements in which to apply
for such a determination letter and to make any amendments necessary to obtain a
favorable determination; (iv) no Company Employee Plan is or within the prior
six (6) years has been subject to, and the Company has not incurred and does not
expect to incur any liability under, Title IV of ERISA or Section 412 of the
Code and (v) nothing in any Company Employee Plan precludes or interferes with
Buyer's ability to cause the Company to terminate (or consolidate, at Buyers
option) any Company Employee Plan after the Closing; provided that (i) the
Company Employee Plans may be terminated prospectively only, subject to rights
accrued by the Company's employees at the time of such termination and (ii) not
more than sixty (60) days notice may be required to terminate certain Company
Employee Plans.
(c) Each Company Employee Plan has been maintained in substantial
compliance with its terms, and all material contributions, premiums or other
payments due from the Company or any of its subsidiaries to (or under) any such
Company Employee Plan have been fully paid or adequately provided for on the
Financial Statements for the most recently-ended fiscal year. All accruals
thereon (including, where appropriate proportional accruals for partial periods)
have been made in accordance with GAAP consistently applied on a reasonable
basis. There has been no amendment, written interpretation or announcement
(whether or not written) by the Company with respect to, or change in employee
participation or coverage under, any Company Employee Plan that would increase
materially the expense of maintaining such plans, programs or arrangements,
individually or in the aggregate, above the level of expense incurred with
respect thereto for the most recently-ended fiscal year.
(d) The Company has provided to Buyer complete, accurate and current copies
of all Company Employee Plans and all amendments, documents, correspondence and
filings relating thereto, including but not limited to any statements, filings,
reports or returns filed with any governmental agency with respect to the
Company Employee Plans at any time within the three-year period ending on the
date hereof.
(e) There are no currently effective consulting or employment agreements or
other agreements (excluding any oral employment agreement terminable at will
without liability to the
-13-
Company), except as set forth on Schedule 4.13, whether written or oral, with
-------------
individual consultants or employees to which the Company is a party. There have
not been any petitions for representation elections filed with the National
Labor Relations Board on behalf of any employees of the Company during the
Company's existence and no employees of the Company are represented by any
union. The Company has no legal obligation to pay any employee or any other
person any bonus in fiscal 1998 or thereafter.
4.14 Permits; Governmental Agreements. All Licenses are, and will be
--------------------------------
immediately before the Closing, valid and in full force and effect and
enforceable. No such License requires the consent of, or a filing or
qualification with, the permitting or licensing authority with respect to the
transactions contemplated by this Agreement. The Company is not subject to or
bound by any governmental agreement, judgment, decree or order, specifically
directed to the Company, which may materially and adversely affect the Business
or the Purchased Assets.
4.15 Borrowings and Guarantees. Except as shown on Schedule 4.15, there are
------------------------- -------------
no agreements or undertakings pursuant to which the Company is: (i) borrowing or
is entitled to borrow any money; (ii) lending or has committed itself to lend
any money; or (iii) a guarantor or surety with respect to the obligations of any
person or entity. The Company is not in default of such agreements or
undertakings listed on Schedule 4.15 so as to allow the other party thereto to
-------------
accelerate the Company's obligations thereunder or terminate or cancel such
agreements or undertakings, and the consummation of the transactions
contemplated by this Agreement will not cause the Company to be in default
thereunder or cause or give rise to a right to any acceleration, or termination
thereof. The Company has not received any grants, cancellation or other payments
from any federal, state or local governmental body which the Company could have
to repay under any circumstances.
4.16 Insurance. The Purchased Assets are insured with insurance companies
---------
against such risks and in such amounts as are customarily maintained by similar
businesses similarly situated. A true and correct copy of all policies of
liability, fire, workers' compensation, health and other forms of insurance of
any nature whatsoever presently in effect with respect to the Company or its
properties and assets, has been delivered to Buyer. All such policies are valid
and enforceable and in full force and effect, are sufficient for all applicable
requirements of law, and to the best of the Company's knowledge, no event has
occurred and no condition exists which would allow coverage under such policies
of insurance to be denied. If the Company receives, prior to the Closing, any
notices of cancellation or other termination of any such policies presently in
effect with respect to the Purchased Assets or the Business, the Company will
promptly inform Buyer and will replace or cause to be replaced such policies no
later than a date prior to the effective date of such cancellation or other
termination with policies providing substantially the same coverage.
4.17 Environmental Matters.
---------------------
(a) Hazardous Material. No underground storage tanks and no material
------------------
amount of any substance that has been designated by any governmental agency or
authority or by applicable state law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including,
-14-
without limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated pursuant
to said laws (a "Hazardous Material"), is present, as a result of the actions of
the Company, or to the Company's knowledge, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company has
at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. At no time prior to the Closing
------------------------------
Date has the Company transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any law in effect on or before the Closing Date, nor has the Company disposed
of, transported, sold, or manufactured any product containing a Hazardous
Material (collectively "Hazardous Materials Activities") in violation of any
rule, regulation, treaty or statute promulgated by any governmental agency or
authority to prohibit, regulate or control hazardous materials or any Hazardous
Material Activity.
(c) Permits. The Company does not hold any environmental approvals,
-------
permits, licenses, clearances and consents (the "Environmental Permits") as none
are necessary as the Company does not conduct any Company's Hazardous Material
Activities.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending or
threatened concerning or relating to the Company, any Environmental Permit or
any Hazardous Materials Activity of the Company. The Company is not aware of
any fact or circumstance which is likely to involve the Company in any
environmental litigation or impose upon the Company any environmental liability
which would have a material adverse effect on the Business or the Purchased
Assets.
4.18 Outstanding Claims. There are no existing, pending or threatened
------------------
claims involving or relating to the Company or the Company's performance of
services which have been, or may be, asserted against the Company and which, if
successful, would be material and adverse to the Business or the Purchased
Assets, nor, to the Company's knowledge, are there any facts which would be a
proper basis for such claims.
4.19 Compliance with Applicable Law; Adverse Restriction. To the Company's
---------------------------------------------------
knowledge, the Company is presently conducting the Business in substantial
compliance with: (i) all applicable laws, rules, regulations and ordinances of
all governmental and regulatory authorities (federal, state, local or otherwise)
(collectively "Statutes") and (ii) all applicable orders, writs, injunctions,
judgments, decrees and awards of all governmental and regulatory authorities
(federal, state, local or otherwise) (collectively "Decrees"). The Company has
not received notification of any asserted present or past failure of the Company
so to comply with any Statute or Decree and no such violation of any Statute or
Decree exists or will exist upon the Closing Date. The Company is not subject to
any Statute or Decree
-15-
or any other restriction of any kind or character, which could materially
adversely affect the Business or the Purchased Assets after the Closing.
4.20 Litigation. Except as set forth on Schedule 4.20, there are no
---------- -------------
claims, actions, suits, proceedings or investigations pending or threatened
against the Company at law, in equity or otherwise, in, before, or by, any court
or governmental agency or authority, nor is there any basis therefor, which,
individually or in the aggregate, would have a material adverse effect on the
Business or the Purchased Assets. There are no unsatisfied judgments or
outstanding orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against the
Company or against any of its respective properties (including the Purchased
Assets) or businesses (including the Business) which, individually or in the
aggregate, would have a material adverse effect on the Business or the Purchased
Assets, and none which will cause this Agreement or any action taken or to be
taken in connection herewith to be invalid.
4.21 Finder's Fee. The Company has not incurred or become liable for any
------------
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement, or otherwise dealt with any brokers
or finders in connection herewith.
4.22 Transactions with Interested Persons. Except as set forth on
------------------------------------
Schedule 4.22, no officer, managerial employee or director of the Company or
-------------
their spouses, parents or children: (i) owns directly or indirectly, on an
individual or joint basis, any material interest in, or serves as an officer or
director of, any customer, competitor or supplier of the Company or any
organization which has a contract or arrangement with the Company; (ii) has any
loans outstanding to the Company; (iii) is indebted to the Company; (iv) owns
any property, real or personal, tangible or intangible, or has rights required
for or used in the business of the Company, with the exception of some
employees' and officers' personal office decorations; or (v) is owed any money
or property by the Company, other than compensation earned in the ordinary
course of business.
4.23 Consents. To the Company's knowledge, the Company is not subject to
--------
any law, ordinance, regulation, rule, order, judgment, injunction or decree,
contract, commitment, lease, agreement, instrument or other restriction of any
kind, which by its provisions would prevent the consummation of the transactions
contemplated hereby, without the consent, filing with or notification of any
third party or which is likely to result in any penalty, forfeiture or
termination as a result of such consummation.
4.24 Information. None of the information supplied by the Company in
-----------
connection with the transactions contemplated by this Agreement and no
representation or warranty made in this Agreement or any Schedule hereto
contains any untrue statement of a material fact or omits to state any 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.
4.25 Questionable Payments. To the Company's knowledge, neither the
---------------------
Company nor any director, officer, agent, employee or other person acting on
behalf of the Company has used any funds
-16-
of the Company for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, made any direct or indirect
unlawful payments to foreign or domestic government officials or employees from
corporate funds, established or maintained any unlawful or unrecorded fund or
corporate monies or other assets, made any false or fictitious entries on the
books of record of the Company, made or received any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment, or made any other
payment, favor or gift to a third party not fully deductible for federal income
tax purposes.
4.26 Taxes. The Company has timely filed within the time period for filing
-----
or any extension granted, or appropriately amended, with respect thereto all
federal, state, local and other returns, estimates and reports ("Returns")
relating to any and all taxes or other governmental charges, obligations or fees
including any secondary or transferee liability for taxes and any related
interest or penalties ("Tax" or "Taxes") it is required to file and such Returns
were true and correct when filed and were completed in accordance with
applicable law. Except for Taxes contested in good faith and which are disclosed
in Schedule 4.26, the Company has paid all Taxes it is required to pay and has
-------------
withheld with respect to the Company's employees, all federal and state income
Taxes, FICA, FUTA and other Taxes required to be withheld. No Tax Return of the
Company has been examined or audited by the IRS or any other taxing authority
for tax years beginning after December 31, 1989. There are no pending or, to the
Company's knowledge, threatened audits, examinations, assessments, asserted
deficiencies or claims for additional Taxes with respect to the Company. There
are (and as of the Closing there will be) no Liens or similar encumbrances
relating to or attributable to Taxes on the Purchased Assets. The Company has no
knowledge of any basis for the assertion of any claims attributable to Taxes,
which if adversely determined, would result in a Lien or similar encumbrance on
the Purchased Assets or otherwise adversely affect Buyer. For purposes of this
Section 4.26, references to the Company include any predecessor or transferor
with respect to the Company.
4.27 Operation of Business. The Company has not taken any actions during
---------------------
the period from January 18, 1999 to the date of this Agreement which would be
considered a prohibited action pursuant to Section 6.2(b) herein if such action
was taken after the date of this Agreement.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
In order to induce the Company and Shareholder to enter into this
Agreement, Buyer makes the following representations and warranties to the
Company and Shareholder:
5.1 Organization. Buyer is a corporation duly organized, validly existing
------------
and in good standing under the laws of the State of Delaware, and is qualified
to do business and is in good standing in the State of California. Buyer has all
requisite corporate power and authority to enter into this Agreement, and any
agreement or document contemplated hereby, and, subject to obtaining the
approval of the shareholders of Buyer, to consummate the transactions
contemplated hereby. The execution and
-17-
delivery of this Agreement, and any agreement or document contemplated hereby,
and, subject to obtaining the approval of the shareholders of the Buyer, the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Buyer.
5.2 Binding Obligation. This Agreement, and all agreements or documents
------------------
contemplated hereby, have been duly executed and delivered by Buyer and the
obligations imposed on Buyer by this Agreement, or by any agreement or document
contemplated hereby, constitute the valid and binding obligations and agreements
of Buyer, enforceable against Buyer in accordance with its terms except: (i)
that such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors rights; and (ii) that the remedy of specific performance, and
injunctive and other forms of equitable relief, may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought.
5.3 Consents. Buyer is not subject to any law, ordinance, regulation,
--------
rule, order, judgment, injunction or decree, contract, commitment, lease,
agreement, instrument or other restriction of any kind, which by its provisions
would prevent the consummation of this Agreement or any of the transactions
contemplated hereby, without the consent, filing with or notification of any
third party or which would result in any penalty, forfeiture or termination as a
result of such consummation.
ARTICLE VI
----------
CERTAIN UNDERSTANDINGS AND AGREEMENTS
-------------------------------------
6.1 Access and Audit. Between the date of this Agreement and the Closing,
----------------
the Company will provide Buyer and its accountants, counsel and other
representatives full access to the offices, books and records of the Company and
will furnish to Buyer and its representatives such financial and operating data
and other information with respect to the business and properties of the Company
as Buyer and its representatives may request for purposes of evaluating the
purchase hereunder, including but not limited to all contracts, agreements and
arrangements with clients, customers, vendors, consultants, agents and suppliers
of the Company, and any other persons having a relationship with the Company.
(a) In connection with an audit which may be performed by Buyer's
accountants (the "Accountants") and in connection with such Accountant's review
of the financial statements of the Company, the parties agree that the fees and
expenses of the Accountants, as well as the fees and expenses of the Company's
accountants in assisting the Accountant's review of the Company's financial
statements, shall be paid by the Buyer.
6.2 Operation of Business.
---------------------
(a) Between the date of this Agreement and the Closing, the Company
and Shareholder shall:
-18-
(i) preserve intact and continue to manage and day-to-day
operate the Business substantially in conformity with the manner in which it has
heretofore been operated by Company;
(ii) preserve the Company's existing relationships with
customers, affiliates, suppliers, consultants, employees and any other persons
having business relations with it;
(iii) preserve and protect all of the Purchased Assets in good
repair and condition, normal wear and tear excepted, and maintain the insurance
policies covering the Business and the Purchased Assets in full force and
effect;
(iv) maintain the Company's books of account and records in the
usual and ordinary manner, and in conformity with its past practices; and
(v) pay its Taxes when due and to pay its debts or perform its
other obligations consistent with recent past practices.
(b) Between the date of this Agreement and the Closing, the Company
shall conduct its business, in a reasonable and prudent manner, in the ordinary
course of business consistent with past practices and, by way of amplification
and not limitation, the Company shall not, without the prior written consent of
Buyer:
(i) amend its Articles of Incorporation or Bylaws;
(ii) grant any increase in the compensation payable, or to
become payable, by the Company to employees of the Business, make any bonus
payment to any of the employees of the Business or enter into any insurance,
pension or other benefit plan, payment or arrangement for or with any of the
employees of the Business;
(iii) borrow or agree to borrow any funds, incur any
indebtedness, or directly or indirectly guarantee or agree to guarantee the
obligations of others;
(iv) not make any capital expenditure or enter into any
agreement, contract, lease or commitment relating to the Business or the
Purchased Assets (other than materials and supplies acquired in the ordinary
course of business);
(v) place or allow to be placed on any of the Purchased Assets
any Lien other than Liens arising by operation of law in the ordinary course of
business consistent with past practices or other minor Liens which do not in the
aggregate detract from the value of such assets or properties in any material
amount;
(vi) cancel, discount or otherwise compromise any indebtedness
owing to it or any claims which it may possess or waive any rights of value, in
each case which are included in the Purchased Assets except in the ordinary
course of business consistent with its past practices;
-19-
(vii) sell, assign, license or transfer any Company Intellectual
Property Rights;
(viii) sell or otherwise dispose of any interest in real property
or personal property comprising the Purchased Assets, except in the ordinary
course of business consistent with its past practices;
(ix) commit any act or omit to do any act which will cause a
breach of any Assigned Contract;
(x) violate any law, statute, rule, governmental regulation or
order of any court or governmental or regulatory authority (whether federal,
state or local) in any material way;
(xi) engage in any activity or transaction or incur any
obligation (by conduct or otherwise) which will have a material adverse effect
on the Business, the Purchased Assets or the Assumed Liabilities;
(xii) make any loan, advance, or distribution or payment of any
type to its shareholders, or any of its officers or directors, except for
payment of salaries;
(xiii) increase any reserves for doubtful or uncollectible
accounts receivable without the consent of Buyer; or
(xiv) take, or agree in writing or otherwise to take, any of the
actions described in Section 6.2(b)(i) through (xiv) above, or take any action
(or fail to take any action) that would cause any representation or warranty
made by the Company or Shareholder herein to be untrue in any material respect,
or that would prevent the Company or Shareholder from performing any
requirements or covenants of the Company or Shareholder contained herein.
6.3 Expenses. Subject to Section 10.2 hereof and except as otherwise
--------
provided herein, Buyer and the Company shall each pay their respective costs
incurred in connection with the preparation, negotiation, execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
including, without limitation, the fees of their respective attorneys, brokers
and finders.
6.4 News Releases. Prior to the Closing, and except as required by law,
-------------
any news releases pertaining to the transactions contemplated hereby shall be
prepared by Buyer, or its representatives, and reviewed and approved by
Shareholder, and shall be acceptable to it them prior to any dissemination.
After the Closing, if a public notice or announcement has not already been made,
the Buyer may prepare a public statement or announcement with regard to the sale
and purchase hereunder. The Company shall not make any other public notice or
announcement without the consent and approval of Buyer.
6.5 Notice of Adverse Developments. Prior to the Closing, the Company
------------------------------
will give immediate written notice to Buyer by facsimile transmission of any
development which adversely
-20-
affects, or which is likely to adversely affect Business, the Purchased Assets
or Buyer after the Closing. No disclosure pursuant to this Section 6.5, however,
shall be deemed to amend or supplement the schedules to this Agreement or to
prevent or cause any misrepresentation or breach of representations, warranties
or covenants made by the Company or Shareholder herein; except that if Buyer
determines any adverse or potentially adverse effect to be material, Buyer and
the Company agree to negotiate a reduction in the Purchase Price mutually
acceptable to Buyer and the Company. If, however, an agreement for a reduction
in the Purchase Price cannot be reached between the parties within thirty (30)
days of beginning such negotiations, any party may terminate this Agreement by
written notice to the other without further obligation to the other.
6.6 Exclusivity. Neither the Company nor any of its directors, officers,
-----------
employees, financial advisors or agents will (i) solicit, encourage, initiate or
participate in any negotiations or discussions with any third party with respect
to any offer or proposal to merge with or acquire the Company or all or
substantially all of the Business or Purchased Assets whether by merger,
purchase of assets or otherwise, (ii) disclose to any third party any
information concerning the Business and properties of the Company or afford any
third party access to the properties, books or records of the Company, except in
the ordinary course of business or as customarily disclosed or accessed or as
compelled by law, or (iii) cooperate with any third party to make any proposal
to merge with or acquire all or any part of the capital stock or assets of the
Company other than inventory in the ordinary course of business or non-essential
or excess assets. If the Company receives a formal or informal offer or proposal
for such a merger or acquisition (or an offer or proposal to enter negotiations
therefor), the Company shall immediately inform Buyer thereof (including the
identity of the offeror and a written summary of the terms of such offer) and
shall provide Buyer with copies of any documents relating thereto.
6.7 Confidentiality. All information furnished by either party to the
---------------
other party or its representatives will be held in strict confidence by the
party receiving such information and will not be disclosed to any third party
except representatives who need access to the information in order to complete
the transactions contemplated hereby. All information furnished by any party
hereto to another party will be deemed to be proprietary in nature and shall be
kept confidential unless (a) the party providing the information consents in
writing to disclosure to third persons, (b) the information is already in the
public domain, (c) disclosure of the information is compelled by process of law,
or (d) the party receiving the information already had such information in its
possession from another source. If this Agreement shall be terminated prior to
Closing, each party and its representatives will return to the other all
tangible, electronic or other forms of such information to the other party, will
retain no such information in its files, and will not use to its commercial
advantage any information obtained (whether or not contained in hard copy,
database or other physical form) concerning products, customers or other
information of or about the other which reasonably could be presumed to be of a
proprietary and confidential nature.
6.8 Preserve Accuracy of Representations and Warranties. The parties
---------------------------------------------------
shall not voluntarily undertake any action which would render inaccurate any
representation or warranty contained herein.
-21-
6.9 Certain Events. Each of the Buyer, the Company and shareholder shall
--------------
immediately communicate to the others any determination that any of the
conditions to its respective obligations to close the transactions contemplated
hereby cannot be met or its knowledge of any circumstances which would require a
modification of any material term of this Agreement.
6.10 Best Efforts and Mutual Cooperation. Each of the parties to this
-----------------------------------
Agreement shall use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. The parties hereto will cooperate with each other to obtain as
promptly as possible all consents, authorizations, orders or approvals of any
third party, whether private or governmental, required in connection with the
transactions contemplated by this Agreement. The parties hereto agree to
coordinate and cooperate with one another in exchanging such information and in
executing and delivering such instruments as the others may request in
connection with all of the foregoing.
6.11 Further Assurances. At and after the Closing, and without any further
------------------
consideration, each of the parties hereto will, at the request of the other
parties hereto, execute and deliver to the requesting party all such further
assignments, assurances and other documents as such party may reasonably request
in order to effect the transfer of the Business, the Purchased Assets and the
Assumed Liabilities to Buyer.
6.12 Third Party Consents. Prior to the Closing, the Company shall use its
--------------------
best efforts to obtain all necessary consents, waivers and acknowledgments
required to avoid a default under, or to avoid giving another party the ability
to terminate or accelerate, any contract, agreement, or other instrument to
which the Company is a party including the Assigned Contracts, or by which any
of the Purchased Assets are bound, or which are otherwise material to the
Business.
6.13 Offers of Employment. The Company will use its best efforts to assist
--------------------
Buyer in obtaining the employment after Closing of those employees of the
Company listed on Exhibit C attached hereto that Buyer indicates it desires
---------
to employ.
6.14 Performance and Payment by Buyer. Buyer shall perform, pay and
--------------------------------
discharge when due: (a) the Assumed Liabilities and (b) all executory
obligations of the Company under the Assigned Contracts, and the Equipment
Leases, on the terms and conditions provided in such agreements.
6.15 Application for Tax Certificates. Within fifteen (15) days of the
--------------------------------
date of this Agreement, the Company shall file with the appropriate governmental
agencies properly completed applications or other appropriate forms of request
to obtain the following:
(a) a tax good standing certificate issued by the Franchise Tax Board
(FTB Form 4263A) which states that the Company is in good standing, has no known
unpaid tax liability and is entitled to transact business in California ("Tax
Good Standing Certificate");
-22-
(b) a certificate of release as authorized in and pursuant to
California Unemployment Insurance Code Sections 1731 through and including 1734
("Certificate of Release"); and
(c) a certificate or receipt of payment of all sales and use taxes as
authorized in and pursuant to California Revenue and Taxation Code Sections 6811
through and including 6814 of the Sales and Use Tax Law of California
("Certificate of Sales Tax Payment").
The Tax Good Standing Certificate, the Certificate of Release and the
Certificate of Sales Tax Payment required hereunder are collectively referred to
herein as the "Tax Certificates" and such Tax Certificates shall be dated not
earlier than thirty (30) days before the Closing Date.
6.16 1.44 Tax Returns. To the extent that failure to do so would adversely
----------------
affect Buyer or the Purchased Assets, the Company shall (i) continue to timely
file within the time period for filing, or any extension granted with respect
thereto, all federal, state, local and other Returns relating to any and all
Taxes it is required to file and such Returns shall be true and correct and
complete in accordance with applicable law and (ii) be responsible for and pay
when due any and all Taxes (A) relating or pertaining to the period (or that
portion of any period) ending on or prior to the Closing Date, and (B)
attributable to, levied or imposed upon, or incurred in connection with the
Purchased Assets on or prior to the Closing Date or the operations of the
Company.
6.17 Post-Closing Date Access to Information. If after the Closing, in
---------------------------------------
order properly to prepare documents or reports required to be filed with
governmental authorities or its financial statements, it is necessary that Buyer
be furnished with additional information relating to the Purchased Assets or the
Business and such information is in possession of the Company, the Company will
furnish, or cause to be furnished, such information to Buyer. The Company agrees
to maintain and retain for three years any and all information regarding its
business and operations on or prior to the Closing.
6.18 Final Schedules of Purchased Assets and Assumed Liabilities. To the
-----------------------------------------------------------
extent that updated Schedules to this Agreement are delivered by the Company to
the Buyer at the Closing and do not reflect all activity of the Company through
and including the Closing Date, within three (3) business days after the
Closing, the Company shall deliver to Buyer updated Schedules to this Agreement
reflecting all activity through and including the Closing Date. Such Schedules
shall become the basis for determining the Purchased Assets, the Excluded
Assets, the Assumed Liabilities and the Excluded Liabilities for purposes of
this Agreement.
ARTICLE VII
-----------
CONDITIONS TO OBLIGATIONS TO CLOSE
----------------------------------
7.1 Conditions Precedent to Obligations of the Company and Shareholder.
------------------------------------------------------------------
The obligations of the Company and Shareholder to consummate the transactions
contemplated by this Agreement are
-23-
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, except to the extent the Company and Shareholder shall have waived
in writing such satisfaction:
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties made by Buyer in this Agreement shall be true and correct as of the
date of this Agreement and on and as of the Closing Date as though such
representations and warranties were made on and as of such date.
(b) Performance. Buyer shall have performed and complied with and be
-----------
in compliance with all covenants, agreements, representations, warranties and
undertakings required by this Agreement to be performed or complied with by
Buyer prior to the Closing.
(c) Closing Documents. Buyer shall have delivered to the Company at
-----------------
Closing all of the documents required by Section 8.1.
(d) Consulting Agreement. W&K Pharmacy, Inc. shall have entered into a
--------------------
Consulting Agreement with Buyer to provide the non-exclusive services of ▇▇▇▇▇▇
▇▇▇▇▇ in the form attached hereto as Exhibit D.
----------
(e) Insurance. Buyer shall have provided the Company copies of
---------
insurance binders for business insurance coverage of the Business and Purchased
Assets to become effective upon the Closing in amounts equal to or greater than
the current coverage maintained by the Company.
(f) Corporate Approval. This Agreement shall have been approved and
------------------
adopted by the requisite vote or consent of the board of directors of Buyer.
(g) Closing Certificate. Buyer shall deliver at Closing a certificate
-------------------
in such detail as the Company shall reasonably request, certifying to the
fulfillment or satisfaction of the conditions set forth in this Section 7.1. The
delivery of such certificate shall constitute a representation and warranty of
Buyer as to the statements set forth therein.
7.2 Conditions Precedent to Obligations of Buyer. The obligations of Buyer
--------------------------------------------
to consummate the transactions contemplated by this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions,
except to the extent the Buyer shall have waived in writing such satisfaction.
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties made by the Company and Shareholder in this Agreement shall be true
and correct as of the date of this Agreement and on and as of the Closing Date
as though such representations and warranties were made on and as of such date.
(b) Performance. The Company and Shareholder shall have performed and
-----------
complied with and be in compliance with all covenants, agreements,
representations and warranties and
-24-
undertakings required by this Agreement to be performed or complied with by the
Company or Shareholder prior to the Closing.
(c) No Proceeding or Litigation. No action, suit or proceeding before any
---------------------------
court or any governmental or regulatory authority shall have been commenced, no
investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any governmental or regulatory
authority shall have been threatened, against Buyer or the Company or any
affiliate, associate, officer or director of any of them, seeking to restrain,
enjoin, rescind, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any such transactions or seeking Losses
in connection with any of such transactions.
(d) No Adverse Change. There shall have been no material adverse change
-----------------
since the date of this Agreement in the general affairs, management, business,
condition (financial or otherwise) of the Purchased Assets, Assumed Liabilities
or the Business or in the Balance Sheet since January 18, 1999.
(e) Employees. The employees of the Company listed on Exhibit C attached
--------- ---------
hereto shall have indicated their willingness to work for Buyer after the
Closing to the reasonable satisfaction of Buyer and pursuant to similar terms of
employment between such employees and the Company.
(f) Receipt of Required Consents. All consents that may be necessary to
----------------------------
consummate the transactions contemplated hereby in accordance with Section 6.12
shall have been received by the Company with copies provided to Buyer.
(g) Consulting Agreement. W&K Pharmacy, Inc. shall have entered into a
--------------------
Consulting Agreement with Buyer to provide the non-exclusive services of ▇▇▇▇▇▇
▇▇▇▇▇ in the form attached hereto as Exhibit D.
----------
(h) Corporate Approval. This Agreement shall have been approved and
------------------
adopted by the requisite vote or consent of the board of directors and
shareholders of the Company.
(i) Delivery of Tax Certificates. The Company shall have delivered to
----------------------------
Buyer on or before the Closing the Tax Certificates.
(j) Closing Certificate. The Company and Shareholder shall have delivered
-------------------
at Closing certificates in such detail as Buyer shall reasonably request,
certifying to the fulfillment or satisfaction of the conditions set forth in
this Section 7.2. The delivery of such certificate shall constitute a
representation and warranty of the Company and Shareholders as to the statements
set forth therein.
-25-
ARTICLE VIII
------------
CLOSING DELIVERIES
------------------
Unless this Agreement shall have been terminated as provided in Article X,
the closing of the transactions contemplated hereby (the "Closing") will be held
at the offices of the Buyer in Burbank, California at 9:00 a.m. on or before
June 30, 1999, or such other time, date and/or place as mutually agreed upon by
Buyer and the Company. The date of the Closing is herein referred to as the
"Closing Date." All actions taken at the Closing will be considered as having
been taken simultaneously and no such actions will be considered to be completed
until all such actions have been completed.
8.1 At the Closing, Buyer shall deliver to the Company:
--------------------------------------------------
(a) The Closing Certificate executed by an officer of Buyer in
accordance with Section 7.1(g).
(b) A certificate of the Secretary of State of the State of
California, dated within seven (7) days of the Closing Date, confirming the
legal existence and good standing of the Buyer.
(c) An executed Consulting Agreement executed by W&K substantially in
the form of Exhibit D attached hereto.
---------
(d) Executed Equipment Lease Assignment Agreements substantially in
the form of Exhibits A attached hereto.
----------
8.2 At the Closing, the Company and Shareholder shall deliver to Buyer:
------------------------------------------------------------------
(a) Resolutions of the Board of Directors and shareholders of the
Company authorizing the execution and delivery of this Agreement by the Company
certified by the Secretary of the Company;
(b) Closing Certificate executed by the President of the Company and
Shareholder in accordance with Section 7.2(j).
(c) A Certificate of the Secretary of State of the State of
California, dated within seven (7) days of the Closing Date, confirming the
legal existence and good standing of the Company.
(d) Copies of all Third Party Real Property Leases, Equipment Leases,
Business Records, Licenses and all Assigned Contracts.
(e) Any Real Property Lease Assignment Agreements and Equipment Lease
Assignment Agreements, substantially in the forms of Exhibits A attached hereto.
----------
(f) The Tax Certificates as described in Section 7.2(i).
-26-
(g) An executed Consulting Agreement executed by W&K substantially in
the form of Exhibit D attached hereto.
---------
(h) The ▇▇▇▇ of Sale duly executed by the Company substantially in
the form of Exhibit E attached hereto.
---------
(i) The consents required in accordance with Section 7.2(f).
(j) Releases executed by creditors with respect to such creditors'
lien on the assets of the Company.
8.3 After the Closing:
-----------------
(a) Within thirty (30) days after Closing, the Buyer shall cause to
be satisfied or shall assume of all Company's and Shareholder's respective
obligations under those certain credit facilities with the American Pacific Bank
and China Trust Bank set forth on Schedule 4.15.
(b) For so long as Company is in the business of acquiring
merchandise for wholesale or retail, including without limitation, jewelry,
watches and precious metal coins, Company shall provide, and Shareholder shall
cause Company to provide, Buyer with such merchandise for sale on Buyer's
shopping channel by buying appropriate inventory, as approved by Buyer, and
selling it to Buyer (or its assigns) at Company's cost to acquire such
merchandise (taking into account any applicable volume discounts) and Company's
actual general and administrative costs (not to exceed 8.0% of Company's costs)
to acquire such merchandise for Buyer. Upon Buyer's request, Company shall
provide written purchase orders, confirmations, invoices and other such
documentation needed to establish Company's acquisition and general and
administrative costs.
ARTICLE IX
----------
INDEMNIFICATION
---------------
9.1 Survival of Representations, Etc. It is the express intention and
--------------------------------
agreement of the parties to this Agreement that all covenants, agreements,
statements, representations, warranties and indemnities made by Buyer, the
Company and Shareholder in this Agreement or in any document or instrument
delivered by Buyer or the Company and Shareholder pursuant to the provisions of
this Agreement at or in connection with the Closing shall survive the Closing as
follows:
(a) all representations, warranties, covenants and agreements of the
Company and Shareholder in Section 4.26 or otherwise relating to the federal,
state, local or foreign Tax obligations of the Company with respect to the Tax
Returns filed or required to be filed prior to or on the Closing Date ("Tax
Matters") shall survive the Closing for the period of the applicable statute of
limitations plus any extensions or waivers granted or imposed with respect
thereto;
-27-
(b) all representations, warranties, covenants and agreements of the
Company and Shareholder relating to regulatory aspects of the Company's business
prior to or on the Closing Date, including but not limited to environmental
matters and employee safety regulations (collectively referred to herein as
"Regulatory Matters") shall survive the Closing for a period of five (5) years
from the Closing Date;
(c) all other representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing for a period of two (2)
years from the Closing Date; and
(d) the right of either party to recover Losses (as defined in
Section 9.2) on any claim shall not be affected by the termination of any
representations, warranties, covenants and agreements as set forth above in
subparagraphs (a), (b) and (c) and in Section 9.5 below, provided that notice of
the existence of any Losses (but not necessarily the fixed amount of any such
Losses) as a result of such claim has been given by the indemnified to the
indemnifying party prior to such termination.
9.2 Indemnification of Buyer. From and after the Closing, the Company and
------------------------
the Shareholder shall jointly and severally indemnify and hold Buyer harmless
from and against any liability, loss, cost, expense, claim, lien or other damage
including, without limitation, reasonable attorney's fees and expenses (all of
the foregoing items for purposes of this Agreement are referred to as "Losses"),
resulting from, arising out of or incurred with respect to, or alleged to result
from, arise out of or have been incurred with respect to:
(a) the falsity or breach of any representation, warranty, covenant
or agreement by the Company herein or in the Schedules hereto, subject to a
claim being made before the expiration of the applicable period specified in
Section 9.1 above with respect to the falsity or breach of any representation,
warranty, covenant or agreement by the Company or Shareholder herein.
(b) the assertion against the Company or Shareholder or against the
Buyer of any Losses created by or attributable to any unknown, undisclosed or
contingent liability of the Company and Shareholder arising out of the Company's
or Shareholder's conduct prior to the Closing.
9.3 Indemnification of the Company and Shareholder. From and after the
----------------------------------------------
Closing, Buyer shall indemnify and hold the Company and Shareholder harmless
from and against any Losses, resulting from, arising out of, or incurred with
respect to, or alleged to result from arise out of or have been incurred with
respect to the falsity of breach of any representation, warranty, covenant or
agreement by Buyer herein or in the Schedules hereto, subject to a claim being
made before the expiration of the applicable period specified in Section 9.1
above with respect to the falsity or breach of any representation, warranty,
covenant or agreement by Buyer herein or the operation of the Business or the
use of the Purchased Assets from and after the Closing Date.
9.4 Minimum Indemnification. Except with respect to Tax Matters, and
-----------------------
fraud and willful concealment, for which there shall be no minimum claim,
neither Buyer nor the Company and Shareholder shall have any liability under the
indemnification provisions of this Article IX unless and
-28-
until the gross aggregate amount of claims for liabilities exceeds $50,000. At
such time as the gross aggregate amount of claims for liabilities exceeds
$50,000, Buyer or the Company and Shareholder, as the case may be, shall be
entitled to be indemnified against the full amount of such liabilities (and not
merely the portion of such liabilities exceeding $50,000).
9.5 Procedures for Indemnification.
------------------------------
(a) Upon obtaining knowledge of the assertion of any personal injury,
property damage, nuisance, tort, contract or other claims, actions or demands,
including any and all investigations, suits, demands, actions, fines, penalties,
enforcement actions, Losses, deficiencies, injunctions, reasonable attorneys'
fees, costs and expenses actually paid, imposed or incurred ("Claims") by any
person or entity who is not an Indemnified Person (as defined below) (i.e., a
third-party claim) and which could give rise to a claim for indemnity pursuant
to Sections 9.2 and 9.3 above, the party seeking indemnification (the
"Indemnified Person") from the other party (the "Indemnifying Person") shall
promptly provide the Indemnifying Person with written notice of any such Claim
and use such Indemnified Person's reasonable efforts to cooperate fully with the
Indemnifying Person, at the Indemnifying Person's expense, in any defense or
settlement thereof, but the failure of the Indemnified Person to so promptly
notify and cooperate fully with the Indemnifying Person shall not affect the
Indemnifying Person's obligation pursuant to this Article IX unless such failure
materially prejudices the Indemnifying Person's right to participate in the
contest of such Claim as hereinafter provided. The Indemnifying Person shall
have the right at its expense to employ counsel of its choice to assume control
of the defense of such Claim and the Indemnified Person shall have the right,
but not the obligation, to participate in the investigation and defense of any
such Claim with separate counsel chosen by such Indemnified Person; provided,
however, that in the event that the Indemnifying Person has employed counsel to
defend a Claim and the Indemnified Person elects to engage its own counsel to
assist in the defense, the Indemnified Person shall pay all fees and expenses of
its own counsel, unless (i) the Indemnifying Person has previously agreed to pay
the fees and expenses of counsel retained by an Indemnified Person, (ii) the
Indemnifying Person has failed to assume the defense of such Claim or (iii) in
the reasonable judgment of such Indemnified Person, based upon advice of its
counsel, there is a conflict of interest between the Indemnifying Person and
such Indemnified Person with respect to such Claim, then the reasonable fees and
expenses of such Indemnified Person's counsel shall be at the expense of the
Indemnifying Person, provided that the Indemnifying Person approves such
counsel, which approval shall not be unreasonably withheld. So long as the
Indemnifying Person is defending such Claim in good faith, the Indemnified
Person will not settle such Claim without the Indemnifying Person's written
consent, which consent shall not be unreasonably withheld, and the Indemnifying
Person will not settle any Claim on behalf of the Indemnified Person without the
Indemnified Person's written consent, which consent shall not be unreasonably
withheld. The Indemnified Person shall make available to the Indemnifying
Person all records and other materials at the Indemnifying Person's expense, as
shall reasonably be required by the Indemnifying Person to contest such Claim.
In the event there is a Claim for indemnification hereunder, the Indemnifying
Person shall have a reasonable period of time, not to exceed thirty (30) days,
to resolve the matter with the person or entity making the Claim and to have the
Claim dismissed as to any applicable Indemnified Person.
-29-
(b) If the Indemnifying Person assumes the defense of a third-party
Claim, the obligations of the Indemnifying Person hereunder as to such Claim
shall include taking all steps necessary to defend or settle such Claim and
holding the Indemnified Person harmless against any and all expenses, costs,
losses and Losses caused by or arising out of any settlement approved by the
Indemnifying Person or any judgment in connection with such Claim. Except with
the prior written consent of the Indemnified Person, the Indemnifying Person
shall not, in the defense of such Claim, consent to the entry of any judgment
(other than a judgment of dismissal on the merits without costs), or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Person a release from
all liability in respect of such Claim.
(c) In the event any Claim is made pursuant to Section 9.2 or 9.3 of
this Agreement, the party asserting the Claim (the Indemnified Person with
respect to such Claim) shall notify the other parties hereto in writing as to
the existence and amount of the Claim. If the Indemnifying Person with respect
to such Claim disputes the existence or the amount of such Claim, the
Indemnifying Person shall so notify the Indemnified Person in writing within
fifteen (15) days following the Indemnifying Person's receipt of written notice
as to the existence and amount of the Claim. Upon such an exchange of written
notification, the parties will negotiate in good faith for up to thirty (30)
days or such other period of time as the parties mutually agree and if after
such period of time the parties are unable to resolve their differences with
respect to such Claim, the matter shall be resolved in accordance with the
arbitration procedures set forth in Article XI hereof. Any decision of the
arbitrator with respect to both the existence and amount of such Claim shall be
final and binding on the parties hereto.
9.6 Payment of Indemnification Claims.
---------------------------------
(a) In the event any Claim not arising from the Claim of a third
party is made pursuant to Section 9.2 of this Agreement, if the Company and
Shareholders fail to object in writing within thirty (30) days of their receipt
of Buyer's written notice as to the existence and amount of the Claim, then the
existence and amount of such Claim as set forth in the Buyer's notice shall be
deemed to be the true and accurate amount of the Claim. Upon the determination
of the amount of the Claim that is payable by the Company and Shareholders as a
result of (i) the failure of the Company and Shareholders as a party to object
in writing to the written notice as to the amount of the Claim within thirty
(30) days of receipt of Buyer's written notice of such Claim, (ii) the
conclusion of negotiations between the parties or (iii) a determination pursuant
to the terms of the arbitration procedures set forth in Exhibit F attached
---------
hereto, such amount shall be immediately due and payable to the Buyer.
(b) In the event a Claim for indemnification arises under Section
9.2(b) hereof, the amount of such Claim shall be paid as follows: (i) if the
Indemnified Person is required to defend the Claim due to the failure of the
Indemnifying Person to defend the Claim or due to the conflict of interest
provisions set forth in Section 9.5(a), the Indemnifying Person shall pay on a
monthly basis the Indemnified Person's reasonable legal fees and related
expenses incurred in investigating and defending the Claim, and (ii) if the
Indemnifying Person assumes the defense of the Claim in accordance with Section
9.5(a) and 9.5(b), no indemnification payment shall be due and payable to an
Indemnified
-30-
Person until a final determination or settlement has been made or entered into.
Immediately upon the determination of any judgment or the rendering of any
settlement with respect to any third party Claim, the Indemnified Person shall
be entitled to receive immediately the amount of such judgment or settlement and
all expenses, losses and Losses incurred by the Indemnified Person in connection
therewith and payable in accordance with this Article IX.
(c) Any payment due to an Indemnified Person (or payable on behalf of
an Indemnified Person) pursuant to any Claim under Section 9.2 and any legal
fees and expenses payable pursuant to Section 9.6(b)(i) in connection therewith
shall be paid by Shareholders by check or wire transfer. Without limiting any
other rights it may have, Buyer may, at its sole option by notice to the Company
and Shareholder, satisfy an amount due to the Buyer pursuant to any Claim under
Section 9.2 and any legal fees and expenses payable pursuant to Section
9.6(b)(i) in connection therewith, by withholding such amount from any amounts
due or to become due to the Buyer pursuant to (i) the Promissory Note of Buyer
described in Section 3.1(b) hereof or (ii) the Contingent Payments described in
Section 3.2 hereof. Nothing contained in this Section 9.6 shall be deemed to
limit the joint and several obligation of the Company and Shareholders to limit
the Company's and Shareholders' rights to defend Claims in accordance with
Section 9.5 above.
(d) In the event a Claim is made for indemnity pursuant to Section
9.3 upon the resolution of the amount determined to be payable by Buyer with
respect to such Claim as a result of (i) the failure of the Indemnifying Person
to object in writing to the amount of the Claim within thirty (30) days of
receipt of written notice of such Claim, (ii) the conclusion of negotiations
between the parties or (iii) a determination pursuant to Article IX hereof, then
such amount shall be immediately due and payable to the Company and
Shareholders.
(e) In the event the Indemnifying Person fails to pay in full any
amount due pursuant to this Section 9.6 within three (3) business days of the
date such amount first becomes due and payable, then the amount of any such
Claim which is due and payable shall bear interest following such (3) three day
period at the reference rate then in effect for Bank of America, NT & SA.
9.7 Tax Indemnification.
-------------------
(a) The Company and Shareholders represent and warrant that all
material Tax Returns for taxable periods ending on or prior to the Closing Date
by, or with respect to the assets or activities of, the Company have been or
will be timely filed in accordance with all applicable laws, and all Taxes shown
to be due on such Returns have been or will be timely paid by the Company and
Shareholder, and the Company and Shareholders shall indemnify Buyer and hold
Buyer harmless against all such Taxes.
(b) Other than Returns to be prepared by the Company and Shareholders
pursuant to Section 9.7(a) above, Buyer will be responsible for and will cause
to be prepared and duly filed any and all Returns of the Company for any and all
taxable periods (including any taxable period which includes and ends after the
Closing Date (an "Overlap Period")). The Company and Shareholders will
-31-
be responsible for and will indemnify and hold harmless the Company and Buyer
with respect to all Taxes for the Overlap Period in an amount equal to the
liability for Taxes that would have resulted had the Overlap Period ended at the
Closing Date (utilizing, if applicable, the actual tax rate imposed on a
particular category of income by the applicable taxing jurisdiction).
(c) After the Closing Date, Buyer, on the one hand, and the Company
and Shareholders, on the other hand, will make available to the other, as
reasonably requested, all information, records or documents relating to the
liability for Taxes of the Company for all periods prior to or including the
Closing and will preserve such information, records or documents until the
expiration of any applicable statute of limitations or extensions thereof.
(d) Notwithstanding any other provision of this Agreement, including
Section 9.6, upon the receipt by Buyer or the Company and Shareholders of any
evidence of an actual, asserted or threatened liability for Taxes attributable
to any period (or that portion of any period) ending on or prior to the Closing
for which Buyer or the Company and Shareholders are claimed to be, or are held,
liable and which would be subject to a claim for indemnification by Buyer or the
Company and Shareholders under this Section 9.7, then the Buyer or the Company
(or any successor thereof) and Shareholders are hereby authorized to apply all
payments due to the Company and Shareholders under the terms of the Promissory
Note of Buyer described in Section 3.1(b) hereof, to the payment of any such Tax
liability by paying any such amounts directly to the appropriate governmental
body. In the event that the Company and Shareholders object to or dispute the
payment or satisfaction of any such Tax liability, the Company's and
Shareholders' sole recourse shall be to file a claim for refund or such other
appropriate claim with the governmental body to which the payment was made;
provided, that (i) the cost of any such claim shall be borne solely by Company
--------
and Shareholders and (ii) Buyer shall cooperate with Company and Shareholders to
the extent reasonably requested with respect to any such claim. Buyer shall
provide Company and Shareholders with notice of the payment of any such Tax
liability made under this Section 9.7.
9.8 Limitations on Liabilities. In case any event shall occur which would
--------------------------
otherwise entitle a party to assert a claim for indemnification hereunder, the
amount of Losses determined to have been sustained by such party shall be
reduced by (a) any net tax savings actually realized by such party with respect
thereto after taking into account the effect for tax purposes of both the event
giving rise to such Losses and the receipt of the indemnification payment, or
(b) any proceeds received by such party from any insurance policies with respect
thereto.
9.9 Sole Remedy. The sole and exclusive remedy for any and all Losses, as
-----------
defined in Section 9.2, shall be the indemnification rights set forth in this
Article IX. Notwithstanding the foregoing, each party to an Exhibit hereto
shall have all the rights and remedies arising from or related to a breach or
default under such Exhibit as are available to such party under law or in
equity, in addition to the rights and remedies provided for in this Article IX.
-32-
ARTICLE X
---------
TERMINATION
-----------
10.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing as follows, and in no other manner:
(a) by mutual consent of Buyer and the Company;
(b) by Buyer, if the Closing shall not have occurred on or before May
31, 1999, or such later date as may have been agreed upon in writing by the
parties hereto;
(c) by Buyer, if any representation or warranty made herein for the
benefit of Buyer , or in any certificate, schedule, exhibit or document
furnished to Buyer, pursuant to this Agreement is untrue in any material
respect, or the Company and Shareholder, respectively, shall have defaulted in
any material respect in the performance of any obligation under this Agreement
and Buyer and the Company are unable in good faith to negotiate a reduction in
the Purchase Price acceptable to Buyer and the Company with respect thereto.
10.2 Liability of the Parties. Upon any termination pursuant to
------------------------
subsection (e) of Section 10.1 hereof due to an intentional misrepresentation or
intentional breach of warranty or an intentional default by Company and
Shareholder, whichever shall be the party at fault, shall (among other things)
reimburse the terminating party or parties for all legal, accounting and other
out-of-pocket expenses reasonably incurred by the terminating party or parties
in connection with this Agreement and the transactions contemplated hereby. Upon
any other termination, no party shall have any liability or obligation under
this Agreement except to observe the confidentiality provisions hereof, and each
party shall bear the expenses incurred by it.
ARTICLE XI
----------
MISCELLANEOUS PROVISIONS
------------------------
11.1 Entire Agreement: Amendment. This Agreement (including the Exhibits
---------------------------
and Schedules hereto), contains the entire agreement among the parties hereto
and supersedes all prior oral or written agreements, promises, representations,
commitments or understandings with respect to the matters provided for therein.
This Agreement may be modified or amended only by a writing duly executed by
Buyer, the Company and Shareholders, which modification or amendment shall be
binding upon all of the parties hereto.
11.2 Assignment and Binding Effect. This Agreement and the rights and
-----------------------------
obligations of any party hereunder may not be assigned by any party without the
prior written consent of the other parties hereto except that Buyer may assign
its rights and delegate its obligations hereunder to any wholly-
-33-
owned subsidiary. All covenants, agreements, statements, representations,
warranties and indemnities in this Agreement by and on behalf of any of the
parties hereto shall bind and inure to the benefit of their respective heirs,
successors and permitted assigns of the parties hereto.
11.3 Waivers. No waiver of any of the provisions of this Agreement shall
-------
be deemed or shall constitute a continuing waiver, and no waiver shall be
binding unless executed in writing by the party making the waiver.
11.4 Notices. All notices, demands or other communications which may be
-------
or are required to be given by any party to any other party pursuant to this
Agreement, shall be in writing and shall be mailed by certified mail, return
receipt requested, postage prepaid, or transmitted by hand delivery, national
overnight express, telegram or facsimile transmission, addressed as follows:
(a) If to Buyer:
TVN Entertainment Corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Sr. Exec. V.P.
Phone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Phone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company:
PandaAmerica Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy (which shall not constitute notice) to:
Buchalter, Nemer, Fields & Younger
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Phone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
until such time as either party notifies the other of a change of address. Each
notice or other communication which shall be mailed, delivered or transmitted in
the manner described above shall be deemed sufficiently given and received for
all purposes at such time as it is delivered to the addressee (with the return
receipt, the delivery receipt, or the affidavit of messenger or telefax
transmission log being deemed conclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
11.5 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws (non-conflict of law laws) of the State of
California.
11.6 Counterparts; Execution. To facilitate execution, this Agreement
-----------------------
may be executed in as many counterparts as may be required, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but a single agreement. This Agreement
shall be deemed to have been executed at the time when and location at which the
last signature of any of the parties is affixed hereto or to any counterpart
hereof.
11.7 Interpretation. The headings contained in this Agreement are for
--------------
reference purposes only and shall not affect in any way the meaning of
interpretation of this Agreement.
11.8 Severability. The parties agree that if any provisions of this
------------
shall under any circumstances be deemed invalid or inoperative, the Agreement
shall be construed with the invalid or inoperative provision deleted and the
rights and obligations of the parties shall be construed and enforced
accordingly.
11.9 Arbitration. After the Closing, the parties agree to arbitrate any
-----------
dispute, claim or controversy of whatever nature arising out of or relating to a
claim for indemnification under Article IX of this Agreement through arbitration
in accordance with the terms of the Dispute Resolution attached hereto as
Exhibit F.
---------
11.10 Knowledge. Any reference to the Company's or Shareholder's
---------
knowledge or awareness of any fact, notice or event shall refer to the present
actual knowledge or awareness of the Company and Shareholder, as well as matters
of which the Company and Shareholder should have reasonably been aware.
-35-
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement,
or caused this Agreement to be executed on its behalf, as of the date first
above written.
BUYER:
TVN ENTERTAINMENT CORPORATION
By:___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive
Officer
THE COMPANY:
W&K PHARMACY, Inc.,
d/b/a PandaAmerica Corp.
By:____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
SHAREHOLDER:
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
-36-
ASSIGNMENT OF EQUIPMENT LEASE AGREEMENT
THIS ASSIGNMENT OF EQUIPMENT LEASE AGREEMENT is made on ____________, 1999,
among ________________________ ("Lessor"), whose address is
_________________________________________, W&K Pharmacy, Inc., d/b/a
PandaAmerica Corp., a California corporation (the "Company"), a California
corporation ("Assignor"), whose address is __________________, Torrance,
California ________, and TVN Entertainment Corporation [or TVN Shopping, Inc.],
a Delaware corporation ("Assignee"), whose address is ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇/▇▇/ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, who agree as follows:
1. Recitals. This Assignment of Equipment Lease Agreement ("Assignment")
--------
is made with reference to the following facts and objectives:
a. Lessor and Assignor, as Lessee, entered into a written equipment
lease dated _______________, 19__ (the "Lease") in which Lessor leased to
Assignor and Assignor leased from Lessor certain personal property and equipment
as more particularly described in the Lease ("Equipment").
b. Assignor desires to assign all of its right, title, and interest in
the Lease to Assignee.
▇. ▇▇▇▇▇▇ shall consent to the proposed assignment on the conditions
set forth in this Assignment.
2. Effective Date of Assignment. The assignment in this agreement shall
----------------------------
take effect on the closing of the transactions contemplated by the Agreement for
Purchase and Sale of the Assets dated January 18, 1999, among Assignee, Assignor
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇") (the "Effective Date"), and Assignor shall give
possession of the Equipment to Assignee on that date.
3. Assignment and Assumption. Assignor assigns and transfers to Assignee
-------------------------
all of its right, title and interest in the Lease, and Assignee accepts the
assignment and assumes and agrees to perform, from the Effective Date, as a
direct obligation to Lessor, all the provisions of the Lease.
4. Lessor's Consent. Lessor consents to the assignment without waiver of
----------------
any restriction concerning further assignment and waives any application or
prior notice period which may be contained in the Lease.
5. Termination of Assignor's Liability. Assignor's liability for the
-----------------------------------
performance of the provisions of the Lease shall terminate as of the Effective
Date.
6. Security Deposit. The parties acknowledge that Lessor now holds the
----------------
sum of _______________________________ Dollars ($__________), to be applied
subject to the
provisions of the Lease. Assignor releases all claims to that sum, and the sum
shall be held by Lessor for the benefit of Assignee, subject to the provisions
of the Lease.
7. Miscellaneous.
-------------
a. Attorneys' Fees. If any party commences an action against any of
---------------
the parties arising out of or in connection with this Assignment, the prevailing
party or parties shall be entitled to recover from the losing party or parties
reasonable attorneys' fees and costs of suit.
b. Notice. Any notice, demand, request, consent, approval, or
------
communication that any party desires or is required to give to any other party
or any other person shall be in writing and either served personally or sent by
prepaid, first-class mail. Any notice, demand, request, consent, approval or
communication that any party desires or is required to give to any other party
shall be addressed to the other party at the address set forth in the
introductory paragraph of this Assignment; provided that, after the Effective
Date, any notice given to the Assignee shall be addressed to the Assignee at the
address set forth in the introductory paragraph of this Assignment as well as at
the location of the Equipment. Any party may change its address by notifying the
other parties of the change of address. Notice shall be deemed communicated
within forty-eight (48) hours from the time of mailing if mailed as provided in
this paragraph.
c. Successors. This Assignment shall be binding on and inure to the
----------
benefit of the parties and their successors.
LESSOR:
,
By:_______________________
Its:______________________
Dated:____________________
ASSIGNOR:
W&K Pharmacy, Inc., d/b/a PandaAmerica Corp.,
a California corporation
By:_____________________________
Its:____________________________
Dated:__________________________
ASSIGNEE:
TVN Entertainment Corporation,
a Delaware
By:_____________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, Grand Pooh Bah
Dated:__________________________
-3-
SECURED PROMISSORY NOTE
$245,000.00 Burbank, California
June 30, 1999
At the times hereinafter stated, for value received, the undersigned W&K
Pharmacy, Inc., d/b/a PandaAmerica Corp., a California corporation (the
"Company") promises to pay to the order of TVN Entertainment Corporation
("Holder") at its principal office the principal sum of Two Hundred Forty-five
Thousand Dollars ($245,000.00) with simple interest accruing from the date
hereof at the rate of 5.4% per annum. The principal amount of this Note as set
forth above and any interest accrued hereon shall be due and payable on June 30,
2003; provided, however, that such amounts shall be offset by (i) any payments
made by the Company to a leasing entity in connection with the Company's former
telephone system (since transferred to Holder), and (ii) any amounts owed by
Holder to the Company under the terms of that certain Consulting Agreement by
and between Holder and the Company entered into in connection with the purchase
by Holder of certain assets of the Company effective January 18, 1999. For the
purpose of calculating interest hereunder, the principal amount of this Note
shall be deemed offset by any amounts under item (i) above when paid or under
item (ii) above accrued.
Principal and interest are payable in lawful money of the United States of
America. THE PRIVILEGE IS RESERVED TO PREPAY ANY PORTION OF THE NOTE AT ANY TIME
WITHOUT PENALTY, BUT PARTIAL PAYMENTS SHALL BE APPLIED FIRST TO OUTSTANDING
INTEREST AND THEN TO THE PRINCIPAL.
Should default be made in the payment of this Note when due, then the whole
sum of principal and accrued interest shall become immediately due and payable
at the option of the holder of this Note. Should suit be commenced to collect
this Note or any portion thereof, such sum as the court may deem reasonable
shall be added hereto as attorneys' fees. The Company waives presentment for
payment, protest, notice of protest, and notice of non-payment of this Note.
This Note shall be governed by, and construed and enforced in accordance
with the laws of the State of California.
Any provision of this Note may be amended, waived or modified upon the
written consent of the Company and the Holder.
This Note is secured by a pledge of certain assets pursuant to the
provisions of the Security Agreement entered into between the Company and the
undersigned contemporaneously with this Note.
Upon payment in full of principal and all accrued interest, the Note will
be marked "Cancelled" by Holder and returned to the Company.
This Note is executed as of the date first above written.
W&K Pharmacy, Inc., d/b/a PandaAmerica Corp.
a California corporation.
By:_________________________________________
Title:______________________________________
Acknowledged and Agreed:
HOLDER:
By:_________________________
Title:______________________
[SECURED PROMISSORY NOTE]
-2-
SECURITY AGREEMENT
In consideration of the acceptance by TVN Entertainment Corporation (the
"Holder") of a Secured Promissory Note (the "Note") in the principal amount of
$245,000 issued by W&K Pharmacy, Inc., d/b/a PandaAmerica Corp., a California
corporation (the "Company") of even date herewith made by Company to the order
of the Holder, the Company hereby agrees, for the benefit of the Holder, as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
-------------
have the following meanings:
"Agreement" shall mean this Security Agreement as the same may from
time to time be amended or modified.
"Collateral" shall mean the Excluded Assets as defined in that certain
Agreement for Purchase and Sale of Assets, dated January 18, 1999, by and among
Holder, the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual, and all proceeds
thereof, including without limitation, the following items related to the
Excluded Assets:
(a) Inventory: All inventories of finished goods, raw materials,
---------
work-in-process and all other items held for sale;
(b) Equipment: All assets, items or other goods owned by the Company
---------
other than inventory, including without limitation all scientific
instrumentation, computing equipment, furniture and fixtures and any interest
therein;
(c) Accounts: Any right to payment for goods sold or leased or for
--------
services rendered which is not evidenced by an instrument or chattel paper,
whether or not it has been earned by performance;
(d) General Intangibles: All personal property (including chooses in
-------------------
action) of an intangible nature of the Company, including without limitation all
patent applications, patents, copyrights, trademarks, trade names, copyrights,
trade secrets, know how or other proprietary rights owned by the Company or any
interest therein; and
(e) Omnibus: All other assets, property rights, documents
-------
instruments, chattel paper or other rights owned by the Company and any interest
therein and all additions, accessions, replacements, substitutions, improvements
and proceeds of any asset set forth in clauses (a)-(e).
"Obligations" shall mean any and all liabilities and obligations of the
Company to the Holder of every kind arising under this Agreement or the Note
(including without limitation any and all costs and expenses (including
attorneys' fees, incurred by the Holder in the collection, whether by suit or by
any other means, of any of the Obligations), together with any future advances
thereunder and amendments thereof.
1.2 Other Defined Terms. Terms not defined herein shall have their
-------------------
respective meanings as set forth in the California Uniform Commercial Code.
ARTICLE II
SECURITY INTEREST
2.1 Grant of Security Interest. As security for the payment and
--------------------------
performance of the obligations, the Company hereby grants to the Holder a
continuing security interest in, and a continuing lien upon, the Collateral.
2.2 Priority of Lien. The Company agrees that the security interest in the
----------------
Collateral granted hereunder to the Holder shall be a lien prior to all other
interests in the Collateral, except for any liens in effect on the date of this
Agreement.
ARTICLE III
COVENANTS OF COMPANY
3.1 Payment or Performance. The Company shall pay, perform or otherwise
----------------------
satisfy the Obligations, when the same shall become due, at term or otherwise.
3.2 Maintenance of Collateral Security. The Company shall continually take
----------------------------------
such steps as are necessary and prudent to protect the security interest of the
Holder in the Collateral, including without limitation the following:
(a) Keep and maintain books and records relating to the collateral,
in a form and substance satisfactory to the Holder, at the Company's principal
place of business, not remove the same without the written consent of the
Holder, and allow the Holder or its representatives access to such books and
records and to the Collateral at all reasonable times for the purpose of
examination, verification, copying, extracting and other reasonable purposes as
it may require;
(b) At any time after an Event of Default (as hereinafter defined)
shall have occurred, deliver to the Holder promptly at its request, all
schedules, lists, invoices, original bills of lading, documents of title,
original purchase orders, receipts, chattel paper, instruments and other items
relating to the collateral;
-2-
(c) Make, stamp or record such entries or legends on any of the
Company's books and records relating to the Collateral as the Holder shall
reasonably request from time to time;
(d) Execute and deliver to the Holder such other and further
documents, instruments or writings as it may deem necessary or advisable in
order to evidence, effectuate, perfect or maintain their security interest in
the Collateral;
(e) Defend the Collateral against all claims, liens, security
interests, demands and other encumbrances of third parties, except buyers in the
ordinary course of the Company's business, at any time claiming an interest in
the Collateral which is adverse or prior to the security interest granted to the
Holder;
(f) Except for liens actively and diligently contested in good faith,
keep the Collateral free of all liens and encumbrances, other than the security
interests of the Holder created hereby and repairmen's and materialmen's liens,
and not sell, transfer or otherwise dispose of the Collateral or any interest
therein, in bulk or otherwise, except in the ordinary course of business, and
except that the Company may sell, exchange, or dispose of all or any portion of
the Collateral if the proceeds of such disposition are used to purchase assets
constituting Collateral of equal or greater value or are entirely used to repay
the Note until all Obligations are paid in full;
(g) Notify the Holder in the event of any material loss or damage to
the Collateral, any material adverse change in Company's business or in the
Collateral, or any other occurrences which could materially and adversely affect
the security interest of the Holder therein;
(h) Pay all taxes which are or may become a lien on the Collateral
promptly when due, and in any event reimburse the Holder for any expenses which
it might incur in satisfying such liens, expenses or taxes which it may incur,
in their sole discretion, as it deems necessary in order to protect the
Collateral ;
(i) Maintain insurance on the Collateral of such types, coverage,
form and amount as is usually carried on similar goods by similar enterprises
and such additional insurance as the Holder shall reasonably determine, and
supply the Holder with certificates as to the continuance of such insurance, at
its request; and
(j) Maintain the Company's equipment in good operating, condition and
repair.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holder, and shall be deemed to
continually do so, as long as this Agreement shall remain in force:
-3-
4.1 That it is the owner of the Collateral with good and marketable title
thereto free and clear of all encumbrances and adverse claims, other than the
liens created by this Agreement, that the liens in effect on the date of this
Agreement.
4.2 That it is authorized to enter into this Agreement and to implement
and carry out the provisions hereof, and has taken all necessary actions,
corporate or otherwise, in respect thereto.
4.3 That this Agreement is a valid, binding and enforceable obligation of
the Company, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and to rules of law governing specific
performance, injunctive relief or other equitable remedies, and the Agreement
does not and will not violate the terms of any other agreement to which the
Company is a party.
4.4 No Misrepresentations. No representation or warranty by the Company in
---------------------
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements made therein not
misleading.
ARTICLE V
EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an "Event of
Default" under this Agreement:
5.1 Default on Obligations. Company fails to pay its Obligations as and
----------------------
when they come due, including, without limitation, any payment of any principal
and interest on the Note.
5.2 Breach of Agreement. Company breaches any material warranty in this
-------------------
Agreement or the Note, or fails to perform any other material obligation under
this Agreement or the Note.
5.3 Inaccuracy of Representations. Any representation or warranty made in
-----------------------------
connection with the execution and delivery of this Agreement or the Note shall
prove to be materially incorrect.
5.4 Bankruptcy. (i) Company shall be or become insolvent, or admit in
----------
writing its inability to pay its debts as they mature; (ii) Company shall apply
for, consent to, or acquiesce in the appointment of the property of Company or,
in the absence of such application, consent or acquiescence, a trustee or
receiver shall be appointed for Company or for a substantial part of the
Collateral of Company or for a substantial part of the Collateral of Company;
(iii) any bankruptcy, reorganization, debt arrangement or other proceedings
under any bankruptcy or insolvency law or a dissolution or liquidation
proceedings shall be instituted with respect to Company; or (iv) any judgment,
writ of attachment or execution or any similar process shall be issued or levied
against a substantial part of the Collateral.
-4-
ARTICLE VI
RIGHTS OF THE HOLDER
6.1 General Rights. The rights of the Holder shall at all times be those
--------------
of a secured party under the California Uniform Commercial Code. Without
limiting the generality of the foregoing, the Holder shall have the additional
rights set forth in this Article VI.
6.2 Rights Upon Default. Upon the occurrence or continuance of any Event
-------------------
of Default hereunder, the Holder may declare any or all of the Obligations to be
immediately due and payable, without presentment, protest, or prior notice of
any kind all of which are expressly waived, notwithstanding anything to the
contrary contained in any Note or any other instrument evidencing any of the
obligations. Also upon the occurrence of an Event of Default, the Company
further authorizes the Holder and does hereby irrevocably make, constitute and
appoint the Holder and any officer or agent thereof, with full power of
substitution, as the Company's true and lawful attorneys-in-fact with full
power, in its own name or in the name of the Company: (a) to endorse any notes,
checks, drafts, money orders or other instruments of payment (including payments
payable under or with respect to any policy of insurance) relating to the
Collateral or in connection therewith, and to sign and endorse any invoices,
drafts against debtors, assignments, verifications and notices in connection
with accounts and other documents relating to the Collateral; (b) to notify the
account debtor or debtors obligated to the Company under any account of the
assignment of such account to Holder and of their security interests therein and
to direct such account debtor or debtors to make payment of all amounts due or
to become due to the Company thereunder directly to the Holder and, upon such
notification, to enforce collection of any such account in the same manner and
to the same extent as the Company is entitled to do; (c) to pay or discharge
taxes, liens, security interests or other encumbrances levied or placed on or
threatened against the Collateral; (d) to receive payment of, receipt for,
settle or compromise and give discharges and releases for or in respect of any
and all monies, claims or other amounts due and to become due at any time under
or arising out of the Collateral; (e) to defend any suit, action or proceeding
brought against the Company with respect to any Collateral; (f) to settle or
compromise any suit, action or proceeding described above and in connection
therewith to give such discharges or releases as the Holder may deem
appropriate; and (g) generally, to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though they were the absolute owner thereof for all purposes.
6.3 Realization Upon the Collateral. In the event the Holder determines
-------------------------------
that the Collateral should be sold to satisfy all or any part of the
obligations, it may dispose of the Collateral in whole or in part at public or
private sale, in accordance with applicable provisions of the California Uniform
Commercial Code, and any notice required to be given shall be given in
accordance with Section 7.4 at least ten (10) days before the proposed sale,
which the parties hereto agree shall be a reasonable notice period. The Company
shall remain liable for any deficiency.
6.4 Pro Rata Application of Collateral Proceeds. All proceeds received
-------------------------------------------
pursuant to the exercise of the rights granted to the Holder by this Agreement
first shall be applied to reimburse any
-5-
and all costs and expenses, including attorneys' fees, incurred by the Holder in
the collection of the Obligations. Any such proceeds remaining following payment
of any such costs and expenses and payment in full of all amounts due under the
Note shall be returned to the Company.
6.5 Expense of Collection and Sale. The Company agrees to pay all costs
------------------------------
and expenses incurred by the Holder in enforcing, collecting or realizing upon
the obligations or the Collateral, including without limitation reasonable
attorneys' fees.
6.6 Financing Statements. Where permitted by applicable law, the Holder
--------------------
are authorized to file financing statements relating to the Collateral without
the Company's signature thereon and at the expense of the Company, and to act as
attorney-in-fact to sign the Company's name to and file such additional or
continuation financing statements as shall be necessary to maintain the priority
of the security interest granted hereby. The Company will, however, at the
request of the Holder, sign any amendments, releases, or assignments of any
financing statements relating to the Collateral. Upon the Company's failure to
do so, the Holder are authorized as the Company's agent to execute any such
modifications to any financing statement.
ARTICLE VII
MISCELLANEOUS
7.1 Waivers. The Company expressly waives notice of nonpayment,
--------
presentment and protest in relation to the Obligations or the Collateral. No
delay or omission of the Holder in exercising or enforcing any of their rights,
powers, privileges, options or remedies under this Agreement, the Note, or any
other agreement or promissory note between the Holder and the Company shall
constitute a waiver thereof, and no waiver by the Holder of any default by the
Company shall operate as a waiver of any other default. This Agreement, together
with the Note, constitutes the entire understanding between the Company and the
Holder with respect to the subject matter hereof and supersedes all prior
written or oral communications or understandings. No term or provision of this
Agreement shall be waived, altered or modified except in writing signed by the
Company and the Holder. All rights and remedies of the Holder under this
Agreement shall be cumulative and not alternative or exclusive, may be exercised
by the Holder at such time or times and in such order as the Holder, in its sole
discretion, may determine, and are for the sole benefit of the Holder. The
exercise or failure to exercise such rights or remedies shall not result in
liability to the Company or others.
7.2 Successors and Survival. This Agreement shall be binding upon and
-----------------------
shall inure to the benefit of the respective parties hereto, their successors
and assigns, and shall remain in force and effect until terminated by written
agreement of the parties. All representations, warranties and covenants
contained herein shall survive the execution hereof.
7.3 Governing Law. The Company agrees that this Agreement shall be
-------------
governed by, and construed and enforced in accordance with, the laws of the
State of California.
-6-
7.4 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered either by hand or by messenger.
7.5 Headings. The headings of Articles and Sections in this Agreement are
--------
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
7.6 Severability. If any provision of this Agreement shall be or become
------------
illegal or unenforceable in whole or in part for any reason whatsoever, the
remaining provisions shall nevertheless be deemed valid, binding and subsisting.
IN WITNESS WHEREOF, this Agreement has been executed this 30th day of June,
1999.
COMPANY:
W&K Pharmacy, Inc., d/b/a PandaAmerica Corp.
a California corporation
By:______________________________________
Title:___________________________________
HOLDER:
TVN Entertainment Corporation
By:______________________________________
Title:___________________________________
-7-
CONSULTING AGREEMENT
--------------------
This CONSULTING AGREEMENT is made and entered into this 5/th/ day of March 1999
by and between W&K Pharmacy, Inc. dba PandAmerica Corporation ("Consultant"),
with its principal office at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. #▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and
TVN ENTERTAINMENT CORPORATION ("TVN"), with its principal offices at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇/▇▇/ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS:
--------
A. Consultant owns and operates a) a precious metals coin business which
direct markets such coins to its customers, and b) a televised home
shopping network, "Panda Shopping Network" ("PSN"), which produces live
television shows for the sale of coins, watches, jewelry and other
merchandise, and distributes them via available commercial time on network
television ("Network"), cable television ("Cable"), direct broadcast
satellite ("DBS") and low power television (LPTV"), among other means of
distribution. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇') is Consultant's President, CEO,
principal owner and managing operator.
B. TVN owns, operates and is marketing under the name "TVN Digital Cable
Television", digital PPV programming and transactional services to cable
operators whose cable subscribers receive and decode the digitally
compressed video, audio and data signals, including PPV movies, events and
other programming, and to whom TVN will deliver interactive and electronic
commerce services such as home shopping.
C. In connection with TVN's pending acquisitions of PSN, TVN wishes to engage
Consultant and Consultant wishes to provide for TVN the consulting services
described below.
NOW THEREFORE, in consideration of the mutual promises and terms and
conditions contained herein, Consultant and TVN agree as follows:
1. Engagement and Term
-------------------
1.1 TVN hereby engages Consultant to provide the following consulting
services for TVN, commencing upon the date shown above, and continuing up
to and including September 4, 1999; Consultant agrees to provide the
personal services of ▇▇▇▇▇ to perform, or direct the performance of, the
Consulting Services.
1.2 The Consulting Services:
a. Consultant will assist TVN with the continued operation and expansion of
the PSN business concurrently being acquired by TVN; and
1
b. Consultant will assist TVN to develop enhanced and interactive HS
Services, business plans and strategies, which will enable TVN to provide
home shopping and transactional services and related applications,
including delivery via digital set-tops and online, to cable and home
satellite dish subscribers.
2. Acceptance of Engagement
------------------------
2.1 Consultant hereby accepts this consulting engagement by TVN upon the
terms, conditions and provisions of this Agreement, and agrees that it
will, and will cause ▇▇▇▇▇ to devote his time, attention, talents, best
efforts and abilities to, ably and effectively perform these consulting
services for TVN. Consultant agrees that it will cause ▇▇▇▇▇ to personally
perform these consulting services for TVN, it will not permit him to
delegate them to others, and it will make him available for meetings and
conferences by phone and, upon reasonable advance notice by TVN, at TVN's
offices in Burbank, CA.
2.2 Consultant will use its best efforts to cause ▇▇▇▇▇ to (i) timely
perform the above described consulting services, (ii) introduce potential
Network, Cable, DBS and LPTV leads for TVN's home shopping services, and
(iii) assist TVN in renewing as many of PSN's current affiliation
agreements as are capable of being renewed, and enter into new such
agreements to launch TVN's home shopping services. Consultant acknowledges
and agrees that TVN shall be the sole and exclusive owner worldwide of all
rights (including copyright, trademark, worldwide web and Internet rights)
in and to all programs, reports, studies, proposals, schedules, lists,
plans, models and other materials created, worked on or prepared by
Consultant or ▇▇▇▇▇ for TVN.
3. Compensation
------------
As full and complete compensation for all consulting services to be
performed and expenses incurred by Consultant hereunder, TVN agrees to pay
Consultant the sum of $13,000 per month at TVN's regular payroll dates
(currently bi-weekly). This is the entire compensation TVN will pay
Consultant for the Consulting Services. Consultant will submit to TVN an
invoice prior to each bi-weekly payroll date for Consultant's services
during the preceding two week period. All such compensation will be paid
without withholding for or deducting federal, state or local income or
other taxes, for which Consultant shall be solely and entirely responsible.
Consultant will submit an invoice prior to each payment due date for the
consulting services rendered during that month.
2
4. Confidentiality and Proprietary Information
-------------------------------------------
Consultant and ▇▇▇▇▇ will have access to, and will become acquainted with,
various trade secrets and confidential and proprietary information relating
to TVN's business, including but not limited to: shopping business plans,
marketing and operations; sources of shopping inventory; proprietary
software and programs; business, financial and marketing plans; research
and analysis; business relationships; contracts, systems, plans and
technologies. Accordingly, Consultant and ▇▇▇▇▇ shall hold in strictest
confidence and shall not disclose any such trade secrets or confidential or
proprietary information to third parties, directly or indirectly, during
the term of this engagement, or use same other than for the direct benefit
of TVN and solely for the purposes above described and shall sign the
attached Non-Disclosure Agreement.
5. Independent Contractor
----------------------
The parties agree that the relationship created herein with Consultant is
that of employer and independent contractor. The parties agree that in
performing the consulting services and duties specified herein Consultant
shall not be an employee of TVN; rather it will act as an independent
contractor and shall have control of its work, subject to review by TVN.
Consultant will be responsible for payment of its own federal, state or
local income or other taxes, for compensation to ▇▇▇▇▇ and for his medical
coverage, and for its and his workers compensation insurance. It is
expressly understood and agreed that in the performance of its duties and
obligations hereunder, Consultant shall have no authority to execute any
agreement, incur any obligation, or make any representations or commitments
for or on behalf of TVN, without having obtained TVN's prior written
consent.
6. Termination
-----------
Upon the expiration, or any termination by either party, of this agreement,
TVN's sole obligations to Consultant shall be to pay the unpaid portion of
the agreed monthly compensation per paragraph 4 hereof, and Consultant's
obligations to TVN shall be to a) return to TVN all materials, including
work in progress, programs, disks, work papers, information and documents,
provided to, obtained by or prepared in connection with the services
performed for TVN, b)provide a final report, if requested by TVN, on the
status of any work in progress or remaining to be done, and c) continue to
comply with the above-described non-disclosure/confidentiality obligations.
7. Indemnification
---------------
Consultant shall indemnify, defend and hold TVN harmless from any and all
judgements, claims, causes of action, demands, damages or liabilities in
connection
3
with any third party action, suit or proceeding to which TVN is made a
party by reason of any misrepresentation made by Consultant or ▇▇▇▇▇, or
for activities outside the scope of Consultant's duties or obligations
provided for hereunder, or by reason of Consultant's or ▇▇▇▇▇' grossly
negligent or willful misconduct in performing his duties hereunder. Upon
receiving any such third party claim, action, suit or proceeding, TVN shall
tender the defense of such action to Consultant, who shall be responsible
for retaining counsel for and approved by TVN, and shall be solely
responsible for all costs, reasonable attorneys' fees and expenses incurred
in such defense. ▇▇▇▇▇ agrees that he will be a guarantor of Consultant's
performance under this paragraph 7, and will perform such obligation
himself if Consultant is unable, unwilling or fails to perform as agreed
herein.
8. Notices
-------
Any notice given pursuant to this Agreement may be served personally on the
party to be notified or may be mailed, with postage thereon fully prepaid,
by certified or registered mail with return receipt requested, addressed as
follows:
If to TVN:
TVN Entertainment Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, President
With a Copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Executive Vice-President
If to Consultant to:
PandAmerica Corp.
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., #▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Or at such other address as either party may from time to time designate in
writing to the other party, and any notice shall be deemed delivered when
given, if personally served, the next day if delivery any national
overnight mail carrier, or three (3) business days after mailing, if mailed
pre-paid by certified mail.
9. Entire Agreement and Amendment
------------------------------
4
This Agreement contains the entire understanding and agreement between the
parties hereto; it supersedes any prior written or oral agreements or
discussions between us regarding acting as a Consultant for TVN, all of
which are merged herein. There are no representations, agreements,
arrangements, or understandings, either oral or written, between the
parties relating to the subject matter of this Agreement which are not
fully expressed as set forth herein. This Agreement may be amended only in
a writing duly executed by each party.
10. Governing Law
-------------
The laws of the State of California applicable to agreements which are to
be performed wholly within such state shall govern this Agreement,
including its interpretation, construction, performance and enforcement.
All claims, disputes, causes of action and issues arising out of or
relating to this Agreement and consulting relationship including without
limitation your hiring, performance, any compensation or bonus claim,
and/or any termination or alleged discrimination or harassment, whether
based on race, color, religion, sex, national origin, age, disability or
otherwise, shall be resolved via binding arbitration in Los Angeles,
California under the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Accordingly, we each understand
that we are waiving (giving up) our right to a trial by jury of any such
claims, disputes or causes of action between Consultant and TVN, or its
employees, officers, directors and agents.
11. Interpretation
--------------
This Agreement has been fully negotiated by both parties hereto, therefore,
it shall not be interpreted for or against either party hereto as the sole
drafter hereof. All pronouns and any variation thereof shall be deemed to
refer to the masculine, feminine, or neuter and to the singular or plural,
as the identity of the person or persons may require for proper
interpretation of this Agreement. Mutually executed fax copies may be used
as originals for all purposes.
12. Successors
----------
Except as expressly provided in section 2 hereof, this Agreement shall
inure to the benefit of and shall be binding upon the parties, and their
heirs, successors, assigns, and grantees, and TVN's associated, affiliated,
subsidiary, and parent companies.
TVN ENTERTAINMENT CORPORATION
a Delaware Corporation
5
By:_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇, President
CONSULTANT
W&K Pharmacy, Inc. dba
PandAmerica Corp.
By:___________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
providing his personal
services on behalf of
Consultant and as a guarantor
of Consultant under (P)7
hereof
6
EXHIBIT E
▇▇▇▇ OF SALE AND ASSIGNMENT OF PURCHASED ASSETS
KNOW BY THESE PRESENTS THAT:
W&K Pharmacy, Inc., d/b/a/ PandaAmercia Corporation, a California
corporation (the "Company"), pursuant to that certain Agreement for Purchase and
Sale of Assets, dated as of January 18, 1999, (the "Purchase Agreement"), by and
among the Company, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and TVN Entertainment Corporation, a Delaware
corporation ("Buyer"), for and in consideration of the Purchase Price set forth
in Article II of the Purchase Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, does
hereby grant, bargain, sell, convey, transfer, assign, set over and deliver unto
Buyer, its successors and assigns, the Purchased Assets, as defined and
described in the Purchase Agreement.
TO HAVE AND TO HOLD, all and singular, all of the properties, assets and
rights granted and transferred hereby, with the appurtenances thereof, unto
Buyer, its successors and assigns forever, to and for their own use and benefit.
For the consideration aforesaid, the Company hereby constitutes and
appoints Buyer, its successors and assigns, the true and lawful attorney or
attorneys of the Company, with full power of substitution, for the Company and
in its name and stead, or otherwise, but on behalf and for the benefit of Buyer,
its successors and assigns, to demand and receive from time to time, any and all
properties hereby given, granted, bargained, sold, assigned, transferred,
conveyed, set over, confirmed and delivered and give receipts and releases for
and in respect to the same and any part thereof, and from time to time to
institute and prosecute in the name of the Company or otherwise, but for the
benefit of Buyer, its successors and assigns, any and all proceedings at law, in
equity or otherwise, which Buyer, its successors or assigns, making proper in
order to collect, assert or enforce any claim, right or title of any kind in and
to the properties hereby given, granted, bargained, sold, assigned, transferred,
set over, confirmed, delivered or conveyed, and to defend or compromise any or
all actions, suits or proceedings in respect of any of said properties and do
all such acts and things in relation thereto as Buyer, its successors and
assigns, shall deem advisable, the Company hereby declaring that the appointment
made and the powers hereby granted are coupled with an interest and shall be
irrevocable by the Company in any manner and for any reason.
The Company for itself and its successors and assigns, does hereby covenant
with Buyer, its successors and assigns, that the Company and its successors and
assigns will do, execute, acknowledge and deliver, or will cause to be done,
executed, acknowledged and delivered all such further acts, deeds, bills of
sale, transfers, assignments, conveyances and powers of attorney, conveying and
confirming unto Buyer, its successors and assigns, all and singular, the
properties hereby granted, sold, assigned, transferred, conveyed and delivered
as Buyer, its successors or assigns, shall reasonably require.
To the extent that the assignment of any claim, suit, contract, license,
lease, charter, commitment, sales order or purchase order to be assigned to
Buyer hereby shall require the consent
of the other party thereto, this instrument shall not constitute an assignment
of the same if such consent has not been given and if an assignment or attempted
assignment without such consent of said other party would constitute a breach
thereof or in any way adversely affect the rights, powers, privileges, or
liabilities of the Company or Buyer thereunder; provided, however, that once
-------- -------
such consent is obtained, this instrument shall effect an assignment of such
claim, suit, contract, license, lease, charter, commitment, sales order or
purchase order. The Company agrees that it will use its reasonable best efforts
to obtain any required consent of the other party or parties to all such claims,
suits, contracts, licenses, leases, charters, commitments, sales orders or
purchase orders of the Company to the assignment thereof to Buyer and will
cooperate with Buyer in any arrangement which Buyer shall consider designed to
provide for Buyer the benefits under any such claims, suits, contracts,
licenses, leases, charters, commitments, sales orders or purchase orders which
are not assigned hereby, including enforcement for the benefit of Buyer of any
and all rights, powers and privileges of the Company against the other party or
parties thereto arising in respect of any default, breach or cancellation by
such other party or parties or otherwise.
All capitalized terms used herein shall have the meaning assigned to them
in the Purchase Agreement unless otherwise defined herein.
IN WITNESS WHEREOF, W&K Pharmacy, Inc., d/b/a/ PandaAmercia Corporation, a
California corporation has caused this instrument to be signed in its name by
its duly authorized officer and its corporate seal to be hereunto affixed, to be
effective as of the 18th day of January, 1999.
W&K Pharmacy, Inc., d/b/a/ PandaAmercia
Corporation, a California corporation
By:____________________________________
Title:__________________________________
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EXHIBIT F
DISPUTE RESOLUTION
1. Binding Arbitration.
-------------------
Any dispute, claim or controversy of whatever nature arising out of or
relating to a claim for indemnification under Article IX of the Agreement (the
"Arbitrable Provisions"), including, without limitation, any action or claim
based on tort, contract, or statute, or concerning the interpretation, effect,
termination, validity, performance and/or breach of any of the Arbitrable
Provisions, shall be resolved by final and binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
administered by [service], Los Angeles, California _____, Telephone: ( )
_________ (the "Administrator").
The parties hereby incorporate the provisions of California Code of Civil
Procedure, Sections 1283.05 and 1283.1 (relating to discovery) into this
Agreement, which shall be a part of and applicable to any arbitration
proceedings arising hereunder. Any arbitration, mediation, court action, or
other adjudicative proceeding arising out of or relating to this Agreement shall
be held in Los Angeles, California. Notwithstanding the foregoing or any other
provision contained in this Exhibit, the parties shall have the right to request
provisional relief from a court of competent jurisdiction pursuant to California
Code of Civil Procedure Section 1281.8.
2. Initiation.
----------
Arbitration shall be initiated by either party in the following manner:
2.1 Timing. Unless barred by an applicable statute or period of
------
limitations, either party may initiate an arbitration at any time after a
dispute has arisen by serving upon the other party and filing with the
Administrator a written Demand for Arbitration, including a general description
of the nature of the claim and the nature and amount of damages and/or other
relief sought (the "Demand for Arbitration"). A claim shall be forever barred if
on the date the Demand for Arbitration is filed with the Administrator, the
claim, if asserted in a civil action, would be barred under law by an applicable
statute or period of limitations.
2.2 Response. If the responding party desires to file a response and/or
--------
counterclaim to the Demand for Arbitration, it shall do so within twenty (20)
calendar days after service of the Demand for Arbitration. Any response to a
counterclaim shall be filed and served within ten (10) calendar days after
service of the counterclaim, but no such response shall be required. A failure
to file a counterclaim or response will not operate to delay the arbitration
proceedings.
2.3 Further Pleadings. After the filing of the Demand for Arbitration, any
-----------------
counterclaim, and/or any responses thereto, no further claims or counterclaims
may be made or filed in that proceeding except by order of the arbitrator made
on a duly noticed motion to the arbitrator.
3. Appointment and Powers of Arbitrator.
------------------------------------
The dispute shall be submitted to a single arbitrator chosen by the parties
from a list of retired judges provided by the Administrator. The Administrator
shall provide such list to the parties twenty (20) days after the Demand for
Arbitration is filed. Should the parties be unable to agree on a choice of
arbitrator within ten (10) days after receipt of the list from the
Administrator, then either party may request the Administrator to furnish a list
of three names and each side may strike one name, thereby nominating the
remaining person as the arbitrator. If more than one name remains, the
Administrator shall choose an arbitrator from the list of remaining names.
If the designated arbitrator shall die, become incapable of, unwilling to,
or unable to serve or proceed with the arbitration, the Administrator shall
appoint a replacement arbitrator, and such replacement arbitrator shall have all
such powers as if he or she had been originally appointed as the arbitrator.
Should either party refuse or neglect, after reasonable notice, to furnish
the arbitrator with any papers or information demanded or to attend hearings
before the arbitrator, the arbitrator is empowered by both parties to proceed
with the remainder of the arbitration process set forth in this Exhibit.
The arbitrator is authorized to issue an award for compensatory damages,
and/or to grant any equitable remedy or other relief he or she deems just and
equitable and within the scope of the Agreement, including, but not limited to,
an injunction or order for specific performance. The arbitrator shall not have
the authority to award exemplary or punitive damages.
4. Costs and Fees.
--------------
The arbitrator, in his or her discretion, shall be authorized to determine
whether a party is the prevailing party, and if so, to award to that prevailing
party reimbursement for its share of the costs and fees of the Administrator and
the arbitrator, and reimbursement for its reasonable attorneys' fees,
disbursements pursuant to California Code of Civil Procedure Section 1033.5, and
costs arising from the arbitration. However, until any such order is issued,
the parties shall bear equally the costs and fees of the Administrator and the
arbitrator.
5. Location and Date of Arbitration Hearing.
----------------------------------------
The arbitration shall be held in Los Angeles, California, and shall
commence no later than six months following the service of the Demand For
Arbitration.
6. Pre-Hearing Conferences.
-----------------------
Within twenty (20) days of the time that the arbitrator is chosen, the
arbitrator shall hold a Pre-Hearing Conference with the parties for the purpose
of exploring or mediating a mutually agreed resolution of such dispute,
narrowing the issues, establishing a discovery schedule, arranging an
-2-
acceptable procedure for any law and motion proceedings and in all respects
arranging for the most expeditious hearing feasible of the matters in dispute.
7. Discovery.
---------
The parties shall have the right to conduct the following discovery:
7.1 Exchange of Documents. At the Pre-Hearing Conference, the parties
---------------------
shall exchange requests for production of no more than fifteen (15) categories
of documents (the "Document Request List") that are relevant to the issues in
the arbitration and that are to be produced by the other side. Subject to any
disputes as to production, the responsive documents shall be produced by the
responding party, or made available for inspection, at the requesting party's
option, within twenty (20) days of the exchange of the Document Request Lists.
Any disputes as to production of documents shall be addressed to the arbitrator
as promptly as possible, and in any event no more than ten (10) days after
completion of the twenty-day production period, and shall promptly and
informally be resolved by the arbitrator.
7.2 Exchange of Witness Lists. Within twenty (20) days after the
--------------------------
production of documents, the parties shall exchange a list of: (i) any fact
witnesses they intend to call at the arbitration hearing, and (ii) any other
persons who may have material information about the dispute. The fact witness
list also shall include a brief description of each identified person's
knowledge.
7.3 Fact Witness Depositions. The parties shall have the right to take
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depositions of no more than five (5) fact (non-expert) witnesses at any time
commencing fifteen (15) days after the production of documents and up until
fifteen (15) days prior to the commencement of the arbitration hearing. The
time available for the deposition of each fact witness shall not exceed two
eight-hour days, including breaks, unless a party or its counsel is found by the
arbitrator, on motion duly made, to have wilfully obstructed discovery, in which
event the arbitrator may award the costs of preparing and arguing such motion to
the prevailing party.
7.4 Expert Witnesses. The parties shall exchange lists of up to three (3)
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expert witnesses, along with a statement of the witnesses' backgrounds, opinions
and published articles or papers, if any, thirty (30) days prior to the
commencement of the arbitration hearing. Between the 10th and 20th day preceding
the arbitration hearing, each party shall have the right to depose the other
party's experts, however, the time available for the deposition of each expert
witness shall not exceed two eight-hour days, including breaks unless a party or
its counsel is found by the arbitrator, on motion duly made, to have wilfully
obstructed discovery, in which event the arbitrator may award the costs of
preparing and arguing such motion to the prevailing party. At least five (5)
business days prior to any expert's scheduled deposition, the party designating
the expert shall provide the other party with copies of any reports or other
documents the expert intends to offer at the arbitration hearing and all
documents that have been provided to the expert by such designating party.
7.5 Additional Discovery. Any additional discovery may occur only at the
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discretion of the arbitrator and allowed only upon a showing of good cause.
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8. Conduct of the Arbitration Hearing.
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The arbitration hearing shall be conducted according to the discretion of
the arbitrator. Judicial rules relating to the order of proof, the conduct of
the hearing and the presentation and admissibility of evidence need not be
followed. Any relevant information, including hearsay, may be admitted by the
arbitrator regardless of its admissibility as evidence in court, but the
arbitrator also shall be authorized to exclude evidence including if the
prejudicial or cumulative effort of such evidence would outweigh its probity.
The parties shall have the power to subpoena witnesses to attend the
arbitration hearing pursuant to California Code of Civil Procedure Section
1282.6. The arbitrator shall have full power to give such directions and to make
such orders in the conduct of the arbitration, including setting pre-arbitration
procedures and scheduling any motions to correct or amend the arbitration award,
as he or she deems just and appropriate, subject to the provisions of the last
paragraph of Section 3 hereof..
9. Award.
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The arbitrator shall, within fifteen (15) calendar days after the
conclusion of the arbitration hearing, issue a written award and a brief written
statement of decision describing the reasons for the award, including the
calculation of any compensatory damages awarded.
10. Survival.
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The provisions in this Exhibit shall survive and apply in all events,
including, without limitation, after the breach, repudiation and/or termination
of the Arbitrable Provisions.
11. Notice.
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Any notice or document required to be served by one party on the other
party under this Exhibit shall be served in accordance with Section 11.4 of the
Agreement. After a party appears in the arbitration proceeding through its
attorney, all further service shall be made upon that party's attorney.
12. Finality of Award.
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The award of the arbitrator shall be final and binding upon the parties
without appeal or review except as permitted by California law. Any party may
apply to any court of competent jurisdiction for confirmation and entry of
judgment based on said award. In connection with any application to confirm,
correct or vacate the arbitration award, any appeal of any order rendered
pursuant to any such application, or any other action required to enforce the
arbitration award, the prevailing party shall be entitled to recover its
reasonable attorneys' fees, disbursements and costs incurred in such post-award
activities.
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