SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
October 10, 1996
AMF GROUP INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware
--------------------------------------------------
(State or other jurisdiction
of incorporation)
001-12131 13-3873272
------------------------- ------------------------
(Commission File No.) (IRS employer
identification no.)
8100 AMF Drive, Mechanicsville, Virginia 23111
---------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(804) 730-4000
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 10, 1996, AMF Bowling Centers, Inc. (the
"Buyer"), a Virginia corporation and an indirect, wholly-owned
subsidiary of AMF Group Inc. (the "Registrant"), a Delaware
corporation, completed the acquisition (the "Acquisition") of
50 bowling centers and certain related assets and liabilities
from Charan Industries, Inc. (the "Seller"), a Delaware corpo-
ration, pursuant to an Asset Purchase Agreement (the "Asset
Purchase Agreement"), dated as of September 10, 1996, by and
between Buyer and Seller. A copy of the Asset Purchase Agree-
ment is attached as Exhibit 1 hereto and is incorporated herein
by reference, and the description of and all references to the
Asset Purchase Agreement are qualified in their entirety by refer-
ence to such Asset Purchase Agreement. The assets purchased
were used by Seller in its operation of bowling centers and
related operations and will continue to be used as such by
Buyer.
The purchase price was approximately $100 million,
subject to certain adjustments. The purchase price was negoti-
ated between Buyer and Seller. The Acquisition was funded with
approximately $40 million from the sale of equity by AMF Hold-
ings Inc., an indirect parent corporation of the Registrant, to
its institutional stockholders and one of its directors, and
with approximately $60 million from available borrowings under
the Registrant's existing acquisition facility established by
the Credit Agreement, dated as of May 1, 1996, by and among the
Registrant, the banks, financial institutions and other insti-
tutional lenders listed on the signature pages thereof as Ini-
tial Issuing Banks, Goldman, Sachs & Co., and Citicorp, N.A.,
as administrative agent, and Citicorp USA, Inc., as collateral
agent.
On October 10, 1996, the Registrant issued a press
release relating to the consummation of the Acquisition. A
copy of the press release is attached as Exhibit 2 hereto and
is incorporated herein by reference.
-2-<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is impracticable at the time of filing of
this report to provide the required financial
statements of the business acquired. Required
financial statements will be filed as soon as
practicable as an amendment to this report, but
not later than 60 days after the date on which
this report must be filed.
(b) Pro Forma financial information.
It is impracticable at the time of filing of
this report to provide the required pro forma
financial information. Required pro forma fi-
nancial information will be filed as soon as
practicable as an amendment to this report, but
not later than 60 days after the date on which
this report must be filed.
(c) Exhibits.
1. Asset Purchase Agreement, dated as of Sep-
tember 10, 1996, by and between AMF Bowling
Centers, Inc. and Charan Industries, Inc.
2. Press Release, dated October 10, 1996, re-
lating to the transaction between AMF Bowl-
ing Centers, Inc. and Charan Industries,
Inc.
-3-<PAGE>
Pursuant to the requirements of the Securities Ex-
change Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
AMF GROUP INC.
By: /s/ Stephen E. Hare
-----------------------------
Name: Stephen E. Hare
Title: Executive Vice
President and
Chief Financial
Officer
Date: October 24, 1996
-4-<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page Number
------- ----------- -----------
1. Asset Purchase Agreement, dated as of
September 10, 1996, by and between AMF
Bowling Centers, Inc. and Charan
Industries, Inc..........................
2. Press Release, dated October 10, 1996,
relating to the transaction between
AMF Bowling Centers, Inc. and Charan
Industries, Inc..........................
-5-
EXHIBIT 1
ASSET PURCHASE AGREEMENT
By and Between
AMF BOWLING CENTERS, INC.,
and
CHARAN INDUSTRIES, INC.
Dated as of September 10, 1996<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Definitions.............................. 1
Section 1.1 Definitions.............................. 1
ARTICLE II Purchase and Sale of Purchased Assets,
Purchase Price and Other Related
Matters................................ 13
Section 2.1 Purchase and Sale........................ 13
Section 2.2 Purchase Price........................... 14
Section 2.3 Payment of Purchase Price................ 14
Section 2.4 Assumption of Liabilities................ 14
Section 2.5 Working Capital Purchase Price
Adjustment............................. 15
Section 2.6 Delayed Closing Purchase Price
Adjustment............................. 18
Section 2.7 Payment of Taxes......................... 21
Section 2.8 Purchase Price Allocation................ 21
ARTICLE III Closing and Closing Date Deliveries...... 22
Section 3.1 Closing Date............................. 22
Section 3.2 Closing Date Deliveries.................. 23
ARTICLE IV Representations and Warranties of the
Company................................ 25
Section 4.1 Incorporation; Authorization; etc........ 26
Section 4.2 Capitalization; Structure................ 27
Section 4.3 Financial Statements..................... 28
Section 4.4 Real Properties.......................... 28
Section 4.5 Tangible Personal Property; Sufficiency
of Assets.............................. 32
Section 4.6 Absence of Certain Changes............... 33
Section 4.7 Litigation; Orders....................... 34
Section 4.8 Intellectual Property.................... 34
Section 4.9 Licenses, Approvals, Other Authoriza-
tions, Consents, Reports, etc.......... 35
Section 4.10 Labor Matters............................ 36
Section 4.11 Compliance with Laws..................... 37
Section 4.12 Insurance................................ 37
Section 4.13 Contracts................................ 37
-i-<PAGE>
Section 4.14 Brokers, Finders, etc.................... 40
Section 4.15 Affiliate Transactions................... 40
Section 4.16 Environmental Compliance................. 40
Section 4.17 Video Games.............................. 42
Section 4.18 Undisclosed Liabilities.................. 42
Section 4.19 Inventory................................ 43
Section 4.20 Disclosure............................... 43
Section 4.21 Nonforeign Certification................. 43
ARTICLE V Representations and Warranties of Buyer.. 43
Section 5.1 Incorporation; Authorization; etc........ 43
Section 5.2 Licenses, Approvals, Other Authorizations
Consents, Reports, etc................. 44
Section 5.3 Brokers, Finders, etc.................... 45
ARTICLE VI Employee Matters......................... 45
Section 6.1 Offers of Employment..................... 45
Section 6.2 WARN Requirements........................ 48
Section 6.3 No Third Party Beneficiaries; No
Continuing Obligations................. 48
Section 6.4 401(k) Plan.............................. 49
Section 6.5 Collective Bargaining Agreements......... 49
ARTICLE VII Covenants of the Company and Buyer....... 49
Section 7.1 Investigation of Business; Access to
Properties and Records................. 49
Section 7.2 Efforts; Obtaining Consents.............. 51
Section 7.3 Further Assurances....................... 53
Section 7.4 Employee, Customer and Supplier
Relationships, etc..................... 54
Section 7.5 Conduct of Business...................... 54
Section 7.6 Termination of Agreements................ 57
Section 7.7 No Solicitation.......................... 57
Section 7.8 Seaway Lanes Lease....................... 58
Section 7.9 Capital Expenditures..................... 58
Section 7.10 Bulk Transfer............................ 58
Section 7.11 Insurance Proceeds....................... 58
Section 7.12 Acquisition of Certain Bowling Centers;
MJR Liquor Licenses.................... 59
Section 7.13 Armonk Bowl.............................. 60
Section 7.14 Liens.................................... 60
Section 7.15 Non-Competition.......................... 61
Section 7.16 Strathmore Lanes......................... 62
Section 7.17 Golf Course Easement..................... 64
-ii-<PAGE>
ARTICLE VIII Conditions of Buyer's Obligation to
Close.................................. 65
Section 8.1 Representations, Warranties,
Covenants and Agreements of
the Company............................ 65
Section 8.2 Filings; Consents; Waiting Periods....... 65
Section 8.3 Litigation; Injunction................... 66
Section 8.4 Liens.................................... 67
Section 8.5 Opinions................................. 67
Section 8.6 Non-Competition Agreements; Ancillary
Agreements; Closing Date Deliveries.... 67
Section 8.7 Affiliate Centers Acquisitions; MJR
Transfer............................... 67
Section 8.8 Proceedings; Certificates................ 67
Section 8.9 Title Insurance.......................... 68
Section 8.10 Surveys.................................. 68
Section 8.11 Title Insurance Affidavits............... 69
Section 8.12 Estoppel Certificates.................... 69
Section 8.13 Transfer Tax Returns..................... 69
Section 8.14 UCC...................................... 69
ARTICLE IX Conditions to the Company's Obligation
to Close............................... 69
Section 9.1 Representations, Warranties,
Covenants and Agreements of Buyer...... 69
Section 9.2 Filings; Consents; Waiting Periods....... 70
Section 9.3 Litigation; Injunction................... 70
Section 9.4 Opinions................................. 70
Section 9.5 Ancillary Agreements; Closing Date
Deliveries............................. 71
Section 9.6 Affiliate Payable........................ 71
Section 9.7 Proceedings; Certificates................ 71
ARTICLE X Termination.............................. 71
Section 10.1 Termination Events....................... 71
Section 10.2 Effect of Termination.................... 72
-iii-<PAGE>
ARTICLE XI Indemnification.......................... 72
Section 11.1 Buyer Indemnified Parties' Right to
Indemnification........................ 72
Section 11.2 Limitations on Buyer Indemnified Parties'
Right to Indemnification............... 73
Section 11.3 Company Indemnified Parties' Right to
Indemnification........................ 74
Section 11.4 Indemnification Procedures............... 74
Section 11.5 Settlement of Indemnification
Obligations............................ 75
Section 11.6 Indemnification Claims Against Escrow.... 75
Section 11.7 Sole Remedy Regarding Representations
and Warranties......................... 75
Section 11.8 Losses Net of Insurance.................. 76
ARTICLE XII Miscellaneous............................ 76
Section 12.1 Counterparts............................. 76
Section 12.2 Governing Law............................ 76
Section 12.3 Entire Agreement......................... 76
Section 12.4 Expenses................................. 77
Section 12.5 Notices.................................. 77
Section 12.6 Knowledge................................ 78
Section 12.7 Successors and Assigns................... 78
Section 12.8 Publicity................................ 78
Section 12.9 Headings; Definitions.................... 78
Section 12.10 Amendments and Waivers................... 79
Section 12.11 Severability............................. 79
-iv-<PAGE>
Schedules and Exhibits
Schedule A - Centers
Schedule 1.1(a) - Net Working Capital
Schedule 1.1(b) - Retained Assets
Schedule 2.4(a) - Assumed Liabilities
Schedule 2.8 - Purchase Price Allocation Ranges
Schedule 4.1(a) - Jurisdictions Where Company Qualified
to do Business
Schedule 4.1(b) - Violations, Conflicts and Defaults
Schedule 4.2(a) - Capitalization of the Company
Schedule 4.3 - Financial Statements
Schedule 4.3(c) - Income Statements and Revenue and Cash
Flow Information of the Centers
Schedule 4.4(a) - Owned Property; Affiliate Ownership
Schedule 4.4(b) - Leased Real Estate
Schedule 4.4(c) - Owned Properties and Leased Real Es-
tate Constituting All Real Estate
Schedule 4.5(a) - Personal Property
Schedule 4.5(b) - Exceptions With Respect to Personal
Property
Schedule 4.5(c) - Title to Purchased Assets
Schedule 4.6 - Certain Changes
Schedule 4.7 - Litigation; Orders
Schedule 4.8 - Company Intellectual Property
Schedule 4.9(a) - Licenses
Schedule 4.9(b) - Approvals, Other Authorizations
Schedule 4.9(c) - Concession Entities
Schedule 4.10 - Labor Matters
Schedule 4.11 - Compliance with Laws
Schedule 4.12 - Insurance
Schedule 4.13(a) - Terminated Contracts
Schedule 4.13(b) - Contracts
Schedule 4.15 - Affiliate Transactions
Schedule 4.16(b) - Environmental Compliance
Schedule 4.16(c) - Presence of Hazardous Substances
Schedule 4.16(d) - Use of Hazardous Substances
Schedule 4.16(e) - Storage Tanks
Schedule 4.16(f) - Environmental Audits, Assessments,
Analyses, Etc.
Schedule 4.17(a) - Video Games
Schedule 4.17(b) - Ownership of Video Games
Schedule 4.17(c) - Purchase Orders for Video Games
Schedule 4.18 - Undisclosed Liabilities
Schedule 5.2 - Buyer Licenses, Approvals, Other Au-
thorizations, Consents, Reports
Schedule 6.1(c) - Seven Executive Employees
Schedule 6.1(d) - Employees
Schedule 6.1(e) - Severance Policy
-v-<PAGE>
Schedule 7.5 - Conduct of Business
Schedule 7.5(m) - Capital Expenditures Committments
Schedule 7.9 - Capital Expenditures since 7/22/96
Schedule 7.12 - Affiliate Centers
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Assignment and Assumption
Agreement
Exhibit C - Form of Bill of Sale
Exhibit D - Form of Assumption Agreement
Exhibit E - Form of Seaway Lease
Exhibit F - Form of Opinion of Farrell, Fritz,
Caemmerer, Cleary, Barnosky & Arman-
tano
Exhibit G - Form of Non-Competition Agreement
Exhibit H - Form of Estoppel Certificate
Exhibit I - Form of Opinion of Wachtell, Lipton,
Rosen & Katz
Exhibit J - Form of Opinion of General Counsel of
Buyer
-vi-<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is
made and entered into as of September 10, 1996 by and between
AMF Bowling Centers, Inc., a Virginia corporation ("Buyer"),
and Charan Industries, Inc., a Delaware corporation (the "Com-
pany").
Recitals:
A. The Company owns and operates the bowling centers
(including (i) the related facilities, such as billiard, pool,
amusement or game halls or rooms, snack bars, restaurants, pro
shops, bars, lounges, entertainment lounges, a restaurant fa-
cility in Michigan, the bar and storefront area contiguous to
the Strathmore Bowling Center in New Jersey and the golf course
(including the related clubhouse and banquet facility and other
related operations) in Michigan, and (ii) the Affiliate Centers
(as hereinafter defined)) and the family fun zone, all relating
to the operations listed on Schedule A hereto (collectively,
the "Centers").
B. Buyer desires to purchase the Centers from the
Company, and the Company desires to sell the Centers to Buyer
at the Closing on the Closing Date (as such terms are herein-
after defined).
NOW, THEREFORE, in consideration of the mutual cov-
enants and agreements hereinafter set forth, the parties hereto
agree as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. Whenever used herein, the
following terms shall have the meanings set forth below unless
otherwise expressly provided or unless the context clearly re-
quires otherwise:
"Accountant" shall have the meaning set forth in Sec-
tion 2.5(b) hereof.
"Action" shall mean any complaint, claim, prosecu-
tion, indictment, action, suit, arbitration, investigation or
proceeding by or before any Governmental Authority.
"Adjusted Closing Date Balance Sheet" shall have the
meaning set forth in Section 2.5(e) hereof.<PAGE>
"Adjusted Closing Date Revenue Statement" shall have
the meaning set forth in Section 2.6(f) hereof.
"Affiliate" (and, with the correlative meaning, "Af-
filiated") shall mean, with respect to any Person, any other
Person that directly, or through one or more intermediaries,
controls or is controlled by or is under common control with
such first Person, and, if such a Person is an individual, any
member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal ben-
eficiary is such individual or one or more members of such im-
mediate family and any Person who is controlled by any such
member or trust. When used with respect to the Company, Af-
filiate shall include each Stockholder and each Company Affili-
ate. As used in this definition, "control" (including, with
correlative meanings, "controlled by" and "under common control
with") shall mean possession, directly or indirectly, of power
to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise).
"Affiliate Centers" shall have the meaning set forth
in Section 7.12(a) hereof.
"Affiliate Centers Acquisition" shall have the mean-
ing set forth in Section 7.12(a) hereof.
"Affiliate Payable" shall have the meaning set forth
in the definition of "Net Working Capital."
"Agreement" shall have the meaning set forth in the
first paragraph hereof.
"Alternative Transaction" shall have the meaning set
forth in Section 7.7 hereof.
"Ancillary Agreements" shall mean the Seaway Lease,
the Strathmore Lease, the Non-Competition Agreements, the As-
sumption Agreement, the Assignment and Assumption Agreement,
the Escrow Agreement and the Golf Course Easement, collec-
tively.
"Appraisal Firm" shall have the meaning set forth in
Section 2.8 hereof.
"Assignment and Assumption Agreement" shall have the
meaning set forth in Section 3.2(a) hereof.
"Assumed Liabilities" shall have the meaning set
forth in Section 2.4(a).
- 2 -<PAGE>
"Assumption Agreement" shall have the meaning set
forth in Section 3.2(b)(iii) hereof.
"Balance Sheet" shall have the meaning set forth in
Section 4.3(a) hereof.
"Business" shall have the meaning set forth in Sec-
tion 7.15(a) hereof.
"Buyer" shall have the meaning set forth in the first
paragraph hereof.
"Buyer Employees" shall have the meaning set forth in
Section 6.1(a) hereof.
"Buyer Indemnified Parties" shall have the meaning
set forth in Section 11.1 hereof.
"Centers" shall have the meaning set forth in Recital
A hereof.
"Closing" shall have the meaning set forth in Section
3.1 hereof.
"Closing Date" shall have the meaning set forth in
Section 3.1 hereof.
"Closing Date Balance Sheet" shall have the meaning
set forth in Section 2.5(b) hereof.
"Closing Date Balance Sheet Neutral Auditors" shall
have the meaning set forth in Section 2.5(e) hereof.
"Closing Date Balance Sheet Resolution Period" shall
have the meaning set forth in Section 2.5(d) hereof.
"Closing Date Revenue Statement" shall have the mean-
ing set forth in Section 2.6(c) hereof.
"COBRA" shall mean Part 6 of Title I of ERISA and
Section 4980B of the Code.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereun-
der.
"Company" shall have the meaning set forth in the
first paragraph hereof.
- 3 -<PAGE>
"Company Affiliates" shall mean Regal Lanes, Inc., an
Indiana corporation, Wanbow Co., a New York partnership, and
Ryanest Associates, a Virginia partnership.
"Company Gaming Licenses" shall have the meaning set
forth in Section 4.9(a) hereof.
"Company Intellectual Property" shall have the mean-
ing set forth in Section 4.8 hereof.
"Company Liquor Licenses" shall have the meaning set
forth in Section 4.9(a) hereof.
"Company Severance Policy" shall have the meaning set
forth in Section 6.1(e) hereof.
"Concession Entities" shall have the meaning set
forth in Section 4.9(c) hereof.
"Environmental Law" shall have the meaning set forth
in Section 4.16(a) hereof.
"ERISA" shall mean the Employee Retirement Income Se-
curity Act of 1974, as amended.
"Escrow Agent" shall have the meaning set forth in
Section 2.3 hereof.
"Escrow Agreement" shall have the meaning set forth
in Section 2.3 hereof.
"Estimated Closing Date Net Working Capital" shall
have the meaning set forth in Section 2.5(a) hereof.
"Evaluation Material" shall have the meaning set
forth in Section 7.1(b) hereof.
"Exercise Notice" shall have the meaning set forth in
Section 7.13 hereof.
"Final Determination" shall have the meaning set
forth in Section 7.16.
"Financial Statements" shall have the meaning set
forth in Section 4.3(a) hereof.
"GAAP" shall have the meaning set forth in Section
4.3(b) hereof.
- 4 -<PAGE>
"Golf Course Easement" shall have the meaning set
forth in Section 7.17 hereof.
"Governmental Authority" shall have the meaning set
forth in Section 4.1(b) hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regula-
tions thereunder.
"Hazardous Substance" shall have the meaning set
forth in Section 4.16(a) hereof.
"Indemnitee" shall have the meaning set forth in Sec-
tion 11.4(a) hereof.
"Indemnitor" shall have the meaning set forth in Sec-
tion 11.4(a) hereof.
"Initial Purchase Price" shall have the meaning set
forth in Section 2.2(a) hereof.
"IRS" shall mean the Internal Revenue Service or any
successor entity thereto.
"Leased Real Estate" shall have the meaning set forth
in Section 4.4(b) hereof.
"Leases" shall have the meaning set forth in Section
4.4(b) hereof.
"Liabilities" shall mean any and all debts, losses,
claims, damages, costs, expenses, demands, fines, judgments,
penalties, obligations (including obligations under written or
oral leases, contracts, licenses, commitments, agreements or
arrangements), payments, and liabilities of every type and na-
ture (whether civil, criminal or other, and whether known or
unknown, due or to become due, fixed or contingent, matured or
unmatured, including those arising out of any Action and those
relating to Taxes), together with any reasonable costs and ex-
penses (including reasonable attorneys' fees and out-of-pocket
expenses) incurred in connection with any of the foregoing.
"Licenses" shall have the meaning set forth in Sec-
tion 4.9(a) hereof.
"Liens" shall have the meaning set forth in Section
4.4(a) hereof.
- 5 -<PAGE>
"Losses" shall have the meaning set forth in Section
11.1 hereof.
"Material Adverse Effect" shall mean a material and
adverse effect on the value, financial condition, results of
operations, business, prospects, rights, properties, assets or
liabilities of the Centers, taken as a whole.
"MJR" shall mean M.J.R. Lounge, Inc., a New Jersey
corporation.
"MJR Transfer" shall have the meaning set forth in
Section 7.12(b).
"Most Recent Financial Statements" shall have the
meaning set forth in Section 4.3(a) hereof.
"Net Working Capital," as of a specified date, shall
mean an amount equal to (x) the current assets purchased by
Buyer pursuant to this Agreement, which are comprised of cash
and cash equivalents, if any, accounts receivable (net), inven-
tory, prepaid expenses (including those related to the Prepaid
Contracts), the cash relating to cash security deposits associ-
ated with league bowling, banquets and any other purposes, and
all other Purchased Assets which, in each case, are properly
treated as current assets in accordance with GAAP consistently
applied, less (y) the Assumed Liabilities, whether or not cur-
rent, except as expressly set forth on Schedule 2.4(a); pro-
vided, that, notwithstanding the application of GAAP, and
whether or not such application is consistently applied, cur-
rent assets shall (A) include (i) $500,000 (or, if less, the
amortized book value thereof, calculated consistent with the
Company's past practices) attributable to the Prior Noncompeti-
tion Agreement (net) (only to the extent assigned and inuring
to the benefit of the Buyer) of the Company disclosed as such
in Schedule 1.1(a) that will be assigned to and will inure to
the benefit of Buyer (exclusive of the Non-Competition Agree-
ments and any other non-competition that may be entered into in
connection with the transactions contemplated hereby), (ii) the
mortgage receivable (valued in accordance with GAAP consis-
tently applied) reflected on the Balance Sheet and disclosed as
such in Schedule 1.1(a) (to the extent that such mortgage re-
ceivable (along with all properties and rights securing such
receivable) is among the Purchased Assets and provided the un-
derlying security is not subject to any underlying mortgages or
notes relating to the property securing such receivable other
than mortgages and notes, if any, issued by the named obligor
of such receivable to third parties) that will be assigned to
and will benefit Buyer and (iii) pinspotter parts, pins and
- 6 -<PAGE>
scoring parts inventory and prepaid expenses relating to resur-
facing costs (but in any case, an amount in excess of
$1,000,000, shall not be attributed thereto for purposes
hereof) that will be assigned to and will benefit Buyer, and
(B) exclude (1) all cash payments made and to be made as con-
templated by Section 7.11 and (2) any prepaid expenses or other
Purchased Assets to the extent that they do not inure to the
benefit of Buyer; provided, further, that notwithstanding the
application of GAAP, and whether or not such application is
consistently applied, current liabilities shall (x) not include
the accounts payable (the "Affiliate Payable") by the Company
to an Affiliate of Buyer (the "Receivable Affiliate") pursuant
to the purchase orders disclosed as such in Schedule 1.1(a)
(provided that if such accounts payable are in excess of
$500,000, such excess shall be included as a current li-
ability), and (y) include (i) all expenses of (including any
installments of payments under the Leases, insurance premiums
and utility, fuel or other periodic charges or other Li-
abilities with respect to Purchased Assets not paid by the Com-
pany prior to the Closing, to the extent accrued (whether or
not otherwise required to be accrued as of such date) and un-
paid through and including the date immediately preceding the
Closing Date), or Taxes payable by, the Company with respect to
the Centers or the Purchased Assets which are Assumed Liabil-
ities, without regard to when they are or become due or pay-
able, to the extent accrued (whether or not otherwise required
to be accrued as of such date) and unpaid through and including
the date immediately preceding the Closing Date (pro rated, on
the same basis as such expenses or Taxes are incurred, with re-
spect to any period that includes dates both prior to and on or
after the Closing Date) and (ii) the Liabilities relating to
cash security deposits associated with league bowling, banquets
and other purposes, and prepaid amounts received by the Company
in connection with contracts being assumed by Buyer pursuant to
Section 2.4 hereto.
"Non-Competition Agreements" shall have the meaning
set forth in Section 8.6 hereof.
"Nontransferred Employees" shall have the meaning set
forth in Section 6.1(e) hereof.
"Notice of Claim" shall have the meaning set forth in
Section 11.4(a) hereof.
"Notice Period" shall have the meaning set forth in
Section 7.16 hereto.
"Owned Property" shall have the meaning set forth in
Section 4.4(a) hereof.
- 7 -<PAGE>
"Person" shall mean any natural person, corporation,
partnership, firm, joint venture, joint-stock company, trust,
association, unincorporated entity of any kind, trust, Govern-
mental Authority or other entity.
"Permitted Liens" shall have the meaning set forth in
Section 4.4(a) hereof.
"Preliminary Closing Date Revenue Statement" shall
have the meaning set forth in Section 2.6(b) hereof.
"Prepaid Contracts" shall have the meaning set forth
in Section 4.13(a) hereof.
"Prior Noncompetition Agreement" shall mean the Non-
competition Agreement listed as such on Schedule 1.1(a) hereto.
"Proposal Notice" shall have the meaning set forth in
Section 7.13 hereof.
"Purchase Price" shall mean the Initial Purchase
Price, as adjusted, if at all, but without duplication, pursu-
ant to Sections 2.5 and 2.6 hereof.
"Purchased Assets" shall mean all of the business and
all of the rights, properties and assets of the Company and the
Company Affiliates, real, personal and mixed, tangible and in-
tangible, of every kind, nature and description, whether ac-
crued, contingent or otherwise, whether now existing or here-
after acquired, and wheresoever situated (and whether or not
carried or reflected on the books of the Company or any Company
Affiliate) relating to, owned or held in connection with, the
business of the Centers (excluding the Retained Assets), in-
cluding, without limitation (A) all assets reflected on the
Balance Sheet and those assets acquired since the date of the
Balance Sheet and (B) the following (excluding, however, the
Retained Assets):
(i) accounts or notes and mortgages receivable,
claims, evidences of debt, utility deposits and other de-
posits and prepaid expenses;
(ii) real property, including the Owned Prop-
erty, and all buildings, fixtures and improvements there-
on, together with all easements, rights of way, servi-
tudes, leases, permits, licenses, options and other real
property rights, and any other real property owned by any
Company Affiliate on which any of the Centers (including
- 8 -<PAGE>
any of the Affiliate Centers) is located or any real prop-
erty contiguous thereto owned by the Company or any Af-
filiate of the Company or of any Stockholder;
(iii) all right, title and interest (A) under
real property leases, including real property leases re-
lating to the Leased Real Estate, (B) to the leasehold im-
provements situated on the real property which is the sub-
ject of such leases, (C) in and to any land lying in the
bed of any streets, roads or avenues, opened or proposed,
in front of or adjoining the Real Property being trans-
ferred hereunder, to the center lines thereof or any award
or awards made or to be made in lieu thereof, and (D) in
and to all strips and gores, if any, abutting, adjoining
or appurtenant to the Real Property being transferred
hereunder;
(iv) all right, title and interest in, to and
under (A) the leases, contracts, licenses, commitments,
agreements and arrangements listed and described in the
Schedules hereto; (B) the other leases, contracts, li-
censes, commitments, agreements and arrangements not re-
quired by the terms of this Agreement to be listed and de-
scribed, or otherwise not listed or described, in the
Schedules hereto; (C) the leases, contracts, licenses,
commitments, agreements and arrangements entered into af-
ter the date hereof; and (D) all other leases, contracts,
licenses, commitments, agreements, and arrangements, in-
cluding the Prior Non-Competition Agreement, in each such
case, to which the Company is a party or which benefit the
Company or the Centers, and any payments owed to the Com-
pany or the Centers in connection therewith, except, in
each such case, those leases, contracts, licenses, commit-
ments, agreements, and arrangements which the Company is
required to terminate effective on or prior to the Closing
Date, the Retained Assets and those relating to the Re-
tained Liabilities;
(v) fixtures, machinery (including video,
amusement and arcade games), equipment (including all
equipment at all snack bars, bars, lounges, entertainment
lounges and restaurants, whether such facilities are owned
or leased, in the Centers), drapes, carpeting, appliances,
cash registers, tableware, shoes, bowling balls, bowling
equipment, pins, pinspotter parts, scoring parts, lockers,
pool and billiard tables, pool and billiard balls, cues
and pool and billiard equipment, the cash relating to cash
security deposits associated with league bowling, banquets
and any other purposes, tools, other inventories of sup-
plies and spare parts, food, beverages, pro-shop items,
- 9 -<PAGE>
automobiles, other vehicles (including all Company owned
automobiles and other vehicles used by employees of the
Company, whether or not Buyer Employees, in connection
with the operation of the business of the Centers or the
Purchased Assets, excluding those used by any of the Seven
Bowling Executives who do not accept employment with Buyer
or any of its Affiliates and excluding those used by any
of the seven regional and district managers of the Company
who do not become Buyer Employees), furniture and office
equipment and other inventory and tangible assets or prop-
erty;
(vi) all intangible property rights (to the ex-
tent assignable), including, without limitation, software,
systems and any Company Intellectual Property, together
with the goodwill associated therewith, but excluding the
ownership of the name "Zones", which Buyer will be permit-
ted to continue to use for six months following the Clos-
ing pursuant to Section 7.3(c) hereof;
(vii) files, records and data, including schemat-
ics, books, manuals, technical information and engineering
data, programming information, computerized data, books of
account, employment records with respect to employees em-
ployed by Buyer, customer lists and files, research
records, market surveys and marketing know-how, mailing
lists, purchase and sale records and correspondence, ad-
vertising records, and files and literature relating to
the Centers;
(viii) all stock, securities and other invest-
ments, and any options, warrants or rights to acquire such
interests and all rights as partner or joint venturer in
each partnership or joint venture in which the Company is
a partner or venturer or otherwise participates or any
rights so to participate or any similar rights;
(ix) to the extent assignable, all rights and
claims whether mature, contingent or otherwise, whether in
tort, contract, or otherwise, including, without limita-
tion, causes of action, unliquidated rights and claims un-
der or pursuant to all warranties, representations and
guarantees made by manufacturers, suppliers, vendors or
others, other than refunds with respect to Taxes to the
extent they relate to periods ending prior to the Closing
Date;
(x) all permits, approvals, orders, authoriza-
tions, consents, licenses (including, without limitation,
- 10 -<PAGE>
the Company Liquor Licenses and the Company Gaming Li-
censes), certificates, franchises, exemptions of, or fil-
ings or registrations with or issued by, any Governmental
Authority in any jurisdiction, which have been issued or
granted to or are owned or used by the Company and all
pending applications therefor, in each case, to the extent
transfer is permitted by law; and
(xi) all rights and assets of MJR relating to
any of the Centers, including liquor licenses.
Purchased Assets shall not include cash, except to
the extent that the Company determines to have cash remain at
the Centers as petty cash to be used for operating purposes.
The Purchased Assets shall include all assets to be transferred
to Buyer pursuant to Section 7.12 hereof, as if such Purchased
Assets were rights or assets of the Company as of the date
hereof.
"Purported Beneficiary" shall have the meaning set
forth in Section 7.16.
"RCRA Hazardous Waste" shall have the meaning set
forth in Section 4.16(a) hereof.
"Real Property" shall mean the Owned Property and the
Leased Real Estate.
"Receivable Affiliate" shall have the meaning set
forth in the definition of "Net Working Capital."
"Retained Assets" shall mean all assets of the Com-
pany and the Company Affiliates which are not related to, owned
or held in connection with the business of the Centers or the
Purchased Assets, including those assets listed on Schedule
1.1(b).
"Retained Liabilities" shall mean any and all Lia-
bilities of the Company , the Company Affiliates and the Cen-
ters, which are not expressly assumed by Buyer pursuant to Sec-
tion 2.4(a), whether or not incurred or accrued, including,
without limitation, any Liability, whether asserted before, on
or after the Closing, (i) owed to the Company or any Affiliate
of the Company or of any Stockholder, or (ii) arising out of or
relating to any period prior to the Closing (a) including,
without limitation, with respect to any Actions (including
workmen's compensation or similar claims), activities, events,
circumstances or occurrences existing on or as of, occurring
prior to, or relating to any period prior to, the Closing (in-
cluding with regard to Taxes with respect to any such period),
- 11 -<PAGE>
without regard to when it is asserted, commenced or identified,
or otherwise arising out of or relating to the use, operation,
condition or ownership of the Centers or the Purchased Assets
at any time prior to the Closing, or (b) the Terminated Con-
tracts, the Retained Assets or any other activities, assets,
agreements or operations of the Company and its Affiliates.
The Retained Liabilities shall include, without limitation, all
Liabilities, whether asserted before, on or after the Closing,
(i) for any breach of a representation, warranty, covenant or
agreement, or for any claim for indemnification, contained in
any lease, contract, license, commitment, agreement or arrange-
ment that Buyer has agreed to assume from and after the Closing
pursuant hereto, to the extent that such breach or claim arises
out of or by virtue of the Company's performance or non-per-
formance thereunder prior to the Closing, it being understood
that, as between the parties hereto, this subsection shall ap-
ply notwithstanding any provision which may be contained in, or
any form of consent to the assignment of, any such lease, con-
tract, license, commitment, agreement or arrangement which by
its terms, imposes such Liabilities upon Buyer and which as-
signment is accepted by Buyer notwithstanding the presence of
such a provision, and that the Company's failure to discharge
any such Liability shall entitle Buyer to indemnification in
accordance with the provisions of Article XI; (ii) of the Com-
pany or any of its Affiliates for injury to or death of persons
or damage of any nature to, or destruction of property of, or
arising out of infringement of the rights of, any Persons, in
each case relating to any time prior to the Closing Date; and
(iii) arising out of violations of or noncompliance with any
statutes, laws, regulations, ordinances, rules, judgments, or-
ders or decrees.
"Revenue Statement Neutral Auditors" shall have the
meaning set forth in Section 2.6(f) hereof.
"Revenue Statement Resolution Period" shall have the
meaning set forth in Section 2.6(e) hereof.
"Seaway Lease" shall have the meaning set forth in
Section 7.8 hereof.
"Seller Indemnified Parties" shall have the meaning
set forth in Section 11.3 hereof.
"Seven Bowling Executives" shall have the meaning set
forth in Section 6.1(c) hereof.
"Stockholders" shall mean Charles P. Ryan, Jr., Kevin
Ryan, John Ryan and Eileen Pettus.
- 12 -<PAGE>
"Strathmore Lease" shall have the meaning set forth
in Section 7.16 hereof.
"Stub Gross Revenues" shall have the meaning set
forth in Section 2.6(b) hereof.
"Surveys" shall have the meaning set forth in Section
8.10 hereof.
"Target Net Working Capital" shall mean negative
$1,000,000 (x) less the amount, if any, by which the Initial
Purchase Price is decreased pursuant to Section 2.5(a)(i) or
(y) plus the amount, if any, by which the Initial Purchase
Price is increased pursuant to Section 2.5(a)(ii). For ex-
ample: (1) if the Estimated Closing Date Net Working Capital is
negative $3,000,000 and, therefore, pursuant to Section
2.5(a)(i), the Initial Purchase Price is reduced by an amount
equal to $1,500,000 (i.e., 75% of $2,000,000), the Target Net
Working Capital shall be equal to negative $2,500,000; or (2)
if the Estimated Closing Date Net Working Capital is $1,000,000
and, pursuant to Section 2.5(a)(ii), the Initial Purchase Price
is increased by an amount equal to $1,500,000 (i.e., 75% of
$2,000,000), the Target Net Working Capital shall be equal to
$500,000.
"Taxes" means all taxes, charges, fees, levies, du-
ties or other assessments, including without limitation, all
net income, gross income, gross receipts, franchise, value
added, sales, use, property, ad valorem, transfer, withholding,
profits, license, employee, payroll, social security, unemploy-
ment, excise, estimated, severance, gains and any other taxes,
duties, withholdings, fees, assessments or charges of any kind
whatsoever, including any interest, penalties or additional
amounts attributable thereto, imposed by any federal, state,
local or foreign taxing authority.
"Terminated Contracts" shall have the meaning set
forth in Section 4.13(a) hereof.
"Title Company" shall have the meaning set forth in
Section 8.9 hereof.
"Title Insurance Policies" shall have the meaning set
forth in Section 8.9 hereof.
"WARN" shall mean the Worker Adjustment and Retrain-
ing Notification Act of 1988, as amended.
- 13 -<PAGE>
ARTICLE II
Purchase and Sale of Purchased Assets,
Purchase Price and Other Related Matters
Section 2.1 Purchase and Sale. (a) Upon the terms
and subject to the conditions of this Agreement, the Company
shall sell, assign, convey, transfer and deliver the Purchased
Assets to Buyer at the Closing, and Buyer shall purchase the
Purchased Assets from the Company at the Closing.
(b) Notwithstanding anything in this Agreement to
the contrary, the Company shall retain title to, and possession
of, and the Company shall not sell, assign, convey, transfer or
deliver to Buyer any right, title or interest of the Company in
or to the Retained Assets.
Section 2.2 Purchase Price. (a) Subject to Section
2.2(b) hereof, the initial purchase price payable by Buyer at
the Closing for the Purchased Assets shall be $99,000,000 (as
adjusted pursuant to Sections 2.5(a) and 2.6(b) and, if ap-
plicable, Section 7.16, the "Initial Purchase Price"), payable
as set forth in Section 2.3 of this Agreement.
(b) As additional consideration, Buyer shall assume
the Assumed Liabilities.
Section 2.3 Payment of Purchase Price. At the Clos-
ing, Buyer shall pay the Initial Purchase Price as follows:
(i) Buyer shall pay to Fleet Bank (or an affiliate thereof or
another banking institution mutually acceptable to Buyer and
the Company), as escrow agent (the "Escrow Agent"), $5,000,000
by wire transfer of immediately available funds to be held by
the Escrow Agent pursuant to the terms and provisions of the
Escrow Agreement substantially in the form attached hereto as
Exhibit A (the "Escrow Agreement") and (ii) the balance of the
Initial Purchase Price by wire transfer of immediately avail-
able funds to an account designated by the Company in writing.
Section 2.4 Assumption of Liabilities. (a) As part
of the consideration for the purchase of the Purchased Assets,
Buyer shall, as of the Closing, assume, agree to perform and
indemnify the Company against the Liabilities of the Company to
the extent expressly set forth on Schedule 2.4(a) (the "Assumed
Liabilities"); provided, that with respect to all leases, con-
tracts, commitments, licenses, agreements and arrangements as-
sumed by Buyer pursuant to this Section 2.4(a), all obligations
of the Company arising thereunder and to be performed prior to
the Closing Date shall not be assumed by Buyer.
- 14 -<PAGE>
(b) Buyer shall not assume or become obligated to
pay any Retained Liability. The foregoing notwithstanding, if
the Company or any of its Affiliates does not pay a Retained
Liability to any vendor, supplier or other service provider re-
lating to the business or operation of the Centers, and does
not, within five business days of Buyer's written request, pay
the amount thereof or confirm to Buyer in writing that the Com-
pany, in good faith, is contesting such Liability, Buyer shall
be permitted to pay the amount thereof and the Company shall
reimburse Buyer for such payment. If the Company confirms that
it is contesting such Liability in good faith, Buyer may from
time to time thereafter reasonably request reconfirmation in
accordance with this Section 2.4(b).
Section 2.5 Working Capital Purchase Price Adjust-
ment. (a) On the Closing Date, Buyer shall estimate in good
faith the Net Working Capital as of the Closing Date, based
upon information provided to Buyer by the Company (the "Esti-
mated Closing Date Net Working Capital"). On the Closing Date,
the Initial Purchase Price (as decreased, if applicable, pursu-
ant to Section 2.6 and Section 7.16) shall be (i) decreased
dollar for dollar by an amount equal to 75% of the amount, if
any, by which the Estimated Closing Date Net Working Capital is
less than negative $1,000,0000 or (ii) increased dollar for
dollar by an amount equal to 75% of the amount, if any, by
which the Estimated Closing Date Net Working Capital is greater
than negative $1,000,000.
(b) As soon as practicable, but in no event later
than 60 days following the Closing Date, the Company shall pre-
pare a special purpose balance sheet of the business of the
Centers as of the Closing Date (including the notes thereto,
the "Closing Date Balance Sheet"). The Closing Date Balance
Sheet shall reflect the Purchased Assets (but not the rights or
amounts assigned pursuant to Section 7.11) which are current
assets and the Assumed Liabilities, and shall not reflect the
Retained Assets or the Retained Liabilities. Except to the ex-
tent expressly set forth on Schedule 2.4(a), all Assumed Li-
abilities shall be accrued (whether or not otherwise required
to be accrued as of such date) and reflected on the Closing
Date Balance Sheet as current liabilities, whether or not re-
quired by GAAP and whether or not such application is consis-
tently applied. The Closing Date Balance Sheet shall be pre-
pared in accordance with GAAP applied on a consistent basis
with the Financial Statements, except as provided in this Sec-
tion 2.5(b) or in the definition of "Net Working Capital." The
Closing Date Balance Sheet shall be accompanied by a schedule
of all the Assumed Liabilities reflected thereon. The Closing
Date Balance Sheet shall be accompanied by a report by Todres &
Sheiffer (the "Accountant"), the Company's independent public
- 15 -<PAGE>
accountants, to the effect that the Closing Date Balance Sheet
has been prepared in accordance with GAAP consistently applied,
except as provided in this Section 2.5(b) or in the definition
of "Net Working Capital."
(c) During the preparation of the Closing Date Bal-
ance Sheet and the period of any dispute within the contempla-
tion of this Section 2.5, Buyer shall (i) provide the Company
and the Company's authorized representatives, upon reasonable
notice, full access during normal business hours to the books,
records, facilities and employees of the Centers to the extent
required for the preparation of the Closing Date Balance Sheet;
provided, however, that such access shall not unreasonably dis-
rupt the personnel and operations of the Centers, and (ii) co-
operate with the Company and the Company's authorized represen-
tatives, including the provision on a timely basis of all in-
formation reasonably requested by the Company or the Company's
authorized representatives and necessary or useful in preparing
the Closing Date Balance Sheet.
(d) The Company shall deliver a copy of the Closing
Date Balance Sheet to Buyer promptly after it has been pre-
pared. After receipt of the Closing Date Balance Sheet, Buyer
shall have 60 days to review the Closing Date Balance Sheet,
together with the workpapers used in the preparation thereof.
Buyer and its authorized representatives shall have full access
during normal business hours to all relevant books and records
and employees of the Company and its Affiliates to the extent
required to complete their review of the Closing Date Balance
Sheet; provided, however, that such access shall not unreason-
ably disrupt the personnel and operations of the Company and
its Affiliates, and the Company and its Affiliates will cause
the Accountant to provide Buyer and its accountants full access
to the workpapers of the Accountant in connection with the
preparation and audit of the Closing Date Balance Sheet. Un-
less Buyer delivers written notice to the Company on or prior
to the 60th day after Buyer's receipt of the Closing Date Bal-
ance Sheet specifying in reasonable detail all disputed items
and the basis therefor, Buyer shall be deemed to have accepted
and agreed to the Closing Date Balance Sheet. If Buyer so no-
tifies the Company of its objection to the Closing Date Balance
Sheet, Buyer and the Company shall, within 30 days following
such notice (the "Closing Date Balance Sheet Resolution Pe-
riod"), attempt to resolve their differences and any resolution
by them as to any disputed amounts shall be final, binding and
conclusive.
(e) If at the conclusion of the Closing Date Balance
Sheet Resolution Period amounts shall remain in dispute, then
all amounts remaining in dispute shall be submitted to a firm
- 16 -<PAGE>
of nationally recognized independent public accountants (the
"Closing Date Balance Sheet Neutral Auditors") selected by the
Company and Buyer within 10 days after the expiration of the
Closing Date Balance Sheet Resolution Period. If the Company
and Buyer are unable to agree on the Closing Date Balance Sheet
Neutral Auditors, then Buyer and the Company shall each have
the right to request the American Arbitration Association to
appoint the Closing Date Balance Sheet Neutral Auditors who
shall not have had a material business relationship with the
Company or Buyer within the past two years, other than pursuant
to Section 2.6 or 2.8 hereof. The parties hereto agree to ex-
ecute, if requested by the Closing Date Balance Sheet Neutral
Auditors, a reasonable engagement letter. All fees and ex-
penses relating to the work, if any, to be performed by the
Closing Date Balance Sheet Neutral Auditors shall be borne
equally by the Company and Buyer. The Closing Date Balance
Sheet Neutral Auditors shall act as an arbitrator to determine
only those issues still in dispute. The Closing Date Balance
Sheet Neutral Auditors' determination shall be made within 30
days of their selection, shall be set forth in a written state-
ment delivered to the Company and Buyer and shall be final,
binding and conclusive. The term "Adjusted Closing Date Bal-
ance Sheet," as used herein, shall mean the definitive Closing
Date Balance Sheet agreed or deemed to have been agreed to by
Buyer and the Company in accordance with Section 2.5(d) or the
definitive Closing Date Balance Sheet resulting from the deter-
minations made by the Closing Date Balance Sheet Neutral Audi-
tors in accordance with this Section 2.5(e) (in addition to
those items theretofore agreed to by the Company and Buyer).
(f) The Initial Purchase Price (as adjusted pursuant
to Sections 2.5(a) and 2.6 and, if applicable, Section 7.16)
shall be (i) decreased dollar for dollar by the amount, if any,
by which Net Working Capital shown on the Adjusted Closing Date
Balance Sheet is less than the Target Net Working Capital or
(ii) increased by the amount, if any, by which Net Working
Capital shown on the Adjusted Closing Date Balance Sheet is
greater than the Target Net Working Capital. Any adjustments
to the Initial Purchase Price which are made pursuant to this
Section 2.5(f) shall bear interest at 9% from and including the
Closing Date to and including the date immediately preceding
the date of such payment. Any adjustments to the Initial Pur-
chase Price made pursuant to this Section 2.5(f) shall be paid
by wire transfer in immediately available funds to an account
specified by the party to whom such payment is owed within five
business days after the Adjusted Closing Date Balance Sheet is
agreed or deemed to have been agreed to by Buyer and the Com-
pany or the written statement of the Closing Date Balance Sheet
Neutral Auditors setting forth their determination regarding
- 17 -<PAGE>
any remaining disputed items is delivered to the Company and
Buyer.
Section 2.6 Delayed Closing Purchase Price Adjust-
ment. (a) The following adjustment of the Initial Purchase
Price shall apply only if the Closing occurs after September
30, 1996.
(b) At Closing, the Company shall deliver to Buyer a
statement of gross revenues (the "Preliminary Closing Date Rev-
enue Statement") reflecting its best reasonable estimate of the
Stub Gross Revenues. On the Closing Date, the Initial Purchase
Price (as adjusted pursuant to Section 2.5 and, if applicable,
Section 7.16) shall be decreased by the amount, if greater than
zero, by which (x) 37% of the gross revenues of the Centers
during the period from and including October 1, 1996 and
through and including the day prior to the Closing Date (such
gross revenues prior to application of such percentage being,
the "Stub Gross Revenues"), as reflected on the Preliminary
Closing Date Revenue Statement, exceeds (y) an amount equal to
$37,000 multiplied by the number of days in the period from and
including October 1, 1996 and through and including the day
prior to the Closing Date.
(c) As soon as practicable, but in no event later
than 60 days following the Closing Date, the Company shall pre-
pare a special purpose gross revenue statement (the "Closing
Date Revenue Statement") reflecting the Stub Gross Revenues.
The Closing Date Revenue Statement shall be prepared in ac-
cordance with GAAP. The Closing Date Revenue Statement shall
be accompanied by a report by the Accountant to the effect that
the Closing Date Revenue Statement has been prepared in ac-
cordance with GAAP.
(d) During the preparation of the Closing Date Rev-
enue Statement and the period of any dispute within the con-
templation of this Section 2.6, Buyer shall (i) provide the
Company and the Company's authorized representatives, upon rea-
sonable notice, full access during normal business hours to the
books, records, facilities and employees of the Centers to the
extent required for the preparation of the Closing Date Revenue
Statement; provided, however, that such access shall not unrea-
sonably disrupt the personnel and operations of the Centers,
and (ii) cooperate with the Company and the Company's autho-
rized representatives, including the provision on a timely ba-
sis of all information reasonably requested by the Company or
the Company's authorized representatives and necessary or use-
ful in preparing the Closing Date Revenue Statement.
- 18 -<PAGE>
(e) The Company shall deliver a copy of the Closing
Date Revenue Statement to Buyer promptly after it has been pre-
pared. After receipt of the Closing Date Revenue Statement,
Buyer shall have 60 days to review the Closing Date Revenue
Statement, together with the workpapers used in the preparation
thereof. Buyer and its authorized representatives shall have
full access during normal business hours to all relevant books
and records and employees of the Company and its Affiliates to
the extent required to complete their review of the Closing
Date Revenue Statement; provided, however, that such access
shall not unreasonably disrupt the personnel and operations of
the Company and its Affiliates, and the Company and its Affili-
ates will cause the Accountant to provide Buyer and its ac-
countants full access to the workpapers of the Accountant in
connection with the preparation and audit of the Closing Date
Revenue Statement. Unless Buyer delivers written notice to the
Company on or prior to the 60th day after Buyer's receipt of
the Closing Date Revenue Statement specifying in reasonable de-
tail all disputed items and the basis therefor, Buyer shall be
deemed to have accepted and agreed to the Closing Date Revenue
Statement. If Buyer so notifies the Company of its objection
to the Closing Date Revenue Statement, Buyer and the Company
shall, within 30 days following such notice (the "Revenue
Statement Resolution Period"), attempt to resolve their differ-
ences and any resolution by them as to any disputed amounts
shall be final, binding and conclusive.
(f) If at the conclusion of the Revenue Statement
Resolution Period amounts shall remain in dispute, then all
amounts remaining in dispute shall be submitted to a firm of
nationally recognized independent public accountants (the "Rev-
enue Statement Neutral Auditors") selected by the Company and
Buyer within 10 days after the expiration of the Revenue State-
ment Resolution Period. If the Company and Buyer are unable to
agree on the Revenue Statement Neutral Auditors, then Buyer and
the Company shall each have the right to request the American
Arbitration Association to appoint the Revenue Statement Neu-
tral Auditors who shall not have had a material business rela-
tionship with the Company or Buyer within the past two years,
other than pursuant to Section 2.5 or 2.8 hereof. The parties
hereto agree to execute, if requested by the Revenue Statement
Neutral Auditors, a reasonable engagement letter. All fees and
expenses relating to the work, if any, to be performed by the
Revenue Statement Neutral Auditors shall be borne equally by
the Company and Buyer. The Revenue Statement Neutral Auditors
shall act as an arbitrator to determine only those issues still
in dispute. The Revenue Statement Neutral Auditors' determina-
tion shall be made within 30 days of their selection, shall be
set forth in a written statement delivered to the Company and
Buyer and shall be final, binding and conclusive. The term
- 19 -<PAGE>
"Adjusted Closing Date Revenue Statement", as used herein,
shall mean the definitive Closing Date Revenue Statement agreed
or deemed to have been agreed to by Buyer and the Company in
accordance with Section 2.6(e) or the definitive Closing Date
Revenue Statement resulting from the determinations made by the
Revenue Statement Neutral Auditors in accordance with this Sec-
tion 2.6(f) (in addition to those items theretofore agreed to
by the Company and Buyer).
(g) If the amount of Stub Gross Revenues reflected
in the Adjusted Closing Date Revenue Statement exceeds the
amount of such Stub Gross Revenues reflected on the Preliminary
Closing Date Revenue Statement, the Company shall pay to Buyer
in cash 37% of the amount of such excess, with interest at 9%
from and including the Closing Date through and including the
day prior to such date of payment.
(h) If the amount of Stub Gross Revenues reflected
on the Adjusted Closing Date Revenue Statement is less than the
amount of such Stub Gross Revenues reflected on the Preliminary
Closing Date Revenue Statement, Buyer shall pay to the Company
in cash 37% of the amount of such difference, with interest at
9% from and including the Closing Date and through and includ-
ing the day prior to such date of payment, but any payment pur-
suant to this Section 2.6(h) shall not exceed the amount by
which the Initial Purchase Price was actually decreased pursu-
ant to Section 2.6(b).
(i) The adjustments contemplated by Sections 2.5 and
2.6 shall be independent and neither one shall limit the other.
(j) Any payments required pursuant to this Section
2.6 shall be paid by wire transfer in immediately available
funds to an account specified by the party to whom such payment
is owed within five business days after the Adjusted Closing
Date Revenue Statement is agreed or deemed to have been agreed
to by Buyer and the Company or the written statement of the
Revenue Statement Neutral Auditors setting forth their determi-
nation regarding any remaining disputed items is delivered to
the Company and Buyer.
Section 2.7 Payment of Taxes. (a) The Company and
Buyer shall each pay one-half of any real property transfer
Taxes applicable to, imposed upon or arising out of the trans-
actions contemplated hereby, whether now in effect or hereafter
adopted and regardless of whom any such Tax is imposed upon.
(b) Except as provided in clause (a) above, the Com-
pany shall pay all income and other gains-related Taxes imposed
- 20 -<PAGE>
upon the Company which arise out of the transactions contem-
plated hereby, whether now in effect or hereafter adopted.
(c) Buyer shall pay any other personal property or
sales Taxes imposed upon the Company or Buyer arising out of
the sale of the Purchased Assets pursuant hereto, whether now
in effect or hereafter adopted.
Section 2.8 Purchase Price Allocation.
The purchase price for the Purchased Assets shall be
allocated with respect to each category of property described
on Schedule 2.8 hereto within the ranges set forth thereon.
Prior to the Closing Date, the parties hereto shall use their
reasonable efforts to agree on the specific final allocations
to each such category within the ranges set forth on Schedule
2.8, and any such agreement shall be final, binding and conclu-
sive on the parties hereto. If, prior to the Closing Date the
parties hereto cannot come to such agreement, the parties shall
engage a firm of nationally recognized independent public ac-
countants (the "Appraisal Firm") selected by the Company and
Buyer within 10 days after the Closing Date. If the Company
and Buyer are unable to agree on the Appraisal Firm, then Buyer
and the Company shall each have the right to request the Ameri-
can Arbitration Association to appoint the Appraisal Firm who
shall not have had a material business relationship with the
Company or Buyer within the past two years, other than pursuant
to Section 2.5 or 2.6 hereof. The parties hereto agree to ex-
ecute, if requested by the Appraisal Firm, a reasonable engage-
ment letter. All fees and expenses relating to the work, if
any, to be performed by the Appraisal Firm shall be borne
equally by the Company and Buyer. The Appraisal Firm shall act
as an arbitrator to determine the specific final allocations to
each category contemplated by Schedule 2.8, but only within the
ranges contemplated thereby, and the allocation to the Real
Property category will be determined in the aggregate without
regard to the specific allocations to the Real Property related
to the Affiliate Centers set forth in this Section 2.8. The
Appraisal Firm's determination shall be made within 30 days of
their selection, shall be set forth in a written statement de-
livered to the Company and Buyer and shall be final, binding
and conclusive. After the final allocation has been made pur-
suant to this Section 2.8, Buyer shall be entitled to subal-
locate the allocation with respect to each category to various
subcategories of items within such category, so long as such
suballocation by Buyer is consistent with the final allocation.
Promptly following completion of the final allocation by the
parties hereto, or the Appraisal Firm, as contemplated by this
Section 2.8, Buyer shall prepare, execute and deliver to the
Company an IRS Form 8594 consistent with such final allocation
- 21 -<PAGE>
and suballocation. The parties agree to use such final alloca-
tion and suballocation in all Tax and information reports and
returns, including, but not limited to, Form 8594, filed by any
of them in respect of the transactions contemplated hereby with
any federal, state or local taxing authority. The foregoing
notwithstanding, the parties hereto agree that the aggregate
purchase price allocable to (i) the Center at Strathmore Lanes
in Aberdeen, New Jersey, to the extent such Center is included
in the Purchased Assets, shall be $4,600,000 and (ii) the Real
Property relating to the Center at (a) Hilltop Lanes in
Roanoke, Virginia shall be approximately $1,242,000, (b) Uni-
versity Lanes in Charlotte, North Carolina shall be ap-
proximately $1,490,000, and (c) Wantagh Lanes in Wantagh, New
York shall be approximately $1,304,000.
ARTICLE III
Closing and Closing Date Deliveries
Section 3.1 Closing Date. The term "Closing" as
used herein shall refer to the actual conveyance, transfer, as-
signment and delivery of the Purchased Assets to Buyer in ex-
change for the payment pursuant to Section 2.3 of this Agree-
ment, and it shall be deemed effective as of the opening of
business on the Closing Date. Subject to Article X of this
Agreement, and to the satisfaction or waiver of all of the con-
ditions contained in Articles VIII and IX of this Agreement,
the Closing shall take place at the offices of Wachtell, Lip-
ton, Rosen & Katz, 51 West 52nd Street, New York, New York, at
10:00 a.m. local time on September 30, 1996, or if all of the
conditions precedent set forth in Articles VIII and IX of this
Agreement are not satisfied or waived by the appropriate party
hereto by September 30, 1996, as soon as reasonably practicable
after all of such conditions precedent are satisfied or waived,
or at such other place and time or on such other date as is mu-
tually agreed to in writing by the Company and Buyer (the
"Closing Date").
Section 3.2 Closing Date Deliveries. At the Closing
on the Closing Date:
(a) The Company shall deliver to Buyer:
(i) an Assignment and Assumption Agreement
(the "Assignment and Assumption Agreement") in the form
attached hereto as Exhibit B with respect to the Leases,
conveying to Buyer the leasehold estate of the Company
thereunder subject only to the Permitted Liens;
- 22 -<PAGE>
(ii) a Bill of Sale in the form of Exhibit C
hereto, which shall convey and transfer the Purchased
Assets which are personal property to Buyer, free and
clear of all Liens other than Permitted Liens;
(iii) all such other bills of sale, lease as-
signments, intellectual property assignments, contract
assignments and other documents and instruments of sale,
assignment, conveyance and transfer, as Buyer or its
counsel may deem reasonably necessary or desirable in
order to effect the transfer of the Purchased Assets to
Buyer, including an assignment of all warranties and
guaranties, if any, of manufacturers, suppliers and con-
tractors in effect at the date of the Closing which re-
late to the Real Property or the personal property which
is among the Purchased Assets located thereon or used in
connection therewith or with the business of the Cen-
ters, together with originals of such documents to the
extent in the possession of the Company or any of its
Affiliates or Affiliates of the Stockholders (such as-
signment may be general in nature and need not list or
itemize specific warranties or guaranties, but in such
event the Company shall cooperate with Buyer (at Buyer's
expense with respect to out-of-pocket expenses) subse-
quent to the Closing in connection with the identifica-
tion of any such warranties or guaranties which may be-
come applicable or enforceable, such agreement to sur-
vive the Closing);
(iv) a special warranty or bargain and sale
without covenant deed or deeds (as applicable in accor-
dance with conveyancing requirements in effect in the
state in which an Owned Property is located) for the
Owned Property to be conveyed to Buyer;
(v) all third party consents and estoppel
certificates obtained by the Company in accordance with
this Agreement;
(vi) certified copies of minutes or unanimous
written consents of the Board of Directors and stock-
holders of the Company approving the execution, delivery
and performance of this Agreement and the consummation
of the transactions contemplated under this Agreement;
(vii) originals, if available, or copies in the
possession of the Company or any Affiliates of the Com-
pany or of the Stockholders, of all certificates of oc-
cupancy, licenses, permits, certifications and approvals
- 23 -<PAGE>
required by law and issued by Governmental Authorities
having jurisdiction over the Real Property;
(viii) assignments of (a) all of the Company's
right, title and interest in all property damage claims
relating to the Purchased Assets against insurance com-
panies except for claims for damage that the Company has
theretofore repaired; and (b) all of the Company's
right, title and interest in all claims for awards by
reasons of the taking of any portion of the Real Prop-
erty in condemnation or eminent domain; and a good cer-
tified or official bank check in the amount of such in-
surance proceeds (and the amount of any deductibles) and
condemnation awards received by the Company in payment
in whole or in part of any of the aforementioned claims
after August 31, 1995 and not applied to the restoration
of the Purchased Assets;
(ix) as soon following the Closing as practi-
cable but in any event within 10 days following the
Closing Date, all records and files relating to the op-
eration and maintenance of the Real Property (such rec-
ords and files to include executed original counterparts
of the applicable Lease, the Company's original counter-
parts of all operating agreements, easement agreements,
easements, subleases, license agreements, service con-
tracts and other agreements relating to the use, occu-
pancy, operation or maintenance of or otherwise affect-
ing the Real Property, current tax bills, fuel bills,
and current water, sewer, other utility bills, copies of
all protests, pleadings and other relevant records re-
lating to protests or proceedings with respect to Taxes,
repair and maintenance records and the like which affect
or relate to the Real Property);
(x) as soon following the Closing as practi-
cable but in any event within 10 days following the
Closing Date, a complete set of all plans, drawings,
surveys, blueprints and specifications in the possession
of the Company or any Affiliate of the Company or of any
Stockholder relating to the buildings and improvements
constituting part of the Real Property;
(xi) certification that the Company is a
"United States Person" as required under Section 1445 of
the Code and a statement of the Company's taxpayer iden-
tification number for federal income tax purposes; and
(xii) such other documents to be delivered by
the Company hereunder, including without limitation, the
- 24 -<PAGE>
documents to be delivered pursuant to Article VIII here-
of, or as Buyer or its counsel may reasonably request to
carry out the purposes of this Agreement.
(b) Buyer shall deliver to the Company:
(i) the payment to be delivered by Buyer pur-
suant to Section 2.3 of this Agreement;
(ii) certified copies of minutes or unanimous
written consents of the Board of Directors of Buyer ap-
proving the execution, delivery and performance of this
Agreement and the consummation of the transactions con-
templated under this Agreement;
(iii) an executed Assumption Agreement, pursu-
ant to which Buyer shall assume the Assumed Liabilities,
in substantially the form attached hereto as Exhibit D
("Assumption Agreement"); and
(iv) such other documents to be delivered by
Buyer hereunder, including, without limitation, the doc-
uments to be delivered pursuant to Article IX hereof, or
as the Company or its counsel may reasonably request to
carry out the purposes of this Agreement.
(c) Buyer shall deliver to the Escrow Agent the
payment to be delivered to the Escrow Agent by Buyer pursuant
to Section 2.3 of this Agreement.
ARTICLE IV
Representations and Warranties of the Company
The Company hereby represents and warrants to Buyer
as follows:
Section 4.1 Incorporation; Authorization; etc.
(a) The Company is a corporation duly organized, validly ex-
isting and in good standing under the laws of the jurisdic-
tion of its incorporation. The Company has full power and
authority to own its properties and assets and to carry on
its business as it is now being conducted and is in good
standing and is duly qualified to transact business in each
jurisdiction in which the nature of the property owned or
leased by it or the conduct of its business requires it to be
so qualified, except where the failure to be in good standing
or to be duly qualified to transact business, individually or
in the aggregate, could not reasonably be expected to have a
- 25 -<PAGE>
Material Adverse Effect. Each jurisdiction in which the Com-
pany is qualified to do business is set forth in Schedule
4.1(a).
(b) The Company has full corporate power to ex-
ecute and deliver this Agreement and each of the Ancillary
Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery
of this Agreement and each of the Ancillary Agreements to
which it is a party, the performance of its obligations here-
under and thereunder and the consummation of the transactions
contemplated hereby and thereby by the Company have been duly
and validly authorized by all necessary corporate proceed-
ings. The execution, delivery and performance by the Company
of this Agreement and each of the Ancillary Agreements to
which it is a party will not (i) violate or conflict with any
provision of the Certificate of Incorporation or By-Laws of
the Company, (ii) except for those consents listed in Sched-
ule 4.1(b) as required to be received at or prior to the
Closing, conflict with, violate or constitute a default under
any provision of, or be an event that is (or with the giving
of notice or passage of time or both will result in) a viola-
tion of or default under, or result in the acceleration of or
entitle any party to accelerate (whether after the giving of
notice or lapse of time or both) any obligation or right un-
der, or result in the imposition or creation of any Lien in
or upon any of the Purchased Assets pursuant to, or require a
consent or waiver or create a penalty or increase the Com-
pany's payment or performance obligations under, any mort-
gage, Lien, instrument, order, arbitration award, judgment or
decree, or any contract, license, permit, commitment, agree-
ment or arrangement, by which the Company or any of its prop-
erty, including the Purchased Assets, is bound, or (iii) af-
ter giving effect to the required consents listed on Schedule
4.9(b), violate or conflict with, or result in the imposition
of any Lien (other than liens arising from Buyer's financing
arrangements) upon any of the Purchased Assets pursuant to,
any provision of statute, law, regulation, ordinance, rule,
judgment, order, or decree of any federal, state, local or
foreign court or tribunal (including any court or tribunal
dealing with labor matters), governmental, regulatory or ad-
ministrative agency, department, bureau, authority or com-
mission or arbitral panel ("Governmental Authority") or any
other material restriction of any kind or character to which
the Company or any of its property, including any Purchased
Asset, is or may be subject or by which any of them is or may
be bound, that, in the case of clauses (ii) and (iii) of this
- 26 -<PAGE>
Section 4.1(b), individually or in the aggregate, could rea-
sonably be expected to have a Material Adverse Effect or pre-
vent the consummation of the transactions contemplated hereby
or by any of the Ancillary Agreements to which the Company is
a party or otherwise impair the performance of the other ob-
ligations of the Company under this Agreement or any of the
Ancillary Agreements to which it is a party. This Agreement
has been, and on the Closing Date each of the Ancillary
Agreements to which it is a party will be, duly executed and
delivered by the Company and, assuming the due execution
hereof and thereof by Buyer, this Agreement constitutes, and
on the Closing Date each of the Ancillary Agreements to which
it is a party will constitute, the legal, valid and binding
obligations of the Company, each enforceable against the Com-
pany in accordance with its terms.
(c) The Company has delivered or caused to be de-
livered to Buyer complete and correct copies of the Certifi-
cate of Incorporation and By-Laws of the Company.
Section 4.2 Capitalization; Structure. (a) All
of the outstanding shares of the Company are owned benefi-
cially and of record by the Stockholders. The authorized
capital stock of the Company and the amount of such stock
which is outstanding is as set forth in Schedule 4.2(a). All
of the outstanding shares of capital stock of the Company, as
listed on Schedule 4.2(a), are validly issued, fully paid and
nonassessable and owned by the Persons and in the respective
amounts set forth in Schedule 4.2(a).
(b) The Company has no subsidiaries or investments
or interests in the stock or other equity interests of any
other Person (except marketable securities of Persons not
controlled by the Company, shares of money market or other
funds, ownership of 40 percent of the outstanding capital
stock of Regal Lanes, Inc. and other investments which do not
fall within the definition of "Purchased Assets" and which
are not related to the Business).
Section 4.3 Financial Statements. (a) Attached
hereto as Schedule 4.3 are true and complete copies of the
financial statements of the Company for the fiscal years end-
ing August 31, 1993, 1994 and 1995 and for the eleven-month
period ended July 31, 1996, including audited balance sheets
as of August 31, 1995, August 31, 1994 and August 31, 1993,
and an unaudited balance sheet as of July 31, 1996, and the
audited statements of income and statements of cash flow for
the fiscal-year periods ended August 31, 1995, August 31,
1994 and August 31, 1993, and the unaudited statement of in-
come and statement of cash flow for the eleven-month period
- 27 -<PAGE>
ended July 31, 1996 (such financial statements, collectively,
the "Financial Statements"). "Balance Sheet" shall refer to
the audited balance sheet as of August 31, 1995. "Most Re-
cent Financial Statements" shall mean the Balance Sheet and
the audited statements of income and statements of cash flow
for the fiscal year period ended August 31, 1995.
(b) The Financial Statements present fairly the
financial position and results of operations and cash flows
of the Company for the respective periods or as of the re-
spective dates set forth therein, in each case in accordance
with United States generally accepted accounting principles
("GAAP") consistently applied (except as otherwise indicated
therein or in Schedule 4.3, and except with respect to those
dated as of or for the eleven-month period ending July 31,
1996, which will be subject to year-end adjustments consis-
tent with those adjustments made to the Company's financial
statements as of or for the fiscal year ended August 31,
1996). The Financial Statements have been prepared from and
in accordance with the books and records of the Company.
(c) The income statements and revenue and cash
flow information provided by the Company to Buyer and at-
tached hereto as Schedule 4.3(c) fairly present, in all mate-
rial respects, the results of operations of the Centers, as
of the dates and periods and as otherwise provided therein,
and are consistent in all material respects with the finan-
cial information relating to the Centers and the Purchased
Assets included in the Financial Statements with respect to
the same periods and dates as provided therein.
Section 4.4 Real Properties. (a) Schedule 4.4(a)
sets forth a list of all real property owned in fee by the
Company and which are included in the Purchased Assets (indi-
vidually, an "Owned Property" and, collectively, the "Owned
Properties"). Except as set forth on Schedule 4.4(a) or
Schedule 4.4(b), (i) no Affiliate of the Company or of any
Stockholder owns or has any interest in any of the Owned
Property or Leased Real Estate or in any other real property
used or useful in conducting the business of the Centers or
contiguous to any such property and (ii) the Company does not
own or have any interest in any real property contiguous to
any of the Owned Property or Leased Real Estate. Except as
set forth on Schedule 4.4(a), the Company has good and mar-
ketable fee title to each Owned Property, including the
buildings, structures and other improvements located thereon,
in each case free and clear of all mortgages, liens, claims,
charges, security interests, easements, restrictive cove-
nants, rights-of-way, leases, purchase agreements, options
and other encumbrances and agreements ("Liens"), except (i)
- 28 -<PAGE>
(A) platting, subdivision, zoning, building and other similar
legal requirements which are not violated by the buildings,
structures and other improvements located thereon, (B) ease-
ments, restrictive covenants, rights-of-way, non-material
leases, encroachments and other encumbrances and agreements
(other than contracts or options pursuant to which any Owned
Property is or may be required to be sold), whether or not of
record, (C) reservations of coal, oil, gas, minerals and min-
eral interests, whether or not of record, and (D) minor im-
perfections of title to such Owned Property, if any, which
are not substantial in nature, do not affect in any material
respect the current use of the Owned Property to which they
relate and do not contain any conditions or rights of reentry
or forfeiture under which title to the Company can be cut
off, subordinated or otherwise disturbed with respect to such
Owned Property, none of which items set forth in this clause
(i) individually or in the aggregate, could reasonably be ex-
pected to have a Material Adverse Effect or a material ad-
verse effect on the value of such Owned Property or on the
right or ability of Buyer to use such Owned Property for the
purposes to which it is presently devoted; (ii) mechanics',
materialmen's, carriers', workmen's, warehousemen's, repair-
men's, landlords' or other like liens securing obligations
that are not delinquent or, if delinquent, that are being
contested in good faith and in respect of which the Company
has created adequate reserves and which have been bonded; and
(iii) liens for Taxes and other governmental charges, assess-
ments or fees which are not yet due and payable (the items
described in clauses (i) through (iii) are collectively re-
ferred to herein as "Permitted Liens"). The foregoing not-
withstanding, the term "Permitted Liens" shall not include
(1) notices of pendency or (2) general exceptions for rights
of Persons in possession, existing tenancies and liens for
work performed at or materials supplied to an Owned Property,
and such other general exceptions to title which would be
omitted customarily in the sale of commercial real property
upon presentation by the Company of an affidavit of title in
the form customarily employed in the jurisdiction in which
such Owned Property is located. Except as disclosed or re-
ferred to on Schedule 4.4(a), there are no condemnations or
eminent domain (which term, as used herein, shall include
other compulsory acquisitions or takings by Governmental Au-
thorities) proceedings pending or, to the knowledge of the
Company, threatened against any Owned Property or any mate-
rial portion thereof. Except as disclosed in Schedule
4.4(a), the Company has not received any notice from any
city, village or other Governmental Authority of any zoning,
ordinance, land use, building, fire or health code or other
legal violation in respect of any Owned Property, other than
violations which have been corrected or which, individually
- 29 -<PAGE>
or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect or a material adverse effect on the
value of such Owned Property or on the right or ability of
Buyer to use such Owned Property for the purposes to which it
is presently devoted. The Company does not have any knowl-
edge of any structural defects relating to the Owned Prop-
erty, except for such structural defects which, individually
or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect or a material adverse effect on the
value of the affected Owned Property or on the right or abil-
ity of Buyer to use such Owned Property for the purposes to
which it is presently devoted; provided that the Company does
not make any representation with respect to any occurrences
(i) resulting in connection with any such structural defect
to the extent such occurrence is caused by Buyer's failure to
maintain such Owned Property in a manner that a reasonable
operator of a similar business would maintain such property
or (ii) caused by unusual weather conditions that affect
buildings of a similar size, built for a similar use and of a
similar age to substantially the same extent (provided that
such occurrences are not the result of the Company's failure
to maintain such property prior to the Closing in a manner
that a reasonable operator of a similar business would main-
tain such property).
(b) Schedule 4.4(b) lists all real property (in-
cluding all land and buildings) which are among the Purchased
Assets and which are leased by the Company as lessee (the
"Leased Real Estate"). The Company has delivered or caused
to be delivered to Buyer complete and accurate copies of the
written leases and subleases which are described in Schedule
4.4(b). Except as disclosed in Schedule 4.4(b), the Company
has not received written notice of condemnation or eminent
domain proceedings pending or threatened against any Leased
Real Estate property. Except as disclosed in Schedule
4.4(b), the Company has not received any notice from any
city, village or other Governmental Authority of any zoning,
ordinance, building, fire or health code or other legal vio-
lation in respect of any Leased Real Estate, other than vio-
lations which have been corrected or which, individually or
in the aggregate, could not reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the
value of such Leased Real Estate property or on the right or
ability of Buyer to use such Leased Real Estate property for
the purposes to which it is presently devoted. The Company
does not have any knowledge of any structural defects relat-
ing to any Leased Real Estate, except for such structural de-
fects which, individually or in the aggregate, could not rea-
sonably be expected to have a Material Adverse Effect or a
material adverse effect on the value of the affected Leased
- 30 -<PAGE>
Real Estate property or on the right or ability of Buyer to
use such Leased Real Estate property for the purposes to
which it is presently devoted; provided that the Company does
not make any representation with respect to any occurrences
(i) resulting in connection with any such structural defect
to the extent such occurrence is caused by Buyer's failure to
maintain such Leased Real Estate property in a manner that a
reasonable operator of a similar business would maintain such
property or (ii) caused by unusual weather conditions that
affect buildings of a similar size, built for a similar use
and of a similar age to substantially the same extent (pro-
vided that such occurrences are not the result of the
Company's failure to maintain such property prior to the
Closing in a manner that a reasonable operator of a similar
business would maintain such property). Other than for ex-
ceptions to the following which are set forth in Schedule
4.4(b) or which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the value of any Leased Real Es-
tate property or on the right or ability of Buyer to use such
Leased Real Estate property for the purposes to which it is
presently devoted:
(i) the leases relating to the Leased Real
Estate (the "Leases") are in full force and effect and
are valid, binding and enforceable in accordance with
their respective terms;
(ii) no amount payable under any Lease is past
due;
(iii) the Company is in compliance in all mate-
rial respects with all commitments and obligations on
its part to be performed or observed under such Lease
and is not aware of the failure by any other party to
such Leases to comply in all material respects with all
of its commitments and obligations;
(iv) the Company has not received any written
notice (A) of a default (which has not been cured), off-
set or counterclaim under any Lease, or, to the knowl-
edge of the Company, any other communication calling
upon it to comply with any provision of any Lease or as-
serting noncompliance, or asserting the Company has wai-
ved or altered its rights thereunder, and no event or
condition has happened or presently exists which consti-
tutes a default or, after notice or lapse of time or
both, would constitute a default under any Lease on the
part of the Company or, to the knowledge of the Company,
any other party, or (B) of any Action against any party
- 31 -<PAGE>
under any Lease which if adversely determined would re-
sult in such Lease being terminated or cut off;
(v) the Company has not assigned, mortgaged,
pledged or otherwise encumbered its interest, if any,
under any Lease, except for assignments, mortgages,
pledges or other encumbrances which constitute Permitted
Liens; and
(vi) the Company has exercised within the time
prescribed in each Lease any option provided therein to
extend or renew the term thereof.
(c) Except as set forth in Schedule 4.4(a), Sched-
ule 4.4(b) or Schedule 4.4(c), the Owned Properties and the
Leased Real Estate constitute, in the aggregate, all of the
real property used or useful to conduct the business of the
Centers in the manner in which such Business was conducted
during the fiscal year ending August 31, 1995 and since such
time.
Section 4.5 Tangible Personal Property; Suffi-
ciency of Assets. (a) The Company has good and valid title
to all tangible personal property which it owns or uses in
the operation of the Centers and which is among the Purchased
Assets, including all such tangible personal property re-
flected in the Balance Sheet as being owned by the Company
except (x) for personal property leased (exclusive of any
capitalized Leases) by the Company pursuant to written agree-
ments identified on Schedule 4.5(a) and (y) for such tangible
personal property disposed of to third parties since August
31, 1995 in the ordinary course of business, consistent with
past practice and which disposals, individually or in the ag-
gregate, could not reasonably be expected to have a Material
Adverse Effect, in each case free and clear of all Liens, ex-
cept (i) mechanics', materialmen's, carriers', workmen's,
warehousemen's, repairmen's, landlord's or other like Liens
securing obligations that are not delinquent; (ii) Liens for
Taxes and other governmental charges which are not due and
payable or which may be paid without penalty; (iii) purchase
money liens securing the purchase price of the related per-
sonal property listed as purchase money liens on Schedule
4.5(a), all of which will be removed at or prior to the Clos-
ing; (iv) other Liens, if any, set forth in Schedule 4.5(a);
and (v) Liens, which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 4.5(a), none of the tangible
personal property which is used in the business of the Cen-
ters is leased by the Company. The tangible Purchased Assets
are in good working order, reasonable wear and tear excepted,
- 32 -<PAGE>
and are suitable for the use for which they are intended in
all material respects.
(b) Except as set forth in Schedule 4.5(b) hereto,
the tangible personal property of the Company which is cur-
rently used or useful in the business of the Centers and
owned by the Company and included in the Purchased Assets is,
in the aggregate, all of the tangible personal property used
or useful to conduct such business in the manner in which
such business was conducted during the fiscal year ending Au-
gust 31, 1995 and since such time, except for additions
thereto and deletions therefrom in the ordinary course of
business and consistent with past practice and which could
not reasonably be expected to have a Material Adverse Effect.
(c) Except as disclosed in Schedule 4.5(c) to this
Agreement, at the Closing, as contemplated by this Agreement,
the Company will deliver to Buyer good and marketable title
to the Real Property and good and valid title to all personal
property included in the Purchased Assets free and clear of
any Liens, except for Permitted Liens and, upon the acqui-
sition of the Purchased Assets pursuant to this Agreement,
the Buyer will own or have valid rights (subject to any in-
terim management or service agreements entered into as con-
templated by Section 7.2(a) with respect to the sale and ser-
vice of alcoholic beverages and to gaming, lottery and gam-
bling activities) to use all of the rights, facilities, as-
sets, properties and interests which are used or useful in,
and are sufficient for, the operation, in all material re-
spects, of the business of the Centers as they are currently
being operated and conducted.
Section 4.6 Absence of Certain Changes. Except as
disclosed in Schedules 4.6 and 7.5 hereto, since August 31,
1995 the Company has conducted the business of the Centers in
the ordinary course of business consistent with past practice
and there has been no change in, or any development since the
date of this Agreement which, individually or in the aggre-
gate, could reasonably be expected to have a Material Adverse
Effect. In addition, except as disclosed in Schedules 4.6
and 7.5, since August 31, 1995: (i) there has been no physi-
cal damage, destruction, loss or abandonment (without regard
to whether any such damage, destruction, loss or abandonment
is covered by insurance) that, individually or in the aggre-
gate, could reasonably be expected to have a Material Adverse
Effect; (ii) the Company has not taken any action which, if
taken from the date hereof through the Closing, would violate
Section 7.5(c), (k)(i), (k)(iv) or (l) (and there have been
no changes in accounting methods or practices referred to in
Section 7.5(f)); and (iii) the Company has not entered into
- 33 -<PAGE>
any agreement to do any of the things previously described in
this Section 4.6.
Section 4.7 Litigation; Orders. Except as dis-
closed in Schedule 4.7 hereto, there are no Actions pending
or, to the knowledge of the Company, threatened or claims as-
serted against the Company that, individually or in the ag-
gregate, could reasonably be expected to have a Material Ad-
verse Effect or in which the complaint or claim specifically
seeks to prohibit or otherwise impair the consummation of
this Agreement or the Ancillary Agreements or the transac-
tions contemplated hereby or thereby. Except as disclosed in
Schedule 4.7 hereto, there are no judgments or outstanding
orders, injunctions, decrees, stipulations, settlement agree-
ments, citations, fines, penalties or awards or, to the
knowledge of the Company, against or binding upon the Company
or any properties included in the Purchased Assets or the
business of the Centers that, individually or in the aggre-
gate, could reasonably be expected to have a Material Adverse
Effect or prohibit or otherwise impair the consummation of
this Agreement or the Ancillary Agreements or the transac-
tions contemplated hereby or by the Ancillary Agreements.
Except as set forth in Schedule 4.7, there is no material Ac-
tion by the Company pending against any other Person with re-
spect to the business of the Centers or the Purchased Assets.
Section 4.8 Intellectual Property. Schedule 4.8
sets forth a true and complete list of all patents, copy-
rights, trademarks, trade names, trade secrets (including
formulae), service marks, or brand name registrations and
copyright registrations, and all other material intellectual
property rights, and all pending applications to be filed, if
any, therefor owned by the Company and/or utilized or re-
quired in the business and operation of the Centers or in
connection with the Purchased Assets (collectively, the "Com-
pany Intellectual Property"), together with a summary de-
scription and, to the extent applicable, full information in
respect of the filing, registration or issuance thereof. No
other patents, trademarks, trade names, trade secrets (in-
cluding formulae) service marks, brand names, copyrights, li-
censes, applications or other intellectual property rights
are necessary for the conduct of the business of the Centers.
To the knowledge of the Company, the ownership and operation
by the Company of the Centers, as presently owned and oper-
ated, does not infringe upon or conflict in any respect with
any patent, trademark, tradename, service mark, brand name,
copyright or other intellectual property rights of any other
Person, and to the knowledge of the Company no other Person
is infringing upon any such rights of the Company.
- 34 -<PAGE>
Section 4.9 Licenses, Approvals, Other Authoriza-
tions, Consents, Reports, etc. (a) The Company possesses or
has been granted all registrations, filings, applications,
certifications, notices, consents, licenses, permits, approv-
als, certificates, franchises, orders, qualifications, autho-
rizations and waivers of any Governmental Authority necessary
to entitle it presently to conduct the business of the Cen-
ters in the manner in which it is presently being conducted
(the "Licenses"), except as set forth in Schedule 4.9(a)(1)
and except those Licenses whose failure to possess or have
granted, individually or in the aggregate, could not reason-
ably be expected to have a Material Adverse Effect or give
rise to any material fine or any criminal liability or any
other material civil penalties. Schedule 4.9(a)(2) lists (i)
all licenses to serve or sell alcoholic beverages which have
been granted to the Company and are used in the business of
the Centers (the "Company Liquor Licenses") and (ii) all gam-
ing, lottery and gambling licenses which have been granted to
the Company and/or are used in the business of the Centers,
together with all such licenses not owned by the Company but
used in the business of the Centers ("Company Gaming Licens-
es"). Except as noted in Schedule 4.9(a)(3), (i) all of the
Company Liquor Licenses and Company Gaming Licenses are in
full force and effect and (ii) all of the Licenses (excluding
the Company Liquor Licenses and Company Gaming Licenses) are
in full force and effect except for those covered by this
clause (ii) whose failure to be in full force and effect, in-
dividually or in the aggregate, could not reasonably be ex-
pected to have a Material Adverse Effect. Except as noted in
Schedule 4.9(a)(4), no Action is pending or, to the Company's
knowledge, threatened seeking the revocation or limitation of
(i) any of the Company Liquor Licenses or Company Gaming Li-
censes or (ii) any License (excluding the Company Liquor Li-
censes or Company Gaming Licenses) that, in the case of Li-
censes covered by this clause (ii), individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
(b) Schedule 4.9(b) hereto contains a list of all
material registrations, filings, applications, certifica-
tions, notices, consents, licenses, permits, approvals, cer-
tificates, franchises, orders, qualifications, authorizations
and waivers required to be made, filed, given or obtained by
the Company, any Affiliate of the Company (including MJR) and
the Centers, with, to or from any Governmental Authority in
connection with the consummation and/or performance of this
Agreement and the Ancillary Agreements.
(c) Schedule 4.9(c) lists all entities other than
the Company ("Concession Entities") that hold licenses to
- 35 -<PAGE>
serve or sell alcoholic beverages in locations on the pre-
mises of the Centers or associated with or contiguous to the
facilities operated by the Company in connection with the
business of the Centers. Schedule 4.9(c) also lists all man-
agement agreements, leases and other significant agreements
or arrangements relating to the relationships between the
Company, on the one hand, and the Concession Entities, on the
other hand (complete and correct copies of which (or descrip-
tions of oral arrangements, to the extent material) have been
provided to Buyer). Except as disclosed on Schedule 4.9(c),
all such agreements are in full force and effect, legal,
valid and binding and enforceable against the Company and, to
the knowledge of the Company, each other Concession Entity or
other party thereto in accordance with their terms, subject,
as to enforceability against each Concession Entity, to bank-
ruptcy, moratorium or other insolvency laws and to equitable
principles of general application (regardless if enforcement
is sought at law or in equity).
Section 4.10 Labor Matters. Schedule 4.10 hereto
sets forth a list of all collective bargaining or other
agreements with labor unions, trade unions, employee repre-
sentatives, work committees, guilds or associations repre-
senting employees of the Company and the respective current
expiration dates thereof. As of the date hereof, no work
stoppage against the Company is pending or, to the Company's
knowledge, threatened. Except as disclosed on Schedule 4.7,
the Company is not, and since January 1, 1993 has not been,
involved in or, to the Company's knowledge, currently threat-
ened with, any labor dispute, arbitration, lawsuit, grievance
or administrative proceeding (other than immaterial griev-
ances), relating to labor matters involving any current or
former employee that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
Except as set forth on Schedule 4.10, to the knowledge of the
Company, no union or association organizing or election ac-
tivities involving any nonunion employees of the Company are
in progress.
Section 4.11 Compliance with Laws. Except as may
be disclosed on Schedule 4.11, the conduct of the business of
the Centers by the Company is, and the Purchased Assets are,
in compliance and, to the knowledge of the Company, has been
in compliance with all statutes, laws, regulations, ordi-
nances, rules, judgments, orders or decrees, applicable
thereto or to the Centers or the Purchased Assets, except for
violations or failures so to comply, if any, that, individu-
ally or in the aggregate, could not reasonably be expected to
- 36 -<PAGE>
have a Material Adverse Effect. Except as set forth on
Schedule 4.11, the Company has not received any written no-
tice of or, to the knowledge of the Company, any other com-
munication relating to, any alleged violation of any statute,
law, regulation, ordinance, rule, judgment, order or decree
from any Governmental Authority, or of any investigation with
respect thereto, applicable to the Company or to the Pur-
chased Assets which has not been satisfactorily addressed ex-
cept for violations, if any, that, individually or in the ag-
gregate, could not reasonably be expected to have a Material
Adverse Effect and could not reasonably be expected to give
rise to material fines or other material civil penalties or
any criminal liabilities.
Section 4.12 Insurance. The Company is covered by
valid and currently effective insurance policies issued in
favor of the Company that are customary for privately-owned
companies of similar size and financial condition in the in-
dustry and locale in which it operates. Schedule 4.12 lists
all insurance policies which are in effect covering the Cen-
ters, the Purchased Assets and the Company and its employees
and Schedule 4.12 lists each of the parties to such policies.
Except as set forth on Schedule 4.12, all such policies are
in full force and effect, all premiums due thereon have been
paid and the Company has complied with the provisions of such
policies, except for failures to be in full force and effect,
to pay premiums and to comply which, individually or in the
aggregate, could not reasonably be expected to have a Mate-
rial Adverse Effect. The Company has not received any writ-
ten notice from or on behalf of any insurance carrier issuing
policies or binders relating to or covering the Centers or
the Purchased Assets that there will be a cancellation or
non-renewal of existing policies or binders, or that alter-
ation of any equipment or any improvements to real estate oc-
cupied by or leased to or by the Company in connection with
the Centers or the Purchased Assets, purchase of additional
equipment, or material modification of any of the methods of
doing business, will be required.
Section 4.13 Contracts. (a) Schedule 4.13(a)
sets forth a list of those contracts to which the Company is
now a party that the Company will terminate, pursuant to Sec-
tion 7.6, effective on or prior to the Closing Date or, to
the extent set forth in Schedule 4.13(a), effective as of the
date after the Closing Date indicated on Schedule 4.13(a)
(those being terminated effective as of such date after the
Closing Date being the "Prepaid Contracts"), as appropriate,
and, in each case, for which the Company shall be solely re-
sponsible and pursuant to which Buyer shall have no Liabil-
ities (collectively, the "Terminated Contracts").
- 37 -<PAGE>
(b) Except for the Terminated Contracts or as set
forth on Schedule 4.13(b) hereto, as of the date hereof, in
connection with the operation of the Centers or the Purchased
Assets, the Company is not a party to or bound by any written
or oral (a) employment or consulting agreement or contract
(in the case of oral agreements or contracts, excluding those
which are terminable at will without any additional expense
other than the payment of previously accrued compensation);
(b) joint venture or partnership contract or agreement; (c)
contract or agreement restricting the right of the Company to
compete in any way with any other Person, which would apply
to Buyer after the Closing; (d)(i) agreement or contract cre-
ating, evidencing or securing obligations for borrowed money,
(ii) purchase money indebtedness, (iii) any guarantee or as-
sumption of an obligation for borrowed money or purchase
money indebtedness or other obligations of reimbursement of
any maker of a letter of credit or any guaranty of minimum
equity or capital or any make-whole or similar agreement,
(iv) any loan or extension of credit by the Company or (v)
bankers acceptance; (e) agreement or contract relating to any
outstanding commitment for capital expenditures; (f) other
than as set forth on Schedule 4.8, licenses, whether as li-
censor or licensee, of any intellectual property; (g) other
than as set forth on Schedule 4.4(b) or Schedule 4.5(a), ma-
terial lease, sublease or option relating to real or personal
property; (h) service agreement relating to the Purchased As-
sets or the Centers; (i) capitalized lease or sale-leaseback
or material conditional sale agreement; (j) contracts relat-
ing to league bowling the original term of which was more
than one year (other than such contracts which have original
terms of two years (but not more) provided such contracts
that have remaining terms in excess of one year do not ex-
ceed, in the aggregate, 3% of both (1) the aggregate number
of all contracts relating to league bowling and (2) the ag-
gregate gross revenues of all contracts relating to league
bowling) or which can be extended or renewed automatically or
by any party thereto; (k) lease, contract, license, commit-
ment, agreement or arrangement to be assumed by Buyer pursu-
ant to Section 2.4(a) hereof, which (i) is not terminable by
the Company, and/or after the Closing will not be terminable
by Buyer, upon less than 31 days' notice or (ii) has a re-
maining term of more than one year and is subject to auto-
matic renewal; (l) any lease, contract, license, commitment,
agreement or arrangement pursuant to which the Company per-
mits the operation of snack bars and/or pro shops; (m) exclu-
sive dealing, requirements or take-or-pay contracts; (n) any
brokerage or finders fee agreements; or (o) other lease, con-
tract, license, commitment, agreement or arrangement, entered
into other than in the ordinary course of business, involving
an estimated total future payment or payments in excess of
- 38 -<PAGE>
$5,000. Except as set forth on Schedule 4.13(b) hereto, each
contract or agreement set forth on Schedule 4.13(b) hereto is
in full force and effect, and, to the Company's knowledge is
legal, valid and binding and enforceable against each other
Person a party thereto, subject, as to enforceability against
each such other Person, to bankruptcy, moratorium or other
insolvency laws and to equitable principles of general ap-
plication (regardless if enforcement is sought at law or in
equity). Except as set forth in Schedule 4.13(b) hereto,
neither the Company, nor, to the Company's knowledge, is any
other party to any such lease, contract, commitment, agree-
ment or arrangement, in breach thereof or default thereunder
and there does not exist under any provision thereof, any
event that, with the giving of notice or the lapse of time or
both, would constitute such a breach or default by the Com-
pany or, to the Company's knowledge, by any other party to
any such contract or agreement, except for such breaches, de-
faults and events as to which requisite waivers or consents
have been obtained or which, individually or in the aggre-
gate, could not reasonably be expected to have a Material Ad-
verse Effect. The Company has delivered to Buyer true and
correct copies of each of the written leases, contracts, li-
censes, commitments, agreements or arrangements or provided
written summaries of any of the oral leases, contracts, li-
censes, commitments, agreements or arrangements set forth on
Schedules 4.10 and 4.13(a) and (b).
(c) At the Closing, the Company will assign all of
its rights to the Prior Noncompetition Agreement to Buyer and
all of the rights of the Company under the Prior Noncompeti-
tion Agreement shall inure to the benefit of Buyer during the
full period provided for by the terms thereof (as if Buyer
were the Company thereunder) and the Company shall be permit-
ted to, and shall, enforce such Agreement for the benefit of
Buyer for such full period, and, in addition, Buyer shall be
entitled to the benefit of any damages, and to any rights of
specific performance, the Company would have been entitled to
had such enforcement been for the benefit of the Company.
Section 4.14 Brokers, Finders, etc. None of the
Company or any Affiliate of the Company has employed, or is
subject to any valid claim of, any broker, finder, or other
similar intermediary in connection with the transactions con-
templated by this Agreement who might be entitled to a fee or
commission in connection with such transactions. Buyer does
not have and will not have any obligation to pay any fee or
expense of any broker, finder or similar intermediary on be-
half of the Company with respect to the transactions contem-
plated by this Agreement.
- 39 -<PAGE>
Section 4.15 Affiliate Transactions. Except as
disclosed on Schedule 4.15 hereto, (i) no Affiliate of the
Company or of any Stockholder provides or causes to be pro-
vided and, since August 31, 1995, has provided or caused to
be provided, to the Company any assets, loans, advances, ser-
vices or facilities used in or relating to the Centers or the
Purchased Assets and (ii) the Company does not provide or
cause to be provided, and, since August 31, 1995, has not
provided or caused to be provided, to any such Affiliate of
the Company or of any Stockholder any assets, loans, ad-
vances, services or facilities used in or relating to the
Centers or the Purchased Assets. Except as disclosed in
Schedule 4.15 hereto, (i) the Company does not purchase from
or sell to, and, since August 31, 1995, has not purchased
from or sold to, Affiliates of the Company or of the Stock-
holders goods or services used in or relating to the Centers
or the Purchased Assets, (ii) the Company jointly with any
Affiliate of the Company or of any Stockholder does not pur-
chase or sell and, since August 31, 1995, has not purchased
or sold goods or services used in or relating to the Centers
or the Purchased Assets and (iii) the Company does not have,
and, since August 31, 1995, has not had, any other signifi-
cant business relationships with any Affiliate of the Company
or of any Stockholder. The Stockholders (other than Eileen
Pettus) have advised the Company, for the benefit of Buyer,
that they will enter into the Non-Competition Agreements in
connection with the Closing.
Section 4.16 Environmental Compliance. (a) For
purposes of this Section 4.16, (i) "Hazardous Substance"
means any pollutant, contaminant, hazardous or toxic sub-
stance or waste, solid waste, petroleum or any fraction
thereof, or any other chemical, substance or material listed
or identified in or regulated by or under any Environmental
Law; (ii) "Environmental Law" means the Comprehensive Envi-
ronmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., the Clean Water Act, 33 U.S.C.
Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section
7401 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq., the Emergency Planning and Community
Right to Know Act, 42 U.S.C. Section 11001 et seq., the Oc-
cupational Safety and Health Act, 29 U.S.C. Section 651 et
seq., the Oil Pollution Act, 33 U.S.C. Section 2701 et seq.,
in each case as amended from time to time and all regulations
- 40 -<PAGE>
promulgated thereunder, and any other statute, law, regula-
tion, ordinance, by-law, rule, judgment, order, decree or di-
rective of any Governmental Authority dealing with the pollu-
tion or protection of natural resources or the indoor or am-
bient environment or with the protection of human health or
safety; and (iii) "RCRA Hazardous Waste" means a solid waste
that is listed or classified as a hazardous waste, as that
term is defined in or pursuant to the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.
(b) Except as set forth on Schedule 4.16(b), there
are no claims pending or, to the knowledge of the Company,
threatened, and the Company has not received any written or,
to the knowledge of the Company, oral notice, alleging, warn-
ing or notifying the Company that any Real Property, Centers
and/or Purchased Assets is, has been or may be in violation
of or in noncompliance with any Environmental Law.
(c) Except as set forth in Schedule 4.16(c), to
the knowledge of the Company, no Hazardous Substances are now
present in amounts, concentrations or conditions requiring
removal, remediation or any other response, action or correc-
tive action under, or forming the basis of a claim pursuant
to, any Environmental Law, in, on, from or under the Real
Property or the Centers.
(d) Except as set forth in Schedule 4.16(d), the
Real Property is not being used in connection with the busi-
ness of manufacturing, storing or transporting Hazardous Sub-
stances, and no RCRA Hazardous Wastes are being treated,
stored or disposed of there in violation of any Environmental
Law.
(e) Except as set forth in Schedule 4.16(e), to
the knowledge of the Company, there are no underground stor-
age tanks or other containment facilities of any kind on the
Real Property which contain or contained any Hazardous Sub-
stances.
(f) Schedule 4.16(f) identifies, and the Company
has provided to Buyer, true and correct copies of, all envi-
ronmental audits or assessments, analyses of soil, groundwa-
ter, indoor and outdoor air, sediment, surface water and as-
bestos containing materials conducted on or after January 1,
1993 relating in whole or in part to the Company, the Centers
and/or the Purchased Assets undertaken by or on behalf of any
of the Company or any of its Affiliates, and any written com-
munications received by the Company since January 1, 1993
from any Governmental Authorities relating in whole or in
- 41 -<PAGE>
part to the Centers and/or the Purchased Assets which de-
scribe the status of any Real Property or the compliance of
the owners, operators or lessees thereof with respect to any
Environmental Law.
Section 4.17 Video Games. Schedule 4.17(a) sets
forth a list of the video, amusement and arcade games owned
or used by the Company in connection with the business of the
Centers on the date hereof, all of which are included in the
Purchased Assets. Except as set forth on Schedule 4.17(b),
the Company owns all video and arcade games used in the busi-
ness of the Centers. Schedule 4.17(c) sets forth all pur-
chase orders for arcade, amusement or video games outstanding
as of the date hereof all obligations in respect of which
outstanding as of the Closing Date shall constitute Assumed
Liabilities.
Section 4.18 Undisclosed Liabilities. Except (i)
as disclosed in Schedule 4.18 hereto, (ii) as and to the ex-
tent disclosed or reserved against on the Balance Sheet or
identified in the notes thereto, and (iii) as incurred after
the date of the Balance Sheet in the ordinary course of busi-
ness of the Company consistent with prior practice and not
prohibited by this Agreement and, in such case, as and to the
extent reflected in the Company's accounting records, which
items referred to in this clauses (iii), individually or in
the aggregate, could not reasonably be expected to have a Ma-
terial Adverse Effect, the Company does not have any Liabil-
ities relating to the Purchased Assets or the operation of
the Centers, that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
All Liabilities assumed by Buyer hereunder are Assumed Li-
abilities and, except as expressly set forth on Schedule
2.4(a), are reflected in the full amount thereof on the books
and records of the Company.
Section 4.19 Inventory. All of the inventory of
the Company consists of a quality and quantity reasonably us-
able and saleable in the ordinary course of business consis-
tent with past practice, subject to normal and customary al-
lowances for spoilage, damage and outdated items reflected on
the books and records of the Company. All items included in
the inventory of the Company are the property of the Company,
free and clear of any Lien, are not held by the Company on
consignment from others and conform in all material respects
to all standards applicable to such inventory or its use or
sale imposed by any law.
Section 4.20 Disclosure. None of the representa-
tions and warranties contained in this Article IV (including
- 42 -<PAGE>
the Schedules hereto) contains any untrue statement of a ma-
terial fact or omits to state a material fact necessary, in
light of the circumstances under which it was made, to make
any such statement not misleading.
Section 4.21 Nonforeign Certification. The Com-
pany is not a "foreign person" within the meaning of Section
1445 of the Code.
ARTICLE V
Representations and Warranties of Buyer
Buyer hereby represents and warrants to the Company
as follows:
Section 5.1 Incorporation; Authorization; etc.
Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Virginia.
Buyer has full corporate power to execute and deliver this
Agreement and each of the Ancillary Agreements to which it is
a party, to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and
each of the Ancillary Agreements to which it is a party, the
performance of its obligations hereunder and thereunder and
the consummation of the transactions contemplated hereby and
thereby by Buyer has been duly and validly authorized by the
Board of Directors of Buyer and no other corporate proceed-
ings on the part of Buyer are necessary therefor. Other than
as contemplated by Section 5.2 or those consents listed on
Schedule 5.2 as required to be received at or prior to the
Closing, the execution, delivery and performance by Buyer of
this Agreement and each of the Ancillary Agreements to which
it is a party will not (i) violate or conflict with any pro-
vision of the Certificate of Incorporation or By-Laws of
Buyer, (ii) conflict with, violate or constitute a default
under any provision of, or be an event that is (or with the
giving of notice or passage of time or both will result in) a
violation of or default under, or result in the acceleration
of or entitle any party to accelerate (whether after the giv-
ing of notice or lapse of time or both) any obligation or
right under, or result in the imposition or creation of any
Lien in or upon any of Buyer's assets or properties pursuant
to, or require a consent or waiver or create a penalty or in-
crease Buyer's payment or performance obligations under, any
mortgage, Lien, lease, instrument, order, arbitration award,
judgment or decree, or any material lease, contract, license,
commitment, agreement, arrangement or permit, by which Buyer
- 43 -<PAGE>
or any of its property is bound, or (iii) after giving effect
to the consents contemplated by Section 5.2, violate or con-
flict with any provision of statute, law, regulation, ordi-
nance, rule, judgment, order, injunction or decree of any
Governmental Authority or any other material restriction of
any kind or character to which Buyer or any of its property
is or may be subject or by which any of them is or may be
bound, that, in the case of clauses (ii) and (iii) of this
Section 5.1, individually or in the aggregate, could reason-
ably be expected to have a material adverse effect on Buyer's
ability to consummate the transactions contemplated hereby or
would otherwise impair the performance of the other obliga-
tions of Buyer under this Agreement or any of the Ancillary
Agreements to which it is a party. This Agreement has been,
and on the Closing Date each of the Ancillary Agreements to
which it is a party will be, duly executed and delivered by
Buyer, and, assuming the due execution hereof and thereof by
the Company and any other party thereto, this Agreement con-
stitutes, and on the Closing Date each of the Ancillary
Agreements to which it is a party will constitute, the legal,
valid and binding obligations of Buyer, each enforceable
against Buyer in accordance with its respective terms.
Section 5.2 Licenses, Approvals, Other Authoriza-
tions, Consents, Reports, etc. Schedule 5.2 hereto contains
a list of all registrations, filings, applications, certifi-
cations, notices, consents, licenses, permits, approvals,
franchises, orders, qualifications, authorizations and waiv-
ers required to be made, filed, given or obtained by Buyer or
any of its Affiliates with, to or from any Governmental Au-
thority in connection with the consummation and/or perfor-
mance of the obligations of Buyer under this Agreement and
the Ancillary Agreements to which it is a party except for
those (i) licenses relating to the sale and service of alcoholic
beverages or gaming, gambling or lottery activities, or
(ii) the failure to make, file, give or obtain which, indi-
vidually or in the aggregate, could not reasonably be ex-
pected to have a material adverse effect on Buyer's ability
to consummate the transactions contemplated hereby or would
otherwise prevent the performance of the obligations of Buyer
under this Agreement and each of the Ancillary Agreements to
which it is a party. To Buyer's knowledge, in connection
with the operation of the Centers, Buyer will not be required
to obtain any licenses to serve or sell alcoholic beverages
or to conduct gaming, lottery or gambling activities in the
same manner as the Company currently conducts such activi-
ties, other than substantially the same licenses as the Com-
pany Liquor Licenses and the Company Gaming Licenses.
Section 5.3 Brokers, Finders, etc. Buyer has not
employed, nor is subject to any valid claim of, any broker,
- 44 -<PAGE>
finder, or other similar intermediary in connection with the
transactions contemplated by this Agreement who might be en-
titled to a fee or commission in connection with such trans-
actions. The Company and its Affiliates do not have and will
not have any obligation to pay any fee or expense of any bro-
ker, finder or similar intermediary on behalf of Buyer with
respect to the transactions contemplated by this Agreement.
ARTICLE VI
Employee Matters
Section 6.1 Offers of Employment. (a) Buyer
shall on or prior to the Closing Date offer employment to the
employees listed on a Schedule to be delivered by Buyer to
the Company prior to Closing upon such terms as the Buyer
shall in its sole discretion determine to be appropriate.
Any employees on such Schedule who accept such offer and com-
mence employment with Buyer on the Closing Date shall be re-
ferred to as "Buyer Employees." The Company shall retain,
and be solely responsible for, all benefits, compensation and
other obligations payable to Buyer Employees, and other em-
ployees of the Company and the Company Affiliates, with re-
spect to services performed, and claims incurred, in each
case, prior to the Closing (including any severance payable
to Buyer Employees or other employees formerly employed by
the Company) under any welfare plan, pension plan, deferred
compensation plan, stock based plans, employee benefit pen-
sion plans (as defined under ERISA) or any other plans, con-
tracts, agreements, policies or arrangements related to com-
pensation, severance or other employee benefits that are
adopted, sponsored, maintained or contributed to by the Com-
pany or the Company Affiliates. For purposes of this Section
6.1, disability claims are incurred on the date on which the
disability was incurred or, in the case of a disability which
is not incurred on a single, identifiable date, the date on
which the disability was diagnosed; medical and dental ser-
vices are incurred when an individual is provided with medi-
cal or dental care; death benefit claims are incurred at the
time of death of the insured notwithstanding any other provi-
sion of any welfare benefit plan to the contrary. The Com-
pany shall be responsible for all qualifying events under CO-
BRA and COBRA claims incurred under the Company's or the Com-
pany Affiliates' welfare plans on or before the Closing Date
and, other than with respect to Buyer Employees, following
the Closing Date. The Company shall pay to all Buyer Employ-
ees an amount equal to the compensation such employees would
have received with respect to all vacation and sick pay and
time, in each case accrued and unpaid or unused prior to the
- 45 -<PAGE>
Closing Date, and Buyer shall not assume any Liabilities with
respect thereto.
(b) Buyer Employees shall receive credit for all
periods of employment with the Company prior to the Closing
Date solely for purposes of eligibility, vesting and benefit
accrual in Buyer's 401(k) plan and Buyer's vacation policy
(but no accrued vacation pay or time), subject to the maximum
benefits obtainable pursuant to such 401(k) plan and Buyer's
vacation policy. Buyer shall waive any waiting periods or
pre-existing condition exclusions in its welfare plans to the
extent such provisions would not have applied to Buyer Em-
ployees when employed by the Company.
(c) The Company shall provide Buyer all of the
services and services of the employees of the Company, to the
extent practicable, provided by or at the headquarters of the
Company for a transition period of at least 30 days commenc-
ing on the Closing Date; provided that, at its election,
Buyer may extend such 30-day period upon written notice to
the Company given not less than 10 days prior to the end of
the initial term for up to another 30 days with respect to
such services and employees Buyer reasonably requests. Buyer
shall reimburse the Company for (i) the actual salary ex-
penses of such employees (other than vacation time) of the
Company (at their normal rates), other than the Stockholders
and any non-bowling employees of the Company, and, after the
initial 30-day period, other than the seven executive bowling
employees listed on Schedule 6.1(c) (the "Seven Bowling Ex-
ecutives"), incurred and (ii) the actual direct out-of-pocket
expenses incurred by the Company associated directly with
such services relating to the Centers (other than any rental
or common area maintenance payments), in the case of each of
clauses (i) and (ii), in connection with such services during
the initial 30-day period described in the immediately pre-
ceding sentence and in connection with any services requested
by Buyer, if any, during the 30-day period thereafter de-
scribed in the immediately preceding sentence. The Company
shall advise Buyer of the amount of such expenses prior to
incurrence. During such transition period, the Company shall
permit Buyer's employees to be on the premises of such head-
quarters and during such period shall provide Buyer and such
employees such reasonable office space (free of rent or com-
mon area maintenance charges) and services that Buyer re-
quests in order to enable Buyer and its employees to complete
such transition promptly.
(d) The Company represents that Schedule 6.1(d)
sets forth, as of August 29, 1996, all employees of the Com-
pany employed in connection with the operation of the Centers
- 46 -<PAGE>
and the Purchased Assets setting forth with respect to each
such employee, such employee's (i) social security number,
(ii) job classification and (iii) working hours and salary or
wages. At the reasonable request of Buyer, the Company shall
provide Buyer with updated information with respect to such
matters.
(e) The Company hereby represents that attached as
Schedule 6.1(e) is the Company's severance policy which shall
be effective prior to the Closing Date (the "Company Sever-
ance Policy"). Buyer agrees that to the extent the Company's
obligations for severance (calculated in accordance with the
express terms of Article IV of the Severance Policy) to full-
time, non-bargaining unit, salaried employees of the Company
employed exclusively in connection with the operation of the
business of the Centers, other than those employees of the
Company (i) not employed at Centers or in connection with the
regional operations of the Centers, (ii) employed at the
Company's Garden City, New York headquarters, (iii) who are
Buyer Employees (or who are employees of Strathmore Lanes in
Aberdeen, New Jersey, if Buyer is leasing or not purchasing
such Center as contemplated by Section 7.16) or (iv) who are
offered positions with Buyer in accordance with Section
6.1(a) but do not accept such employment (those full-time,
non-bargaining unit, salaried employees of the Company em-
ployed exclusively in connection with the operation of the
business of the Centers, other than those referred in clause
(i), (ii), (iii) or (iv), being the "Nontransferred Employ-
ees"), would exceed $100,000, and the Company advises Buyer
accordingly in writing prior to the Closing, Buyer shall re-
imburse the Company for the amount of such severance (docu-
mented to Buyer's reasonable satisfaction) in excess of
$100,000 the Company is required to pay to such Nontrans-
ferred Employees in accordance with the express terms of Ar-
ticle IV of such Severance Policy, net of any tax benefits
received by the Company and the Stockholders.
(f) For one year following the Closing, Buyer
shall provide severance payments (in an amount and on payment
terms calculated on the same basis and subject to analogous
limitations as the severance payments contemplated by the
Company Severance Policy) to any Buyer Employees who are ter-
minated in a Qualifying Termination (as defined in the Com-
pany Severance Policy), and who were full-time, non-
bargaining unit, salaried employees of the Company im-
mediately prior to the Closing Date, other than any Buyer Em-
ployees employed at Strathmore Lanes if Buyer is leasing or
not purchasing such Center pursuant to Section 7.16 hereto.
For purposes of such severance, Buyer shall give effect to
- 47 -<PAGE>
the periods of employment of such Buyer Employees with the
Company prior to the Closing Date.
Section 6.2 WARN Requirements. From the date of
this Agreement through the Closing Date, the Company shall
not take any action which could be construed to be a plant
closing or mass layoff under WARN with respect to any of its
offices or operations, including the operation of the Cen-
ters, and the Company agrees that any claim, Loss or Action
arising from or relating to a violation of its agreements
pursuant to this sentence shall be a Retained Liability.
From the date of this Agreement through the Closing Date,
Buyer shall not take any action which could be construed to
be a mass layoff or plant closing under WARN with respect to
the operation of the Centers, and Buyer will indemnify the
Company pursuant to Section 11.3 hereof from any liabilities
under WARN that arise from Buyer not offering employment to
employees of the Company who are employed by the Company as
of the Closing Date, which liabilities will be liabilities of
Buyer and not of the Company. The Company shall be respon-
sible for issuing any notices required under WARN, other than
those notices relating to Buyer's failure to offer employment
to employees of the Company who are employed at the Centers
and who are employed by the Company as of the Closing Date,
which shall be the responsibility of Buyer. The Company
shall deliver to Buyer a copy of the draft notices it is re-
quired to issue in accordance with WARN (or any similar law)
and this Section 6.2 for Buyer's review and comment at least
five business days prior to issuance and will incorporate all
reasonable requests of the Buyer.
Section 6.3 No Third Party Beneficiaries; No Con-
tinuing Obligations. Neither Buyer nor the Company intends
this Article VI to, and this Article VI shall not, create any
rights or interest except as between the parties to this
Agreement, and no present or future employees of either party
(or any dependents of such employees) will be treated as
third party beneficiaries in or under the provisions of this
Article VI; any obligations the Company has to any of its em-
ployees shall, as between such employees and the Company, re-
main obligations of the Company. Nothing in this Article VI
shall create any obligation on the part of Buyer to continue
the employment of any Buyer Employee on any particular terms
and conditions or for any period of time after the Closing.
Section 6.4 401(k) Plan. Buyer's 401(k) plan will
accept eligible rollover distributions (within the meaning of
Section 401(a)(31) of the Code) made from the Charan Indus-
tries, Inc. 401(k) Retirement Plan to Buyer Employees on ac-
count of termination of their employment with the Company.
- 48 -<PAGE>
Section 6.5 Collective Bargaining Agreements.
Following the Closing Date, Buyer shall, in accordance with
applicable law, recognize the union as the representative of
employees in the union and perform all obligations of the
Company under: the agreement with Local 50 at Strike & Spare
Lanes in St. Louis, Missouri; the agreement with Local 50 at
Western Bowl in St. Louis, Missouri; and the agreement with
Local 2 at Van Wyck Lanes in Queens, New York.
ARTICLE VII
Covenants of the Company and Buyer
Section 7.1 Investigation of Business; Access to
Properties and Records. (a) After the date hereof and until
the Closing Date, the Company shall afford to representatives
of Buyer full access to its personnel, offices, properties,
books and records relating to the business of the Centers or
the Purchased Assets and shall cause its accountants to af-
ford Buyer and its representatives access to the work papers
of all audits and reviews of the financial statements of the
Company, in each case, during normal business hours, upon
reasonable request, in order that Buyer may continue to have
full opportunity to make such investigations as it desires of
the affairs of the Company with respect to the business of
the Centers, including, without limitation, for purposes of
preparing the list contemplated by the first sentence of Sec-
tion 6.1(a) hereof; provided, however, that such investiga-
tion shall not unreasonably disrupt the personnel and opera-
tions of the Company.
(b) After the date hereof until the Closing Date,
the Company will continue to supply Buyer with all relevant
documents and information for use in connection with Buyer's
investigation contemplated hereby. Such material (regardless
if delivered prior to or after the date hereof) is hereinaf-
ter referred to as "Evaluation Material." Buyer agrees that,
prior to the Closing, it and its representatives will hold in
confidence any Evaluation Material it has received or will
receive and will not disclose, except to the extent required
by law or otherwise deemed necessary or appropriate in the
sole discretion of Buyer in connection with Buyer's financing
arrangements, all or any part of such material to anyone ex-
cept its officers, directors, direct and indirect parent en-
tities and stockholders, employees, financing sources, af-
filiates, agents, consultants, advisors or other representa-
tives who are involved with the transaction contemplated
hereby, who is consulted with respect to the transactions
contemplated hereby or who Buyer determines otherwise needs
- 49 -<PAGE>
to know such information and who was informed by Buyer of the
confidential nature of the Evaluation Material. If this
Agreement is terminated, except as required by law, all writ-
ten Evaluation Material supplied by the Company to Buyer
shall, upon written request of the Company, be destroyed by
Buyer, returned by Buyer to the Company, or at the election
of Buyer, returned in accordance with the terms of the confi-
dentiality agreement, dated May 13, 1996, between the parties
hereto.
(c) From and after the Closing Date, the Company
and its Affiliates and representatives shall maintain the
confidentiality of nonpublic information with respect to the
Centers and the Purchased Assets. In the event that Buyer or
its Affiliates or representatives prior to the Closing Date,
or the Company or its Affiliates or representatives after the
Closing Date, are requested, or become required by law, to
disclose any confidential information relating to the Centers
or the Purchased Assets (other than to the extent permitted
by Section 7.1(b) or this Section 7.1(c), as applicable),
such party will provide the other party with prompt notice
thereof (before such information is disclosed if practicable)
so that such other party may seek a protective order or other
appropriate remedy and/or waive compliance with the terms of
Section 7.1(b) or this Section 7.1(c), as applicable. In the
event that such protective order or other remedy is not ob-
tained or that such other party, in its sole discretion,
waives compliance with the terms of Section 7.1(b) or this
Section 7.1(c), as applicable, the party from which such in-
formation is requested or which is required by law to dis-
close such information will furnish only that portion of such
confidential information which is legally required to be so
disclosed and will exercise its reasonable efforts to obtain
reliable assurance that confidential treatment will be ac-
corded such confidential information. In the event that
Buyer or any of its Affiliates or representatives, or the
Company or any of its Affiliates or representatives shall re-
ceive notice of, or become subject to, an audit by any Gov-
ernmental Authority with respect to the operation of the Cen-
ters or the Purchased Assets, which audit relates to a period
occurring prior to the Closing Date, Buyer or the Company, as
the case may be, shall provide the other party with prompt
notice thereof. The parties hereto agree that the injury
caused by any breach of the covenants contained in Section
7.1(b) or this Section 7.1(c) cannot be easily calculated and
that any party seeking enforcement of such covenants shall be
entitled to, among other things, equitable remedies, includ-
ing without limitation temporary and permanent injunctions,
specific performance and an accounting for profits.
- 50 -<PAGE>
(d) Information shall no longer be subject to the
confidentiality restrictions of Sections 7.1(b) and 7.1(c) to
the extent that such information becomes generally available
to the public other than in violation of a confidentiality
agreement.
(e) Buyer and the Company agree to provide the
other with access to all relevant documents and other infor-
mation which may be needed by such party for purposes of pre-
paring tax returns or responding to an audit by any Govern-
mental Authority or for any other reasonable purpose. Such
access will be during normal business hours and not subject
to time limitations, to the extent not unreasonable. Fur-
ther, Buyer and the Company each agree for a period of seven
(7) years after the Closing Date not to destroy or otherwise
dispose of any records relating to the Purchased Assets or
the operation of the Centers relating to the period prior to
the Closing.
Section 7.2 Efforts; Obtaining Consents. (a)
Subject to the terms and conditions herein provided, each of
the Company and Buyer agrees to use its best reasonable ef-
forts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advis-
able to consummate and make effective as promptly as practi-
cable the transactions contemplated by this Agreement and to
cooperate with the other in connection with the foregoing,
including using its reasonable efforts (i) to obtain without
increased cost all necessary waivers, consents and approvals
from other parties to material leases, contracts, licenses,
commitments, agreements and arrangements (including, without
limitation, any debt-related agreements) and to obtain with-
out increased cost all consents and agreements and to make
such other provisions, to the extent permitted by law, in-
cluding entering into interim management or services arrange-
ments, reasonably necessary or requested by Buyer and on
terms reasonably acceptable to the Company and Buyer (without
payment to the Company other than reimbursement of out-of-
pocket expenses and customary indemnity) to enable Buyer (or
a third party or third parties chosen by Buyer) to continue
to sell and serve alcoholic beverages and engage in gaming,
lottery or gambling activities at each of the Centers (in-
cluding, without limitation, with respect to gaming in the
State of Washington for a period of up to 60 days if Buyer
reasonably believes that it will be able to receive its own
licenses with respect thereto following such 60-day period)
in the same manner and under the same terms and arrangements
as such beverages are currently sold and served and such ac-
tivities are engaged in, without significantly increasing the
- 51 -<PAGE>
costs of such sales, services or activities to Buyer with re-
spect to the relevant Center (or to the extent requested by
Buyer, to enable Buyer to have the economic benefits thereof
from and after the Closing), (ii) without the imposition of
restrictions on the terms of the transactions contemplated
hereby and by the Ancillary Agreements or on the current or
future ownership or operation of the Centers or on any other
activities or business of the respective parties or their Af-
filiates, to obtain all consents, approvals and authoriza-
tions that are required to be obtained from Governmental Au-
thorities, (iii) without the imposition of restrictions on
the terms of the transactions contemplated hereby or by the
Ancillary Agreements or on the current or future operation of
the Centers or on any other activities or business of the re-
spective parties or their Affiliates, to lift or rescind any
injunction, restraining order, decree, or other order ad-
versely affecting the ability of the parties hereto to con-
summate the transactions contemplated hereby, (iv) to effect
all necessary registrations and filings including, but not
limited to, making all filings under the HSR Act, a request
for early termination of the waiting period under the HSR Act
and submissions of information requested by Governmental Au-
thorities, and (v) to fulfill all conditions to this Agree-
ment.
(b) Each party hereto shall promptly inform the
other of any material communications from the United States
Federal Trade Commission, the United States Department of
Justice or any other Governmental Authority regarding any of
the transactions contemplated hereby. If any party or any
Affiliate thereof receives a request for additional informa-
tion or documentary material from any such Governmental Au-
thority with respect to the transactions contemplated hereby,
then such party will endeavor in good faith to make, or cause
to be made, as soon as reasonably practicable and after con-
sultation with the other party, an appropriate response in
compliance with such request.
(c) Each party shall advise the other party if it
becomes aware of any fact or circumstance that would give
rise to the breach of a representation or warranty of either
party hereto.
Section 7.3 Further Assurances. (a) The Company
and Buyer agree that, from time to time, whether before, at
or after the Closing, each of them will, and the Company will
cause its Affiliates to, execute and deliver such further in-
struments of conveyance and transfer and take such other ac-
tion as may be reasonably necessary to carry out the purposes
- 52 -<PAGE>
and intents of this Agreement, to assure that Buyer has ac-
quired all of the Purchased Assets other than such rights and
assets disposed of to third parties prior to the Closing to
the extent permitted by Section 7.5 and to assure that the
Company, prior to the Closing, retains all Purchased Assets
or acquires them from its Affiliates or causes such Affili-
ates to transfer such Purchased Assets to Buyer, without any
change to the total Purchase Price or additional cost or ex-
pense to Buyer. In addition to the actions contemplated by
Section 7.12 to be taken prior to the Closing, in the event
that the assignments and conveyances contemplated by this
Agreement and the Ancillary Agreements shall not have been
completed at or prior to the Closing, the Company shall con-
tinue to use all commercially reasonable efforts to effect
such assignments and conveyances and will cooperate with
Buyer in any lawful and commercially feasible arrangement to
provide that Buyer shall have all of the benefits of such
rights and assets. From and after the Closing, the Company,
the Stockholders and their respective Affiliates will not use
any Company Intellectual Property, including the names "Bowl-
ing Corporation of America," "BCA" or any similar names or
any of the trade or operating names of the Centers, in their
names or operations; provided that the Company shall be per-
mitted for a period ending on the second anniversary of the
Closing Date to continue to use the names "Bowling Corpora-
tion of America" and "BCA" in connection with (x) the sale
and distribution outside of the United States (or for export
from the United States) of bowling equipment, or parts and
consumer products relating to bowling and (y) the operation
of video coin operated amusement game routes in the State of
Washington; provided further that the Company shall no longer
use such name in any manner thereafter. If, at or prior to
the Closing, Buyer has not converted to its computer system
all data of the Company relating to the Centers which Buyer
reasonably desires so to convert, the Company shall, from and
for a period of 120 days after the Closing, maintain, afford
Buyer access to, and cooperate in the conversion to Buyer's
computer system of all such unconverted data.
(b) If there are any warranties or guaranties of
manufacturers, suppliers and contractors in effect at the
date of the Closing which relate to any property which is
among, located on or used in connection with the Purchased
Assets or the business of the Centers which are not transfer-
able, the Company agrees, upon request of Buyer from time to
time subsequent to the Closing, to use its best efforts (at
Buyer's expense with respect to out-of-pocket expenses) to
enforce the same for the benefit of Buyer.
- 53 -<PAGE>
(c) For a period of six months after the Closing,
Buyer may continue to use the name "Zones" and the current
related signage and any similar or related property to the
extent currently used in connection with the operation of the
Centers; provided that Buyer shall no longer use such name,
signage or property in any manner thereafter.
(d) The Company shall enforce, and shall take all
actions reasonably requested by Buyer to enforce, all of the
Company's rights under the terms of the Prior Noncompetition
Agreement for the benefit of Buyer as if Buyer were the Com-
pany thereunder and shall pay over to Buyer, upon receipt,
any damages or other payments received in connection there-
with. The Company shall not waive or amend any provision
thereof without the prior written consent of Buyer, which
Buyer may withhold in its discretion.
Section 7.4 Employee, Customer and Supplier Rela-
tionships, etc. Pending the Closing, except as otherwise
agreed or requested by Buyer, the Company shall use its rea-
sonable best efforts (i) to preserve and protect the Pur-
chased Assets and the goodwill, business, rights, properties
and assets of the Company, the Centers and the Purchased As-
sets; (ii) to keep available to the Centers the services of
the present employees of the Centers (provided nothing in
this clause (ii) will be deemed to require the Company to pay
compensation or provide benefits in excess of the current
compensation and benefits of such employees); and (iii) to
preserve and protect the Centers' relationships with employ-
ees, creditors, suppliers, customers, advertisers and others
having business relationships with them.
Section 7.5 Conduct of Business. Pending the
Closing, the Company shall, except as set forth in Schedule
7.5 and unless otherwise agreed to by Buyer in writing:
(a) operate the business of the Centers in the or-
dinary course of business and consistent with past practice
and maintain the current business and legal organization of
the Company;
(b) deliver to Buyer within 20 days (but with re-
spect to those relating to August 1996, 29 days) of the end
of each accounting month, a balance sheet for the Company as
of the end of such month and a statement of income and ex-
penses for such month;
(c) not sell, lease, assign, mortgage, pledge,
transfer or otherwise acquire or dispose of, or enter into
any material lease, contract, license, commitment, agreement
- 54 -<PAGE>
or arrangement with respect to, any assets or properties, in-
cluding Company Intellectual Property, which are (or which,
but for such sale, transfer, lease or disposition would have
been) or would become (in the case of an acquisition) Pur-
chased Assets hereunder, except for personal property, sold
or otherwise disposed of in the ordinary course of business
and consistent with past practice;
(d) not (i) increase or otherwise change the rate
or nature of the compensation (including wages, salaries and
bonuses and benefits under bonus, severance, pension, profit
sharing, deferred compensation, group insurance, retirement
and other employee benefit plans, funds or similar arrange-
ments) which is paid or payable to any employee of the Com-
pany employed in connection with the operation of the Cen-
ters, except pursuant to the current terms of existing col-
lective bargaining agreements or compensation and fringe ben-
efit plans or as required by law, (ii) enter into any employ-
ment, severance, consulting, or similar agreement with, any
Buyer Employee, (iii) contribute or make any commitment to,
or representation that it will, contribute any amounts to any
bonus, severance, pension, profit sharing, deferred compensa-
tion, group insurance, retirement or other employee benefit
plan, fund or similar arrangement or collective bargaining
agreement for employees employed in connection with the op-
eration of the Centers, other than contributions made in the
ordinary course of business consistent with past practice, or
(iv) otherwise alter any such plan or the funding thereof,
except as required by law or by the current terms of any such
plan, agreement or arrangement as in effect on the date
hereof;
(e) maintain in full force and effect policies of
insurance of substantially the same type, character and cov-
erage as the policies currently carried by or for the benefit
of the Company with respect to the Purchased Assets and the
business, operations, assets and liabilities of the Centers;
(f) maintain its files and records in the usual,
regular and ordinary manner, consistent with past practice
and not make any change in the accounting methods or prac-
tices of the Company (except that expenses paid currently
which benefit future periods are now being recorded as pre-
paid expenses) or make any changes in the depreciation or am-
ortization policies or rates adopted by the Company;
(g) not merge or consolidate with any other Per-
son;
- 55 -<PAGE>
(h) promptly notify Buyer of any and all material
adverse changes which occur or arise between the date hereof
and the Closing Date or of any events or occurrences occur-
ring or arising which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Ef-
fect or a material adverse effect on the ability of the Com-
pany to consummate the transactions contemplated hereby oc-
curring or arising at any time after the date hereof;
(i) maintain all Purchased Assets in good working
order and repair, ordinary wear and tear excepted;
(j) cause all Liabilities relating to the business
of the Centers or the Purchased Assets to be paid or satis-
fied when the same become due, except Liabilities which are
being contested in good faith and by appropriate proceedings;
(k) not (i) remove any fixtures, equipment or per-
sonal property from the Centers other than in the ordinary
course of business and consistent with past practice unless
the same are replaced prior to the Closing Date with similar
items of at least equal value and quality; (ii) sell, dis-
count or otherwise dispose of any receivables (except by col-
lection in the ordinary course of business) that are (or
which, but for such sale, discount or disposition would have
been) among the Purchased Assets; (iii) except in the ordi-
nary course of business and consistent with past practice,
incur any material Liability with respect to the Centers or
the Purchased Assets; or (iv) except in the ordinary course
of business and consistent with past practice, cancel or com-
promise any debt or claim or waive or release any rights of
material value with respect to the Purchased Assets;
(l) except in the ordinary course of business and
consistent with past practice, (i) make no material change in
the character of the Purchased Assets or the business of the
Centers or, in connection with the business of the Centers,
enter into any new business or relocate any of its facilities
or acquire any additional operations or businesses and (ii)
not terminate, discontinue, close or dispose of any facility
or business operation relating to the Centers or the Pur-
chased Assets;
(m) not make any capital expenditures in connec-
tion with the business of the Centers except those listed on
Schedule 7.5(m) hereto or to which Buyer has consented in
writing after the date hereof and prior to the Closing;
(n) except in the ordinary course of business and
consistent with past practice, not transfer, grant, license,
- 56 -<PAGE>
assign, terminate or otherwise dispose of, modify, change or
cancel any rights or obligations with respect to any Company
Intellectual Property;
(o) not (i) declare, pay or set aside for payment
any dividend or other distribution in respect of its capital
stock, other than those payable in cash or other Retained As-
sets; (ii) directly or indirectly, redeem, purchase or other-
wise acquire any shares of its capital stock, other than for
cash or Retained Assets; or (iii) transfer to any Affiliate
of the Company or of any Stockholder any right, property or
interest, other than cash or other Retained Assets;
(p) not allow inventories to decline in condition
or usefulness or decrease in quantity below the normal and
ordinary amounts and quality which are necessary for the on-
going operation of the business of the Centers or which the
Company would have maintained had it not entered into this
Agreement; and
(q) not agree to take any of the actions prohib-
ited by this Section 7.5.
Section 7.6 Termination of Agreements. The Com-
pany shall terminate, unless Buyer otherwise requests in
writing prior to the Closing Date, effective as of the Clos-
ing Date or as of such other date set forth in Schedule
4.13(a) under the heading "Effective Termination Date," all
Terminated Contracts, including all leases, contracts, li-
censes, commitments, agreements and arrangements pursuant to
which the Company leases snack bars and pro shops and all
service or maintenance contracts, commitments, arrangements
and agreements, including, without limitation, those relating
to security, trash hauling, cleaning, gardening, extermina-
tion and heating, ventilation and air conditioning; provided,
that, in the case of each such termination, Buyer shall have
the right to review, and make reasonable comments on, the ap-
plicable notice of termination prior to its being given.
Section 7.7 No Solicitation. The Company shall
not, directly or indirectly, or through any officer, direc-
tor, agent or representative, solicit, initiate or intention-
ally encourage submission of proposals or offers from any
Person relating to any acquisition of all or a part of the
Purchased Assets or the Centers (an "Alternative Transac-
tion"), or participate in any negotiations regarding or fur-
nish to any other Person any information with respect to, or
otherwise cooperate in any way with, assist, facilitate or
encourage, any effort or attempt by any other Person to do or
seek an Alternative Transaction.
- 57 -<PAGE>
Section 7.8 Seaway Lanes Lease. Prior to the
Closing, the Company and Buyer shall enter into a lease (the
"Seaway Lease") to be effective immediately following the
Closing substantially in the form attached hereto as Exhibit
E (and which lease will be assignable subject to the consent
of the landlord which consent will not be unreasonably with-
held), which lease shall provide for the Company's lease to
Buyer of the real property used by Seaway Lanes in a shopping
center in Watertown, New York by the Company for a period of
ten years (with four 5-year extensions) for an aggregate cost
(including rent and any other payment required thereby) of
not more than (x) $75,000 per annum for the initial five-year
period and (y) the greater of $75,000 or 10% of revenues per
annum for the second five-year period in the initial term and
during any extension provided pursuant to the terms of such
lease.
Section 7.9 Capital Expenditures. (a) At the
Closing, provided Buyer has received documentation reasonably
acceptable to Buyer, Buyer shall reimburse the Company for
(x) any capital expenditures made by the Company prior to the
Closing Date which are listed on Schedule 7.5(m) or Schedule
7.9 hereto or to which Buyer has consented in writing after
the date hereof and prior to the Closing, and (y) any ad-
ditional capital expenditures the Company makes on an emer-
gency basis consistent with past practice (but in an amount
not to exceed $10,000 with respect to any individual event
without the prior oral approval of Buyer).
(b) If, following the Closing, but prior to Janu-
ary 1, 1998, Buyer determines to add additional parking
spaces at Lincoln Lanes (or the related golf course, banquet
or other facilities) in Grand Rapids, Michigan in order to
provide for additional parking availability, the Company
shall reimburse Buyer for the costs thereof, but not in ex-
cess of $100,000, subject to the Company's reasonable review
of such expenditures.
Section 7.10 Bulk Transfer. Buyer hereby waives
compliance by the Company with any applicable bulk sales law
in connection with the sale of the Purchased Assets. The
Company will indemnify and hold Buyer harmless from any li-
ability as a result of the failure to comply with any ap-
plicable bulk sales law.
Section 7.11 Insurance Proceeds. At the Closing
(A) the Company shall assign to Buyer all of its right, title
and interest in and to all insurance proceeds payable, or
claims available to the Company, by reason of the occurrence
of damage to any of the Purchased Assets caused by fire or
- 58 -<PAGE>
other casualty and all awards payable by reason of a taking
in condemnation or by eminent domain, or by sale in lieu
thereof, of any part of the Purchased Assets, and (B) the
Company shall pay over to Buyer the proceeds of any insur-
ance, condemnation or eminent domain taking, or sale in lieu
thereof, which have not theretofore been utilized to repair
or restore the affected portion of the Purchased Assets and,
in the event of an insured casualty to the affected Purchased
Assets, the amount of any deductible under the insurance cov-
ering the casualty. To the extent any claim referred to in
this Section 7.11 is not assignable as contemplated hereby,
the Company shall enforce such claim to the extent requested
by Buyer and pay the proceeds thereof to Buyer upon receipt
thereof. From and after the date hereof, the Company will
not settle any claims for insurance with respect to the Cen-
ters or the Purchased Assets without the prior written con-
sent of Buyer, except with respect to claims relating solely
to Liabilities of the Company that are not included in the
Assumed Liabilities. Buyer's rights under this Section 7.11
shall not prejudice any other rights of Buyer hereunder, in-
cluding without limitation, Buyer's right to terminate this
Agreement in accordance with the provisions hereof if the
conditions set forth in Section 8.1 have not been satisfied
notwithstanding the assignments to Buyer contemplated by this
Section 7.11.
Section 7.12 Acquisition of Certain Bowling Cen-
ters; MJR Liquor Licenses. (a) At or prior to the Closing,
the Company shall purchase and shall cause the owners thereof
to sell, for cash (and, thereafter and until the Closing,
maintain such ownership of) (such purchase or acquisition,
the "Affiliate Centers Acquisition") (i) the real property on
which Wantagh Lanes in Wantagh, New York, University Lanes,
in Charlotte, North Carolina and Hilltop Lanes in Roanoke,
Virginia are located and (ii) the Center called Regal Lanes
in Mishawaka, Indiana, the real property on which such Center
is located and all rights, assets and property related to the
operation of the business of the Centers and the Purchased
Assets in connection with each of the foregoing referred to
in clauses (i) and (ii), as more explicitly described in
Schedule 7.12 hereto, and any contiguous real property owned
by any Affiliate of the Company (the "Affiliate Centers").
The Affiliate Centers shall be deemed to be Centers hereun-
der. The rights, assets and property (including real prop-
erty, which shall also be deemed to be Owned Property here-
under) of or related to the Affiliate Centers shall be deemed
to be Purchased Assets hereunder. All representations, war-
ranties, covenants and agreements (including indemnities) of
or by the Company contained herein shall be deemed to include
the Affiliate Centers and the rights, assets and properties
- 59 -<PAGE>
(including real properties) as if the Affiliate Centers and
such rights, assets and properties (including real proper-
ties) were owned by the Company as of the date hereof. Prior
to the transfer contemplated by this Section 7.12(a), the
Company will ensure that the Affiliates that own the Affili-
ate Centers and the related rights, assets and properties
(including real properties) shall comply with all covenants
and agreements of the Company hereunder with respect to such
Affiliate Centers, rights, assets and properties (including
real properties), as if such Affiliates were the Company
hereunder.
(b) At the Closing, the Company shall cause MJR to
transfer (the "MJR Transfer") to Buyer if, and to the extent
permitted by law, the Company Liquor Licenses held by MJR,
and all other rights, assets or property owned or used by MJR
in connection with the Centers.
Section 7.13 Armonk Bowl. Prior to the second an-
niversary of the date hereof, the Company shall permanently
close the bowling center operations at Armonk Bowl, located
in Armonk, New York. If the Company at any time proposes to
sell or lease the property or building on which Armonk Bowl
is located to a third party to be used as a bowling center
(any sale or lease of such property or building together with
a substantial portion of its bowling machinery and equipment
shall be deemed to be such a sale or lease giving rise to the
rights in this Section 7.13), the Company shall deliver to
Buyer notice (the "Proposal Notice") of such proposal, the
name and description, in reasonable detail, of such third
party, and all of the material terms and, conditions of such
proposed transaction, at least 120 days prior to the date of
such proposed sale or lease, as applicable. Buyer shall have
60 days from receipt of the Proposal Notice to provide the
Company with notice (the "Exercise Notice") of its desire to
exercise a right of first refusal, and, if it so elects,
shall purchase or lease, as applicable, Armonk Bowl, on the
terms and conditions set forth in the Proposal Notice. If
the Exercise Notice is not delivered within such 60-day pe-
riod, the Company shall be permitted to sell or lease, as ap-
plicable, Armonk Bowl for a period of 60 days following the
end of the 60-day period in which Buyer may deliver the Exer-
cise Notice only to the proposed third party and only on
terms and conditions no less favorable than those set forth
in the Proposal Notice. If Buyer delivers an Exercise Notice
within the applicable 60-day period, the Company shall sell
or lease, as applicable, Armonk Bowl and/or such equipment,
as applicable, to Buyer on the terms and conditions set forth
in the Proposal Notice on a date to be agreed upon between
Buyer and the Company during such 120-day period.
- 60 -<PAGE>
Section 7.14 Liens. If there are any Liens, mort-
gages, deeds of trust, deeds to secure debt or title defects
relating to the Real Property existing on the date hereof or
which come into effect following the date hereof with the ex-
press consent of the Company, in each case, which may be
eliminated or discharged by the payment of money, the Company
shall so eliminate or discharge the same on or before the
Closing Date.
Section 7.15 Non-Competition. (a) The Company
agrees that during the five-year period from and after the
Closing Date (the "non-competition period"), except as other-
wise provided in Section 7.13 or Section 7.16, the Company,
the Stockholders (other than Eileen Pettus) and the Company
Affiliates will not, directly or indirectly, participate in
or permit its name to be used by any Person involved in the
same or similar business as the Business. For purposes of
this Agreement, the term "Business" shall mean any of the
following: owning, operating, managing or leasing (as lessee)
bowling centers located anywhere in the United States or en-
gaging in any promotional, marketing or sales activity with
respect to the business of operating a bowling center located
anywhere in the United States. The term "Business" shall not
include the sale or distribution of bowling equipment, or
parts and consumer products related to bowling. The term
"participate" includes any direct or indirect interest,
whether as a partner, sole proprietor, trustee, beneficiary,
agent, representative, independent contractor, consultant,
advisor, provider of personal services, creditor, owner
(other than by ownership of less than five percent of the
stock of a publicly-held corporation whose stock is traded on
a national securities exchange or in the over-the-counter
market). The Company agrees that this covenant is reasonable
with respect to its duration, geographical area and scope.
If, at the time of enforcement of this Section 7.15(a), a
court holds that the restrictions stated herein are unreason-
able under circumstances then existing, the parties hereto
agree that the maximum period, scope, or geographical area
legally permissible under such circumstances will be substi-
tuted for the period, scope or area stated herein.
(b) The Company agrees that during the five-year
period from and after the Closing Date, without the prior
written approval of Buyer, the Company, the Stockholders
(other than Eileen Pettus) and the Company Affiliates will
not solicit (i) any person who was an employee of the Company
and who becomes an employee of Buyer or any of its Affili-
ates, (ii) any customer of Buyer or its Affiliates, including
- 61 -<PAGE>
any bowling league, or (iii) any supplier to Buyer or its Af-
filiates, in any such case, to terminate his or her employ-
ment or relationship with Buyer or any of its Affiliates.
The Company agrees that this covenant is reasonable with re-
spect to its duration and scope. If, at the time of enforce-
ment of this Section 7.15(b), a court holds that the restric-
tions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period or
scope legally permissible under such circumstances will be
substituted for the period or scope stated herein.
Section 7.16 Strathmore Lanes. In connection with
a potential right of first refusal relating to the Real Prop-
erty on which Strathmore Lanes in Aberdeen, New Jersey is op-
erated, the parties hereto agree that, if either of the par-
ties hereto is not satisfied, in its sole discretion, that
such right of first refusal, if any, is inapplicable to the
transactions contemplated hereby, such Center and its related
equipment shall not be sold pursuant hereto and the Initial
Purchase Price shall be reduced on the Closing Date by
$4,600,000 and the parties shall wait until 30 days has ex-
pired from the date of documented receipt by the attorney for
the purported beneficiary (the "Purported Beneficiary") of
such right of first refusal of the August 30, 1996 notice
sent by the Company to such attorney. At the end of such 30-
day period (the "Notice Period") the following provisions
shall apply:
(i) if, at the end of the Notice Period, the Pur-
ported Beneficiary has waived or not exercised any such right
of first refusal, if any, the Company shall represent to Buyer
that it has given the notice required to be given to the Pur-
ported Beneficiary pursuant to the terms of such potential
right of first refusal and such right, if any, has lapsed or
been waived and, subject to Buyer's reasonable satisfaction
therewith, the parties hereto promptly shall complete the sale
of such property and equipment by the Company to Buyer for
$4,600,000 under the terms contemplated by this Agreement, as
if such property were being transferred at the Closing pursuant
to this Agreement, so long as all the representations, warran-
ties, covenants, conditions and agreements contained herein ap-
plicable to such Center shall continue to be true and correct
and satisfied as of the date of such transfer. Any Liabilities
to the Purported Beneficiary arising out of this transaction
shall be treated as Retained Liabilities hereunder, and the
Company shall use reasonable efforts to defend against any such
claims and the Company shall indemnify and hold Buyer harmless
with respect to all Actions and Losses related thereto. If,
within one year of the Closing Date, it is determined pursuant
to a final and nonappealable order or judgment of a court of
- 62 -<PAGE>
competent jurisdiction (a "Final Determination") (or if such a
proceeding is pending as of such one-year anniversary date,
then at the time a Final Determination has been made with re-
spect to such proceeding) that the Company must deliver such
Center to the Purported Beneficiary, then, if the Company shall
be required to (and thereafter does) convey such Center to the
Purported Beneficiary pursuant to the Final Determination in
any such proceeding, Buyer shall convey the Center to the Com-
pany in exchange for $4,600,000 in cash and the Company shall
reimburse Buyer for its reasonable expenses in connection
therewith (not to exceed $25,000 without the consent of the
Company), in addition to any severance obligations (other than
severance relating to Buyer's severance policies or agreements
in excess of those in effect as of the Closing Date or contem-
plated pursuant hereto) and any capital expenditures (but, with
respect to capital expenditures, not to exceed the total cost
of (x) $50,000 during the first six-month period (or portion
thereof) after the Closing, (y) an additional $25,000 during
each six-month period (or portion thereof) thereafter and (z)
additional capital expenditures with the consent of the Com-
pany, which consent shall not be unreasonably withheld) made by
Buyer, and shall assume any Liabilities of Buyer consistent
with those assumed by Buyer in connection with the acquisition
thereof;
(ii) if, at the end of the Notice Period, the Pur-
ported Beneficiary has agreed to buy the Center pursuant to the
right of first refusal, if any, applicable to the transactions
contemplated hereby, then the Seller may continue to operate
such Center until consummation of such sale; provided that if
consummation of such sale does not occur within 60 days (or 75
days if such consummation appears imminent at the end of such
60-day period, or if a proceeding with respect thereto is then
pending, until there has been a Final Determination with re-
spect to such proceeding) after the end of the Notice Period,
then the parties hereto shall consummate the sale of the Center
pursuant to clause (i) to this Section 7.16 (provided that
Buyer's obligation to consummate such transaction will termi-
nate one year after the Closing Date, but notwithstanding such
termination, after such one-year anniversary Buyer may elect to
consummate such transaction and if Buyer does so elect within
60 days of the Final Determination, the Company shall be re-
quired to consummate such transaction), as if the right of
first refusal, if any, was waived and the provisions thereof
shall apply, except that Buyer's purchase price shall be re-
duced by such Center's net operating income (exclusive of pay-
ments to Stockholders or their Affiliates, but including over-
head, not to exceed $2,500 per month), if positive, from the
operation of such Center (including any rents received from the
- 63 -<PAGE>
leases of such property) from the Closing Date through the date
of the sale of such Center to Buyer; or
(iii) if, at the end of the Notice Period, the Pur-
ported Beneficiary has not agreed to buy the Center for at
least $4,600,000, but either party hereto in its sole discre-
tion is not satisfied that any right of first refusal period,
if any, has lapsed with respect thereto, the Company will, as
of the Closing Date, lease such Center and the related equip-
ment to Buyer (and transfer to Buyer the rights as landlord
with respect to any leases pursuant to which any Persons lease
space or real property from the Company or any of its Affili-
ates on the property on which such Center is located) at a
rental rate of zero for the first three months, $22,500 per
month for the next three months and $40,000 per month for the
last six months (on a triple net basis) for a twelve-month pe-
riod beginning on the Closing Date (or, if later, the end of
the Notice Period), pursuant to a lease to be reasonably ac-
ceptable to the parties hereto (the "Strathmore Lease") (which
lease shall be terminable if the Purported Beneficiary acquires
such property pursuant to the right of first refusal, if any).
If both parties hereto, during such twelve-month period, become
satisfied, in their sole discretion, that such right of first
refusal, if any, would not, or would no longer, be applicable
to the transfer of such property as contemplated hereby, either
party may require the other party to complete the sale of such
property and equipment by the Company to Buyer for $4,600,000
under the terms contemplated by this Agreement, as if such
property were being transferred at the Closing pursuant to this
Agreement, so long as all the representations, warranties, cov-
enants, conditions and agreements contained herein applicable
to such Center shall continue to be true and correct and satis-
fied as of the date of such transfer. If the Strathmore Lease
is terminated or expires without the Company transferring own-
ership of the property and equipment to Buyer, the Company will
reimburse Buyer for any severance obligations and capital ex-
penditures (in each case, subject to the limitations provided
in clause (i) of this Section 7.16) made by Buyer during the
term of such lease.
In connection with this Section 7.16, the Company
agrees to use all reasonable efforts to resolve all issues re-
lating to any such right of first refusal as expeditiously as
possible.
Section 7.17 Golf Course Easement. The Company and,
to the extent applicable, its Affiliates shall, at or prior to
the Closing, grant in a writing, in recordable form, a per-
petual easement, reasonably acceptable to Buyer (and for the
benefit of Buyer and its successors and assigns, for the use by
- 64 -<PAGE>
Buyer and its successors, assigns, agents, Affiliates, contrac-
tors, invitees and patrons), with respect to the land abutting
the fourth fairway of the golf course at Lincoln Lanes in
Walker, Michigan (which land is approximately 10 feet wide and
200 yards long and the outer width of which in part is demar-
cated by a fence) currently owned by the Company and its Af-
filiates, for the purpose (and only to the extent reasonably
required to continue play on the fourth hole (as currently
played), as reasonably agreed to by Buyer and the Company) of
access and use of the easement premises in connection with the
use and operation of such golf course (the "Golf Course Ease-
ment").
ARTICLE VIII
Conditions of Buyer's Obligation to Close
Buyer's obligation to consummate the transactions
contemplated hereby shall be subject to the satisfaction on or
prior to the Closing Date of all of the following conditions:
Section 8.1 Representations, Warranties, Covenants
and Agreements of the Company. The representations and warran-
ties of the Company contained in this Agreement (when read
without regard to any qualifications to such representations
and warranties as to knowledge or materiality (including as to
whether it has a Material Adverse Effect)) shall be true and
correct when made and, except for representations and warran-
ties that speak as of a specific date or time (which need only
be true and correct as of such date or time), on and as of the
Closing Date, with the same effect as though such representa-
tions and warranties had been made on and as of such date, in
any case, except for such breaches and inaccuracies in repre-
sentations and warranties which could not reasonably be ex-
pected to have a Material Adverse Effect, and the covenants and
agreements of the Company contained in this Agreement to be
performed on or before the Closing Date in accordance with this
Agreement shall have been duly performed in all material re-
spects, and Buyer shall have received at the Closing a certifi-
cate to the effect of the foregoing dated the Closing Date and
validly executed by a senior officer of the Company. For pur-
poses of this condition, breaches and inaccuracies of represen-
tations and warranties shall be deemed to be reasonably ex-
pected to have a Material Adverse Effect when the aggregate
consequences of all breaches and inaccuracies of representa-
tions and warranties of the Company, when read without regard
to any qualification to such representations and warranties as
to knowledge or materiality (including as to whether it has a
- 65 -<PAGE>
Material Adverse Effect), could reasonably be expected to have
a Material Adverse Effect.
Section 8.2 Filings; Consents; Waiting Periods. All
registrations, filings, applications, notices, licenses, per-
mits, consents, approvals, orders, qualifications and waivers
necessary for Buyer to own the Purchased Assets and conduct the
business of the Centers as they are currently conducted shall
have been filed, made or obtained, as applicable, without any
significant conditions or restrictions imposed (including,
those relating to the receipt of licenses to sell or serve al-
coholic beverages or to engage in gaming, lottery or gambling
activities and including those which impose restrictions on the
terms of the transactions contemplated hereby or by the Ancil-
lary Agreements or the current or future ownership or operation
of the Centers or any other activities or business of Buyer or
its Affiliates), and all applicable waiting periods under the
HSR Act shall have expired or been terminated; provided, how-
ever, with respect to the receipt of licenses to sell or serve
alcoholic beverages or to engage in gaming, lottery or gambling
activities (or the necessary consents or approvals with respect
thereto), such condition shall not be satisfied unless Buyer is
reasonably satisfied that licenses are in place or that other
appropriate mechanisms which will not result in denial or loss
of a license or civil penalties or put the Company at risk of
an enforcement action for a violation are in place and, in each
case, are expected to remain in place for the foreseeable fu-
ture without material risk or expectation of losing such abil-
ity in the future (other than the risk that any holder of a li-
quor license or a gaming, lottery or gambling license that com-
plies with the terms and requirements of such license and the
relevant law generally bears of nonrenewal) so that after the
Closing alcoholic beverages can continue to be sold or served
and gaming, lottery, and gambling activities can continue to be
conducted in essentially the same manner and on essentially the
same terms (and without any additional material restrictions)
as before the Closing and in compliance with all applicable
statutes, laws, regulations, ordinances, rules, judgments, or-
ders, decrees and licenses of any Governmental Authority relat-
ing to the sale or service of alcoholic beverages or engaging
in gaming, lottery and gambling activities at Centers (or re-
lated premises, including the facilities referred to in Recital
A and their related premises) which, during the fiscal year
ended August 31, 1995 had at least 90% of the total revenues
from the sale and/or service of alcoholic beverages and, other
than in the State of Washington, gaming, lottery and gambling
activities (and from any related management service agreements
and leases) during such period.
- 66 -<PAGE>
Section 8.3 Litigation; Injunction. There shall be
no injunction, restraining order or decree of any nature of any
Governmental Authority of competent jurisdiction that is in ef-
fect that restrains or prohibits or imposes substantial penal-
ties or damages on Buyer or the Company and their respective
Affiliates with respect to (or any other materially adverse re-
lief or remedy in connection with, including those which impose
restrictions on the terms of the transactions contemplated
hereby or by the Ancillary Agreements or the current or future
ownership or operation of the Centers or any other activities
or business of Buyer or its Affiliates), the consummation of
the transactions contemplated hereby or the performance of the
other material obligations of the Company or Buyer under this
Agreement or the Ancillary Agreements, and there shall be no
Action pending or threatened seeking such relief.
Section 8.4 Liens. There shall have been eliminated
or discharged (a) all Liens on the Purchased Assets, other than
Permitted Liens, and (b) the lien of the first mortgage encum-
bering the real property commonly known as 2305 South M-139,
Benton Harbor, Michigan, and, in each case, Buyer shall have
received evidence thereof which is satisfactory to it.
Section 8.5 Opinions. Buyer shall have received at
Closing an opinion addressed to Buyer and dated the Closing
Date from Farrell, Fritz, Caemmerer, Cleary, Barnosky & Arman-
tano, counsel to the Company, with respect to the matters and
substantially in the form set forth in Exhibit F hereto. Such
opinion shall state that such opinion is made for the benefit
of Buyer, Buyer's debt and equity financing sources and Buyer's
counsel and that Buyer's financing sources and counsel shall be
entitled to rely thereon as if such opinion were addressed to
such sources.
Section 8.6 Non-Competition Agreements; Ancillary
Agreements; Closing Date Deliveries. Buyer shall have received
(i) from each Stockholder other than Eileen Pettus a fully ex-
ecuted counterpart to a Non-Competition Agreement (collec-
tively, the "Non-Competition Agreements") substantially in the
form attached hereto as Exhibit G and such agreements shall be
in full force and effect; (ii) fully executed counterparts of
the Ancillary Agreements and such agreements shall be in full
force and effect and (iii) the deliveries contemplated by Sec-
tion 3.2(a).
Section 8.7 Affiliate Centers Acquisitions; MJR
Transfer. (a) The Affiliate Centers Acquisition shall have
been consummated and the Company shall be delivering good and
marketable title to the Owned Property and good and valid title
- 67 -<PAGE>
to the other rights, assets and property relating to the Af-
filiate Centers as part of the Purchased Assets and (b) the MJR
Transfer shall have been consummated.
Section 8.8 Proceedings; Certificates. All corpo-
rate proceedings of the Company that are required in connection
with the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Buyer and its counsel,
and Buyer and its counsel shall have received such evidence of
such corporate proceedings, certified if requested, as may be
reasonably requested and is customary in transactions such as
the transactions contemplated hereby.
Section 8.9 Title Insurance. A title insurance com-
pany or companies selected by Buyer (the "Title Company") shall
have issued ALTA Owner's and Leasehold title insurance policies
(or "marked" title insurance commitments having the same force
and effect as title insurance policies), in form and substance
reasonably acceptable to Buyer, insuring, as the case may be,
(i) the fee simple title of the Company, as applicable, to each
parcel of Owned Property, (ii) the leasehold estate (and any
purchase option rights) of the Company, as applicable, in each
of the Leases, and (iii) the Lien on any of the Real Property
required by any lender providing Buyer financing in connection
with the transactions contemplated hereby or by the Ancillary
Agreements, and, in the case of each such policy: (a) provid-
ing insurance in the amount of the value of the insured estate
(as determined by Buyer); (b) insuring good and marketable
title to the insured estate, free and clear of all exceptions
other than the Permitted Liens; (c) with all general exceptions
(including, without limitation, any exception for materialmen's
or laborers' Liens, rights of third parties in possession or
otherwise under unrecorded instruments, general survey matters,
and matters filed but not yet appearing of record) deleted; (d)
containing a description of the insured property based, at
Buyer's election, on the Surveys described below; and (e) in-
cluding such endorsements and affirmative coverage as Buyer
shall reasonably request (all such title insurance policies be-
ing hereinafter collectively referred to as the "Title Insur-
ance Policies"). The premiums for the Title Insurance Policies
shall be paid by Buyer.
Section 8.10 Surveys. Buyer shall have received
with respect to each parcel of Owned Property, to the extent
requested by Buyer, an instrument survey, prepared by a duly
licensed surveyor in accordance with ALTA specifications and
reasonably satisfactory in form and substance to Buyer, prop-
erly certified to the Title Company, any lenders designated by
Buyer, and, as selected by Buyer, the Company, and/or Buyer,
with each such survey: (i) showing the boundaries of such
- 68 -<PAGE>
Owned Property and the location, setbacks, side yards and di-
mensions of each structure and improvement located thereon, the
location of the public streets adjoining such Owned Property
and the means of ingress and egress to and from such streets,
and the location of all easements of record and utility lines
serving such Owned Property; (ii) indicating that none of the
improvements on such Owned Property encroaches upon adjacent
lands and that no portion of such Real Property is located in
any flood plain, and disclosing no title defects, easements,
third-party rights or claims or other encumbrances other than
the Permitted Liens; (iii) being dated within 30 days prior to
the Closing Date; and (iv) being sufficient to cause the Title
Company to delete from each of the Title Insurance Policies the
general survey exception (all such surveys being herein col-
lectively referred to as the "Surveys").
Section 8.11 Title Insurance Affidavits. At or
prior to the Closing, the Company shall deliver to Buyer and
the Title Company such affidavits, certifications, evidence of
corporate authority and other instruments, and, to the extent
reasonably acceptable to the Company, indemnities, as the Title
Company shall typically require in similar transactions in or-
der to issue the Title Insurance Policies.
Section 8.12 Estoppel Certificates. The Company
shall obtain and deliver to Buyer at least three days prior to
the Closing Date an estoppel certificate (including, if re-
quested by Buyer, a consent to the transactions contemplated by
this Agreement) in the form set forth in Exhibit H hereto, duly
and properly executed by the landlord(s) under each Lease.
Section 8.13 Transfer Tax Returns. The Company and
Buyer shall execute and deliver such transfer tax returns and
forms in connection with the transfers of Real Property pro-
vided for herein as may be required under the laws of each
state in which such Real Property is located.
Section 8.14 UCC. Buyer shall have received, in
form and substance reasonably satisfactory to Buyer, the re-
sults of an examination of financing statements, judgment liens
and tax liens filed under the Uniform Commercial Code in each
office in each such jurisdiction as counsel for Buyer shall
reasonably request.
- 69 -<PAGE>
ARTICLE IX
Conditions to the Company's Obligation to Close
The Company's obligation to consummate the transac-
tions contemplated hereby shall be subject to the satisfaction
on or prior to the Closing Date of all of the following condi-
tions:
Section 9.1 Representations, Warranties, Covenants
and Agreements of Buyer. The representations and warranties of
Buyer contained in this Agreement (when read without regard to
any qualifications to such representations and warranties as to
knowledge or materiality (including as to whether it has a Ma-
terial Adverse Effect)) shall be true and correct when made
and, except for representations and warranties that speak as of
a specific date or time (which need only be true and correct as
of such date or time), on and as of the Closing Date, with the
same effect as though such representations and warranties had
been made on and as of such date, except for such breaches and
inaccuracies in representations and warranties which could not
reasonably be expected to have a material adverse effect on
Buyer's ability to consummate the transactions contemplated
hereby, and the covenants and agreements of Buyer contained in
this Agreement to be performed on or before the Closing Date in
accordance with this Agreement shall have been duly performed
in all material respects, and the Company shall have received
at the Closing a certificate to that effect dated the Closing
Date and validly executed by a senior officer of Buyer.
Section 9.2 Filings; Consents; Waiting Periods. All
registrations, filings, applications, notices, consents, ap-
provals, orders, qualifications and waivers necessary for the
Company to sell the Purchased Assets hereunder shall have been
filed, made or obtained, as applicable, without any significant
conditions or restrictions imposed (including those which im-
pose restrictions on the terms of the transactions contemplated
hereby or by the Ancillary Agreements or the current or future
ownership, operation or activities or business of the Company
or its Affiliates) and all applicable waiting periods under the
HSR Act shall have expired or been terminated.
Section 9.3 Litigation; Injunction. There shall be
no injunction, restraining order or decree of any nature of any
Governmental Authority of competent jurisdiction that is in ef-
fect that restrains or prohibits or imposes substantial penal-
ties or damages on the Company and their Affiliates with re-
spect to (or any other materially adverse relief or remedy in
connection with, including those which impose restrictions on
- 70 -<PAGE>
the terms of the transactions contemplated hereby or by the An-
cillary Agreements or the current or future ownership, opera-
tion or activities or business of the Company or its Affili-
ates), the consummation of the transactions contemplated hereby
or the performance of the other material obligations of the
Company or Buyer under this Agreement or the Ancillary Agree-
ments, and there shall be no Action pending or threatened seek-
ing such relief.
Section 9.4 Opinions. The Company shall have re-
ceived from (i) Wachtell, Lipton, Rosen & Katz, Buyer's coun-
sel, its opinion addressed to the Company and dated the Closing
Date with respect to the matters and substantially in the form
set forth in Exhibit I hereto and (ii) the General Counsel of
Buyer an opinion addressed to the Company and dated the Closing
Date with respect to the matters and substantially in the form
set forth in Exhibit J hereto.
Section 9.5 Ancillary Agreements; Closing Date De-
liveries. (i) The Company shall have received (a) fully ex-
ecuted counterparts of the Ancillary Agreements and such agree-
ments shall be in full force and effect and (b) the deliveries
contemplated by Section 3.2(b), and (ii) the Escrow Agent shall
have received the delivery contemplated by Section 3.2(c).
Section 9.6 Affiliate Payable. The Affiliate Pay-
able shall have been forgiven; provided, that if the Affiliate
Payable is in an amount in excess of $500,000, such forgiven
amount shall be $500,000 and the excess shall remain payable by
the Company.
Section 9.7 Proceedings; Certificates. All corpo-
rate proceedings of Buyer that are required in connection with
the transactions contemplated by this Agreement shall be rea-
sonably satisfactory in form and substance to the Company and
its counsel, and the Company and its counsel shall have re-
ceived such evidence of such corporate proceedings, certified
if requested, as may be reasonably requested and is customary
in transactions such as the transactions contemplated hereby.
ARTICLE X
Termination
10.1 Termination Events. This Agreement may be ter-
minated at any time prior to the Closing as follows:
(a) by mutual consent of the Company and Buyer;
- 71 -<PAGE>
(b) by the Company if (i) Buyer is in material
breach of this Agreement and (ii) the Company is not in mate-
rial breach of this Agreement;
(c) by Buyer if (i) the Company is in material
breach of this Agreement and (ii) Buyer is not in material
breach of this Agreement;
(d) by the Company or by Buyer if, at or before the
Closing, any condition set forth herein for the benefit of such
terminating party shall not have been timely met and cannot be
met on or before December 31, 1996 and has not been waived;
provided, that the terminating party is not in material breach
of this Agreement; or
(e) by Buyer or the Company, if the Closing shall
not have occurred on or before December 31, 1996; provided,
that the terminating party is not in material breach of this
Agreement.
Except as otherwise provided in Section 10.2, each
party's right of termination hereunder is in addition to any of
the rights it may have hereunder or otherwise.
10.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Sec-
tion 10.1 hereof, this Agreement shall forthwith become void
and have no further effect, except that the provisions of Sec-
tions 7.1(b), 7.1(d) and 12.4 shall survive such termination,
and no such termination of this Agreement shall release any
party from liability for any breach hereof occurring prior to
the date of termination.
ARTICLE XI
Indemnification
Section 11.1 Buyer Indemnified Parties' Right to In-
demnification. The Company agrees to indemnify and hold Buyer,
its Affiliates, each of their respective stockholders, part-
ners, directors, officers, employees and agents, and each of
the heirs, executors, successors and assigns of any of the
foregoing (collectively, the "Buyer Indemnified Parties") harm-
less after the Closing against all losses, liabilities, claims,
damages, costs, expenses, fines and penalties (including (i)
the cost of investigating, preparing or defending any Action
against which such Person would be indemnified if required to
pay any Liabilities as a result thereof, (ii) reasonable attor-
neys' fees and expenses and (iii) any such Liabilities incurred
- 72 -<PAGE>
in connection with the enforcement of any valid demand or claim
hereunder, but excluding consequential damages, except to the
extent the indemnified party is seeking reimbursement for the
cost of consequential damages it was required to pay to a third
party) (collectively, "Losses") suffered by any Buyer Indemni-
fied Party resulting from or arising out of (a) any breach by
the Company of this Agreement or any of the Ancillary Agree-
ments; (b) any inaccuracy in or breach of any of the represen-
tations or warranties made by the Company herein or in any of
the Schedules; (c) any breach or nonfulfillment of any cove-
nants or agreements made by the Company herein or in any of the
Schedules; (d) any inaccuracy or misrepresentation by the Com-
pany in a certificate, affidavit or other document or instru-
ment executed and delivered in connection with the Closing in
accordance with the provisions of this Agreement; and (e) any
Retained Assets or Retained Liabilities.
Section 11.2 Limitations on Buyer Indemnified Par-
ties' Right to Indemnification. The Buyer Indemnified Parties'
rights to indemnification pursuant to Section 11.1 hereof are
subject to the following specific limitations:
(a) Except as provided in Section 11.2(b), a Buyer
Indemnified Party shall not be entitled to assert any right of
indemnification pursuant to clause (b) of Section 11.1 for any
Losses suffered by it arising from a breach by the Company of
any warranty or representation set forth in this Agreement
(other than those contained in Sections 4.1, 4.2 and 4.13(c)
hereof, the third sentence of Section 4.4(a), and the first
sentence of Section 4.5(a) solely, with respect to those con-
tained in the third sentence of Section 4.4(a) and the first
sentence of Section 4.5(a), as each relates to good (and mar-
ketable or valid, as applicable) title to and ownership of the
property referred to therein, subject to the qualifications
contained therein) after the second anniversary of the Closing
Date; provided that if on or prior to such second anniversary
date a Notice of Claim shall have been given to the Company,
pursuant to Section 11.4 hereof, for such indemnification, the
Buyer Indemnified Party shall continue to have the right to be
indemnified with respect to such indemnification claim until
such claim for indemnification has been satisfied or otherwise
resolved as provided in this Article XI.
(b) The provisions of Section 11.2(a) shall not
limit or restrict any indemnification claims of any Buyer In-
demnified Party (i) pursuant to clauses (a), (c) or (e) of Sec-
tion 11.1 or (ii) with respect to any inaccuracy in or breach
of any of the representations or warranties made by the Company
in Sections 4.1, 4.2 and 4.13(c) hereof, or the third sentence
of Section 4.4(a) or the first sentence of Section 4.5(a)
- 73 -<PAGE>
(solely, with respect to those contained in the third sentence
of Section 4.4(a) and the first sentence of Section 4.5(a), as
each relates to good (and marketable or valid, as applicable)
title to and ownership of the property referred to therein,
subject to the qualifications contained therein) or the Sched-
ules to such Sections.
(c) Anything to the contrary in this Article XI not-
withstanding, the Company shall (i) be liable to the Buyer In-
demnified Parties only to the extent that all Losses experi-
enced by all Buyer Indemnified Parties exceed $500,000 in the
aggregate with respect to all such Losses, in which event the
indemnity provided for herein by the Company shall apply with
respect to all such Losses in excess of the initial $500,000.
The provisions of this Section 11.2(c) shall not limit or re-
strict any indemnification claims of any Buyer Indemnified
Party pursuant to clause (e) of Section 11.1.
Section 11.3 Company Indemnified Parties' Right to
Indemnification. Buyer agrees to indemnify and hold the Com-
pany, its Affiliates, each of their respective stockholders,
partners, directors, officers, employees and agents, and each
of the heirs, successors and assigns of any of the foregoing
(collectively, the "Seller Indemnified Parties") harmless after
the Closing against any Losses suffered by the Company result-
ing from or arising out of (a) any breach by Buyer of this
Agreement or any of the Ancillary Agreements; (b) any inaccu-
racy in or breach of any of the representations or warranties
made by Buyer herein or in any of the Schedules; (c) any breach
or nonfulfillment of any of the covenants or agreements made by
Buyer herein or in any of the Schedules; (d) any inaccuracy or
misrepresentation by Buyer in a certificate, affidavit or other
document or instrument executed and delivered in connection
with the Closing in accordance with the provisions of this
Agreement; and (e) any Assumed Liabilities.
Section 11.4 Indemnification Procedures. (a) Upon
obtaining knowledge of any claim or demand which has given rise
to, or is expected to give rise to, a claim for indemnification
hereunder, the party seeking indemnification ("Indemnitee")
shall give written notice ("Notice of Claim") of such claim or
demand to the indemnifying party ("Indemnitor"). Indemnitee
shall furnish to the Indemnitor in reasonable detail such in-
formation as Indemnitee may have with respect to such indemni-
fication claim (including copies of any summons, complaint or
other pleading which may have been served on it and any written
claim, demand, invoice, billing or other document evidencing or
asserting the same). Subject to the limitations set forth in
Section 11.2(a) hereof, no failure or delay by Indemnitee in
- 74 -<PAGE>
the performance of the foregoing shall reduce or otherwise af-
fect the obligation of Indemnitor to indemnify and hold Indem-
nitee harmless, except to the extent that such failure or delay
shall have actually adversely affected Indemnitor's ability to
defend against, settle or satisfy any Losses for which Indemni-
tee is entitled to indemnification hereunder.
(b) If the claim or demand set forth in the Notice
of Claim given by Indemnitee pursuant to Section 11.4(a) hereof
is a claim or demand asserted by a third party, Indemnitor
shall have 15 days after the date on which Notice of Claim is
given to notify Indemnitee in writing of its election to defend
such third party claim or demand on behalf of the Indemnitee.
If Indemnitor elects to defend such third party claim or de-
mand, Indemnitee shall make available to Indemnitor and his
agents and representatives all records and other materials
which are reasonably required in the defense of such third
party claim or demand and shall otherwise cooperate with, and
assist Indemnitor in the defense of, such third party claim or
demand, and so long as Indemnitor is defending such third party
claim in good faith, Indemnitee shall not pay, settle or com-
promise such third party claim or demand. If Indemnitor elects
to defend such third party claim or demand, Indemnitee shall
have the right to participate in the defense of such third
party claim or demand, at Indemnitee's own expense. In the
event, however, that Indemnitee reasonably determines that rep-
resentation by counsel to Indemnitor of both Indemnitor and In-
demnitee may present such counsel with a conflict of interest,
then such Indemnitee may employ separate counsel to represent
or defend it in any such action or proceeding and Indemnitor
will pay the fees and disbursements of such counsel. If Indem-
nitor does not elect to defend such third party claim or demand
or does not defend such third party claim or demand in good
faith, Indemnitee shall have the right, in addition to any
other right or remedy it may have hereunder, at Indemnitor's
expense, to defend such third party claim or demand; provided,
however, that (a) Indemnitee shall not have any obligation to
participate in the defense of, or defend, any such third party
claim or demand; and (b) Indemnitee's defense of or its par-
ticipation in the defense of any such third party claim or de-
mand shall not in any way diminish or lessen the obligations of
Indemnitor under the agreements of indemnification set forth in
this Article XI.
Section 11.5 Settlement of Indemnification Obliga-
tions. Except for third party claims being defended in good
faith, Indemnitor shall satisfy its obligations hereunder in
respect of a valid claim for indemnification hereunder in cash
within 30 days after the date on which Notice of Claim is
given.
- 75 -<PAGE>
Section 11.6 Indemnification Claims Against Escrow.
In addition to any other right available to Buyer hereunder or
otherwise, Buyer may pursue collection of any indemnification
claims against the Company under the Escrow Agreement. The
foregoing notwithstanding, the right of Buyer to indemnity
hereunder shall not be limited by or to any amounts held pursu-
ant to the Escrow Agreement.
Section 11.7 Sole Remedy Regarding Representations
and Warranties. (a) The indemnification rights provided in
this Article XI shall be the sole remedy to which a Company In-
demnified Party will be entitled for breach of any representa-
tion or warranty of the Buyer contained in Article V hereof
(including Schedule 5.2).
(b) The indemnification rights provided in this Ar-
ticle XI shall be the sole remedy to which a Buyer Indemnified
Party will be entitled for breach of any representation or war-
ranty of the Company contained in Article IV hereof (including
the Schedules to such representations, i.e., Schedules 4.1(a)
through 4.18). The maximum amount the Company shall be re-
quired to pay with respect to any or all such breaches of rep-
resentations and warranties contained in Article IV hereof in
the aggregate shall be $99,000,000.
Section 11.8 Losses Net of Insurance. The amount of
any Loss for which indemnification is provided under this Ar-
ticle XI shall be net of any amounts recovered by the Indemni-
tee under insurance policies with respect to such Loss. In the
event that an Indemnitee shall later collect any such amounts
recovered under insurance policies with respect to any Loss for
which such Indemnitee has previously received payments under
this Article XI from an Indemnitor, such Indemnitee shall
promptly repay to such Indemnitor such amount recovered.
ARTICLE XII
Miscellaneous
Section 12.1 Counterparts. This Agreement may be
executed in two or more counterparts, all of which taken to-
gether shall be considered one and the same agreement.
Section 12.2 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York (without reference to the principles of con-
flicts of law).
- 76 -<PAGE>
Section 12.3 Entire Agreement. This Agreement (in-
cluding the Ancillary Agreements and the other agreements re-
ferred to herein) and the Schedules and Exhibits hereto contain
the entire agreement between the parties with respect to the
subject matter hereof and this Agreement and the Ancillary
Agreements supercede all prior agreements, understandings, rep-
resentations or warranties between the parties, including the
Confidentiality Agreement dated May 13, 1996 between the par-
ties hereto, and the Letter of Intent, dated July 22, 1996, be-
tween the parties hereto. Except as specifically provided oth-
erwise in Article XI, this Agreement is not intended to confer
and shall not confer upon any person not a party hereto (and
their successors and assigns permitted by Section 12.7) any
rights or remedies hereunder. This Agreement is an agreement
providing otherwise as contemplated by Section 5-1311 of the
General Obligations Law of the State of New York.
Section 12.4 Expenses. Except as otherwise set
forth in this Agreement, whether the transactions contemplated
hereby are or are not consummated, all legal and other costs
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party in-
curring such costs and expenses.
Section 12.5 Notices. All notices hereunder shall
be sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by documented overnight delivery
service or, to the extent receipt is confirmed, telefax or oth-
er electronic transmission service to the appropriate address
or number as set forth below. Notices to the Company shall be
addressed to:
Charan Industries, Inc.
370 Old Country Road
Garden City, New York 11530
Attn: Charles P. Ryan, Jr.
Telecopier No.: (516) 747-6551
with a copy to:
Farrell, Fritz, Caemmerer, Cleary,
Barnosky & Armantano
EAB Plaza
Uniondale, New York 11556
Attn: Charles M. Strain, Esq.
Telecopier No.: (516) 227-0777
or at such other address and to the attention of such other
person as the Company may designate by written notice to Buyer.
Notices to Buyer shall be addressed to:
- 77 -<PAGE>
AMF Bowling Centers, Inc.
7313 Bell Creek Road
Mechanicsville, Virginia 23111
Attn: Douglas J. Stanard
Telecopier No.: (804) 730-4327
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Mitchell S. Presser, Esq.
Telecopier No: (212) 403-2000
or at such other address and to the attention of such other
person as Buyer may designate by written notice to the Company.
Section 12.6 Knowledge. For purposes of determining
the accuracy of the representations and warranties of the Com-
pany in order to determine fulfillment of the conditions set
forth in Section 8.1 and to determine the rights of the Buyer
Indemnified Parties to indemnification under Article XI, any
information of which, through any means, Buyer or any other
Buyer Indemnified Party gains knowledge after the date hereof
and prior to the Closing shall not affect such determinations,
even if Buyer consummates the transactions contemplated hereby
while in possession of such knowledge. The term "knowledge"
with respect to (x) the Company shall mean the knowledge of the
Stockholders (other than Eileen Pettus) and the Seven Bowling
Executives and (y) Buyer shall mean its senior executive offic-
ers.
Section 12.7 Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided,
however, that no party hereto will assign its rights or del-
egate its obligations under this Agreement without the express
prior written consent of the other party hereto, except that
Buyer may assign any or all of its right, title and interest
under this Agreement to any one or more Affiliates, provided
that in the event of such assignment, Buyer shall not be re-
leased from any obligations under this Agreement. Notwith-
standing the foregoing sentence, Buyer may assign this Agree-
ment to any lender to Buyer or any Affiliate of Buyer as secu-
rity for obligations to such lender in respect of Buyer's fi-
nancing arrangements and any refinancings, extensions, refund-
ings or renewals thereof; provided, however, that no assignment
- 78 -<PAGE>
hereunder shall in any way affect Buyer's obligations or li-
abilities under this Agreement.
Section 12.8 Publicity. The Company and Buyer agree
that prior to the earlier of the termination of this Agreement
and the Closing, except as may otherwise be required by law or
regulatory authority, any press releases or other announce-
ments, whether written or oral, to be made by either of them
with respect to the transactions contemplated hereby shall be
subject to mutual agreement and consent prior to the dissemina-
tion thereof.
Section 12.9 Headings; Definitions. The Section and
Article headings contained in this Agreement are inserted for
convenience of reference only and will not affect the meaning
or interpretation of this Agreement. All references to Sec-
tions or Articles contained herein mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms
defined herein are equally applicable to both the singular and
plural forms of such terms. For purposes of this Agreement,
"including" shall mean "including without limitation."
Section 12.10 Amendments and Waivers. This Agree-
ment may not be modified or amended except by an instrument or
instruments in writing signed by the party against whom en-
forcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing, waive com-
pliance by the other party hereto with any term or provision of
this Agreement on the part of such other party hereto to be
performed or complied with. The waiver by any party hereto of
a breach of any term or provision of this Agreement shall not
be construed as a waiver of any subsequent breach.
Section 12.11 Severability. In the event that this
Agreement, or any of its provisions, or the performance of any
provision, is found to be illegal or unenforceable under ap-
plicable law now or hereafter in effect, the parties shall be
excused from performance of such portions of this Agreement as
shall be found to be illegal or unenforceable under the applic-
able laws or regulations without affecting the validity of the
remaining provisions of the Agreement; provided, that (i) the
remaining provisions of the Agreement shall in their totality
constitute a commercially reasonable agreement, (ii) should any
method of termination of this Agreement or a portion thereof be
found to be illegal or unenforceable, such method shall be re-
formed to comply with the requirements of applicable law so as,
to the greatest extent possible, to allow termination by that
method and (iii) if a court having jurisdiction shall find that
the covenants contained in Section 7.15 hereof are not reason-
able, such court shall have the power to reduce the duration,
- 79 -<PAGE>
geographic area or scope of such covenants, and in this reduced
form the covenants shall be enforceable. Nothing herein shall
be construed as a waiver of any party's right to challenge the
validity of such law.
- 80 -<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by
or on behalf of each of the parties as of the day first written
above.
AMF BOWLING CENTERS, INC.
By: /s/ Douglas J. Stanard
Name: Douglas J. Stanard
Title: President<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by
or on behalf of each of the parties as of the day first written
above.
CHARAN INDUSTRIES, INC.
By: /s/ Charles P. Ryan, Jr.
Name: Charles P. Ryan, Jr.
Title: President
EXHIBIT 2
AMF Completes Acquisition of Bowling Corporation of America
Richmond, Virginia, October 10, 1996 -- AMF Bowling Centers,
Inc., a wholly-owned subsidiary of AMF Group Inc., announced
that it has completed the acquisition of the Bowling
Corporation of America chain of 50 bowling centers from Charan
Industries, Inc. of Garden City, New York for approximately
$100 million. With the acquisition of Bowling Corporation of
America, AMF Bowling Centers now operates 338 bowling centers
worldwide, including 260 in the U.S.
AMF Group Inc., headquartered in Richmond, Virginia, is the
largest owner and operator of bowling centers in the world and
one of the world's leading manufacturers and marketers of
bowling products.
